Leading Economic Indicators

This exercise will give you a chance to examine data on some of the leading economic indicators.

1. Download the data for new privately owned housing units authorized by building permits from www.census.gov/const/www/C40/table1.html. Choose the seasonally adjusted data for the United States in an Excel format. Graph the "Total" series.
2. Download the last five years of data for manufacturers' new orders of non-defense capital goods from the St. Louis Federal Reserve site at research.stlouisfed.org/fred2/series/NEWORDER. Graph the data.
3. Locate data for the average weekly hours of production workers in manufacturing, available at www.bls.gov/lpc/lpcover.htm#Data. Select the historical time series link and then choose the Index data. Choose manufacturing as the sector and average weekly hours as the measure. Retrieve the report for the past five years. Use the options for a table format, non-HTML, and a space as a delimiter. This will give you both quarterly data and annual averages. When you copy the data into Excel you can use the Data, Text to Columns menu to put the data into a usable format. Create a graph of the data that shows the quarterly trend over the last five years.
4. The data series you retrieved are all leading economic indicators. Based on the tables and your graphs, what is your opinion of where the economy is heading in the near future?

Identifying Trends in Economic Data

Economic data series are used by investors to search for trends that might predict the economy's direction or confirm a reversal of direction. Download the data series described below and use them to form an opinion about the state and direction of the economy.

The consumer price index (CPI), the producer price index (PPI), and the real earnings series show the percent change from the previous month. The unemployment rate is directly represented – it is not shown as a percent change. For each series, click on the dinosaur icon to download the most recent ten years of data.

1. Find the CPI data at www.bls.gov/cpi. Use the U.S. city average, all items. What has been the trend in the consumer price index over the last three years?
2. Get the data for the PPI at www.bls.gov/ppi. Select the finished goods series. What has been the trend in the producer price index for finished goods over the last three years?
3. Have there been any significant trends in real earnings (www.bls.gov/ces) over the last three years?
4. What have been the trends in the unemployment rate (www.bls.gov/cps) during the last three years?
5. Create your own graph of each series using Excel. Examine all four graphs together. Do the graphs confirm the opinion you previously formed based on the data tables?

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Forecaster's Ability to Call Turns

There have been instances in recent times when forecasters actually missed predictions of a recession until it was over! A short article from the Federal Reserve Bank of San Francisco discusses the ability of forecasters in calling turning points in the economic cycle. It can be found at:

http://www.frbsf.org/publications/economics/letter/2002/el2002-07.pdf

1. How well have forecasters predicted recessions?
2. What factors were cited as possible explanations for their performance?
3. What about forecasters' ability to predict recoveries?