Key Economic Indicators
and what they mean
There are a lot of economic reports and indicators that are announced and released every day on business news programs. These statistics are released by either education institutions, government agencies or by private investment research firms. This information never fails to make the stock market indicators go up or down [sometimes by a little, sometimes by a lot]. In this and the next page we try to give you a basic overview of some of this information.
Gross Domestic Product (GDP)
The textbook definition of GDP is the market value of all goods and services produced in a region during a period of time (usually measured quarterly or annually). This indicator is typically expressed as "Real GDP" because the Commerce Department adjusts the information to remove changes in price (inflation). This is a very good top-level guage of the overall health of an economy. This information [as well as other information] is used by the Federal Reserve to change monetary policy, like interest rates or the amount of money to be introduced into the economy.
This information is calculated by the US Department of Commerce on a quarterly basis typically within 30-40 days of the end of a quarter. There are typically 3 announcements for the quarterly GDP; Advance Estimates, Preliminary Estimates and Final Estimates. The Commerce Department can be accessed at:
Consumer Price Index(CPI)
This indicator is a statistic which measures the changes in cost of living in an urban area. The CPI measures changes in the prices for goods and services for a specified period (typically measured on a monthly basis). The CPI does not include EVERY item within the scope of goods and services but uses a sample of about 200 items in its measurements but does not include any taxes (except sales taxes) or investments in stocks, bonds, etc.
As you might already know, the CPI is a measure of inflation. More information on CPI is available at:
Producer Price Index (PPI)
The next indicator is very much related to the CPI, this is the PPI. This indicator is similar to the PPI, but measures the changes in the SELLING price of goods and services, which is a little different than the CPI which measures the purchase price. This is the business-side equivalent to the CPI which measures the consumer. The PPI reviews price changes in agriculture, forestry, fisheries, mining, manufacturing, etc. The prices of over 20,000 firms are tracked.
The PPI is the first inflation measure available every month and also, this indicator measures the changes before they hit the consumer. For example, the PPI includes changes in the price of oil, which is one of the first items in the production chain and can be used to predict future changes in CPI.
More information on CPI is available at:
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