[100 Challenge] DanJ’s reading note_87

 

Time to read economic indicators

technology that always finds signs of change one step ahead

Author: Vincent (Kim Doo-eon)

Published by Wisdom House

Published: April 19, 2023.

 

Table of Contents

Prologue. Why Should We Know Economic Indicators?

Introduction. How to separate macroeconomic data

 

Part 1. U.S. Economic Indicators: Start with consumption and end with consumption

 

Chapter 1, Consumption: Key Engines Driving the U.S. Economy

#1. Vincent Insight: How do you take advantage of the two psychological indices: the University of Michigan and the Conference Board?

#2. Vincent Insight: How do retail sales differ from personal consumption expenditure?

Chapter 2. Income: Consumption is a function of income

Chapter 3. Employment: Source of Household Income, Earned Income

#3. Vincent Insight: The difference created by the way employment metrics are surveyed

Chapter 4. Real Estate: Determining Household Income by Wealth Effect

Chapter 5. Corporate activities: Corporate economic indicators that provide a glimpse into the global economy

#4. Vincent Insight: The U.S. Manufacturing Business in Two Manufacturing Indices

Chapter 6. Business: Economic Indicators Related to the Business Cycle

#5. Vincent Insight: Why does the conference board game-leading index differ from the OECD U.S. game-leading index?

#6. Vincent Insight: What's the difference between GDP, GDI, GNP, and GNP?

Chapter 7. Government: U.S. Government Spending Hugely Affects Global Stock Markets and Economies

Chapter 8. Foreign Sector: U.S. Export-Import Indicators With Key Currency

Chapter 9. Prices: Economic Indicators from Inflation to Interest Rate

#7. Vincent Insight: Why You Need To Know The Dollar Index

#8. Vincent Insight: The Difference Between Consumer Price Index and Personal Consumption Expenditure Prices

#9. Vincent Insight: How will the Fed set its benchmark interest rate?

Chapter 10. Others: Other indicators to remember

 

Part 2. China Economic Indicators: From the World's Factories to the World's Market

 

Chapter 11. Consumption: Core of the theory of commonwealth

#10. Vincent Insight: From Mao Zedong's theory of study to Xi Jinping's theory of commonwealth

Chapter 12. Income: Employment Indicators, Source of Household Consumption

Chapter 13. Corporate Activity: Economic Indicators To Watch If You Want To Invest In Chinese Companies

Chapter 14. Government: Government-related economic indicators with growing influence

Chapter 15. Export-Import: Still Important Indicators in China's Economy

#11. Vincent Insight: China's Bicircular Strategy

Chapter 16. Prices: Inflation in China is also inescapable

#12. Vincent Insight: Why do Chinese pork prices matter?

#13. Vincent Insight: Why has LPR become a de facto benchmark rate?

 

Part 3. Eurozone Economic Indicators: Circulation in the regional economic zone is important

 

Chapter 17. Consumption: Factors accounting for the largest share of the eurozone economy

#14. Vincent Insight: The Difference Between Europe and the Eurozone

Chapter 18. Income: Employment and Real Estate Indicators, Source of Household Consumption

Chapter 19. Corporate Activity: Corporate Investment Shows Corporate Activity

Chapter 20. Government: Economic Indicators on Government Spending and Investment

#15. Vincent Insight: Why do BIS debt data represent eurozone economies?

Chapter 21. External Sector: Economic Indicators on Exports and Imports

Chapter 22. Prices: Economic Indicators on Inflation

#16. Vincent Insight: What are the types of ECB benchmark interest rates?

 

Part 4. Korea Economic Indicators: Pay attention to the structural transformation of advanced countries

 

Chapter 23. Consumption: Changes in economic structure increase importance

Chapter 24. Income: Focusing on the correlation between employment, income, and consumption

Chapter 25. Real Estate: A Big Share in Household Assets Portfolio

#17. Vincent Insight: Portfolio diversification of Korean households is urgently needed

Chapter 26. Corporate activities: Economic indicators related to corporate investment, a leading indicator of the economy

#18. Vincent Insight: Different countries have different ways of publishing GDP.

Chapter 27. Government: Expect expansionary fiscal policy based on good fiscal health

#19. Vincent Insight: Warning light in Korea's fiscal balance

Chapter 28. Foreign Sector: Export-Import and Overseas Investment Trends

#20. Vincent Insight: Why You Should Maintain Proper Foreign Exchange Reserves

Chapter 29. Prices: Determining real-life patterns beyond the value of objects

#21. Vincent Insight: Why the Consumer Price Index and Producer Price Index vary

#22. Vincent Insight: 2 things to know by looking at Korea's exports

 

Epilogue. The economic indicator reading method that will be the basis for investment

an index of economic indicators

 

Economic indicators are divided into two categories according to their characteristics. 

Complex data always has timeliness limitations regarding financial investments, such as stock investments, although economic indicators reflect the real economy. It is best to check the first quarter's gross domestic product (GDP) that reflects the real economy three months ago if stock investors use economic indicators to determine the real economy in mid-June. This is because the second quarter GDP, which reflects the real economy in April, May, and June, will be released at the end of July. Therefore, soft data should be used to compensate for the limitations of complex data. 

Soft data is an economic indicator that reflects the sentiment of financial players and is extracted through a survey method. The consumer sentiment index is soft data, a leading indicator of complex household consumption expenditure data.

Because it contains psychology, it is necessary to keep soft data in mind that the focus may be excessive.

The importance of economic indicators by country is considered based on the financial structure.

Consumption accounts for 67% of the U.S. economy. Therefore, consumption and consumption-related economic indicators are the most important in the U.S. economy. Investment accounts for 43% of the Chinese economy. In the Chinese economy, corporate investment-related economic indicators are the most important. In Korea, consumption accounts for more than exports in GDP. We have leaned on the trickle-down effect because of our high dependence on exports, but things have changed in the past. We need to boost consumption to reconsider growth. As such, the importance of economic indicators such as consumption and exports varies from country to country. 

When using economic indicators, it is necessary to classify the gravity. First, it is essential to determine the priorities of economic indicators based on the financial structure of each country, and second, to understand economic indicators while matching complex data reflecting the actual economy with soft data that are related to them so that economic indicators can be used most appropriately for investment. 

Retail Sales: It represents consumption in terms of suppliers (company), and personal consumption expenditure represents consumption in terms of consumers (households).

Companies: An economic entity seeking profit maximization is highly incentivized to maximize sales. Retail sales data is likely to be overstated compared to actual consumption in the United States. On the other hand, if the expenditure is significant in households, the National Tax Service may target them so that personal consumption expenditure may be underestimated compared to actual consumption. The stock market is a place where companies deal with their interests. Therefore, of course, it can be said that the attention of stock market participants is focused on the retail sales data that investigates companies.

Income: Economist John Keynes said income is the factor that has the most significant impact on consumption. He also noted that consumption increases as income increases, but consumption movements are gentler than income. To grasp personal consumption expenditure, the most critical factor in the U.S. economy, it is also necessary to look at income indicators.

Employment: Employment, or salaries, is the most critical factor in household income. As employment increases, people will have a thick pocket, which gives an optimistic outlook on the economy. On the contrary, fewer employments will likely reduce personal consumption expenditures, and a contraction can be expected.

Real estate: When prices rise, household property income is considered to increase. When the value of an asset increases, the effect of wealth effect increases consumption. In other words, an increase in real estate prices increases investment and consumption, which affects economic growth.

Business Activities: When judging the U.S. economy, it is essential because it accounts for 21% of the US GDP. Investment is a function of interest rates. When interest rates and prices rise, business investment shrinks, and business investment tends to expand when interest rates and prices fall. If you look at economic indicators related to U.S. business activity, you can predict the U.S. and global economies.

Business: It's a cycle. It keeps moving, not fixed. It stagnates and becomes active according to a particular cycle. Boom period → Retreat period → Recession period → Recession period → Repeated movement is called the 'economic cycle.' The economic indicators related to this cycle show where the global economy is now.

 

This is the American episode.