3 Economic Indicators You Should Really Pay Attention To

Source: http://www.flickr.com/photos/theclevelandkid24/

On Wednesday, the Bureau of Economic Analysis let us know that the economic pain experienced in the first quarter was deeper than originally thought. The latest and final round of revisions show that the economy contracted 2.9 percent in the first quarter, down from a previous estimate of -1 percent. Things may not be as bad in the second quarter, given that consumer price inflation has picked up some pace and there are signs that labor market conditions are getting better, but economists still appear to be conservative about the economic recovery.

The overall unemployment rate for April and May steadied at 6.3 percent, having declined from over 7 percent around November. Consumer prices, as measured by the Consumer Price Index (CPI), also rose 0.4 percent in May, for the third straight month, and year-on-year consumer prices increased 2.1 percent, the highest growth since June last year. Economic theory suggests that some demand-led inflation is good, as it is a sign that the economy is moving toward full employment. But in spite of these signs of recovery, the Federal Reserve has pruned its growth projections for the entire year from a range between 2.8 and 3 percent to somewhere between 2.1 and 2.3 percent. The International Monetary Fund also made a sharp revision in its full-year growth estimates, from 2.8 percent to 2 percent.

But does the skepticism about recovery stem from the latest revisions alone or does the economic data from the last five years have something to add? If we look at not-so-popular economic indicators like output per capita (per person), real personal consumption expenditure per capita, or real private domestic investment per capita, we might find some guidance for our question.