GUIDE TO ECONOMIC INDICATORS

257 Pages·2007·2.7 MB·English

01 Econ Indicators 2006 10/24/06 5:14 PM Page i
GUIDE TO ECONOMIC INDICATORS
01 Econ Indicators 2006 10/24/06 5:14 PM Page ii
OTHER ECONOMIST BOOKS
Guide to Analysing Companies
Guide to Business Modelling
Guide to Business Planning
Guide to the European Union
Guide to Financial Markets
Guide to Investment Strategy
Guide to Management Ideas
Numbers Guide
Style Guide
Dictionary of Business
Dictionary of Economics
International Dictionary of Finance
Brands and Branding
Business Consulting
Business Miscellany
Business Strategy
China’s Stockmarket
Economics
Future of Technology
Globalisation
Headhunters and How to Use Them
Mapping the Markets
The City
Wall Street
Essential Director
Essential Economics
Essential Investment
Essential Negotiation
Pocket World in Figures
01 Econ Indicators 2006 10/24/06 5:14 PM Page iii
GUIDE TO ECONOMIC
INDICATORS
Making Sense of Economics
01 Econ Indicators 2006 10/24/06 5:14 PM Page iv
THE ECONOMIST IN ASSOCIATION WITH
PROFILE BOOKS LTD
Published by Profile Books Ltd
3a Exmouth House, Pine Street, London ec1r 0jh
Copyright © The Economist Newspaper Ltd 1992, 1994, 1997, 2000, 2003, 2006
Text copyright © Richard Stutely 1992, 1994, 1997, 2000, 2003, 2006
Diagrams and extracts copyright © The Economist Newspaper Ltd
1992, 1994, 1997, 2000, 2003, 2006
Additional research Sophie Brown, Carol Howard, Stella Jones, Ulric Spencer
All rights reserved. Without limiting the rights under copyright reserved above, no
part of this publication may be reproduced, stored in or introduced into a retrieval
system, or transmitted, in any form or by any means (electronic, mechanical,
photocopying, recording or otherwise), without the prior written permission of both
the copyright owner and the publisher of this book.
The greatest care has been taken in compiling this book.
However, no responsibility can be accepted by the publishers or compilers
for the accuracy of the information presented.
Where opinion is expressed it is that of the author and does not necessarily coincide
with the editorial views of The Economist Newspaper.
Typeset in EcoType by MacGuru
01 Econ Indicators 2006 10/24/06 5:14 PM Page v
Contents
List of tables viii
List of charts x
1 Interpreting economic indicators 1
2 Essential mechanics 12
3 Measuring economic activity 28
Omissions 30
Output, expenditure and income 32
Prices 38
Putting it in context 39
Reliability 40
4 Growth: trends and cycles 41
Nominal GDP 43
GDP per head 45
Real GDP 46
GDP: output 49
GDP: expenditure 50
Productivity 51
Cyclical or leading indicators 54
5 Population, employment and unemployment 58
Population 59
Labour or workforce 61
Employment 64
Unemployment and vacancies 66
6 Fiscal indicators 71
Public expenditure 72
Government revenues 76
Budget balance, deficit, surplus 79
National debt; government or public debt 83
7 Consumers 85
Personal income, disposable income 86
Consumer and personal expenditure, private consumption 88
Personal and household savings; savings ratio 92
Consumer confidence 94
8 Investment and savings 96
Fixed investment and GDFCF 98
v
01 Econ Indicators 2006 10/24/06 5:14 PM Page vi
Investment intentions 102
Stocks (inventories) 103
National savings, savings ratio 105
9 Industry and commerce 108
Business conditions; indices and surveys 110
Industrial and manufacturing production 112
Capacity use and utilisation 115
Manufacturing orders 117
Motor vehicles 119
Construction orders and output 120
Housing starts, completions and sales 122
Wholesale sales or turnover, orders and stocks 124
Retail sales or turnover, orders and stocks 125
10 The balance of payments 127
Accounting conventions 127
Imports of goods and services 131
Exports of goods and services 136
Trade balance, merchandise trade balance 138
Current-account balance 141
Capital- and financial-account flows 144
International investment position (IIP) 144
Official reserves 145
External debt, net foreign assets 146
11 Exchange rates 148
Nominal exchange rates 150
Special drawing rights (SDRs) 154
EMU, ecu, ERM and euro 157
Effective exchange rates 160
Real exchange rates; competitiveness 162
Terms of trade 165
12 Money and financial markets 167
Money supply, money stock, M0 ... M5, liquidity 168
Bank lending, advances, credit, consumer credit 173
Central bank policy rates 174
Interest rates; short-term and money-market rates 176
Bond yields 179
Yield curves, gaps and ratios 181
Real interest rates and yields 184
Share prices and yields 185
vi
01 Econ Indicators 2006 10/24/06 5:14 PM Page vii
13 Prices and wages 187
Price indicators 190
Gold price 193
Oil prices 195
Commodity price indices 197
Export and import prices; unit values 205
Producer and wholesale prices 206
Surveys of price expectations 209
Wages, earnings and labour costs 210
Unit labour costs 213
Consumer or retail prices 214
Consumer or private expenditure deflators 218
GDP deflators 219
Appendix: Useful websites 221
Index 225
Gross domestic product (gdp) and gross national product (gnp) or gross national income
(gni), as it is sometimes referred to now, are similar measures of total economic activity.
gdp has slightly wider international usage and the term is used in this book to mean either
gdpor gnp/gni unless the context makes it clear that the reference is to one in particular.
Precise definitions are given on pages 28–29.
vii
01 Econ Indicators 2006 10/24/06 5:14 PM Page viii
List of tables
1.1 World output and trade 3
1.2 Euro area countries 7
1.3 The former Soviet Republics 7
2.1 OPEC crude oil production and prices 13
2.2 US GDP 14
2.3 Chaining index numbers 17
2.4 When did inflation fall? 21
2.5 Choosing the period for comparison 21
2.6 Annualised and doubling rates 23
2.7 Analysing seasonal and erratic influences 26
4.1 Nominal GDP 44
4.2 GDP per head 46
4.3 Five world cycles 48
4.4 Dominant sectors 50
4.5 Sources of economic growth in industrial economies 52
4.6 Growth of productivity 53
4.7 Peaks and troughs in GDP 56
5.1 Population 59
5.2 Labour force 62
5.3 Total employment 65
5.4 Unemployment 67
6.1 General government spending 76
6.2 General government budget balances 82
7.1 Personal income, outlays and savings in the United States 87
7.2 Consumer spending 91
8.1 Investment and savings 97
8.2 Real fixed investment 100
8.3 Savings ratios 106
9.1 Output by sector 109
9.2 Motor vehicle markets 120
10.1 Imports of goods and services 134
10.2 Exports of goods and services 137
10.3 Trade and current-account balances 140
10.4 External debt 147
11.1 Exchange rates 153
viii
01 Econ Indicators 2006 10/24/06 5:14 PM Page ix
LIST OF TABLES
11.2 Currencies in the SDR 155
11.3 SDR exchange rates 156
11.4 Ecu exchange rates 158
11.5 Permanent conversion rates against euro area currencies 159
11.6 Effective exchange rates 161
11.7 Real effective exchange rates 163
12.1 Money supply 173
12.2 Comparative interest rates 177
12.3 Benchmark yields 180
12.4 Yields 182
12.5 Real yields 184
12.6 Share prices 186
13.1 Comparative inflation rates 189
13.2 The world oil market 196
13.3 Effect of a $30 oil price increase 197
13.4 Producer prices (manufacturing) 208
13.5 Hourly earnings in manufacturing 212
13.6 Unit labour costs in the whole economy 213
13.7 Consumer prices 217
13.8 Consumer spending deflators 218
13.9 GDP deflators 220
ix