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An economic indicator is a statistic that indicates the current status of the economy, and how the economy will likely perform in the future. Investors and other private or government organizations use this information as a tool to make business decisions. By gathering historical data about the economy and comparing it to current trends, you can compile a snapshot of economic fluctuations. The direction of an indicator may vary according to changes in the economy. The indicator can be leading, lagging, or coincident. Leading indicators are changes before the economy has recognized the change. Lagging indicators do not change until a few quarters after the economy has change. Coincident indicators move at the same time as the economy. GDP is a known coincident indicator (Economic About, 2006). Some of the common indicators are Real GDP, Retail Sales, Unemployment Rate, Inflation Rate, Housing Starts, and Savings rate. As the explanation of these six indicators will be use to forecast the future of the economy, the trend of these indicators will also be used to evaluate the economy's historical and future outcome.
Real GDP
Real Gross Domestic Product (GDP) is used and described as "the Federal Reserve's primary goal is sustained growth of the economy with full employment and stable prices. Real GDP is the most comprehensive measure of the performance of the U.S. economy". (Federal Reserve Bank, 2006). The Federal Reserve Bank continues to say "By monitoring trends in the overall growth rate as well as the unemployment rate and the rate of inflation, policy makers are able to assess whether the current stance of monetary policy is consistent with that primary goal. ...