An economic indicator refers is statistics which in most cases is issued by the government and indicates the growth and stability of the economy. Some of economic indicators include the gross domestic product (GDP), inflation rates, employment rates, consumer price index and changes in money supply among others. They apply in analyzing business conditions in a country.
Gross domestic product is the sum of all good and services produced within a country in a given fiscal year valued at the prevailing market prices. It can be measured using either income or expenditure approaches. Many governments use the GDP in estimating the economic growth and predicting future trends. When the GDP of a country is increases at a fast rate than the population growth, it means that the per capita income is rising. This means that citizens are experiencing better living conditions. The expenditure approach of measuring GDP indicates that increase in exports more than imports may lead to overall increase in GDP.
Growth in GDP does not necessary mean that a country is experiencing economic development. This is because it does not consider how the additional income gained is spread across the population. Brazil with an annual increase of 5% in its GDP, its population grows at high rate hence it’s a developing country. 2011 Index of Economic Freedom (2011). The Brazil GDP in 2010 has been 7.5%. The Spain GDP has been experiencing a growth rate of o.67 since 1995 and reached a peak of 1.53 in 1997 this growth slugged by -1.70 in 2009 during the financial crisis. Since then the GDP has started rising. The Canada GDP from 1961 had been growing 0.84 % until in December 1963 when it reached a peak of 3.33 in 1963 the growth was -1.80% due to the word financial crisis. The quarterly GDP growth in New Zealand from 1987 has been 0.55 it reached a climax of 2.7 in 1999 but had recorded a low of -2.60 in March 1991.
Increase in business and industrial activities leads to rise in GDP; this indicates an improvement in economic growth. Increased GDP indicates that government policies in the fiscal year favored business and industrial activities. In determining the market value of goods and services considered in calculation of the GDP price changes over time must be considered. (Mankim, 2008).
Consumer price index (CPI)
This is a measure of changes in retail prices of consumer goods and services. It is measured by re-pricing the same goods at different times. Increase in consumer index indicates increase in inflation. It measures goods and services purchased for household use.
Inflation is sustainable increase in general price level of goods and services. This increase may be as a result of either increase in aggregate demand or increase in cost of production. Inflation as result of increase in aggregate demand is known as demand-pull. Inflation resulting from increase in production is known as cost-push.
The Spain’s economy was affected by the 2009 financial crisis and inflation. The country faced a deflation of -3.1% in 2009. This was due weakened domestic demand. The brazil inflation rate was 6.01% in 1980 this was before its ever worse inflation rate of 6821.31 % back in April, 1990. Trading economics (2010). Canada’s rate of inflation for the last 20 years has been stable about 2.1% on average. Economists forecast this rate to be sustainable in long run.
New Zealand inflation rate has averaged 2.6 % from 2000 to 2007. This rate rose to 5.1 % in 2008. In 2008 this high rate of inflation was caused by high fuel and food prices. It then dropped to1.5% during September quarter and 4 % in December 2010. The inflation rise in the December quarter is due to the increased transport, housing and house hold demand. Trading Economics (2010).
This is the number of people who are willing to work in the prevailing wage rates, but, are unable to get a job. Types of unemployment includes seasonal, frictional, chronic and under employment among others. Chronic unemployment is a situation where by majority of the people are unemployed. Seasonal unemployment fluctuates with changes in business cycle. In German, unemployment changed from 7.80% in 2009 down to 7.50%in 2010. Mundi (2010). The government can put in place policies which encourage investment so as to reduce seasonal unemployment. There is an inverse relationship between rates of inflation and unemployment rates demonstrated by the Phillip’s curve. (Baumol, 2010). The unemployment rate in Brazil has been fluctuating but the rate has been on decline from 2001 to 2011. The unemployment rate at the start of 2011 was 6.1 % this rate had fallen by15 % since 2009. 2011 Index of Economic Freedom (2011).
The Canadian unemployment rate had increased to 7.8% in 2008. Though the government has been trying to control the unemployment, it is higher than in the United States. The unemployment rate in 2009 was 8.3 % unlike 9.3% in United States. The New Zealand unemployment rate in 1991 was 11.1%, since then this rate has stagnated below 3.5% prior to the recent recession of 2009. This rose to 6.8% in last quarter of 2010.The Treasury (2010). The rate of unemployment in Spain was around 17% in 1997 but the rate fell to 11.3% in 2008. This rate is above the average European rate.
Economic indicators are interrelated; therefore, no one indicator can be sufficient to explain the economic activity in a country. The indicators of GDP, inflation rates and unemployment rates are major indicators of the level of economic activity in a country.
Baumol W.J. (2010). Macroeconomics: principles and policy
Mankim G. N. (2008). Principles of economics