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Economic Indicators - Meaning, List of Top 10 Leading Economic Indicators - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
of WallStreetmojo friends today we
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are going to learn a topic that is the
top 10 economic indicators what exactly
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to look and do and why so let's get
started that the top 10 economic
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indicators see even before getting into
the content about this topic is
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basically subjective not to mention that
it is it could be fairly little bit
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misleading no it's ok we can start with
this the first and the foremost thing
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that we can study the first indicator
the indicator that you should go for is
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the GDP and the GDP growth rates so you
can say well there is a lagging
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indicator generally they are fundamental
factor to look at look at the finance
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news for the same and and you would
notice that the IMF or some other
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institution has revised the GDP growth
rate forecast of a country GDP or gross
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domestic product is the monetary value
of the goods and service produced in the
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country the second indicator that you
should go look and do is you can see the
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debt and basically their ratios you can
say and the cycles so debt ratios debt
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cycles and so on and so forth so this is
leading indicator we can say that this
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is leading indicator a fairly large
stopping in itself but very important
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that is essentially pouring money and
comes in to two forms one is the private
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debt that issued by the corporates and
other institutions loans taken by
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individual groups of the individuals and
there is called a public debt borrowing
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by governments so the money borrowed can
be used in many ways depending upon who
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is issuing it very important and
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this money borrowed can be used in many
ways depending upon who is actually
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showing the debt to finance asset
purchases and to pay equity holders to
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the fund projects and to take levered
risk on the trades and when there is
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more boring than the ability to pay down
the dues and that's a different case so
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thus there is a limit to how much debt
can or should be taken other ways in
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which debt can be taken is either
domestically or from abroad
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now the third indicator that you can
ponder into is the inflation and
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inflation expectation okay that's the
third thing you should go and do now
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while you may think that there isn't a
much explanation to do about inflation
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as you already know it but it could be
mistaken inflation takes different forms
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to me as a vague indicator which I
wouldn't like to delve into but it has
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been and will be really important one
for the economists the economy and the
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policymakers investors in the trade
alike so apart from the various types of
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the inflation the metric commonly used
are like CPI they also use like WPI that
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is the wholesale price index now then
they have the PCE that is the personal
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consumption expenditure and GDP deflator
so in general excessive inflation can
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cause a fall into exchange rates high
interest rates to cover it and demand
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and supply side issue and blowing up
through the prices economic terrorism
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where everyone is a basically a hostage
no foot what you should look into is the
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exchange rate okay exchange rate
stability is the fourth thing that
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you should go for the word stability is
very important over here exchange rate
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in general compared with the US dollar
tells us how much one unit of the US
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dollar would fetch in terms of the
domestic currency like let's say for
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example India's exchange rate is Rs.67 per US dollar within the exchange rate there
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are two areas where you must focus on
first thing is the nominal effective
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exchange rate that is any ER which is
just the exchange rate weighted
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according to the trade and other
countries and there is another thing
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that's called REER so there are
two thing NEER and REER means
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the real effective exchange rate which
adjusts the exchange rate comparing it
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with the basket of the other currencies
adjusted for inflation and that's enough
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to know about right now now you can say
that the fifth indicator that will following
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is the interest rates now why this
is important see of late the 10 years
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benchmark interest Treasury bonds of
Germany Switzerland Japan and in in few
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other countries have been healing
negative interest rates you lend money
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and get back get paid back less when the
amount is due crazy enough right but
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that's the world we live in
negative policy rates in countries
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suggest poor economies and very low to
negative 10 years bond rate can
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indicate a heavy safe heaven investments
or possible recession
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so if Treasury creel curve is
downward-sloping so during this
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financial crisis of 2008 we have known
about the credit spread all right for
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you credit spread blue or the roof and
cause the corporate distress and deforms
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the sixth indicator is basically the
gold prices and other metal prices rate
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the gold is considered as a safe have an
asset and tends to go up in the value if
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there is a recession
like tendency in the world economic just
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like prices of viewers in German t bonds
although there are deep of facets to
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understand in gold price movements by
the precious metals like silver and
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platinum prices also must must be looked
into confirm our take on gold now why
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they are seen close enough to and 2015
or or gold prices had almost Dutch close
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enough to dollar $1050/oz
and the changing critical complexion of
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the world from moderately safe too risky
caused heavy allocation of money in gold
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and it currently trades in the range of
one 1350 but that's a pretty
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interesting thing the seven indicator
that you should ponder into is the stock
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markets and volatility you can say stock
markets and volatility
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now a leading indicator they are
basically the first thing that comes to
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our attention in the morning if you have
got to money at stake
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it reflects the sentiments of the
investors and traders alike on the
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companies that form the stock index and
macro decisions that affects their
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sentiment so volatility is the risk we
see due to the large fluctuations on
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either side of the index when it's
tilted more to the downside market
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volatility is measured in the volatility
index the next thing that you should go
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for is the risk premiums this is really
important risk premiums are generally
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lagging indicators and give you a sense
of the perceived riskiness of the
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different security index simply put they
are like extra
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you can say expected return that you get
for facing the volatility it's like RP
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your risk from the market minus the risk
from the you from your free risk a
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risk-free rate that is your risk premium
so when coupled with slow growth and
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other slowdowns this could actually
affect the country's credit rating given
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by the credit rating agencies like S&P
and Moody's now why exactly this
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premiums are there see during the credit
crisis of 2008 credit spreads blue over
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the roof below like you know you can you
can understand that serious freedoms
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around 2008 crisis were like crazy it
has it had gone way beyond the mark that
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one could even imagine so that's why
risk premium has an at most importance
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then the next thing that you should look
into is the budgets deficit and
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surpluses an FDI flows FDI flow also
plays a very important role then there
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is deficits and surplus that's basically
you can see the balance of payment and
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balance deficit a good government that
makes progressive steps and tries to
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achieve its budgetary targets are
generally rewarded and what follows is
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like good stock market performance
possible FDI and a better credit rating
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etc so higher deficit has to be financed
and is generally done by showing government
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debt thereby raising money so this again
gets linked into the debt spiral and
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weakening the exchange rates so surplus
would reduce debts but may reduce the
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incentive to push reforms ahead given in
the economic seemingly look strong so
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strong and consistent FDI are an unambiguous good while weakness would indicate a
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drop in the police sentiments the last
thing that you should look into is the
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crude oil prices now this has become
even more important since crude oil fell
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from around 120 barrel 250 barrel
in 2015 this is like the most important
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thing nowadays then less to 25 barrel in
2016 if you weren't aware of it so here
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you know basically you need to look into
how the prices are getting drop crude
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oil is a major component which tends to
affect the crude importing economies and
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energy related industry positively when
it's it's rise Falls if they are in net
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importers are negatively if they are at
net exporters
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so let's let me finally conclude on
the whole topic we have possibly covered
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the whole gamut of economic indicators
to give importance in every single
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heading technically they are easily more
than ten economic indicators mentioned
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but keep in mind that political factors
is equally important and to be coupled
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with the economic ones so the most
important economic indicators to choose
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from the about ten combining all of them
to come up with your independent stands
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is the best and the most important of
all good luck working on that
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