Economic Indicator

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DEFINITION of 'Economic Indicator'

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. Economic indicators can potentially be anything the investor chooses, but specific pieces of data released by government and non-profit organizations have become widely followed - these include:

  • The Consumer Price Index (CPI)
  • Gross Domestic Product (GDP)
  • Unemployment figures
  • The price of crude oil

BREAKING DOWN 'Economic Indicator'

An economic indicator is only useful if one interprets it correctly. History has shown strong correlations between economic growth (as measured by GDP) and corporate profit growth. However, determining whether a specific company will grow its earnings based on one indicator is nearly impossible. Indicators give us signs along the road, but the best investors will utilize many economic indicators, looking for patterns and verifications within different sets of data.

Most economic indicators have a specific schedule for release, allowing investors to prepare for and plan on seeing certain information at certain times of the month and year.

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RELATED FAQS
  1. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  2. Where can I find year-to-date (YTD) returns for benchmarks?

    Benchmarks are securities or groups of securities against which investment performance is analyzed. Examples of popular equity ... Read Full Answer >>
  3. What economic indicators should an investor in the aerospace sector consider?

    The economic indicators that investors in the aerospace sector should consider are economic growth, interest rates and inflation. ... Read Full Answer >>
  4. What economic indicators are important to consider when investing in the oil and ...

    The oil and gas sector is affected by economic indicators, and they help determine prices for petroleum and natural gas products. ... Read Full Answer >>
  5. How were bonds and derivatives manipulated in the LIBOR scandal of 2012?

    The LIBOR scandal was the systemic rigging of the overnight rates reported by banks to increase the value of bonds and derivatives ... Read Full Answer >>
  6. What is the difference between macroeconomics and finance?

    Economics is a broad category that encompasses both macroeconomics and finance. Macroeconomics refers to behaviors of large ... Read Full Answer >>
  7. What is the difference between the consumer price index (CPI) and the producer price ...

    The consumer price index, or CPI, and the producer price index, or PPI, are economic indicators, and although both quantify ... Read Full Answer >>
  8. What economic indicators are especially important to oil traders?

    Economic indicators are used by traders and investors in an attempt to understand the underlying fundamentals of the market. ... Read Full Answer >>

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