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The Secrets of Economic Indicators
by Bernard Baumohl
Wharton School Publishing © 2005, 376 pages, $27.95 (ISBN 0-13-145501-X).
Hidden Clues to Future Economic Trends and Investment Opportunities
A shift of a single economic statistic has the ability to trigger intense action and reaction that can reverberate around the globe the instant it is released, affecting consumer prices, worker wages, fuel prices, mortgage rates, investment values, foreign exchange markets, and many other crucial elements of the global economy.
There are more than 50 economic indicators affecting financial markets that are released every week, month or quarter, including industrial production, job growth, retail sales, and new home construction. These indicators are so pivotal that the government takes extraordinary measures to control their flow. Economics reporter and consultant Bernard Baumohl has written The Secrets of Economic Indicators to help investors, brokers, portfolio managers, researchers, journalists and students understand what the numbers really mean, make sense of conflicting indicators, and learn how to spot impending changes in the U.S. economy.
Although economics and its measurements could easily become dry subject matter, Baumohl presents the release of these powerful numbers as a dramatic race to propagate valuable information to the world. He starts his book with a riveting tale from the “lock-up” room where the government releases the latest figures to a select group of reporters who must scramble to write their stories during a 30-minute frenzy behind locked doors and tight security and await the single second when they are allowed to transmit the reports they have compiled. As this powerful story unfolds, Baumohl describes the tension behind the exact moment when the reports are broadcast and the impact that the release of these statistics will have around the globe.
Before the rigid rules governing how these reports are released were developed in the 1970s, Baumohl explains, there was rampant manipulation of the economic indicators. This includes President Nixon’s pressure on the Commerce Department to time the release of upbeat figures for maximum political impact, and the bribery of reporters to leak economic news to brokerage firms before writing about it. Today, he writes, nearly every major economic indicator is released under tight lock-up conditions, which has virtually ended trading based on inside information of economic indicators.
Throughout The Secrets of Economic Indicators, Baumohl explains how indicators can be deciphered for important information about the economy. With four key economic indicators released on a weekly basis, 43 every month, and nine each quarter, he writes that all of them are crucial to understanding the United States’ complex economy. Although, he points out, there is no single indicator, nor combination of measures, that provides a complete picture of the future’s economy, he describes how each indicator can provide “a snapshot of what conditions are like within a specific sector of the economy at a particular point in time.”
After presenting the key phrases and concepts that are essential to understanding economic indicators, he describes in detail how all the major U.S. economic indicators are evaluated, and explains why each one is important to know and how it is computed. After providing the nitty-gritty of the indicator, he presents what the economic indicator says about the future and how bonds, stocks and the dollar might react differently to economic data. He writes that much depends on the specific economic indicator, its timeliness, the expectations of investors, and what else is going on in the economy at the time it is released.
The remainder of The Secrets of Economic Indicators presents a detailed overview of international economic indicators and why they are so important to American investors and CEOs looking to sell products overseas. Baumohl rounds out his book with a complete resource guide to the best Web sites for both domestic and international economic indicators, as well as other useful Web resources. ~
Why We Like ThIs Book
Baumohl’s two decades history as an award-winning TIME magazine economics reporter has prepared him not only to be able to write clearly and succinctly on the intricacies of economic data, but also to turn stark facts and figures into an entertaining tome that breathes with life and human drama while delivering crucial investment information. ~