Economic indicators are statistical macroeconomic variables which assist in analyzing the phase in which the business cycle is. Agreed with the time when they take place, they give indication in which direction the entire economy is moving to. Due to the time specific features of the economic indicators, these can be leading, contemporary with the changes, or delayed. Leading indicators are the ones which change before the macroeconomic changes take place. Those are one of the most important indicators which assist the analysts and investors in their projections for the economy in future. Therefore precisely, the focus on this article is on those indicators.
During 2019 increased interest for discussion and analysis of the change in the business cycle emerged on world level. Economists are giving their opinions and projections throughout various media in view of the next recession. Should we expect it in the next quarters or has it already begun? There from, leading indicators are those which should give clear picture on the present situation in the world economy, and is it facing the expected recession. Leading indicators are numerous and they differ in different regions around the world, but still, some indicators are consistent everywhere. In continuation, considered are the stock market indices, range of interest rates and composite leading indicators as one of the most important.
Stock Market Indices
Monitoring the stock market share indices as are S&P500 (USA) and Euro Stoxx 50 (Europe) is important part in projecting the changes in the business cycle. This indicator is not the most important one, but is an indicator to be analyzed first by the investors, analysts and media. Share prices result largely from the expectations by the investors for the future, i.e. earned profit for the companies. If the assessment for the profit of the companies is correct, the indices may be good indicator for the direction of movement of the business cycle. Due to that, the indices value is the highest before the economy reaches its peak. Starting from 2009 up until today, the index S&P500 is permanently growing. In July this year it reached its peak of 3.083,82 USD. It can be easily considered through this index that the shares are with growing tendency. Until investors are satisfied with the profit from the companies, the index will be in upward line, and it is indicating that the business cycle is not yet on its peak. Still, monitoring of this indicator as a leading one has its failures. At the so called “bull” mood of the market, it is very difficult to predict the exact moment where the economy shall have its peak in the cycle. Continue reading “At the edge of recession? What are the leading indicators saying for the business cycle- magazine Economy and Business”