Key indicators may provide better picture of outlook for economy

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If you follow financial news closely, you may have noticed there is a lot of economic data that's discussed and debated to determine the overall outlook for the econorny. But what economic indicators should you pay closer attention to? And what do they mean?|ret||ret||tab|

Economic indicators help forecast where the economy is headed based on data reflecting either economic performance of the recent past or expected future performance. For example, one of the leading and sometimes overlooked economic indicators is the stock market. The stock market usually provides investors with a three- to six-month forward view of the economy. |ret||ret||tab|

When using the market as an indicator, it is important to look at its long-term performance and not the daily swings. While it can provide a good outlook for the economy, the stock market is not the only indicator experts follow closely. Other indicators of particular interest include:|ret||ret||tab|

Unemployment rate. This monthly rate shows what percentage of the country's work force is unemployed at a given time. A declining rate is a good sign for the economy. If this indicator is low, it means companies are hiring again and creating more jobs for workers. |ret||ret||tab|

We have seen such low rates of unemployment in the last few years that during the most recent recession, when the rate climbed to 5.8 percent, it seemed to be very high, even though it was lower than the rate of any other recession we have had. Generally speaking, an unemployment rate above 6 percent is considered high and a rate below 5 percent is considered low.|ret||ret||tab|

Retail sales. This monthly economic indicator measures the strength of consumer spending across the country and the demand for the goods that companies produce.|ret||ret||tab|

This indicator tells us how much people are willing to buy, and what the demand is for goods and services.|ret||ret||tab|

To have a strong and healthy economy, retail sales figures should go up with time.|ret||ret||tab|

Economically speaking, it is not good to see consumers cutting back and spending less because if the demand is low, companies will begin producing less|ret||ret||tab|

A continued gain in sales is ideal and economists say retail sales are now running a bit ahead of what the figure was a year or so ago. Even during the recent recession, many economists said retail sales held up pretty well.|ret||ret||tab|

Interest rates. Interest rates determine how much it will cost to borrow money for both near-term and long-term purchases. The Federal Reserve meets every six to seven weeks to discuss possible changes to interest rates, among other topics. |ret||ret||tab|

For example, when interest rates are going down, it is usually a sign that the Federal Reserve is trying to help jump-start the economy by making money cheaper to borrow. It often takes some time for lower rates to help improve the economy as more than one rate cut is usually required to see a significant effect on the economy.|ret||ret||tab|

The number of changes by the Federal Reserve is not as vital as the size of the changes, For instance, if rates are cut too low, it could create inflation and the economy could overheat. On the other hand, rising interest rates are a sign the economy is strong and does not need help.|ret||ret||tab|

Many economists believe we have a healthier economy now than 20 years ago, mainly because we now have better control over inflation. |ret||ret||tab|

As long as inflation is not stealing the purchasing power from consumers, consumers are able to spend more, allowing companies to produce more for people to consume, which can mean good news for both the economy and the stock market.|ret||ret||tab|

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