Question

Discuss any four or more macroeconomic indicators and explain how each economic indicator assists investors in predicting the price movements .

Answer 1

Economic indicators for investor are as following

1)Real GDP

2) Consumer Price index

3)M2 (money supply)

4) Employment statistic

Lets discuss them one by one

1) Real GDP(Gross domestic product):

Gross domestic product is important indicator of any country’s growth, GDP for a country means goods and services produced in a country for a given period, GDP also has types real and nominal however we use real GDP as it gives the true picture of economic growth for a country as the real values are adjusted to inflation while its not adjusted for nominal GDP

Central bank also adjust the monetary policy according to GDP data it also shows its sovereign debt in a nutshell it gives a snapshot of country’s growth which would be useful for investor can decide whether to invest in particular country.

2)Consumer price index:

Also called CPI which indicates the change in prices of goods and services by the residents

It takes sampling of several goods and services, it is used by many investors as an inflation data which helps investor to find good investment opportunities, high inflation is usually termed as

Negative for investors, central banks decide to change the rates based on inflation data as well.

3)M2( Money Supply):

M2 is important for any country basically M2 means M1 plus accounts of all the depositors that can be converted to physical cash in short period may be less than one month.

M2 includes money market accounts, saving accounts, retirement accounts and small denomination deposits, it shows the liquidity in a country and it is useful for central banks for monetary policy also helps investors to as an indicator for a money supply.

4)Employment statistics :

Employment stat for a country is an indicator of economic success ,indicators of employment like employment and payroll data shows the well being of labour force and overall economy which ultimately contributes to the GDP of the country, it also shows the wages given which also shows how the labour force compensated gives the picture of unemployment too, every investor should keep a track of it in order to predict the market.