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The Complete Idiot’s Guide to

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The Complete Idiot’s Guide to Economic Indicators

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Chapter 4

 

GDP and Monthly Indicators

 

Introduction from Chapter 4

 

In Chapter 3, you got an introduction to the big picture of GDP. Now, you’re going to learn some fascinating details about monthly indicators’ relationships to GDP. By the time you finish this chapter, you’ll have a solid grasp on how these indicators lend insight into GDP components. And it’s not as complex as you might think.

 

You already understand some basics of GDP, so we’re going to hit the ground running. Grab your beverage of choice, get comfortable, and hop back onto the path of becoming a savvy market watcher!

 

The bottom line is we want to know how monthly economic indicators give us the big picture for the economy.  GDP paints a broad picture of what going on and actually condenses the major sectors into four manageable parts. Now we want to learn which monthly indicators impact those four parts (C + I + G + Net Exports).  How do we start to tie together the monthly indicators to get the overall direction of the economy?  Tie them in with GDP components!

 

There are two basic ways of viewing monthly indicators in their relationship to GDP components. First, some series are source data for GDP. The Commerce Department uses those indicators to estimate portions of GDP. Second, other monthly indicators suggest how strong or weak a particular GDP component is in coming months. The expenditure approach to GDP helps you to think about how other economic indicators fit into the big picture, such as which indicators tell you how strong the consumer sector is currently in GDP.

 

GDP divides the expenditure view of the economy into relatively tidy categories that have common factors affecting that sector’s growth. When you learn the basic GDP expenditure components and their fundamentals, you’ll think like an economist! It may seem daunting now, but by the time you finish this book, you’ll understand the underlying factors that determine the strength for a sector. These factors are what economists call sector fundamentals.

 

Web Links for Chapter 4

 

Key Source Data for GDP

 

Chapter 4 talks about learning what key series go into estimates for gross domestic product.   It also goes into what the behavioral characteristics are for various components of GDP (such as personal spending versus exports).   Basically, you can tie subsequent chapters (such as Part 2 on the consumer sector) with economic indicators to the related behavioral components of GDP.  An example listed is the employment situation report gives lots of clues about the health of consumer spending.

 

However, you may be interested in the current data that make up most of the estimates for the latest quarter of GDP.  This would be the source data.

 

First, the Commerce Department lists the primary source data used in each quarter’s advance report (first estimate) for GDP. 

 

So, you can start by looking at the advance estimate found at the main link at the Commerce Department.

 

Or you may want to look at the advance report in historical releases of GDP.

 

 

 

Here’s a list of the main source data for GDP components. 

 

Personal consumption expenditures

Unit new motor vehicle sales

Retail sales excluding autos

 

Nonresidential investment, structures

Nonresidential construction outlays

 

Nonresidential investment, equipment and software

Shipments (from the durables report) of nondefense capital goods

Exports and imports of capital goods from the monthly international trade report

 

Residential investment

Residential construction outlays

 

Change in private inventories

Monthly business inventories report

 

Government consumption expenditures and gross investment

Monthly Treasury Statement

Construction outlays, public

 

Net exports

Exports and imports from the monthly international trade report

 

 

The long, detailed list can be found at the Bureau of Economic Analysis web site for National Economic Accounts.

 

Look under “Supplemental Estimates,” “Underlying Detail Tables

 

 

 

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