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  1. 1. Economics for Journalists Tutorial 1: Intro to Economic Indicator Project Jeffrey TimmermansTuesday, 5 February, 13
  2. 2. What’s an “economic indicator”? ✤ Data about some kind of economic activity that helps governments and citizens evaluate – and occasionally predict – the overall health of their country’s economy. ✤ “A piece of economic data, usually of macroeconomic scale, that is used by investors to interpret current or future investment possibilities and judge the overall health of an economy.” – InvestopediaTuesday, 5 February, 13
  3. 3. Some long-established indicators ✤ Consumer Price Index: tracks changes in prices of consumer goods (i.e. inflation) ✤ Price of copper: copper is the “backbone” of an industrial economy, yet supply is relatively stable and not that sensitive to price changes. ✤ Book-to-bill ratio: measures to ratio of orders of a product to shipments of that same product over a given time period. A ratio over 1 indicates an order backlog (i.e. indicates an economic expansion) ✤ Ted spread: measures how much more banks have to pay to borrow money than the government pays (i.e. indicates the health of banks)Tuesday, 5 February, 13
  4. 4. Types of indicators ✤ Lagging: an indicator of activity in the recent past (i.e. changes after the broader economy changes) ✤ Coincident: indicates activity in the present (i.e. the current state of the economy ✤ Leading: an indicator of future economic activityTuesday, 5 February, 13
  5. 5. What makes a good indicator? ✤ Is original ✤ Measures an interesting and important economic activity ✤ Measures that activity in an accurate and consistent manner ✤ Closely correlates with a broader measure of the economy in a statistically significant way ✤ Considers other possible factors that might interfere with its accuracyTuesday, 5 February, 13
  6. 6. Examples from past classes ✤ Wedding Dress Indicator: measures the health of the economy by comparing the spending on wedding dresses with the change in the annual number of registered marriages ✤ Premium-to-Standard Petrol Indicator: predicts consumer confidence by measuring the ratio of purchases of premium auto fuel to standard fuel ✤ Gym-membership Indicator: attempts to measure unemployment by looking at the change in numbers of gym membershipsTuesday, 5 February, 13
  7. 7. A bad indicator Source: Bloomberg BusinessWeekTuesday, 5 February, 13
  8. 8. A worse indicator Source: Bloomberg BusinessWeekTuesday, 5 February, 13
  9. 9. Totally off-the-wall indicator Source: Bloomberg BusinessWeekTuesday, 5 February, 13
  10. 10. Please refer to the Economic Indicator Project page on the course blog for details on the requirements, deadlines and assessment criteriaTuesday, 5 February, 13