If experts want to reliably assess how a country's economic situation is developing, it is worth taking a look at a large number of indicators. In this article, you will find out what economic indicators are and learn about a variety of practical examples.
Economic indicators Definition
The term “economic indicators" has the synonymous terms "Macroeconomic key figures" or "Economic indicators”. It is a collection of many indicators, each of which represents different information. They can help to assess the economic development of a country and compare it with other countries.
The various indicators are published at regular intervals. The analysis of economic activity can be used for Investors be useful, for example, to achieve a higher Diversification and want to invest in other countries. In addition, economic indicators for Entrepreneurs, economic experts and politicians of interest.
What economic indicators are there?
Depending on the objective of the analysis, some indicators are more suitable than others. Economic indicators are therefore divided into leading indicators, present indicators and lagging indicators.
Leading indicators
This type of indicator provides information about future economic development. Specific examples include stock levels, the share index or company profit expectations. These are comparatively speculative Economic indicators, as unforeseen economic events can always occur. They therefore serve as a guide.
- They often refer to the period of the next six months.
- Leading indicators are often based on the assessment of economic experts and business managers.
- Such indicators are particularly useful for recognizing turning points in the economic situation at an early stage.
Presence indicators
Unlike leading indicators, presence indicators provide information about the Current economic situation of a country. This results in reliable, non-speculative data.
The most important presence indicator is the Gross domestic product:
- GDP provides information on how much a country has achieved economically in a given period.
- This shows the value of all products and services generated within the country during the period.
- This indicator of a country's economic performance therefore provides information on the development and economic upturn or downturn of a country.
Lagging indicators
Lagging indicators refer to the past. Such indicators can be analyzed according to a trend. They are important, for example, to assess the reliability of leading indicators.
One of the most important examples is the Unemployment rate. This indicator shows the proportion of unemployed people in the labor force. For the calculation, the number of unemployed is divided by the number of people in the labor force.
What are the criteria for typical economic indicators?
Not all typical economic indicators are economic indicators. Certain criteria must be met for an economic indicator to be an economic indicator:
- StatisticsScientific procedures must be taken into account. Data analysis uses samples to make assessments. The samples must be sufficiently large for the statements to be reliable.
- Long-term natureActual development can only be analyzed if data relates to a longer period of time.
- RegularityThe data must be up-to-date and collected regularly, for example monthly or quarterly. In this way, experts can monitor changes.
- SignificanceThe information provided by the indicators must be relevant to the economic development of a country.
Economic indicators table with concrete examples
The following table shows some examples of economic indicators. It is important to note that the list is not exhaustive, but only represents a small selection of relevant indicators.
| Stock index | The share index is a key figure for representing the performance of a share. |
| Stocks | This is the total quantity of physical goods such as merchandise, raw materials or other products that companies have in stock at any given time in order to meet demand. |
| ZEW Index | The ZEW Index is a sentiment indicator published monthly by the Center for European Economic Research (ZEW). |
| Capacity utilization | Capacity utilization or the degree of utilization describes the percentage of a company's total capacity that is used. |
| Savings rate of the population | The savings rate is the proportion of disposable income that is saved rather than consumed. |
| Inflation rate | This is the percentage change in the general price level for a basket of services and consumer goods over a certain period of time. |
| Insolvencies | The term describes the situation of a debtor who is unable to meet his payment obligations to a creditor. Insolvency describes an inability to pay. |
| Import prices | Import prices are the prices paid for goods imported from other countries. |
| Number of people in employment | In Germany, gainfully employed persons are persons aged 15 years or older who work at least one hour a week for pay. |
| Producer prices | Producer prices are the prices that manufacturers charge for their products. |
| Private consumer spending | This is the expenditure of private households and private non-profit institutions for the final consumption of services and goods. |
| Balance of trade | This refers to net exports, i.e. the difference between exports and imports of goods. |
| ifo Business Climate Index | The ifo Business Climate Index is a monthly sentiment indicator that reflects economic developments in Germany. Companies are surveyed for the data. |
Significance of economic indicators
Data from the economic indicators are Companies and private households relevant. They provide information on wages, unemployment and consumption. Overall, the population can obtain a useful overview of the economic development of their own country.
Also the Politics benefits from the economic indicator data:
- Central banks such as the ECB or the FED and governments use some of the key figures to adjust their own behavior.
- If economic data indicates a potential economic deterioration, the central bank can, for example, lower the key interest rate or buy government bonds. Governments can implement measures to reduce corporate taxes or increase government investment.
Some economic indicators are Investors useful. They can provide indications of the performance of securities and should therefore be taken into account by investors. It is advisable to include a large number of leading indicators.
Conclusion: economic indicators explained simply
Economic indicators or macroeconomic indicators are key figures that help to Economic development of a country to assess. Depending on their temporal orientation, the indicators can be divided into leading indicators, presence indicators and lagging indicators.
Not every economic indicator is an economic indicator. Instead, some Criteria be fulfilled, such as a sufficient Statistics, Regular data collection at fixed times, a high Significance economic development and current developments in the Data collection over long periods of time. Important examples of economic indicators are gross domestic product, the unemployment rate and the inflation rate.
The importance of economic indicators extends across many different areas. Central banks and Governments can adapt their own laws, for example to counteract an emerging downturn. Private households and Company get an overview of the most important developments. Investors can use leading indicators to obtain clues about the performance of securities and adjust their own strategy if necessary.