ADDENDUM TO INVESTMENT

AND CONSUMPTON SLIDES

MORE ON THE BUSINESS
CYCLE AND CONSUMPTION
LEADING AND
LAGGING INDICATORS

FIRST, TAKE A LOOK

AT
MACROECONOMICS
WITH HELP OF WIFI
http://www.tradingeconomics.com/phili
ppines/indicators

Leading and Lagging

Indicators the Roller
Coaster comparison
Leading indicators are statistics that
Economists look at to measure
economic performance, which will
start to change BEFORE THE
ECONOMY REACHES THE NEXT
STAGE OF THE BUSINESS CYCLE

Leading Indicators
Leading indicators should be thought
of as the first car of a roller coaster car
example of leading indicator:
Consumer confidence index - If
consumers are confident this month
about things they will be spending
more for the next 30 days at
least..

Leading Indicators
Another example of leading indicator:
Stock Market
EXAMPLE PSE up 8% in DEC
Or S&P (USA) 500 up 3% in MAR

Leading Indicators
example new building
permits

When construction companies want to

build new buildings, they have to get a
permit to do that, so they go to a
government office to get the permit
But they wont start the construction
until they have the permit, and once
they have the permit they will be
employing workers and ordering
materials to do the construction

Building Permits
The government keeps track of how
many permits have been applied for each
month

This is an example of a leading incidcator

because the number of permits will go up
BEFORE the level of economic activity
goes up (new jobs, purchasing new
materials)

Lagging Indicators
The opposite of leading indicators, they will
change AFTER the economy has started to
change
Example: Consumer Price Index
(inflation)why? It takes time for the market for
a good or service to react to the
decrease in demand (to a new, lower
equilibrium price)

Lagging Indicators
Or Unemployment
Why?
Or Interest Rates
Why?