Every entrepreneur should follow key economic indicators.  There are key economic factors that impacts your small business.  These economic factors measures the health of the economy.  They are an indication of how the business cycles are faring and how consumers are spending.  As a result, you should understand what the economic indicators are and pay attention to them on an ongoing basis. 

These indicators will impact the decisions you make to grow your business, whether that is how inventory you buy, whether or not you raise your prices, your access to capital, etc.  When you watch experts on tv give their opinions about the state of the economy they base their opinions on key economic indicators.

Economic indicators are put out by government agencies and private organizations.  They are published daily, weekly, monthly and/or quarterly.

There are many key economic indicators.  However, not all of them are relevant to you as a small business owner.  Some are general indicators while others are industry specific.

These are some of the key economic indicators that you should pay attention to:


Gross Domestic Product (GDP):

2nd Quarter 2019: 2.1%
1st Quarter 2019: 3.1%
4th Quarter 2018: 2.2%
3rd Quarter 2018: 3.4%
2nd Quarter 2018: 4.2%
1st Quarter 2018:  2.2%
4th Quarter 2017:  2.3%
3rd Quarter 2017:  2.8%
2nd Quarter 2017:  3.0%

Published quarterly by the Bureau of Labor Statistics.

The GDP is a measure of the market value of all goods and services produced in a nation during a specific time period.  It tells you whether economy is expanding or contracting.  Two consecutive quarters of negative GDP growth indicates that the country is in a recession.  A slowing economy indicates that the job growth is slowing and less people will be able to work and hence, have disposable income to buy consumer goods.  So by looking at the GDP which shows a slowing economy you can make decisions to reduce spending, lower inventory and prepare to weather the storm.  On the other hand, if the economy is expanding the opposite would be true.  You would then be looking at increase demands if the customer base is growing.



Consumer Price Index (CPI):

Sep 2019:  0.1%
Aug 2019:  0.1%
Jul 2019:   0.3%
Jun 2019:  0.1%
May 2019:  0.1%
Apr 2019:   0.3%
Mar 2019:  0.4%
Feb 2019:    0.2%
Jan 2019:   1.6%
Dec 2018:  -0.1%
Nov 2018:    0.2%
Oct 2018:    0.3%
Sep 2018:    0.1%

Published monthly by Bureau of Labor Statistics.  

The CPI is the best indicator of inflation.  The CPI is a sampling of several hundred goods and services across 200 item categories.  It measures changes in prices paid for goods and services.  A sharp increase in the CPI would indicate inflation.  Higher prices would mean that consumers will likely pull back on spending which could have an impact on your business.



Producer Price Index (PPI):

Sep 2019: 0.3%
Aug 2019: 0.1%
Jul 2019:   0.2%
Jun 2019:  0.1%
May 2019: 0.1%
Apr 2019:  0.2%
Mar 2019: 0.6%
Feb 2019:   0.1%
Jan 2019: -0.1%
Dec 2018: -0.2%
Nov 2018: -0.1%
Oct 2018: -0.6%
Sep 2018: -0.2%

Published monthly by Bureau of Labor Statistics.

The PPI measures the changes in the selling price of goods and services received by U.S. producers in a given month.  It measures prices on the production side as opposed to the CPI which prices on the consumer side.  The PPI captures price changes on the production side before they show up on the consumer/retail side.  Think of it as a way to see ahead and gauge what decisions will be made by government agencies made based on what will show up at the CPI.  If the PPI is increasing it will be an indication that your production cost may rise and hence you may have to increase the retail price of your product to make up for it.  The reverse is true as well.  If cost is going down you may have to lower your retail price to remain competitive.



Consumer Confidence Survey:

Sep 2019: 125.1%
Aug 2019: 135.1%
Jul 2019:  135.7%
Jun 2019: 121.5%
May 2019: 134.1%
Apr 2019: 129.2%
Mar 2019: 124.1%
Feb 2019: 131.4%
Jan 2019: 121.7%
Dec 2018: 128.1%
Nov 2018: 135.7%
Oct 2018: 137.9%
Sep 2018: 138.4%

Published monthly by the Conference Board's Consumer Research Center (last Tuesday of each month).

The Consumer Confidence Survey is a measure of the public's confidence about the health of the economy.  Increasing consumer confidence is an indication that they feel confident about their financial and employment prospects and are likely to spend more on consumer goods and services.  Hence, a negative report indicates the opposite.  This report gives you an indication of what decisions you should be making about your business.  If the likelihood of consumer spending is declining you don't want to make investment to meet the needs of a customer base that will not be there to buy your goods and services.



Current Employment Statistics (CES):

Unemployment Rate

Sep 2019:  3.5%
Aug 2019: 3.7%
July 2019: 3.7%
Jun 2019:  3.7%
May 2019:  3.6%
Apr 2019:  3.6%
Mar 2019:  3.8%
Feb 2019:   3.8%
Jan 2019:   4.0%
Dec 2018:   3.9%
Nov 2018:   3.7%
Oct 2018:   3.7%
Sep 2018:   3.7%

Published monthly by Bureau of Labor Statistics.

The CES is a survey of the business and industry that provides data on employment, unemployment and earnings across all industries except for agriculture.  It includes civilian as well as government workers.  It gives an indication of where jobs are being created, the make up of the labor force, the tightness of the laborforce, the average number of hours being worked and average hourly wages. An increasing employment rate means a growing customer base, but it also means that individuals will have more choices for work and hence the competition for skilled workers could drive up the labor cost.

When reading the unemployment report pay attention to the amount of part-time jobs being created and the labor force participation rate.  If a record amount of prat-time jobs are being created it is an indication that businesses see obstacles to growth.  The labor force participation is the amount of working age people that are working or looking for work.  If the participation rate is high it is a good indication of a good economy.  

The Cost of Fuel:

Fuel is a key component of all things produced and sold.  Fuel is required to provide electricity that is used to light facilities, run machinery, transport raw materials and finished goods to the point of sale and to the customer.  Fuel has a cost and the fluctuation in the price of the fuel will cause ripple effects throughout the economy.  Some industries are fuel intensive while others are less so.  The price of what you produce will change depending on the cost of fuel.  Businesses offset the higher cost of fuel by passing it on to consumers.



The Bank Prime Rate (or Prime Lending Rate):

Current Prime Rate:  4.50%

The Prime Rate is the interest rate at which banks lend money to consumers (with good credit).  If the Prime Rate goes up then it becomes more expensive for you as a small business owner to borrow money and for consumers to borrow money.  Hence, it could curtail borrowing and hence spending.  A higher Prime Rate could result in slowing economic activity.


Consumer Spending or Consumer Expenditure Survey[BLS]:

Average Daily Spending:  $109 (as of July 2017)

This report shows how consumers are spending their disposable income.  It is an indication of how much disposable income consumers have and how much confidence they have in the economy. 

The Bureau of Labor Statistics also generate their own report on an annual basis.