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Economics for Journalists
    Tutorial 1: Intro to Economic Indicator Project

    Jeffrey Timmermans


Wednesday, 8 February, 12
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.”
                                                                 – Investopedia



Wednesday, 8 February, 12
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)


Wednesday, 8 February, 12
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 activity




Wednesday, 8 February, 12
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

          ✤   Remember: correlation doesn’t imply causation!



Wednesday, 8 February, 12
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 memberships



Wednesday, 8 February, 12
A bad indicator




                            Source: Bloomberg BusinessWeek



Wednesday, 8 February, 12
A worse indicator




                            Source: Bloomberg BusinessWeek



Wednesday, 8 February, 12
Totally off-the-wall indicator




                            Source: Bloomberg BusinessWeek



Wednesday, 8 February, 12
Groups

                  1            2         3           4           5

        Naushin              Varia     Diana         Ish      Hui Yi

              Kat           Carolyn   Quiteria        J       Michelle

           Corey            Haruka    Catherine   Stephanie    Mimi

               Kai            Ivy      Phoebe      Naomi       Amy



Wednesday, 8 February, 12
Please refer to the Economic Indicator Project
                              page on the course blog for details on the
                              requirements, deadlines and assessment
                                                 criteria




Wednesday, 8 February, 12

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Tutorial1

  • 1. Economics for Journalists Tutorial 1: Intro to Economic Indicator Project Jeffrey Timmermans Wednesday, 8 February, 12
  • 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.” – Investopedia Wednesday, 8 February, 12
  • 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) Wednesday, 8 February, 12
  • 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 activity Wednesday, 8 February, 12
  • 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 ✤ Remember: correlation doesn’t imply causation! Wednesday, 8 February, 12
  • 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 memberships Wednesday, 8 February, 12
  • 7. A bad indicator Source: Bloomberg BusinessWeek Wednesday, 8 February, 12
  • 8. A worse indicator Source: Bloomberg BusinessWeek Wednesday, 8 February, 12
  • 9. Totally off-the-wall indicator Source: Bloomberg BusinessWeek Wednesday, 8 February, 12
  • 10. Groups 1 2 3 4 5 Naushin Varia Diana Ish Hui Yi Kat Carolyn Quiteria J Michelle Corey Haruka Catherine Stephanie Mimi Kai Ivy Phoebe Naomi Amy Wednesday, 8 February, 12
  • 11. Please refer to the Economic Indicator Project page on the course blog for details on the requirements, deadlines and assessment criteria Wednesday, 8 February, 12