First Steps in Economic Indicators
By Phil Parker
October 2002
Financial Times / Pearson Education
ISBN: 0-273-65911-1
64 pages + supplemental material, illustrated
$52.50 paper original
Economic Indicators are anything but "just numbers" - they are the keys to unlocking invaluable information about market behavior. Covering all the major indicators reported by private and government statistical agencies - including the pricing index, employment figures, retail sales, housing - this comprehensive resource provides full descriptions of indicators and what they represent, their impact on the direction of interest rates, exchange rates, and the stock market, and how and why the market reacts as it does.
The book also offers brief guidelines for gearing your investment strategies to these ever-changing economic statistics.
Written in a clear non-technical terms and clearly organized by sectors of the economy, this accessible guide:
- takes a closer look at GDP, with an overview of the macro-economic framework using the standard national income computing methodology
- compares and contrasts consumer sector indicators to distinguish which series are more reliable and consistent
- differentiates between all measures of inflation, and makes the key distinction between inflation in the goods market and inflation in the services market
- explores foreign market indicators, including the monthly and quarterly indicators for the foreign exchange, domestic bond and equity markets
- features revealing "did you know?" tidbits and cautionary tales, as well as special factors unique to specific indicators.
Contents
Introduction
1. How Economic Indicators are Calculated
The RPI - an example
Building blocks Pitfalls
2. Who Collects and Issues them?
Who's who in international and national statistics
Commentary on national statistics websites
Timing of releases
3. Who Forecasts Them?
Adam Smith's army
How do the forecasters work?
Are their forecasts accurate?
Information on economic forecasts
4. Prices and Money
Inflation
Money Supply
Producer prices
5. What We Spend
Consumer spending
Consumer confidence
Public spending
Business spending
6. The Work We Do
Gross domestic product
Business confidence
Index of production
Employment and unemployment
7. What We Earn, Save and Borrow
Average earnings
Savings ratio
Interest rates
How interest rates are set
Interest rate statistics
8. How We Trade
Foreign trade and the balance of payments
Exchange rates
Commodity prices
Terms of trade
9. Leading Indicators and Other Stories
Retail sales
Car production and sales
Housing market statistics
Advertising
Stock market indices
Composite leading indicators
10. Oddball Indicators
The Big Mac index
The hemline index
The cocktail party theory
The R-word index
The odd-lot theory
The put-call ratio
The stock market capitalization to GDP ratio
Tobin's Q ratio
Glossary
Abbreviations
Further Reading
Index
Author: Peter Temple was born in West Yorkshire and has a degree in economics and statistics from the University of Wales, where he won the Eames Prize for Economics in 1970. He is a former member of the London Stock Exchange and a Fellow of the Securities Institute. He spent the first 18 years of his working life in fund management and investment banking, turning to full-time writing in 1988.
His articles cover a wide variety of topics on business, finance and investment and appear regularly in the Financial Times, Shares, International Fund Investment, and on the Ample Interactive Investor website. He also edits the Zurich Club Communique, an investment newsletter.
He has written several other books about investing, covering topics such as online investing, venture capital and hedge funds, including First Steps in Shares, First Steps in Bonds and Traded Options, all published by FT Prentice Hall. He and his wife live near Kendal, in Cumbria, and have two grown-up children.
Reviews
"Peter is, as usual, informed and informative. This is a useful tool for all investors."
-- Deborah Hargreaves, Personal Finance Editor, Financial Times
"Absolutely vital to new and experienced investors and market followers alike. Market indicators are too often overlooked by investors - this very readable and comprehensive book makes perfect sense of these essential tools".
--Alpesh B Patel, Financial Times Columnist, Bloomberg Television online trading specialist, author of Trading Online.
"Economists are of two kinds, those who make simple things complicated and those who make complicated things simple. Peter Temple makes complicated things simple. The book is an ideal introduction to financial market indicators for the layman."
-- Professor Tim Congdon, CBE - Chief Economist, Lombard Street Research Ltd.
"Peter Temple is one of those very rare breeds that has considerable experience on a practical basis in financial markets, whilst at the same time having the creative skill of being able to translate that knowledge coherently and descriptively to his audience. This book is a must for the investment portfolio!"
--David Buik, Cantor Index
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