The current state of the economy is one that is concerning for almost all Americans. Though we are in the recovery phase businesses are still hurting, people are out of work, we are barely getting out of a depression etc. People are pointing fingers at what is the cause and who is to blame. What was once a strong healthy economy has now drastically changed. There are many economic indicators that are used to evaluate and provide an image of what is currently happening and what an outlook may be on the economy.
Several of the important factors are the business cycle, consumer price index, stock prices, consumer confidence index, gross domestic product and unemployment rates. The overall picture of the economy is relevant to its current business cycle. The business cycle is the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. The five stages of the cycle are growth, peak, recession, trough and recovery. As stated before we are in the recovery process but at a slow rate. One indicator is the Gross Domestic Product.
The Gross Domestic Product (GDP) is the total market value of all goods and services produced, including total consumer, investment, and government spending, plus the value of exports, minus the value of imports. It moves with the economy and describes what’s happening right now. The GDP was at a huge decline a few years ago which resulted in our recession. Currently it has increased by 2. 7 percent which is indicating an improving economy. Another indicator is the Consumer Price Index. The Consumer Price Index (CPI) is a measure of the change in the purchasing power of currency and the rate of inflation.
It shows the current price of a “basket” of goods and services in terms of the prices during the same period during the previous year. The purpose of the CPI is to show the effect of inflation on purchasing power. The “basket” of goods and services includes energy (gas prices) and food as well as other goods and services. The decline leads to deflation instead of inflation where consumers hold off on purchases in hopes of lower prices. Consumers are feeling pretty confident and spending has increased over time but not by much leading to the consumer confidence Index.
The Consumer Confidence Index is a measure of how well the average American thinks the economy is doing and will do in the short-term. Stock prices are leading indicators of economic activity. If the market goes up and sustains upward activity this is seen as a good economic sign. The measure of stock prices comes from the Standard and Poor’s 500 index not the Down Jones Industrial Average. In September 2012 the S&P 500 index ended more than 25 percent above August. If current trends continue the economy will be vastly improved. The Unemployment rate is also used to understand an economy.
The unemployment rate shows the economy’s production, private consumption, workers’ earnings, and consumer sentiment. A lower unemployment rate translates into more employed individuals with paychecks, which leads to higher consumer spending, economic growth and potential inflationary pressures. High levels of unemployment are connected with lower incomes, lower spending, and economic stagnation. Our economy has seen the rates change up and down but the growing trend is our unemployment rate is lowering. All these indicators are used to describe the current economy.
Though we are not at our highest point, we are slowly moving on the upward side. A pace that most don’t like but relative to the recession years ago it’s surly a vast improvement. November 30, 2012 U. S. Department of Commerce Bureau of Economic Analysis: U. S. Economic Accounts Retrieved on November 30, 2012 from: http://www. bea. gov/ Cunningham, Steven P. H. D The Consumer Sees Reason to Spend American Institute for Economic Research Retrieved on November 30, 2012 from: https://www. aier. org/article/7864-consumer-sees-reasons-spend