The performance of an economy
Economic indicators are statistics that show general trends in the economy. Used to
analyze economic performance and predict the future
Some economic indicators are given in newspapers such as: exchange rates ,
platinum and crude oil , gold prices , GDP , economic growth rate ,
unemployment rate , CPI , PPI and the repo rate
Social indicators are statistics that show level of human development in a country
They include measurements such as unemployment figures and birth and
mortality data
Indicators are used to:
Make decisions and frame policies
Compare conditions between areas
How do economic indicators work?
Meaningless unless compared to indicators showing previous performances
Comparing indicators shows whether the figure has increased or decreased
Sources of statistics about South Africa
A census aims to obtain information’s about the population
A survey is done in a shorter time period such s every year
Two main government sources of statistic info i.e. Statistics South Africa (StatsSA) and
the South African Reserve Bank (SARB)
StatsSA is gov. agency – conduct national census every ten years – most accurate way
of collecting data
SARB produces stats in the SARB Quarterly Bulletin
Common problems in I interpretation of statistics
Expressing a change in statistics – when the value of an indicator increases from 5% -
8% it’s wrong to say there has been a 3% increase. It should be described as an
increase of three percentage points
A percentage point refers to 1% ….1% = 1 percentage point
Basis points refers to 1% = 100 basis points i.e. if the basis points are increased
by 50 then it’s only a 0.5% increase
Has the effect of inflation been removed – when comparing from previous years one
must find out if adjustments to inflation have been made
Origin of statistics – check the origin of the statistics so that you know whether they are
likely to be reliable or not
, Economic Indicators
Inflation and inflation rate
Foreign trade
Exchange rate
Employment and unemployment
Productivity
Interest rates
Money supply
Inflation and inflation rate
Inflation is the continuous increase in the prices of g/s over a long period of time
An index number is the ratio between the value of a given variable at a given time and
its value in a base year
An index is a series of index numbers with a fixed frequency such as year or month
Indicators that relate to inflation are the consumer price index(CPI) , inflation rate
and the producer price index (PPI)
The consumer price index (CPI) is an indicator that measures the change in the cost of
a fixed basket of g/s that an average househo9ld will purchase.
CPI is the best known index
The inflation rate is the rate of change of prices calculated on an annual basis
Once a set of CPI figures is available the inflation rate can be calculated
The producer price index (PPI) is an indicator of changes in the price of manufactured
goods as they leave the factories’ and not when they are sold to consumers
PPI includes capital and intermediate goods and excludes taxes and services
PPI is based on a different basket of items that the CPI and measures CoP rather
than cost of living
PPI is seen as an early indicator for coming changes in the CPI
Foreign Trade
The process of selling g/s across national boundaries
The indicators that regulate foreign trade are trade balance , terms of trade and
the exchange rate
The trade balance is the difference in value of a country’s merchandise imports and
exports over a time period
A countries terms of trade is the ration between the average price of its exports and
average price of its imports
It’s a countries average export price expressed in terms of the average import
price
i.e. Terms of Trade = (Index of export prices/Index of import prices) * 100
changes in terms of trade signal changes in economic welfare of a country:
if ToT improve , a greater volume of imports can be purchased with an
unchanged volume of exports – the country is richer
if ToT deteriorate , more g/s have to be exported to purchase the same
volume of imports and the county has become poorer
Exchange Rate
exchange rate is the price of the currency of one country expressed in terms of the
currency of another country
importance of changes in exchange rates:
When the Rand appreciates When the Rand depreciates
Imports become cheaper Imports become expensive
Exports become expensive Exports become cheaper
Foreign tourists are discouraged Foreign tourists encouraged
Cheaper for SA tourists to travel Expensive for SA tourists to travel
Economic indicators are statistics that show general trends in the economy. Used to
analyze economic performance and predict the future
Some economic indicators are given in newspapers such as: exchange rates ,
platinum and crude oil , gold prices , GDP , economic growth rate ,
unemployment rate , CPI , PPI and the repo rate
Social indicators are statistics that show level of human development in a country
They include measurements such as unemployment figures and birth and
mortality data
Indicators are used to:
Make decisions and frame policies
Compare conditions between areas
How do economic indicators work?
Meaningless unless compared to indicators showing previous performances
Comparing indicators shows whether the figure has increased or decreased
Sources of statistics about South Africa
A census aims to obtain information’s about the population
A survey is done in a shorter time period such s every year
Two main government sources of statistic info i.e. Statistics South Africa (StatsSA) and
the South African Reserve Bank (SARB)
StatsSA is gov. agency – conduct national census every ten years – most accurate way
of collecting data
SARB produces stats in the SARB Quarterly Bulletin
Common problems in I interpretation of statistics
Expressing a change in statistics – when the value of an indicator increases from 5% -
8% it’s wrong to say there has been a 3% increase. It should be described as an
increase of three percentage points
A percentage point refers to 1% ….1% = 1 percentage point
Basis points refers to 1% = 100 basis points i.e. if the basis points are increased
by 50 then it’s only a 0.5% increase
Has the effect of inflation been removed – when comparing from previous years one
must find out if adjustments to inflation have been made
Origin of statistics – check the origin of the statistics so that you know whether they are
likely to be reliable or not
, Economic Indicators
Inflation and inflation rate
Foreign trade
Exchange rate
Employment and unemployment
Productivity
Interest rates
Money supply
Inflation and inflation rate
Inflation is the continuous increase in the prices of g/s over a long period of time
An index number is the ratio between the value of a given variable at a given time and
its value in a base year
An index is a series of index numbers with a fixed frequency such as year or month
Indicators that relate to inflation are the consumer price index(CPI) , inflation rate
and the producer price index (PPI)
The consumer price index (CPI) is an indicator that measures the change in the cost of
a fixed basket of g/s that an average househo9ld will purchase.
CPI is the best known index
The inflation rate is the rate of change of prices calculated on an annual basis
Once a set of CPI figures is available the inflation rate can be calculated
The producer price index (PPI) is an indicator of changes in the price of manufactured
goods as they leave the factories’ and not when they are sold to consumers
PPI includes capital and intermediate goods and excludes taxes and services
PPI is based on a different basket of items that the CPI and measures CoP rather
than cost of living
PPI is seen as an early indicator for coming changes in the CPI
Foreign Trade
The process of selling g/s across national boundaries
The indicators that regulate foreign trade are trade balance , terms of trade and
the exchange rate
The trade balance is the difference in value of a country’s merchandise imports and
exports over a time period
A countries terms of trade is the ration between the average price of its exports and
average price of its imports
It’s a countries average export price expressed in terms of the average import
price
i.e. Terms of Trade = (Index of export prices/Index of import prices) * 100
changes in terms of trade signal changes in economic welfare of a country:
if ToT improve , a greater volume of imports can be purchased with an
unchanged volume of exports – the country is richer
if ToT deteriorate , more g/s have to be exported to purchase the same
volume of imports and the county has become poorer
Exchange Rate
exchange rate is the price of the currency of one country expressed in terms of the
currency of another country
importance of changes in exchange rates:
When the Rand appreciates When the Rand depreciates
Imports become cheaper Imports become expensive
Exports become expensive Exports become cheaper
Foreign tourists are discouraged Foreign tourists encouraged
Cheaper for SA tourists to travel Expensive for SA tourists to travel
