How Understanding Economic Indicators Can Help Investors

On Wednesday, U.S. stock markets finished lower after the Federal Reserve said economic growth had slowed in recent months. Last week, markets (1)……………………………………………. based on good and bad news about the European financial crisis. Before that, the Dow Jones Industrial Average surged on the news that the housing crisis could finally be coming to a close.

In each case, these market shifts were caused by what are known as economic indicators, or single points of economic data that (2) ……………....................................... There are indicators for all aspects of the economy, from consumer spending to housing.  In recent months, these individual data points (3) ……………………………………………… each day

Since May, the Dow has fallen 1,000 points, but (4)…………………………………. ..

These swings are (5) ……………………………………………. based upon a seemingly irrelevant piece of economic data.

Lisa Kirchenbauer, president of Omega Wealth Management in Arlington, Va., says the key to understanding indicators is to spot larger trends. One positive indicator might sway the market for a day or two. But a series of positive indicators has the ability to affect the market over the long term. However, Kirchenbauer says there are economic indicators that are (6)………………………………. .

For her, the most relevant indicators are tied to consumer behavior, (7)……………………………….. . "I think that retail sales remain important given our consumer-driven economy," she says.

"Unemployment numbers are a great example of an indicator that you need to take with a grain of salt, since they are (8) ………………………………………………..[and] they have all kinds of seasonable adjustments that may or may not show an accurate picture," she adds.

Kirchenbauer also says investors should pay attention to numbers related to the construction industry, and that manufacturing new orders can (9) ……………………………. "Consumer expectations may be worth watching, but can also be overly optimistic or pessimistic depending on what is going on economically and politically," she says.

Ernest Dawal, chief investment officer of wealth and investment management for SunTrust Banks says the most important indicators are tied to what he calls the three legs of the spending stool: the individual, business, and government spending rates.

According to Dawal, the individual rate shows how consumers feel about their personal finances: The more optimistic they are, the more they'll spend. An increase in the government spending rate (10)……………………………….. , while a decrease will serve as a drag. As for business spending, Dawal says, "If businesses are finding a reason to spend, that bodes well for future economic activity."

money.usnews.com August 2, 2012

NOTES

1. the Federal Reserve System (the FED) – Федеральная Резервная Система (ФРС) выполняет функции Центрального Банка США

2. Dow Jones Index – фондовый индекс Доу Джонса, рассчитываемый для промышленных и транспортных компаний на Нью-Йоркской фондовой бирже с 1897 года. Наиболее известен промышленный индекс Доу Джонса (DJIA), включающий акции 30 ведущих монополий.

3. consumer sentiment index – индекс потребительских ожиданий./настроений - представляет собой результаты опроса потребителей на предмет уверенности в текущей экономической ситуации и отражает готовность потребителей тратить свои деньги. Опрос проводится сотрудниками Мичиганского Университета США.

4. business sentiment index – бирж. индекс общего состояния экономики (является средним арифметическим двух подындексов: текущего состояния экономики и предпринимательских ожиданий

5. given – учитывая, что…

6. to bode well/ill for… - сулить хорошее/плохое