Economic Indicators and Business

Discussion on what cos. Look in economic statistics…

Economic Indicator

• Variables/Indices sending signals on economies performance..

Types: • Leading indicators consistently turn before the

economy does. • Coincident indicators turn in step with the economy

and track the business cycle's progress.• Lagging indicators turn after the economy turns, and

play a confirming role.

Examples:

• Leading indicators: Bond price to predict stock market trend..

• Coincident indicators: personal income changes same as total GDP

• Lagging indicators: unemployment rate confirms economic up or down turn..

The genus of leading indicators..

• In 1950, Moore built on his mentors' findings to develop the first leading indicators of both revival and recession.

• In the 1960s he developed the original index of leading economic indicators (LEI).

• It is a testament to the quality of that breakthrough that, nearly half a century later, many still believe the LEI and its variants to be the best tools for cycle forecasting.

India – Key Economic Indicators2012 vs. 2001

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2012 2001Population 1.22 bn 1.03 bnGDP (at current prices) US $ 1,800 bn US $ 492 bnPer capita income (nominal) US $ 1,480 US $ 460

Exports - Merchandise US $ 305 bn US $ 44.5bnImports - Merchandise US $ 489 bn US $ 50.5 bnShare in world trade (exports + imports) 4.2% 1.5%

Export - Services US $ 142 bn US $ 16.3bn

Import – Services US $ 78 bn US $ 14.6bn

Foreign Currency Reserves US $ 295bn US $ 39.5 bn

External Debt US $ 376 bn US$ 99.6 bn

Average exchange rate / US$ 54.5 47.7

Use of Economic indicators in strategic business plans

• This collaborative research project between Financial Executives Research Foundation (FERF) and Merrill DataSite explored the.

• The research looked at:• the issue from both a qualitative and quantitative perspective. • On the qualitative side, senior level financial executives were

surveyed using a 15-question online survey instrument. • In-depth telephone interviews were conducted with 19 senior

financial executives. • These interviews consisted of nine open-ended questions and

were completed during July and August 2011.

Some of the key survey findings included the following:

The four most widely followed indicators are inflation (57%), the unemployment rate

(54%), oil prices (39%), and GDP (32%).

The two most cited purposes for using economic indicators are budgeting/forecasting

(83%) and strategic planning (71%).

57% of respondents currently have open positions they are looking to fill.

Key interview findings were:

• Inflation, the unemployment rate and GDP are good general economic indicators buteach company should follow those indicators that are the best predictors for theirbusiness and/or specific industry.

• Even though the unemployment rate remains high, finding qualified candidates withthe needed specific job skill sets has proven difficult.

• Both business and the general public have lost confidence in the ability of thegovernment to make the difficult and unpopular decisions needed to move the economy and country forward.

• Economic Indicators are tools that can be used in the business planning/decisionmakingprocess but they should not be a company’s only tools.

Survey takeaways:

• The four most widely followed indicators are inflation (57%), the unemployment rate

• (54%), oil prices (39%), and GDP (32%).• The two most-cited purposes for using

economic indicators are budgeting/forecasting• (83%) and strategic planning (71%).• 57% of respondents currently have open

positions they are looking to fill.

Lets find some economic indicators:

• Go to dbie.rbi.org.in• What is the trend of employment in rural and urban area

and for both combined under broad categories of employment (primary, secondary, tertiary)

• The BPL category is 22% in India. What are the top 5 states and UTs having highest and lowest BPL% of population and how much.

• Throw light on number of educational institutes and their growth in Indian economy.

• What is the trend of major food and non food items production in India. What are the popular ones.

Go to: http://drshradhabanga.jimdo.com/

• Download macro economics data• Download components of gross domestic

product

Find trend of :GDP, NDP at fc and mp, GDP, GNPAgriculture, industry, service sector

contribution..