gordeeva_o_g_praktikum_po_perevodu_ekonomicheskih_tekstov_s

report is typically two months old, owing to the length of time involved in closing home sales. It is useful in predicting consumer spending, and is directly affected by factors, such as mortgage interest rates and the seasonal nature of the real estate business.

• The Consumer Confidence Index (CCI) is released by the Conference Board and is one of a handful of reports that measure respondents' perceptions and attitudes. It is inexact and imprecise, but surprisingly accurate in projecting consumer spending, which accounts for 70% of the economy. The survey sample size (5,000 U.S. households out of roughly 120 million) is small, and thus economists use a multimonth moving average to examine the report.

•The Business Outlook Survey is released by the Philadelphia Fed and surveys purchasing managers at 5,000 manufacturing companies in Pennsylvania, Delaware and New Jersey, collecting "better", "same" or "worse" readings on a host of measures. Its limitations - a small sample size, limited geography and a manufacturing focus - do not prevent it from accurately gauging the key Purchasing Managers Index (PMI) report it precedes. Month-to-month variance in the readings is due in part to the small sample size.

•The PMI is released by the Institute for Supply Management, formerly the National Association of Purchasing Mangers. The report collects "better", "same" or "worse" information from a mere 400 purchasing managers throughout the country and compiles it into an index. Despite its small sample size and focus on manufacturing, Wall Street watches it closely given its historical reliability in predicting growth in gross domestic product (GDP).

•The Durable Goods Report (DGR) is released by the Census Bureau. As a barometer for the health of heavy industry, it surveys manufacturers of goods with a life expectancy of more than three years. Such purchases by businesses signify capacity expansion; sales at retail suggest rising consumer confidence. High month-to- month volatility requires the use of moving averages and year- over-year comparisons to identify pivot points in the economy.

•The Factory Orders Report also comes from the Census Bureau; it is more detailed and less timely than the DGR. Its main

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shortcoming is that it fails to account for price changes that can greatly affect inventories during both inflationary and deflationary times. The report contains data for the two months prior to its release, making it another "leading from the rear" indicator.

•Mutual Funds Flows is a measure issued monthly by the Investment Company Institute. This indicator aggregates net flows for stock, bond and money market mutual funds, but it is largely ignored for several reasons, including that this report omits individual stock purchases and sales, and does not differentiate between systematic investing and market timing actions. It is also a contrarian indicator in that many individual investors react to events by, in effect, buying high and selling low. Money market fund flow is reported separately by the Federal Reserve.

Conclusion

Leading economic indicators can give investors a sense of where the economy is headed in the future, paving the way for an investment strategy that will fit future market conditions. Leading indicators are designed to predict changes in the economy, but they are not always accurate so reports should be considered in aggregate, as each has its own flaws and shortcomings.

Wikipedia, the free encyclopedia

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The French government has scaled back its forecast for 2005 economic growth. But even the lower version may prove too optimistic.

On June 21, Finance minister Thierry Breton said growth in real gross domestic product for 2005 will probably total less than 2%, instead of the 2% to 2.5% projected earlier. Unlike last year, when real GDP grew 2.1%, consumers are not fueling growth. In May, household spending on manufactured goods took an unexpectedly large drop, falling 0.9% from April. And while business confidence picked up in June, it remains well below the readings of 2004.

Consumers are struggling with higher energy costs and a weak job market. Big job losses in the factory sector led the 6,000 drop in first quarter payrolls. By April, the jobless rate had hit a five-year high of 10.2%, with more increases expected. Indeed, worries about protecting jobs and working conditions were a key reason given for the defeat in France of the European Union Constitution.

Because of the “no” vote, new Prime Minister Dominique de Villepin has unveiled a 4.5 billion euro plan to create jobs and loosen up hiring laws for small companies. Villepin hopes to have the plan in place by September when most French workers will return from their August holidays.

But any spending plan to boost employment will run up against France’s other major economic challenge: a growing fiscal deficit. With the economy slowing more than expected, the government is collecting

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less in taxes and paying more in social assistance than was budgeted. Unless the economy were to unexpectedly perk up, France will probably have a 2005 deficit equal to 3.1% of GDP. That would mark the fourth year in which France misses the EU limit on deficits, which is 3% of GDP.

A stronger economy this year does not seem likely. Private economists have cut their forecasts for growth, and even the government’s own statistical agency, INSEE, said on June 22 that real GDP expansion will probably be only 1.5%. Growth that slow will exacerbate France’s problems of weak job growth and a profligate government.

July Index Data Signal

Pickup in U.S. Growth

The leading index of economic health rose for the fourth consecutive month, signaling a widespread pickup in the rate of U.S. growth.

The Conference Board, a business-research group in New York, said its composite index of leading indicators rose 0.4% in July to 112,5, an improvement from the revised 0.3% increase in June.

The index has been showing steady growth, increasing nearly 2% from March. The improvement in the index – a composite of 10 different economic measurements that are believed to be forward-looking – resembles a similar performance at the end of 2001 and in early 2002, which was followed by strong economic growth.

“The bottom line is that the leading economic indicators are more favorable than any time since the recession started more than two years ago,” said Ken Goldstein, an economist at the Conference Board.

“With export growth still months away, the burden now falls on consumer spending and business investment,” he added.

Since the economy sank into recession in 2001, U.S. employers have cut more than three million private-sector jobs. As a result, the unemployment rate has climbed to a nine-year high of 6.2%.

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Вy the Numbers

The economy’s prospects look rather good. George Bush’s don’t

All presidents, whatever their confession or denomination, are closet numerologists. Numbers are how they read the mood and track the progress of the nation they govern. For George Bush, the numbers – rising casualty rates in Iraq, falling approval rating at home – have not been good of late. Hence he is turning with some enthusiasm to a happier set of figures: those tracking the American economy’s resilience and resurgence.

This week, he summoned his economic team to a meeting at his ranch in Crawford, Texas. Under a painting of a rodeo, they discussed an economy that is kicking strongly, but not bucking out of control. Output grew at an annual rate of 3.4% in the second quarter, a little slower than in the first. This was largely because firms chose to run down their inventories (subtracting 2.3 percentage points from growth) rather than making new stuff. With their shelves now depleted, companies are expecting to restock in the coming months and output is expected to rebound. Some analysts now forecast growth of 5% this quarter.

Momentum is gathering. Cars left the showrooms at a near-record rate in July (20.8m a year) and existing home sales reached all-time highs the month before (7.3m a year). Factories reported faster activity and fuller order books, especially for capital goods (up by 3.9% in June) that presage stronger investment. Even the federal government is doing well. So far this fiscal year, it has collected about $210 billion more in taxes than it had by this time last year.

Best of all, hiring is steady and sure. Employers added 207,000 workers to their payrolls in July, and 42,000 more than previously thought in May and June. They have hired about 200,000 workers a month on average since the end of January – not spectacular by the standards of the 1990s, but a marked improvement on Mr. Bush’s first term.

The Federal Reserve has digested the same numbers as Mr. Bush and reached a similar conclusion. There is much to welcome and little to fear in the economy’s current progress. This week, as widely expected, it raised interest rates by a quarter point.

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Unlike central bankers and presidents, the public at large sets little store by numbers. Only a fifth of those polled recently by CBS News thought the country’s economic fortunes were improving, whatever the statisticians might tell them. More than half disapproved of Mr Bush’s handling of the economy.

What explains their skepticism? In Mr. Bush’s first term he was dogged by the question: Where are the jobs? Now the question is: Where are the pay rises? Workers’ total compensation grew strongly for the three quarters that began in July of last year – strongly enough to alarm some of inflation hawks at the Fed. But these gains were probably not very widespread, confined to those lucky employees who collected juicy bonuses or cashed in their stock options. Last quarter, according to figures released on August 9th, compensation actually fell, in real terms.

Indeed, the picture is worse for workers than these figures imply. Not all of an employee’s compensation ends up in his pay packet. Much of it goes in the form of benefits, such as employer contributions to health insurance or pensions. According to the Bureau of Labour Statistics, the cost of such benefits accounted for almost 60% of the gains in compensation enjoyed by private-sector workers in the first quarter of the year, and nearly 35% of the gains in the second. By the bureau‘s reckoning, wages and salaries proper grew by only 2.4% in the year to June, slower than the rate of inflation.

Despite these meager pay gains, households are eager to spend whatever they get. In June, they earned just over $9 trillion (at an annual rate) in disposable income. They duly disposed of all but $1.9 billion (0.02%) of it. Households save so little of what they earn because they gain so much from what they already own. In the 12 months to March the value of their houses rose by $2.3 trillion, according to the Fed. Home prices rose by almost 15% in the year to June, the fastest in decades.

Can these gains continue? One simply cannot know for sure. Even if a bubble in the housing market does exist, the Fed believes it should do little about it.

As for Mr. Bush, he still has more than three years to achieve his goal of reforming taxes. But before he can hope to transform the American economy, he must hope the economy’s good numbers transform his own flagging ones.

The Economist August 2005.

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Improving on the Latin rate of growth

Three times in the past quarter-century, Latin America has played a leading role in global financial crises. So when investors around the world dumped risky assets in recent days, it made a refreshing change that Latin American shares, currencies and bonds were not singled out. That pointed to an economic transformation in the region. Taken as a whole, Latin America’s economies are doing better than they have for more than two decades.

In 2004, Latin America’s economies grew at an average rate of 5.9%, the fastest rate since 1981, as they finally pulled out of several years of stagnation (or worse in some countries). Though the pace has slowed a little, growth continues. Barclays Capital, an investment bank, reckons that in the first three months of this year the region grew at an annualized rate of 6%.

In some ways the growth looks more sustainable than in the past. Inflation, after a blip, averaged just 6.3% last year. Except for 2001, when it was 6.1%, that was the lowest rate since 1960s. The region has had a current-account surplus for the past three years. That is a sharp contrast with 1997, when growth of 5.55% saw a current-account deficit of 4.5% of GDP the following year – the unsustainable prelude to a wrenching round of devaluations and recessions.

Far from increasing its foreign debt, Latin America has used its growth to reduce it. Public debt is down too, from 72% of GDP in 2002 to 53% last year, according to the Inter-American Development Bank. That reflects stronger public finances. Bank calculates that the average fiscal deficit in the region has shrunk from 3.3% of GDP in 2002 to 1.7% last year.

All these changes have inspired a boom in Latin American assets. Stock markets have enjoyed three bumper years, and the risk premiums governments have to pay on their bonds have fallen to record lows. Unless commodity prices collapse and interest rates in the United States rise sharply, the region’s economies should sail safely through the current choppiness in financial markets, says Peter West, a Latin America specialist at Poalim Asset Management in London.

The Economist May 2006

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Taking a Turn for the Better

Japanese companies are more confident about their prospects despite a big export slowdown and oil prices near $60 per barrel. The optimism is an indication that the sickly domestic economy is being nursed back to health.

The quarterly Tankan survey showed a broad-based improvement in business confidence. The June index of large manufacturers rebounded to 18, from 14 in March. The brighter outlook trickled down to medium and small businesses as well as nonmanufacturers. One of the biggest jumps came from companies that provide services for individuals, a sign that domestic demand is improving.

Businesses remain cautiously optimistic about the coming months even as exports remain a big question mark. Brighter prospects at home have companies lifting sales and profit expectations. As a result, businesses are ratcheting up capital investment plans and hiring workers. Through May, payrolls have grown by 750,000 persons, with the strongest gains coming in full-time hires.

The nascent turnaround in the labor market is already having positive effects. Despite cool weather conditions, May retail sales were up 2.7% from the previous year. June auto sales rose 8.6%. Even the housing market is showing early signs of improvement, with housing starts up 3% in May from previous-year levels.

Better times are paving the way to other vital changes in Japan’s economy. Brisk demand and rising wages and bonuses should help end the more than seven-year run of deflation. Analysts see a return to rising prices sometime next year. Brighter prospects are attracting foreign direct investment (FDI). In the fiscal year ended last March, FDI in Japan hit a record $36.7 billion. The influx of investment should help revive the ailing property market.

Japan’s economic fortunes will remain disproportionately linked to exports for the foreseeable future. Even with an upswing at home,

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economic growth in 2005 is unlikely to top 2%.. But more balanced growth will provide Japan the stability it needs to finally climb out of its long-running economic funk.

It’s time for rates to catch up with rising euro-zone growth

Germany is old and tired, and its economy is doomed to decline – that conventional wisdom has been rock-solid for so long. But not any more. The latest Ifo survey of business climate in Germany was a knockout. It was the highest since the boom time of May 2000. Even the longsuffering construction sector is looking up.

Estimates of German growth for 2006 are following the Ifo upward. The German government yesterday revised its own forecast up to 1.4% from 1.2%, but that still looks low. If the current optimism does not prove in vain, growth could easily reach 2%. That would be the highest since 2001. What’s more, this improved momentum can last for several years.

Germany has never really lost its economic advantages – an educated work force and world-class technological expertise. But for a decade or so, it has lost the plot on wages and unemployment benefits. That’s changed, thanks to a steady trickle of labor-market reforms and some tough tactics by corporate bosses. The only weak point in the recovery is household spending, but lower unemployment should fix it before long.

Germany may be ahead of Europe in its turnaround, but the latest indicators for the whole euro zone are also pretty encouraging. Even

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Italy, which really does have fundamental weaknesses, is looking a little better. If the healthier economic environment persists, government deficits should start to decline.

U.S. factories hit by sharp decline in orders

Factory orders in the U.S. fell off sharply in August as demand declined at the fastest rate since the start of the year – a sign that the recovery in manufacturing could be running out of steam.

The decline in orders was led by a 40 per cent drop in demand for commercial aircraft, which helped distort the volatile monthly figures. But there was also weakness across a range of industries, including industrial machinery and home appliances.

Policy makers and investors are generally optimistic that business investment and industrial activity will be supported by overseas appetite for U.S. goods despite a slowdown in domestic demand aggravated by the credit squeeze and falling U.S. house prices.

But yesterday’s sharp decline in factory orders combined with other recent indicators of manufacturing activity underline the risk that industrial momentum may not be sustained in the face of economic headwinds at home and abroad.

The commerce department said orders fell 3.3 per cent last month in the biggest setback for manufacturers since January.

Orders for durable goods expected to last at least three years fell by 4.9 per cent, while demand for products with a shorter lifespan, such as food and petrol, fell by 1.6 per cent.

There were also tentative signs of weakness in the jobs market as the Department of Labor said the number of newly filed claims for unemployment benefits rose last week by 16,000 to a total of 317,000, the largest weekly increase in four months.

Today’s closely watched report on job creation is a critical gauge of the health of the economy and will provide the Federal Reserve with an important indication of how much support consumer spending may get from a tight labour market.

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