If you have no idea what CPI, PMI, or ECI mean, then you are like most beginning
investors. Let me explain these and a few others terms to enhance your knowledge
of indicators that affect your investments.
Economic indicators are used by the Federal Reserve to monitor inflation. When
they reflect inflationary pressure, the Fed will increase interest rates. Conversely,
when they show signs of deflation, a decrease of interest rates becomes imminent.
Interest rates are important for the economy because they influence the willingness
of individuals and businesses to borrow money and make investments. An
increase of interest rates will cause a downturn in the economy, while a decrease
will fuel an expansion.
The purpose of this guide is to explain in simple terms, the twenty economic
indicators followed by most investors and analysts. The next time you hear these
terms in the media and or financial press, you can use the information in this guide
to evaluate their potential effect on the economy and ultimately your portfolio.
