Fun with Economic Indicators
A recent literature search turned up a list of twenty-five economic indicators. These indicators record the direction and rate of change of activities related to business activity and the economy They evoke reactions of despair or jubilation among analysts everywhere and do influence the stock markets. Government and industry scrutinize them and incorporated them into policy decisions. One common use is the leading story on many news casts.
For example you may have seen recent references to the Baltic Dry Shipping Index. It records the shipping volumes for commodities around the world. You have probably not heard of the Sulfuric Acid Shipment Index . Because this acid is so common in the production of many materials it has been used for many years as a precursor of future economic activity. Who knew? There are other indicators that seem a bit obscure such as the Hemline Index. The higher the hemline the more optimistic we should be. Similarly the Lipstick Index purports to tell us all about our intentions to spend money on luxury goods.
New ones emerge as technology changes such as shipments of micro chips and new cell phone connections. What would we do without the Big Mac Index. Because this has become such a ubiquitous food source around the world the number of hours of work needed to buy a Big Mac Combo is now an indicator of economic prosperity Over a ten year period, my office looked down on a five story parkade. The number of cars on the top level was a reliable indicator of the state and direction of the Calgary economy.
We believe that the profusion of indicators is very useful when referencing where we are economically. The indicators act as an approximation about the state and future of the economy. We leave it to you to decide how much emphasis you place on them when deciding on investing activities.