Bloomberg Market Concepts
Economic Indicators
The Primacy of GDP
● Main measure of economic activity
● World GDP: 8% compounded annual growth over
... [Show More] 50 years
● How accurately do GDP statistics portray the economy?
○ Inaccurately because the scope of GDP measurements can change
● Economic growth is cyclical, with series of booms and busts
● Investors interpret economy through economic indicators
● Leading indicators attract the most investor interest
Economic statistics
Essential Economic Indicators
● Economic growth
○ Gross domestic product
○ Market value of all final goods and services in a country
○ GDP = C + I + G + (X-M)
○ C = personal consumption
○ I = private investments
○ G= gov consumptions
○ X = exports
○ M = imports
○ Different countries have different emphasis on GDP (example: in America
personal consumption makes up most of GDP, while in China it is Private
investment)
○ Important: percentage change in GDP from one year to the next
○ Nominal GDP - inflation = Real GDP Growth
○ Real GDP growth: only production, taken out inflation effects
○ Recession: 2 successive quarters of negative real GDP growth
● Inflation
○ Erodes value of bonds
○ General increase in prices of goods and services
○ Decreases purchasing power of money
○ Sources of inflation data: quarterly GDP report, monthly CPI
○ CPI needs to be fully representative of consumer spending
○ Inflation basket
○ What was a representative basket yesterday may not be representative today
● Unemployment
○ Consumer spending based on salaries
○ Economy shrinks when unemployment rises
○ GDP growth is depressed when unemployment rises
● Business confidence
○ Business consumers make more investments when they feel confident there will
be a demand for their goods and services in the future
○ ISM: gauges business confidence
○ Above 50: optimism
○ Below 50: pessimism
○ PMI and GDP move together
○ PMI is best leading economic indicator
● Housing
○ Housing starts → house building
○ Buying new h [Show Less]