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
Investopedia explains '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.