Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 32

weakening economy and diminishing corporate profits. As undesirable as it is to have any unemployment in an economy, a maintained low unemployment level (let's say 4-5%) has always been necessary to keep the economy from heating up and to keep prices stable.

Personal Income And Spending - These reports are released monthly by the Commerce Department. A rise in income or spending by consumers is indicative of a strong economy and an increased demand for goods and services. A large rise in these numbers can lead to price pressures and ultimately inflation.

Industrial Production And Capacity Utilization - Both of these reports are prepared monthly by the Fed. The industrial production index reflects the output of the country's factories, mines, and manufactures. An increase in industrial production suggests that demand for wholesale and retail goods is expanding and the economy is growing. The capacity utilization rate measures the proportion of plant and equipment capacity used by these industries. The capacity utilization rate is gauged against a pre-determined value (usually 85%) to measure demand in the economy. If this rate exceeds the threshold, it could be a signal for inflationary conditions, warranting the Fed's raising of interest rates.

Housing Statistics - There are several reports on the real estate activities released by the government and several housing trade associations (e.g., National Association of Realtors) throughout the year. These reports cover new and existing home sales, housing starts, building permits, and new constructions. The housing sector and its supporting industries are one of the major components of the economy. An increase in housing activity points to a strong economy and can lead to inflationary pressures.

Producer Price Index (PPI) - Reported monthly by the Bureau of Labor Statistics, the PPI shows the monthly changes in prices of a number of important raw materials sold (such as steel and oil) at the


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