Page 34

consumers relative to the economy. Higher consumer optimism can lead to higher spending and thus higher inflation.

Consumer Confidence Index - Reported by the Conference Board (a business research organization) it measures the comfort level of consumers, indicating their likelihood of making large purchases. A rise in this measure could signal increased demand and higher inflation.

NAPM Index - Reported monthly by the National Association of Purchasing Managers, it indicates the expansion or contraction of the manufacturing sector measured by the prices paid by the purchasing managers. A high reading could indicate inflationary pressures.

Index Of Leading Economic Indicators (ILEI) - Produced monthly by the Conference Board, this is the weighted average of 11 indicators such as jobless claims and stock prices. The index is intended to signal the overall climate of economic activity in the months ahead. A forecast of a strengthening economy could prompt the Fed to consider a preemptive strike against inflation by raising interest rates.

Productivity - This indicator is reported quarterly by the Labor Department. It measures the output per hour of work for non-farm business production and can be used in conjunction with the rate of change in GDP to determine whether economic growth is likely to be inflationary. A separate component measures unit labor costs, an important indicator of future inflation. An increase in productivity actually signals a healthy and growing economy.

Export And Import Levels - These figures are reported monthly by the Commerce Department. An increase in exports, while beneficial to companies' bottom lines, could reduce supplies in the domestic economy contributing to price increases. An increase in imports could signify increasing consumer demand and therefore rising prices which can lead to inflation. Decreased levels of export and import activity could point to an economic slowdown. A healthy balance between export and import levels would, on the other hand, indicate economic soundness to that end. …