First Steps in Economic Indicators
P e t e r T e m p l e
PEARSON EDUCATION LIMITED
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First published in Great Britain in 2003
© Pearson Education Limited 2003
The right of Peter Temple to be identified as Author
of this Work has been asserted by him in accordance
with the Copyright, Designs and Patents Act 1988.
ISBN 0 273 65911 1
About the author v
Acknowledgements vi
A note on data sources vii
Introduction 1
1 How economic indicators are calculated 5
The RPI – an example 6
Building blocks 8
Pitfalls 18
2W ho collects and issues 23them?
Who’s who in international and national statistics 26
Commentary on national statistics websites 33
Timing of releases 45
3 Who forecasts them? 47
Adam Smith’s army 47
How do the forecasters work? 49
Are their forecasts accurate? 51
Information on economic forecasts 54
4 Prices and money 67
Inflation 67
Money supply 73
Producer prices 79
5 What we spend 85
Consumer spending 86
Consumer confidence 90
Public spending 94
Business spending 99
6 The work we do 105
Gross domestic product 106
Business confidence 110
Index of production 115
Employment and unemployment 118
7 What we earn, save and borrow 125
Average earnings 126
Savings ratio 130
Interest rates 133
How interest rates are set 138
Interest rate statistics 139
8 How we trade 143
Foreign trade and the balance of payments 144
Exchange rates 149
Commodity prices 154
Terms of trade 159
9 Leading indicators and other stories 163
Retail sales 164
Car production and sales 166
Housing market statistics 169
Advertising 172
Stock market indices 174
Composite leading indicators 179
10 Oddball indicators 185
The Big Mac index 187
The Hemline index 189
The Cocktail Party theory 191
The R-word index 192
The odd-lot theory 193
The put–call ratio 195
The stock market capitalization to GDP ratio 197
Tobin’s Q ratio 199
Appendix 1: Glossary 202
Appendix 2: Abbreviations 207
Appendix 3: Further reading 208
Index 209