Economic Indicators - useful for International Business
Table of Contents:
Leading Indicators
Economic indicators that help to inform analysts about the direction of the economy:
OECD leading INTERNATIONAL indicators:
- http://stats.oecd.org/wbos/Index.aspx?DatasetCode=KEI
- www.oecd.org/std/cli
- Example from January 2009: http://www.oecd.org/dataoecd/33/21/41968144.pdf
- Access to time series data and methodological information for OECD Composite Leading Indicators (CLI) and Consumer and Business Confidence Indicators is provided by the OECD Business Cycle Analysis Database available at the OECD web site at http://stats.oecd.org/mei/default.asp?rev=2
Indicators to avoid
- leading home pending sales
Commodities as Leading-Indicators:
commodities make for good GLOBAL indicators because of the international orientation of most commodity markets. For this purpose, these are some of the best internationally traded commodities, which are useful:
- Copper: 3rd most heavily-used metal. it is cheap and heavy, making storage inefficient...any copper bought is used relatively quickly. when the price rises, it is almost always because of a construction or infrastructure boom. it is mined and refined all over the world and is used all over the world.… that copper is the metal with the Ph.D. in economics in that copper has tended to rise during periods of economic strength and has tended to wane in periods of weakness. Now, however, we prefer saying that the base metals in aggregate have a Ph.D. in economics, for they do tend to rise when the global economy is rising and fall when the global economy is falling. see mining and metals
- Cement: basically all the same reasons as above, provides good check for copper
- Rice: grown in several regions and consumed in most regions...only setback is that it is a staple of many Asian diets, so it skews the consumption...usually a great indicator of other agricultural commodities and tends to "lead the pack." (concern: rice might not be good because it is really not traded. most rice is consumed in the market where its produced (with the exception of a few countries such as Thailand, its mostly because of export barriers).
- Soy: similar to rice...good to use as a check...also, heavily used in animal feed
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see also: commodity and mining and metals
Economic indicators & leading indicators:
see also USA macro data
lots of data here: http://www.federalreserve.gov/releases/
US government site: Joint Economic Committee by the Council of Economic Advisors: http://www.gpoaccess.gov/indicators/
Conference Board indicators:
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More Indicators:
Macro Economic Growth
- GDP
- Cyclical indicators such as the Economic Sentiment Indicator (ESI), which correlates closely with year-on-year GDP growth
"Surprise" index:
Citigroup is one of a number of institutions that calculates an "economic surprise index", which measures data outcomes relative to consensus expectations. The real economy aftershock of the Lehman collapse generated a steady skein of worse-than-expected data. More recently, however, analysts seem to have "caught up", and so far this year the data has, in aggregate, come out in line with expectations. source: MacroMan blog
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Predicting Defaults:
"The risk of corporate debt is often measured by looking at the spread between its yield and similar ‘risk-free’ government debt. The higher the spread, the greater the risk. However, when government credit comes into question, this spread is no longer suitable as a measure of corporate risk. The spread does, nevertheless, tell a story about relative risk. In Greece, Ireland, and Portugal, a number of sectors have negative corporate spreads, suggesting that firms are either less likely to default than their governments or will have higher recovery rates if they do default. The sector that stands apart as being much riskier than the government is financials. If these governments partially default, the guarantees they have made to the banking system are no longer credible, and the credit losses may be severe." See chart here
Spread of Junk bonds (high yield bonds) over Treasuries:
If the spread of junk bonds over comparable Treasuries widens, that is a good indicator that bond traders are expecting a recession. Risk premiums, or spreads, on speculative bonds in 10/2008 (the middle of the credit crisis) widened to the highest level since the great depression, indicating that bond speculators were pricing in a huge recession.
Shipping as leading indicators....Baltic Dry Index:
a benchmark for global freight costs (indicator that mirrors price of shipping bulk products such as iron ore, coal or grains) read more here:
- http://www.bloomberg.com/apps/quote?ticker=bdiy&exch=IND&x=15&y=11
- http://www.slate.com/id/2090303/
- http://en.wikipedia.org/wiki/Baltic_Dry_Index
read more here: Bespoke Investments
PMI -
another leading index: measures the rise and fall of manufacturing in the USA....is a leading indicator of economic activity
Venture Capital confidence indicator:
http://www.usfca.edu/sobam/nvc/pub/svvcindex.html
The Silicon Valley Venture Capital Confidence Index hit an all time low of 2.77 in the fourth quarter. (The survey ranks confidence from 1 to 5, with 1 being the lowest.) It was the fifth consecutive new low since the index began in the first quarter of 2004. The index is compiled by Mark Cannice at the University of San Francisco. He contacted 33 San Francisco Bay Area VCs and asked them about their outlook for the entrepreneurial environment for the Bay Area over the next six to 18 months.
Cardboard sales to indicate manufacturing / shipping in Brazil
Cardboard sales, a key measure of economic activity, fell 4.5 percent in December from a year earlier, the Brazilian Corrugated Paper Association said this week.
Geographic-specific indicators
China
Chinese economic data: Reading China's palm | The Economist
Reading China's palm. A new leading indicator for China's economy. May 20th 2010 | BEIJING | From The Economist print edition ...
www.economist.com/businessfinance/displaystory.cfm?story_id...
Leading sites for Trend watchers
links:
ECRI maintains well over 100 proprietary indexes for 20 major economies. Our complete index database is available as part of our Professional Services, which also includes analysis and forecasting.
Future prediction?
Here is a list of sites that try to predict what is going to happen next....enjoy...
Links from GloboTrends
see our discussion of global trends
economic indicator
blog Spread of Junk bonds (high yield bonds) over Treasuries: If the spread of junk bonds over comparable Treasuries widens, that is a good indicator that bond traders are expecting a recessio…Brian D Butler edited 6 hrs ago
- Credit Default Swap (CDS) market
in credit spread. Pricing: if the price is 85 basis points, that means that it costs 83,000 euros to insure 10 million Euros of debt over 5 years. Examples: 5-year Spa…Brian D Butler edited 1 mo ago
- Crisis watch
Credit-default-swap spreads on its government debt have surged to horrifying levels, signalling that investors see a high risk of default. Asia Export-dependent countries: would normally do wel…Brian D Butler edited 1 yr ago
- bid-ask spread
sp; Bid-ask spread how a broker makes money in a stock market . Lets say you hear a quote of 100-100 1/4, that means that the broker is willing to buy at 100, and is willing to sell at 100.25.…Brian D Butler edited 1 mo ago
- bond
an excel spreadsheet, or financial table...find the annuity factor for time = T, and rate = r, and plug into this formula: PV = C * annuity factor + Future payment / (1+r)^t. 3. Consols: a uniqu…Brian D Butler edited 8 hrs ago
- Carry Trade
imaginable, credit spreads, bond spreads; everything is poisoned. It's going to come to an end later this year and it's going to be ugly, even if we haven't reached the shake-out just yet. People have a Panglossian beli…Brian D Butler edited 1 yr ago