Macro-economic Indicators
Macroeconomic indicators are statistics that provide measurements for evaluating the current status and health of the economy of a country depending on a particular area of the economy.
Importance:
· Economic indicators help give a sign of what direction an economy is heading to.
· Knowing how to interpret economic indicators of a future change will make one make better investment decisions and also stay ahead of competition.
Who Releases them and How Often are They Released?
They are published regularly at a certain time by government agencies. The indicators are usually released daily, weekly, monthly, quarterly, and annually depending on what type of indicator. In Nigeria for example, the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), Nigerian Stock Exchange (NSE), are responsible for the release of most macro-economic indicators.
Who Makes Use Of Them?
Everyone in the financial markets makes use of a combination of these indicators to make informed investing decisions.
Economists use it to determine the overall health and direction of the economy. Some of the data is also used to forecast cyclical economic recessions and recoveries and also changes in the Central Bank’s monetary policy.
Financial Analysts/Investors both local and foreign also use it to predict movement of stock prices and how viable it is to invest in the economy
Forex traders – Accurate speculation of central bank’s actions can enhance the trader’s chances for a successful trade.
Gross Domestic Product (GDP)
The GDP is the broadest measure of a country’s economy, and it represents the total market value of all goods and services produced in a country during a given year.
Who releases them: NBS & CBN (Quarterly)
Monetary Policy Rate (MPR)
The monetary policy rate is the rate at which commercial banks can borrow from the Central Bank. It is usually set at a level consistent with meeting the central bank’s inflation target.
The MPR is expected to communicate the stance of monetary policy and act as a guide for all other market interest rates.
Interest rates play a crucial role in the movement of prices in the foreign exchange market. Interest rates also dictate the flow of investments in an economy. Since currencies are the representations of a country’s economy, differences in interest rates affect the relative worth of currencies in relation to another.
So for example, when the Central Bank changes the interest rates, the forex market can experience movement and volatility.
Who releases them: CBN (Monthly)
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is the most crucial indicator of inflation. It represents the change in the level of prices for the basic consumer basket. The level of inflation in a country is directly linked to the purchasing power of a currency within its borders and also affects its standing on the international markets.
Who releases it: NBS (Monthly)
Market Capitalization
This is the aggregate valuation of a company based on its current share price and the total number of outstanding stocks. It is calculated by multiplying the current market price of the company’s shares with the outstanding share of the company.
Who Releases It: NSE releases it daily.
Importance: Market Cap helps an investor determine the returns and the risk in a share price, and also helps the investors choose the stock that can meet their risk and diversification criterion.
Balance of Payments
The Balance of Payments represents the ration between the amount of payments received from abroad and the amount of payments going abroad. It shows the total foreign trade operations, trade balance, and balance between export and import, transfer payments. If coming payment exceeds payments to other countries and international organizations the balance of payments is positive. The surplus is a favorable factor for growth of the national currency.
Who Releases it: CBN on a yearly basis.
All Share Index
The ASI is a total market index, reflecting a total picture of the behavior of the shares quoted on the stock exchange. It is calculated on a daily basis, showing how the movement of prices.
On the Nigerian Stock Exchange for example, the ASI represents the change in the average value of all the share prices of all companies, which is used to measure how well the stock market is performing daily.
Who Releases it: NSE on a daily basis.
Cash Reserve Ratio
The Cash Reserve Ratio is a certain minimum amount of deposit that the commercial banks have to hold as reserves with the central bank. The CRR is set by the central bank of a country, and is a tool used by the central bank to control liquidity in the banking system. It helps to ensure that banks do not run out of cash to meet the payment demands of their depositors.
Who Releases it: CBN
Unemployment Rate
Unemployment rate is defined as the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.
The unemployment rate is a measure of the number of people who are both jobless and looking for a job.
Employment indicators help reflect the overall health of an economy or business cycle. In order to understand how an economy is functioning, it is important to know how many jobs are being created or destructed, and what percentage of the work force is actively working, and how many people are claiming unemployment.
Who Releases It: NBS
Per Capita Income
Per capita income measures the average income earned per person in a particular area (city, region, country) in a specified year. It is calculated by dividing the area’s total income by its population.
Who Releases it: CBN
In conclusion, there are many more economic indicators that can be used to assess the health of an economy and make informed decisions based on those indicators. It is important to use a combination of different indicators, as one indicator is not enough to evaluate how well an economy is performing.
