Top 10 U.S. Economic Indicators

In addition to company and industry data, the state of the overall economy can provide insight to investors for their decision-making. For instance, when considering whether to invest in a company that depends on consumer spending, it's useful to know whether the economy faces a recession.

Economic indicators provide information about an economy and whether it is expanding or contracting. Most indicators are released monthly by government departments and agencies. They typically report on activity in the previous month and year for comparison purposes. Here are ten important U.S. economic indicators that investors watch.

1. GDP

The gross domestic product, or GDP, of an economy provides the overall value of the goods and services that economy produces and indicates whether it is growing or slowing.

The Department of Commerce’s look at the quarterly change in GDP breaks down the activity into changes in consumer spending, business investment, and government spending, as well as the net impact of foreign trade. The government puts out a preliminary first estimate, updates with a revised second reading as it gets more input, and then delivers a third and final report.

2. Employment Figures

The Department of Labor puts out a monthly release on employment that includes the number of jobs created the previous month by the private sector, the government and some specific industries, as well as the national unemployment rate. Low unemployment can point to a strong economy, but can also predict rising inflation.

3. Industrial Production

Industrial production is a measure of output of manufacturing-based industries, including those producing goods for consumers and businesses. This monthly release from the Federal Reserve also reports on capacity utilization in the factory sector.

4. Consumer Spending

Consumer spending accounts for two-thirds of U.S. gross domestic product and is a good gauge of consumer health. The Department of Commerce’s monthly release on personal income and outlays provides data on consumer spending. It also provides information on inflation through a price index that reflects changes in how much consumers have to spend to buy certain items.

5. Inflation

Inflation is the general price level rise of goods and services in an economy. Too much inflation can mean the economy is overheating while very low inflation can be a harbinger of economic recession.

Depending upon the selected set of goods and services used, multiple types of inflation values are calculated and tracked as inflation indexes. The most commonly used inflation indexes are the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). The Producer Price Index (PPI) is also used to measure inflation as it relates to producers.

6. Home Sales

Home sales represent a major purchase for most people. Thus, the Department of Commerce’s monthly report on new residential sales speaks to consumer sentiment.

This report, based on contracts to buy new or existing homes, provides input on sales of single-family homes regionally and nationally. It also reports on median and average sales prices. The National Association of Realtors (NAR), a private realty trade association, puts out a monthly report on sales of existing homes, based on closed sales.

7. Home Building

The number of houses that builders started working on, as well as the number of permits that they obtained to start building houses, indicates real estate developers’ confidence level in the economy. The Department of Commerce’s monthly release on new residential construction provides this regional and national information.

8. Construction Spending

Another construction-based indicator is the change in monthly construction spending, in dollars, nationally. This spending encompasses various construction-related expenses, such as labor and materials and engineering work. The Department of Commerce's report provides a breakdown of residential and nonresidential public and private construction.

9. Manufacturing Demand

The report on manufacturers’ shipments, inventories, and orders gives an indication of demand for manufactured items. The Department of Commerce puts out a preliminary monthly report and a more lengthy report as a follow up. They break down manufactured goods by many types and industries, from electronic instruments to machine tools to nondurable consumer goods.

10. Retail Sales

The Department of Commerce’s monthly release on retail and food services sales is an indication of consumer spending health. This report shows retail sales in various sectors, such as department stores, furniture stores, and home furnishing stores.

The Bottom Line

No one key indicator paints a complete picture of the state of the economy. However, a combination of indicators—such as the top ten key economic indicators described above—can be used to inform a variety of economic and investment decisions.