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Top Five Economic Indicators

Part of the Economic Indicators For Dummies Cheat Sheet

Looking for the best economic forecasting tools? Here are a few investor favorites that you can use to improve your investment decisions:

  • Unemployment insurance: A rise in unemployment insurance claims is one of the earliest signs of a faltering economy. A one-week rise doesn't foretell a recession, but a persistent increase usually does. The Unemployment Insurance Weekly Claims Report tracks job losses throughout the country.

  • Personal spending: Consumers make the U.S. economy grow. When consumer spending rises, so does the economy. Likewise, when spending slows, a recession is likely to follow. Stay up to date with consumer spending habits with the Personal Income and Outlays report.

  • Consumer sentiment: Consumers cut back on their spending when they're worried about their financial future. The University of Michigan's Consumer Sentiment Index is an excellent way to find out if people are worried or optimistic about their economic future.

  • Business sentiment: Purchasing managers are the consumers of the business world, which is why it makes sense to ask them how businesses feel about the economy. The Institute of Supply Management does just that with its Manufacturing Report On Business®.

  • Inflation: When the Federal Reserve (the Fed) is on the lookout for inflation, it puts investors on pins and needles. If the Fed thinks inflation is rising, it'll put on the economic brakes by raising interest rates. Although knowledgeable investors and economists at the Fed use the PCE price deflator (PCE stands for personal consumption expenditures; the deflator is also called an implicit price deflator) to track inflation, the most popular inflation indicator is the Consumer Price Index (CPI).

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