Making Sense of Economic Indicators: A Consumer's Guide to Indicators of Real Economic Activity
This article develops and implements a set
of procedures for evaluating indicators of economic
activity that closely match the actual use
of such indicators by policymakers and businessmen
alike. We see that process as primarily
involving the reassessment of short to medium
term economic activity based on an indicator by
indicator analysis, with the primary decision
matrix being whether to revise the assessment of
activity up or down. We do not address related
issues of assessing long run growth, inflation,
interest rates or the value of the dollar. Evaluating
indicators in this context has four primary
parts: ranking candidate indicators; characterizing
the nature of the information in those indicators;
assessing their usefulness in practice; and
determining what relative weight should be
given to each indicator. The idea is to develop
the information that an analyst needs in order to
interpret information as it comes in and to
choose which indicators to watch depending on
the questions being asked.
