What it is:
An economic indicator is an index or other data that suggests whether the is expanding or contracting.
How it works/Example:
For example, the U.S. Department of factory orders every month. The information is divided into four parts: new orders, unfilled orders, shipments, and inventories.
The report includes information about durable goods and nondurable goods. data is often not very surprising, if only because the report of durable goods orders comes out one or two weeks earlier.
When factory orders increase, the is usually expanding as consumers demand more goods and services (which in turn require retailers and suppliers to order more goods from factories). that increases in factory orders could also that inflation may be just around the corner. When factory orders decrease, the economy is usually contracting -- there is less demand for goods and services and thus less need to reorder supplies. Thus, the factory orders report is an economic indicator.
Why it matters:
Economic indicators can help investors decide where to market -- that is, to predict the bottom of the to sell at the optimal time and then predict the top of the cycle to buy at the optimal time. This can be hard, given the fact that some countercyclical start sliding before a recovery has actually begun, but economic indicators can point to where the is headed, making the decision easier.their . For example, as the slows, countercyclical companies grow. Investors attracted to in countercyclical industries are faced with the arduous task of trying to time the