The Use of Various Macroeconomic Indicators - Coursework Example

Introduction This article focuses on the use of various macroeconomic indicators. Macroeconomic indicators are statistical indicators of the economy of any country that reflect the different economic sectors of the state (the labor market, real estate, industrial and trade sectors, etc.). Stock market traders are actually using fundamental analysis for the trade; keeping track of the values of key macroeconomic indicators. It is quite easy, as they are published in the strict time limit and they are actively discussing the situation at market. Typically, macroeconomic indicators are divided into several types according to their significance for exchange movements, as it affects the volatility of the market at the time of publication index. The overview of macroeconomic indicators Macroeconomic indicators cover economic development, point to economic growth or decline. Therefore we can say with certainty that the output of major data can lead to significant and lasting movements in exchange rates. These are important data: Nonfarm Payrolls, GDP, Industrial Production, CPI, PPI and other macroeconomic indicators. There is a calendar of economic indicators and the most important events in the life of the individual states (with specific dates or approximate time of their release). These events market is ready. Emerging expectations and forecasts of the value of an indicator can be and how it can be interpreted. The output data can lead to sharp fluctuations in exchange rates. Depending on how market participants apostrophe and interprets a particular indicator, the rate can go as one and the other side. This movement can lead to a strengthening of an existing trend of course, its correction or the beginning of a new trend. Or that the outcome depends on several factors: market conditions, economic status of the host countries examined rates, preliminary expectations and sentiment, and, finally, the value of a specific indicator. The indicator of average earnings growth is calculated by taking into account earnings growth over the past three months (taking into account all payments that were actually made and not "accrued"). This is a good indicator of future inflation, as rising wages, if it is not offset by productivity growth is the cause of rising prices. Average earnings growth is one of the defining indicators, according to which the Bank of England determines the level of interest rates. This indicator has a significant impact on the market. The indicator of producer output prices (PPI output) is defined as a change in the level of wholesale prices of goods in the industry. It is a strong indicator of inflation that reflects the inflationary pressures on the economy by the manufacturers (the increase of prices in "output" may not affect the inflation index, as it can reduce the costs in the trade). The price of food, alcohol, tobacco and fuel (prices for these products is very variable) are not taken into account. The indicator of producer input prices (PPI input) is defined as the change in the price level for parts and semifinished products in the industry (the rise in prices may not be reflected in the inflation index, as it can reduce the costs in the manufacturing process). The indicator of retail price index determines the change in the price level in the basket of consumer goods. The indicator of inflation is the Retail Prices Index, excluding the interest payments on loans to purchase real estate (RPI-X). The retail price index is calculated by a single formula. If the growth of rate exceeds the planned value of the index, usually the Bank of England raises interest rates. The indicator of CBI industrial trends overviews (in the form of numbers) the business sentiment of businessmen about the state of the manufacturing sector. The review has no direct connection with the real prospect of economic development. The indicator of CBI distributive trades overviews (in the form of numbers) the business sentiment regarding business trading areas. Review has no direct connection with the real prospect of economic development. Retail Sales is an indicator of the level of consumption. If the level of consumption is above the level of production, it usually leads to inflation. It should be noted that the index of retail sales for the month is a very variable quantity. Averaged for the three previous months, the index better describes what is happening. Manufacturing output is an indicator of volume of production, released by the manufacturing industry, expressed in prices. It is an indicator of economic growth. The indicator value for the market is small, since the contribution of manufacturing in gross domestic product is the last time less than 20%. The indicator of unemployment (Claimant count rate) shows the number of applications for employment of unemployed in the employment centers. The lower unemployment rate, the more people pay the salary, which causes inflation. The indicator of global trade, non-EU trade balance shows the difference between exports and imports, expressed in prices. The index is gradually losing its influence on the market as increasingly important capital flows, rather than goods. At the same time, import growth indicates an increase in consumption in the country, and export growth - to increase the level of production. In the UK it is common to take separately the importance of a balance of trade with countries outside the European Union. Gross domestic product (GDP) is the amount of domestically produced goods and services, expressed in prices. Despite the importance of the indicator, its impact on the market is reduced because its value is normally expected by the market on the basis of other data, as well as by repeated revisions of the value of GDP after the first exit. Public sector borrowing requirement (PSBR) shows the difference between revenue and expenditure of budget. The indicator does not have much influence on the market. A unit wage cost is an indicator that shows if the growth rate exceeds the cost of labor productivity growth, it causes inflationary pressures in the economy. It has a limited impact on the market. Net consumer credit indicator shows the amount of loans granted to individuals for the last month. A large value of the indicator can talk about the "overheating" of economy, as consumers take more credit than is necessary for normal living. Government policy and macroeconomic indicators Government policy has a significant impact on the increase in productivity and living standards. First of all, with economic policy the state may affect the amount of physical and human capital. If the growing stock of capital in the economy, it increases the countrys economic potential, and the economy can produce more products and services in the future. Therefore, if the government wants to increase productivity, accelerate growth and improve living standards of its citizens, it must carry out the following policy: To stimulate domestic investment and savings. The growth of the capital stock in the economy is through investment. The higher the share of investment in the economy, the higher rates of economic growth are. Since the growth of the capital stock directly affects the growth of labor productivity, the basic condition for economic growth - increased investments. The basis of the amount of investment is savings. If a society consumes less and saves more, it has more resources to invest. To encourage the investment from abroad, removing restrictions on the ownership of capital in the country. Obviously, the increase of capital may occur not only due to internal, but also due to foreign investments. There are two types of foreign investment: direct and portfolio. Foreign direct investment is an investment in the capital, owned and managed by foreigners. Pottfolio foreign investment is an investment in the capital which is financed by foreigners, such as income from the sale of foreign shares and bonds of companies. Foreign investments provide growth of the economy. Despite the fact that part of the revenues of companies that were created with the participation of foreign capital goes abroad (profits of foreign companies on direct investments and dividends received and interest on securities from the portfolio), foreign sources of financing to increase economic potential, improve performance and of payment. In addition, foreign investment, developing countries can learn the most advanced technologies developed and used in developed countries. To protect property rights and ensure political stability. The ownership means the ability of people to freely dispose of their resources. To make people want to work, save, invest, trade, invent, they should be confident that the results of their labor and their property will not be stolen, and that all agreements are fulfilled. Even the slightest possibility of political instability creates uncertainty over property rights, because the revolutionary government can confiscate property, especially the capital. To encourage free trade. Free trade is like a technological achievement. It allows the country not to produce all the products by itself, but to buy from other countries those products that they produce more efficiently. Often, developing countries need sound argument for the protection of young industries from foreign competition, and therefore hold the protectionist policies restricting or prohibiting even international trade. The background of macroeconomic indicators impact on the asset classes Housing starts indicates the number of new homes whose construction has already begun. This indicator has a limited impact on the market. Youth unemployment has reached a level of 991 thousand or 21.3%, it is the worst result since 1992. In general, in the United Kingdom the number of people receiving unemployment benefits rose to 1.6 million. In September this year for monetary assistance to the State there appealed 17.5 thousand Britons who lost their jobs. Analysts say that the UK economy is growing at only half of the power required to maintain a stable unemployment rate. Alternative Energy in the UK from 2008-2009 became very popular for investors - in this direction there has been invested almost 40% of total energy investment. Trend NEX (the sectoral index of alternative energy) is the objective criterion, which is able to respond to alternative energy, as an investment: to the crisis of 2008-2009 the sectoral index of alternative energy was set to NEX 460 items; November 2009 - only 132 points, that is, fell by 70%; In 2010, the index reached the NEX index averaged to 187 points, showing the dynamics of growth for 40%. The laws of economics are immutable - if investors are buying, then such investments are economically viable. It is not surprising that even the British royal family has entered into the agreements for the development of offshore windmills and believes this project is very profitable. It is estimated that the annual income from wind power plants will bring the English crown to 37.5 pounds of net income. Such facilities are already installed about 436 units, whose number is further expected to increase to 7000. For the first time, alternative energy has become a reality in the 70s of the 20th century, in the midst of the First Middle East oil crisis, when the "oil shock" made to install solar panels even on the roof of the White House. But the fall in oil prices has postponed development of alternative energy and oil companies lobbying slow process allowed the use of alternative sources of energy until the beginning of the 21st century. September is the month of inflation, consumer prices in the UK for the month increased by 0.7%, annual growth in prices repeated the record in 2008 and reached 5.2% - faster than consumer prices rose only in 1992. The base consumer price index rose last year by 3.3%. Retail prices rose over the month by 0.8%, an annual increase of 5.6%, but excluding mortgages grew by 5.7% and a record from the distant 1991. In September, the strong spike in the price of clothing and footwear, an increase of 4.4%, 3.5% increased prices in the housing (blame the spike in utilities), 2.3% increased in price formation. Virtually all of the September increase - this rise in prices of clothing and utilities. The annual price growth was fairly broad front: transportation + 8.9%, housing +8.6%, +6.4% food, communication, +5.9%, machinery and equipment for the home 5.3%, +4.7% education. Accelerated and the rate of price increase, excluding the factor of indirect taxes, the annual price growth reached 3.7%, which was maximum in the spring of 2009. After a sharp rise in inflation in the eurozone to 3.0%, the UK decided not to come off, the pace of price growth exceeded even the wildest predictions and issued a record for a couple of decades. But this annual dynamics played a major role base effect, the data for the quarter is still not as scary relative to the second quarter prices rise by 2,5% year on year, due to years of slower growth in consumer prices. Bank of England in this situation is likely to ignore inflation, although they can not exert the fact that prices in August after rising by 0.6% in July jumped by another 0.7%. Inflationary expectations can continue to grow at close to the background of economic stagnation that threatens to increase in stagflation. Suddenly inflation became the current issue. Inflation in the euro area now amounts to 2.2%, higher than the target level of the European Central Bank. In Britain inflation reached 3.3% (4.7 % in term of the retail price index), forcing the head of the Bank of England to write letters to the Minister of Finance explaining why inflation exceeded the targer 2.0%. Economic activity in the Western world, hardly meets the definition of activity, and therefore the demand of higher wages is practically useless. Economists have generally argued that there are only two types of inflation: demand pull inflation and cost. If the demand is growing, prices are rising. If the costs increase, prices are also rising. In the absence of these forces inflation is assumed to remain at the level. However, recent events make us think. U.S. inflation is relatively low; however, recent developments in America are consistent with changes in the Eurozone and the UK. The gap between the base and core inflation has increased as a result of rising prices for food and energy. This, in turn, reflects the growth in demand for commodities. In Comprehensive Spending Review the Government has confirmed their plans to slash spending over the next four years, as well as to raise some taxes that will affect the majority of Britons. As reported by Dow Jones, John Philpott, chief economic adviser Research Institute of Chartered Institution of Personnel and Development CIPD appreciated the prospects for the next year: "If all goes well and the unexpectedly strong progress in 2010, continues, the labor market can cope with the influence of ongoing coalition government spending cuts and tax increases without any significant increase in unemployment. However only slightly more adverse than expected turn of events in the overall economy will lead to deterioration in the labor market. In the report submitted in late December 2010, the Institute CIPD, gave the negative outlook on the labor market: the number of unemployed people in Britain could rise by 200 thousand people, and then the army of the unemployed by 2.7 million people, while the average growth rate earnings are likely to remain well below inflation. A rise in inflation is inevitable in raising taxes, and the British government in 2011 will have to solve these problems. Actually it looks like there was fairly rapid rise against the tax increase and a rise in price of resources, then it slowed down and now again begins to price growth accelerated sharply, if the growth of the last two months, will continue the Bank of England will face a stark choice. In the market-companies there is an entire system of interconnected planning and economic indicators and mechanisms for determining the end result of all production and financial and social work. They perform a very important regulatory role in modern industry and business. The content and purpose of specific targets, their validity and extent of mutual coordination depends not only the level of the process of free-farm planning, but also achieved with both intermediate and final results. In market the main outcomes are the financial indicators, which determine the total amount of profits or income of the enterprise. The magnitude of the final financial results affected by many industrial, labor, social, economic and other benchmarks. In accordance with current national planning theory and practice the indicators adopted by group companies such activities as the production and development of new products, labor and social development, logistics, investment, finance, advertising, credit, etc. Each of these targets is not only an intermediate in terms of financial results, but also for its final stage of production or planning functions. If there is a clear interaction between the initial, intermediate and final results of the planning and production activities of firms and we can talk about the existing economic mechanisms, phenomena and processes. There is a strong interaction mechanism between the rules and plans for all companies and firms in market. Foreign experience of advanced market economy teaches us that all economic phenomena, combined in a homogeneous group, are closely linked. It is clear that it is possible to buy only what was already previously made. Consumption rate is preceded by a definite plan of production. It is clear, secondly, that it is necessary to produce those goods and in such quantities that it will be possible to sell on the market. The production plan must be balanced with the rate of consumption. The effect of these and similar economic mechanisms and phenomena should be taken into account to the greatest extent in the development of targets and the formation of the final results. In the free market as practicable so that in any economic planning mechanism for any initial economic phenomenon or a planned decision entails a number of other processes, and for their occurrence does not require any additional impacts. They follow one another in strict dependence and lead to certain obvious results. For example, machine-building enterprises a comprehensive system of market impact on the main results of the production of many form interconnected mechanisms that establish the highest degree of dependence between such planning and economic indicators such as demand and production volume, the value of deals and number of staff employed and the effectiveness of their work, the results of labor and workers personal income, the income and standard of living, etc. Consequently, the economic planning mechanism is determined by the interplay of various parameters and phenomena. The main constituent elements of any economic mechanism can simultaneously act as the initial standards and regulations, and cleanup targets or events, as well as the entire production process, which occurs in the interval between them and leads to the planned outcomes. Therefore, for in-process planning is necessary to consider more fully the existence of a wide variety of economic mechanisms and their interaction in the modern market relations. Consider in this regard, the most significant in the industrial and economic activities of enterprises mechanisms of balance between production and consumption, the effect of which, judging by their name, must lead, under certain conditions to the equilibrium state plans for the production and sale of products, goods and services in the domestic market. Between production and consumption processes in the market there is a necessary sequence: first the product is produced and then consumed. The act of consumption must be after the act of production and presupposes it. Production and consumption are different by degrees of cognitive and predictability. The volume of production within a given time period of the enterprise may be scheduled in advance with high accuracy. The volume of production is always easy to plan, and the prediction of consumption can only get some data on the value of consumer spending. It is more difficult to plan for real consumption and its potential scale or rules and almost nothing can be set in advance, for a means of influencing consumption are primarily psychological in nature, they are quite uncertain, and therefore the volume of sales can not be predicted with certainty. All these differences indicate not only the need to include a mechanism to ensure the equilibrium of production and consumption, but also the complexity of the planning outcome indicators in the marketplace. In world practice there are two main ways to achieve a balance of production and consumption of specific goods. The first is through the so-called rationing, which consists in drawing the given equilibrium plan on the basis of progressive norms of consumption of resources. The second is through the law of supply and demand in a free market. In this case there must be considered that plans are not only the volume or the rules of supply and demand, but also the magnitude of market prices and production costs. After all, at any given time the market requires the manufacturer to reduce costs and achieve savings through better technology and production organization. In this regard, market planning also provides a wide variety of cost-effective application of standards and indicators of resource consumption. Therefore, in practice, market planning aims to make fuller use of the mechanisms of interaction of all the targets with the end results to achieve economies of scarce resources and increase efficiency. To do this it is first necessary to apply science-based rates of consumption of inputs, especially labor costs, the subjects of labor and capital goods. These standards are the basis for the progressive development of a comprehensive plan of all the indicators of socio-economic development of businesses and preparing a business plan production and sales. Conclusion Thus, in the current market conditions for enterprises of different ownership forms there should be used a variety of content and purpose of planning standards and indicators. At the state and municipal enterprises can be used as free or estimated market indices, and approved plans for a compulsory-order or public (municipal) purchase orders for the production of major products and works. The mechanism of interaction of the main targets should be linked not only by various kinds of business, but at every stage of production, as well as the time of action plans. This comprehensive interaction targets will contribute to each company or firm the high market outcomes. The existing conditions of the market mechanisms of action planning standards and indicators of results of economic-financial activity of enterprises will be fully disclosed when considering different types of strategic, technical, economic, operational, industrial and other types of systems and production planning. Summary The article deals with the analisys of macroeconomic indicators and governt policy which has a significant impact on the increase in productivity and living standards. First of all, with economic policy of the state may affect the amount of physical and human capital. If the growing stock of capital in the economy, it increases the countrys economic potential, and the economy can produce more products and services in the future. Therefore, if the government wants to increase productivity, accelerate growth and improve living standards of its citizens, it must carry out the number of actions of the economical planning. Consequently, the economic planning mechanism is determined by the interplay of various parameters and phenomena. The main constituent elements of any economic mechanism can simultaneously act as the initial standards and regulations, and cleanup targets or events, as well as the entire production process, which occurs in the interval between them and leads to the planned outcomes. Bibliography 1. ‘Bank of England’ http://www.bankofengland.co.uk/monetarypolicy/overview.htm 2. ‘Office for national statistics’ http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/august-2011/stb-uk-trade-august-2011.html 3. ‘UK National Statistics’ http://www.statistics.gov.uk/hub/labour-market/people-not-in-work/unemployment 4. ‘This is money’ http://www.thisismoney.co.uk/money/cardsloans/article-1714095/How-personal-debt-grew-to-14-trillion.html#ixzz1bbru7y7i 5. ‘Property and Mortgages’ http://www.ft.com/cms/s/2/f1a27f90-fbbe-11e0-9283-0144feab49a.html#axzz1c1IkhAZT Read More