Understanding Key Economic Indicators ● 林兆权 By Desmond Lum In these times when market forces appear increasingly complicated and more volatile, it is all the more important to understand the professional jargon and terminology in the market place in order to be able to better make our investment and business decisions. Understanding key-economic indicators will assist in the decision making process, providing a snapshot of the current situation and an insight into the future. Each economic indicator tells us something about the economy or inflation. Gross Domestic Product (GDP) is probably the most important report as it is the whole framework where other economic indicators fall under. Using the textbook formula where Gross National Product = Consumption + Investment + Government Spending + Exports - Imports, some of the indicators will fall into the above-mentioned category e.g. retail sales figures will fall under Consumption, construction spending under investment, to name a few. There are also indicators that are broader that tell us about the economy itself rather than the component, e.g. employment figures, leading indicators, money supply figures (M3). Inflation figures, Produce Price Index (PPI) and the Consumer Price Index (CPI) will, in short , inform us of the changes in wholesale prices , cost of consumer (retail) goods and services respectively. An indicator that is useful must be accurate, timely and reliable. It depends entirely on the integrity of the national statistical system responsible. It is vital to know the accurate components of an indicator. We have to be mindful of the limitation of these statistical figures too. Some indicators can be historic or extremely volatile, and therefore their value are reduced. It is better to compare the most recent data with earlier months, or take a moving average for the past 3,6 or 12 months to smooth the data. It will tell us if there has been a significant change in trend and whether a new direction is under way. Timeliness of an indicator is also significant. Although the reported figures are important, it is crucial to recognise that markets react to the variance to the consensus forecast than to the absolute change in the indicator. Markets do not like surprises and can be frustrated with volatility upon subsequent revisions to the numbers published, even though significance of the absolute number diminishes with each passing month. In the US, together with the monthly employment report released on the first Friday of the month, an important survey by US National Association of Purchasing Management (NAPM) is released within the first three business day of the month, which tracks the economic movements fairly well. These two reports are considered by many as valuable adjunct to the Commerce Department’s index of leading indicators. The Index of Leading Economic Indicators (LEI) in the US acts as an early warning system, telling us when the economy is about to change direction. This composite index of 11 leading indicators has a good record of providing accurate forecasts. The total index performs better as a prediction tool than any of its parts. This monthly figure is available on the last business day of the month and has low volatility. As a general rule, turning points in the economy are signalled by three consecutive months of LEI changes in the same direction. This leading indicator is like a lighthouse, giving the rest of the world economies a glimpse of the direction of the world’s largest economy. Singapore is highly dependent on trade, about four times our GDP in 1997 at US $217.7 billion. The US is the most important destination for our electronics exports, followed by Malaysia. Electronic goods make up about 70% of non-oil domestic exports and about 45% of manufacturing sector. It is therefore imperative to note the demand of electronic goods from the US. As Singapore imports much of the raw materials needed for its value-added processes in the manufacturing concerns, the retained import figures become a good gauge of future activities. Retain Import, a leading indicator (usually about three months) for the manufacturing sector, is still down. It fell 15.6% for 1998. This spells weak manufacturing and electronics figures in the following two quarters. July’s total trade figures fell 9.1%, Singapore-made exports (also known as non-oil domestic exports) fell 2.3% worse than expected, led by the 5% decline in exports of electronic goods. Although the accuracy of the predicting quality is debatable, the retained import figure does give a relatively good indication of the direction of the manufacturing and electronic activities and as such the Singapore economy. The indicator that reflects the domestic demand is the non-oil imports. It fell 19.3% in July, the fifth month in a row. On a three-month trend basis, the decline is accelerating, reflecting extreme weakness in domestic consumption. (The writer is fund manager of Jardine Fleming Investment Management Singapore.This column has the support of the Investment Management Association of Singapore and the Stock Exchange of Singapore.) 了解主要经济指标的意义 在目前这种时期，市场越来越幻化莫测、颠簸也越来越大，大白 市场的专业术语和名词因此变得更重要。主要经济指标转达的信息包 括当前的经济状况以及未来可能呈现的环境，能协助制定投资和商业 决策。 每个经济指标都能给我们一些有关经济表示或通货膨胀的信息， 个中应以国内出产总值最重要，因为它包罗了全部的经济指标。经济 课本把国内出产总值的方程式列为： 消费＋投资＋当局开支＋出口－进口 从以上的方程式可看出它 包括了很多经济数据，如零售销售数字包罗在消费、建筑开支属投资 部门等。 除此之外，就业数字、领先指标和钱币供给也是很有用的数字。 通胀方面，出产品价指数和消费物价指数别离让我们知道物品和处事 的批发和消费价格的变换。 经济指标必需准确、及时和可靠才算有用。这完全依赖有关统计 系统是否完善。知道有关指标是由哪些身分构成也很是重要。另外， 我们也应知道这些统计数字的局限性。 有些指标可能过期或是颠簸剧烈，减低了它们的有效性。因此， 比力妥当的做法是把最新数字与之前几个月份的比力，或是操作已往 3个月、6个月或是12个月的平均移动数。我们将能因此知道是否呈现 显著的趋势改变大概在朝新成长偏向。 指标的及时性也不容忽略。不外有一点应该注意的是，现代职业教育杂志社，市场凡是 不是对实际数字做出回响，而是它与市场的平均预测相差有多远。市 场不喜欢“惊喜”，也不喜欢颠簸或之后做出调解。 在美国，除商业部发布的领先指标指数外，每月初发布的就业报 告和采购经理指数也是两份重要的陈诉。后者能相当准确地反应制造 业的勾当。 领先经济指标指数在本地可是个预先警报系统，能显示经济是否 正要转向。它包罗11个指数，整体指数比任何一个单一指数更准确地 预测走向。凡是，这个数字在每月的最后一个事情日发布。 一般上，如果持续三个月往同个偏向转变，是经济正转向的征兆 。它也像是个灯塔，让全世界窥探美国这个世界最大经济体的走向。 新加坡是个高度依赖对外贸易的国家，去年的对外贸易额相即是 国内出产总值的4倍。美国事我国电子产物出口的最大市场，马来西 亚仅排在之后；而电子产物占非石油国内出口的七成，制造业的45% 。因此，源自美国的电子产物需求是个重要的指标。 由于我国出产的增值产物需要很多进口原料，保存进口因此也是 个值得注意的数字。 做为制造业领先指标（凡是是三个月）的保存进口，目前仍处在 下跌状态。今年上半年它跌了15.6%，意味着未来两季制造业和电子 业的表示会是疲弱。 7月份的数字便显示总贸易额减9.1%，电子产物出口跌5%长短石 油国内出口落2.3%、跌得比预期还严重的原因。 非石油进口则能反应国内需求。它在7月份持续第五个月下跌， 再跌19.3%。以三个月的走势看，下跌的趋势越来越急，显示国内需 求很是疲软。 （作者是怡富投资打点新加坡基金经理。本栏是新加坡股票交易所和 新加坡投资打点协会联办的公家教育打算。）
