The Trader's Guide to Key Economic Indicators

Business Economics, April, 2005 by Edmund A. Mennis

The Trader's Guide to Key Economic Indicators

By Richard Yamarone. 2004. Princeton, NJ: Bloomberg Press. Pp. 267. $39.95 hardcover.

This book is another in the growing number of those that are aimed at investors who are now managing their own investment accounts and are looking for clues to economic reports that will affect stock prices. The emphasis is not on long-term investment advice but rather is directed to the frequent trader who uses economic information to anticipate short-term market movements.

Richard Yamarone is well qualified to write on this subject. He is vice president and director of economic research for Argus Research Corporation, where he specializes in analyzing domestic and international economic trends, monitoring monetary and fiscal policy developments, and forecasting the U.S. macro economy. His prior experience included senior positions for several international and investment banks as well as teaching positions at several colleges.

The book describes only a dozen key groups of economic indicators, but they are considered the most important in their influence on stock market movements. These include gross domestic product and its components; the leading, coincident and lagging indicators; the employment situation; industrial production and capacity utilization; the Institute of Supply Management indexes; manufacturers' shipments, inventories and new orders; manufacturing and trade inventories and sales; new residential construction; consumer confidence and sentiment indicators; retail sales; personal income and outlays; and the consumer and producer price indexes. All of these are related to the business cycle, either because of their predictive powers or because they reflect the current state of the economy.

The treatment of each of the dozen groups of indicators is similar. Initially, a brief description of its evolution provides background. The data sources are then described in detail. Following is a discussion of what the information means and how it can be used. The final step is a section called "Tricks from the Trenches," which provides analytical methods or issues to be aware of in reviewing the data reported. In each data set, excellent charts provide perspective for ten years or more, so that current readings can be placed in an historical context.

While aimed at stock traders and short-term investors, the book provides excellent coverage of the most important economic indictors. As such, it can be useful for the beginning economist and as a good reference for the seasoned practitioner.

For more information about book reviews, contact Gerald L. Musgrave, Book Review Editor, musgravegl@aol.com

Edmund A. Mennis

Palos Verdes Estates, California

For more information about book reviews, contact Gerald L. Musgrave, Book Review Editor, musgravegl@aol.com