Introduction
According to Mullineux, (1984) economic growth and development are an integral part of a healthy economy. The analysis of the economy’s health requires the use of economic indicators. Economic indicators are classified into different categories. These include; the leading economic indicators, lagging and coincident. This classification helps in the analysis of the economy in terms of the business cycle.
Best indicators for the future health of the economy
Manufacturers’ new orders, consumer goods, and materials indicator
These manufactured goods are used by consumers. In this case, new orders affect the number of both inventories and unfulfilled orders. In this line, when manufacturers’ new orders are increased, the consumer goods will increase hence boosting economic growth and development. This makes this indicator to be healthy for future economic development because it is an injection to the economy. In this regard, there will be increased GDP due to increased earnings from consumer goods bought as well as employment creation.
Manufacturers’ new orders, nondefense capital goods indicator
This economic indicator is necessary for healthy economic growth and development. Nondefense capital goods industries are an injection to the economy hence boosting economic development. In this regard, the production of consumer goods will increase hence an increase in GDP. In addition, this kind of injection to the economy will boost employment opportunities in the economy.
Stock prices, 500 common stocks indicator
This economic indicator is good for the future development of an economy. The increase and decrease in stock index show the price shifts of a large selection of stocks traded on the New York Stock Exchange. The increase and decrease in the price of the stocks trades is a clear demonstration of the investors’ interest. It also influences the movement of interest rates. This free-market movement is good for healthy economic development.
Building permits, new private housing units indicator
This economic indicator is necessary for the future economic health of a nation (Siegel, 2002). This is because an increase in the number of residential permits increases the construction activities in the country. The increase in construction activities is an effective injection to economic development. This is because it not only increases the number of residential houses but also stabilizes economic growth through employment creation.
Research on Manufacturers’ new orders, consumer goods and materials indicator
According to Savage and Young, (2010); New orders for manufactured goods in January, up nine of the last ten months, increased $6.2 billion or 1.7 percent to $378.4 billion, the U.S. Census Bureau reported today. This followed a 1.5 percent December increase. Excluding transportation, new orders increased 0.1 percent. Shipments, up to seven of the last eight months, increased $1.0 billion or 0.3 percent to $383.7 billion. This followed a 1.8 percent December increase. Unfilled orders, up following fifteen consecutive monthly decreases, increased $0.1 billion to $717.8 billion. This followed a 0.9 percent decrease in December. The unfilled orders-to-shipments ratio was 5.54, up from 5.44 in December. Inventories, up to three of the last four months, increased $0.8 billion or 0.2 percent to $495.2 billion. This followed a 0.2 percent December decrease. The inventories-to-shipments ratio was 1.29, unchanged from December.
From the above information, the indicator is predicting economic growth this is demonstrated by the increase in the percentage of manufactured goods. In this regard, the economy is showing signs of growth which is good for the economic future of a nation.
Economic Advice to the government
Demand-side policy
Economic growth needs the right economic policy to achieve and sustain it (Pring, 1992). In this case, to increase aggregate demand in the economy, the government needs to cut tax rates since this will increase people’s disposable income. When there is an increase in disposable income investment will increase which is an injection to economic growth and development.
Supply-side policy
These policies are responsible for making the economy more productive and responsive to economic change. In this line, cutting tax rates will be necessary for the Obama government to provide incentives to the people to produce more goods and services. Secondly, I will advise the government to promote education and training. This will increase the number of skilled workforces thereby promoting productivity in the economy.
Third and lastly, I will advise the government to cut spending on social benefits. This will go a long way in boosting the unemployed incentive to look for employment. Employment is quite necessary for economic development. In this regard, increase benefits reduce the unemployed agility to find a job. In this case, my advice and views are inclined to the Keynesian approach this is because the approach is government intervention. In this case, it is fiscal policies. Unlike the classical approach which seeks the intervention of free-market forces. Free market forces have got merits and demerits.
Conclusion
The analysis of the trend of a business cycle is not only important to economists but also to investors and the general public. It provides the basis on which all stakeholders in the process of economic development can effectively plan and make decisions on the best economic policies to apply at a given period.
References
Mullineux, A. W. (1984). The business cycle after Keynes: a contemporary analysis. Rowman & Littlefield
Pring, M. J (1992). The all-season investor: successful strategies for every stage in the business cycle. John Wiley and Sons
Savage, C. and Young, J. (2010).U.S Census Bureau News. U.S Department of Commerce. Washington D.C. Web.
Siegel, J. J. (2002). Stocks for the long run: the definitive guide to financial market returns and long-term investment strategies. McGraw-Hill Professional