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EconomicIndicator Book

EconomicIndicator Book

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Published by gagan585

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Published by: gagan585 on Aug 07, 2008
Copyright:Attribution Non-commercial

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09/13/2010

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2 UNDERSTANDING THE BUSINESS CYCLES
There are certain times when the release of certain economic indicators is awaited withgreat anticipation. However, those same indicators barely get noticed at some other conditions. Why do these economic measures jump in and out of the limelight? Theanswer is that much depends on where the US economy stands in the business cycle.
[
During a recession, when there are lots of unemployed workers and idle manufacturingcapacity, inflation was less of a concern. Thus, measures such as the consumer priceindex, which gauges inflation and the retail level, do not have the same impact on thefinancial markets as they would if the economy were operating at full speed. Duringrecessionary periods, indicators that grab the headlines are housing starts, automobilesales, and the major stock indices because they often provide the earliest clues that aneconomic recovery is imminent. Once business activities is in full swing, inflationmeasures like the CPI take centre stage again while other indicators receive a bit to thebackground.The business cycle itself has 5 phases. The first phase refers to the highest point of outputthe economy achieves just before it gets into trouble and turns down. After this peakcomes phase two, which is the recession itself, at this stage the economy actually shrinks.It saps the confidence of households and causes financial distress for business. The thirdphase is reached when the economy actually reaches bottom, a point known as therecession trough. The fourth phase occurs after the economy actually stops shrinking andresumes its growth path. Finally, when the level of economic activity pushes past theprevious high point, the business cycle marks the fifth and last phase, often referred to asexpansion.
 
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3 GROSS DOMESTIC PRODUCT
The foremost report on the heath of the economy,GDP measures how fast or slow the economy isgrowing. This report is released quarterly by theBureau of Economic Analysis under theCommerce Department. This report is the mother of all economic indicators and the most important statistic to come out in any givenquarter.
Composition of GDP
It is vital to realize that eachof the major sectors of GDP-- consumer spending,capital spending, andgovernment spendingrepresents the ultimatevalue of the productive or service when it is purchasedby the final user. Capitalspending is another major sector of GDP that, likeconsumer spending, issubject to cyclicalinfluences. Capital spending consists of spending by businesses on factories and officesand in the treatment, as well as housing in addition to capital spending, there are twomajor economic sectors other than consumer spending that influence economic growth:government spending which represents around 13 to 17% of total GDP in recent yearsand net exports that is value of goods produced for non domestic consumption less thevalue of goods manufactured abroad and brought into the United States.
Market Importance:
High
Frequency:
Quarterly
Website:
 www.bea.doc.gov 
 
Composition of US GDP (1997-2006)
Consumer Spending67%CapitalSpending17%Govt.Spending16%

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