Tuesday, 17 January 2012

A few thoughts about economic indicators

This is not geographical economics, but last week saw some interesting posts about economic indicators and I thought that I can write a bit more about it. It started with The Economist's misery index which looks at the unemployment rate and inflation rate as indicators of economic gloom. According to their daily graph South Africa lies fourth out of 92 countries.

This solicited different responses in the Twitterverse. Some were glad that it seems that unemployment is below 25% according to the EIU and others argued that our unemployment is structural rather than cyclical and implies a different kind of gloom. Prof Frederick Fourie's "Three worlds, three discourses" paper about the unemployment debate links up with this.

During the week Classic Business (on Classic FM 102.7) hosted a show in which they asked guests what they think the economic indicators are that South Africans should obsess about. There were some interesting points of view. Economists are of course interested in the performance of the economy, but cannot afford to wait for quarterly GDP or unemployment statistics. They are particularly interested in predictors or leading indicators of economic performance:
  • Dennis Dykes (Nedbank) looks at credit numbers as advanced warning about what might happen with interest rates. They give a feel of what is happening with consumption demand, the housing market and corporate loan demand (fixed investment spending).
  • Loane Sharpe (Adcorp) mentioned notes and coins in circulation as an indicator of consumer buoyancy, arguing that economic performance depends on a consumption-oriented middle class and emerging informal sector.
  • Tony Twine (Econometrix) said that NUMSA vehicle sales data take the greatest proportion of his time. He is interested in the macro forces that drive auto sales numbers - if you have the vehicle sales data, you can figure out the macro forces. He says that vehicle sales is such an important indicator since passenger car sales is a barometer of economic activity and  truck sales an indicator an of what is happening with fixed capital formation.
This is exactly the sort of things that I think our third year Economics students should start to get interested in.

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