By Bennett Whitlock, CRPC®
Private Wealth Advisor
How do we know if the economy is doing well? Leading economic indicators are considered the most important factors to watch. These indicators tend to come before economic shifts, helping predict the direction of the economy. Here are some of the most discussed leading economic indicators:
The Consumer & Producer Price Indexes: The Bureau of Labor Statistics calculates the Consumer Price Index (CPI), which tracks the price of goods and services over time at
the consumer level. Changes to the CPI help determine inflation and cost of living, helping to shape monetary policy. When prices rise or fall too much, the government
may intervene with policies to bring the economy back in line. Much like CPI, Producer Price Index (PPI) takes into account wholesale costs of American goods and services
(less food and energy) and is also a predictor of inflation.
U.S. Import and Export Price Indexes: The prices our foreign trading partners pay for goods and services help measure our economic health as well. Supply and demand, competition and the stability of global partners influence these indexes.
Productivity and Costs: Efficient well-managed businesses increase productivity and increase profits, which in turn leads to greater investments, an increase in jobs and overall prosperity.
Real Earnings: This economic indicator uses real average hourly earnings to estimate consumer buying power. Economists use this measure along with the CPI to measure the value of the American dollar.
New Construction: Housing starts and building permits indicate business growth and consumer confidence.
Employment Situation: The stock market rises with new jobs and less unemployment, leading to greater consumer confidence which in turn means more consumer spending. For a deeper dive into leading indicators and their meanings, visit the websites for the Bureau of Economic Analysis and the U.S. Census Bureau, or talk to your financial advisor to understand how shifts in the economic outlook affect your portfolio.
Bennett Whitlock, CRPC®, is a private wealth advisor and managing director with Whitlock Wealth Management, a franchise of Ameriprise Financial Services, Inc. Learn more
at WhitlockWealth.com or call 703-492-7732.