Economic Indicators_Introduction to Business

Economic Indicators_Introduction to Business

Indicators allow an analysis of economic performance and predictions of future performance. The study of business cycles is one of the main applications of economic indicators. These indicators include various indices, earning reports, and economic summaries. Examples: unemployment rate, consumer price index (a measure of inflation), industrial production, bankruptcies, gross domestic product, stock market prices, and money supply changes.

Here we will discuss the major economic indicators of Pakistan and the effects of their fluctuations on the economy of the country.

Unemployment rate unemployment occurs when a person who is without work are actively seeking work for the past four weeks. The age limit is 16 years to fit this criterion.

Unemployment rate = Unemployed workers X 100%

                                   Total labor force

According to the latest data from World Bank (2011- 2015), the following figures indicate the rate of unemployment in Pakistan.

Different Unemployment categories	1996-2000	2001-2005	2006-2010	2011-2015
Unemployment, female (% of female labor force)	8.9	8.9	9.0	9.3
Unemployment, male (% of male labor force)	4.0	4.0	4.0	4.0
Unemployment, total (% of labor force)	5.1	5,1	5.1	5. 2
Unemployment, youth female (% of female labor force) modeled ILO estimate	10.9	10.8	11.4	12.1
Unemployment, youth male (% of male labor force) modeled ILO estimate	7.3	7. 2	7.3	7.6

 

The above figures indicate that the percentage of unemployment is increasing over time. The unemployment rate play important role in determining the health of the economy of a country.

1.                  Gross Domestic Product (GDP)

Gross domestic product (GDP) is defined as the monetary value of all the finished goods and services produced within the country’s border at a specific period. GDP indicates the economic progress of the country. It is calculated annually as well as every quarter.

The World Bank provides detailed data on the GDPs of different countries.

	2011	2012	2013	2014
GDP growth (annual %)	2.7	3.5	4.4	4.7
GDP per capita (current US$)	1230.8	1266.4	1275.4	1316.6

 Annual growth rate of GDP is improving that shows that economic state of country is becoming stable.

3.     Inflation rate

General rise in the prices is known as inflation rate. This is favorable for countries but at moderate rate. Deflation and super inflation damage the countries.

World Bank gives following data on inflation rate.

	2011	2012	2013	2014	2015
Inflation, consumer prices (annual %)	11.9	7.9	7.7	7. 2	2.5
Inflation, GDP deflator (annual %)	19.6	6.0	7.0	6.9

Inflation is caused by the following factors: excess money printing, high production cost, international lending, and national debts, federal taxes.

Negative Effects of Inflation

• It is difficult for the consumer to purchase more goods.
• It generates very bad effects on the poor labor force.
• Inflation reduces the living standard and purchasing power of people.
• Causes an increase in the tax bracket.

Positive Effects of Inflation

• There is more investment in the country at the time of inflation.
• Inflation increases the economic activities that may cause innovations and inventions.
• The profit of the producers also increases when there is normal inflation.

Inflation in Pakistan

In Pakistan, the most important thing is the rise in the price of oil, and gas, excise duties, and increased utility tariffs. These all have inflationary impacts on the economy. The government claims that to keep the prices of essential commodities under control, it has been taking various measures throughout the year. Unfortunately, in Pakistan, these core problems have never undergone such a planning process. Inflation always compromises one’s standard of living. People have to pay more money for the same goods and services. In a competitive environment, where demand and supply forces predominantly influence price movements, any attempts to keep the prices down artificially result in the dilution of quality. Devaluation of currency can also be the cause of inflation.

Conclusion

Inflation is everywhere in the economy. Its rate is high in developing countries and low in poorly developed countries. Effective operation of monetary and fiscal policy can be beneficial to controlling the rate of inflation.