Article and Images by: inc.com
Nobody likes to think about the economy until there's a problem. Unfortunately, if you own a business or if you have any investments (retirement counts!), you have to pay attention to economic trends. Paying attention to economic trends can help you make better-informed decisions about your business and about your investments, and if you aren't paying attention you could find yourself in trouble, and fast!
What are the major economic indicators you should be looking at?
The federal government has been tracking housing starts since 1959. This is the number of new houses that begin construction in a given time period, and it has historically been an indicator of the strength or weakness of the overall economy. Housing starts could indicate that consumers are confident in the market or that there may be a rise in purchases of other consumer goods, such as lawnmowers and refrigerators.
Consumer financial stress is another major economic indicator. When consumers face serious financial stress, they are less likely to spend on things they don't absolutely need. If you're in the high-end restaurant business or the pool business, take note -- consumers may not have disposable income if the consumer financial stress index shows high-debt loads.
Housing activity is another major indicator of the overall direction of the economy. If consumers are under a great deal of financial stress - when there's high unemployment and high debt, for example - they are going to stay in their homes longer. When more homes are being bought and sold, that is an indicator that the economy is on an upswing.
Bankruptcy is an obvious financial indicator. When there are more bankruptcies, there is a good chance the economy is in a downturn. Foreclosures are also an indicator of overall consumer financial stress.
But what if there's conflicting information from economic indices?
It takes an economist to truly be able to interpret what is going on in the economy at any given time, and even at times they can be wrong. But there are other economic indices that can give you more information about why a particular trend is happening.
Enter law indices. Legal data from the last 15 years can be used as an additional clue as to why the economy is headed one way or another, or why two economic indices may be in conflict with each other. Tracking legal intakes can give you a clearer picture of who is filing for bankruptcy or who is entering foreclosure and why - not just that bankruptcies and foreclosures are going up.