Widely Followed Economic Indicators

Major economic indicators that are widely followed by investors include gross domestic product (GDP), consumer price index (CPI), and unemployment rate, according SmartInMoney.com.


Gross Domestic Product: Gauging the economic health

Gross domestic product, commonly referred to as GDP, is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. GDP measures the overall value of the goods and services produced by the U.S. economy in a specific time period; and is often thought of as the most important economic indicator. GDP is made up of several factors, including public consumption or consumer spending; business investment; federal, state, and local government spending; and net exports (exports less imports).

U.S. consumer sentiment at two-year high

U.S. consumer sentiment was the most optimistic in more than two years in June, but remained far below average level, according to a survey released Friday by Reuters and the University of Michigan.

The UMich index rose to 76.0 in late June, up from 73.6 in May and 75.5 in mid-June. The average level of the index is around 87.

Consumers expect a very slow pace of economic growth, the survey said.

U.S. Economy Expanded at a 3.2% in First Quarter

The U.S. economy continued to grow in the first quarter. National output expanded at a seasonally adjusted annual rate of 3.2 percent last quarter, after growing 5.6 percent in the fourth quarter of 2009. This marked the third quarter in a row the economy showed strong economic growth. Economists are optimistic that the news may breed more confidence about the future turnaround.

Increased consumer spending played a significant role in the last quarter expansion. Consumer spending grew at 3.6 percent annual rate in the first part of the year, after growing at 1.6 percent annual rate in the previous three months.

SEC charges Goldman Sachs defrauded investors

The Securities and Exchange Commission (SEC) filed a case to sue Goldman Sachs and one of its employees for civil fraud, alleging they defrauded investors in selling a financial product tied to subprime mortgages, in 2007.

The SEC's allegation focuses on a mortgage securities transaction structured by Goldman, for which it allegedly earned $15 million in fees. Goldman allegedly helped hedge fund Paulson & Co., led by John Paulson, bet against those securities, and Paulson's firm made a profit of about $1 billion. Investors in the mortgage securities lost more than $1 billion, the SEC said.

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market.

Economy added new jobs in March

Payrolls surge in March marked the beginning of job recovery as employers added 162,000 nonfarm jobs. This good news came from the Labor Department reported on Friday, after eight million jobs lost since the beginning of recession in December 2007. To absorb only new entrants into the labor market the economy needs to add more than 100,000 jobs a month.

While the unemployment rate held steady at 9.7 percent, economists saw signs in the latest report that the economy was poised to make steady progress.

Euro came under more pressure

The euro came under more pressure after Fitch, a credit-ratings agency, downgraded its assessment of Portugal’s debt.

Meanwhile, Greece got a little bit of good news as the European Central Bank signalled that it would keep its collateral standards relaxed beyond 2010, making Greek bonds less unattractive.

Revised GDP showed faster growth in Q4 2009

The economy grew at a faster pace than initially thought at the end of 2009. It grew at a 5.9% annual rate in Q4, up from the Commerce Department's initial reading of 5.7% and the fastest pace in six years.

The better-than-expected Q4 growth figure came as companies cut inventories at a slower pace, accounting for 3.9 percentage points of the 5.9% growth figure. Business investment also rose at a much faster pace than initially reported. However, consumer spending, which accounts for about 70% of economic activity, remained weak.

For all of 2009, the economy shrank 2.4%, the most since 1946

Meanwhile, sales of existing homes unexpectedly plunged 7.2% in January to an annual rate of 5.05 million units, a seven-month low, following December's record 16.2% plunge.