Class7
- 1. Fundamentals of Business & Financial Journalism Week 7: Covering economic events Jeffrey Timmermans
- 2. Economic goals of governments ✤ Full employment ✤ or at least as full as possible... ✤ Steady annual growth in output ✤ without overheating ✤ Stable prices (low but steady rise in prices over time)
- 3. Measuring economic performance ✤ Output of goods & services ✤ Changes in prices for goods & services over time ✤ Mood of consumers ✤ Employment ✤ Total supply of money ✤ Trade with other countries
- 4. Questions to ask about data ✤ Who is publishing the data, and who compiled it? ✤ What do the data cover, and what is left out? ✤ How reliable are the data? ✤ What is the time period for the data? ✤ Will the data be revised later? ✤ Are the data seasonally adjusted? Adjusted for inflation? Annualized?
- 5. More questions ✤ Is the data published as an index, or an absolute amount? ✤ If an absolute amount, what is the unit of measurement? ✤ What will you use for comparison? Year-earlier period? Previous month or quarter? ✤ How should you describe the significance of the measure to your reader?
- 6. Adjustments ✤ Seasonally adjusted ✤ Data “smoothed” using long-term seasonal trends ✤ Inflation adjusted ✤ Real: effects of inflation are removed ✤ Nominal: no adjustment for inflation ✤ Annualized: “what if” same trend continued for a whole year
- 7. Economic indicator stories: basic structure ✤ Change ✤ Cause ✤ Expectations CCE CCF ✤ Comment ✤ Context ✤ Future
- 8. Advance prep for covering data ✤ Always keep updated schedule of data announcements ✤ Before each major announcement, find out the expectations ✤ Conduct a poll of economists or other analysts ✤ Get your story template ready (plug in comparison data, expectations) ✤ Make appointments to speak with economists/analysts right after announcement
- 9. Measuring economic performance ✤ Output of goods & services ✤ Changes in prices for goods & services over time ✤ Mood of consumers ✤ Employment ✤ Total supply of money ✤ Trade with other countries
- 10. Major economic indicators ✤ Gross Domestic Product ✤ Consumer Price Index ✤ Consumer Confidence Index ✤ Unemployment rate ✤ Money Supply ✤ Trade Balance
- 11. Gross Domestic Product ✤ Total value of goods & services produced within a country’s borders ✤ Typically measured using the expenditure method: adding up the country’s spending on final goods & services ✤ GDP = Consumption + Investment + Government Spending + (Exports - Imports)
- 12. Problems with GDP ✤ Doesn’t measure externalities (positive or negative) ✤ Pollution, education ✤ Doesn’t include a measure of overall quality of life, happiness nor well-being ✤ Doesn’t account for the consumption of fixed assets (depreciation) ✤ In cross-border comparisons, doesn’t account for purchasing power parity
- 13. World News: Asia: Indonesian growth rate rises By Farida Husna and I Made Sentana 11 May 2010 JAKARTA -- Indonesia's economic growth accelerated in the first quarter to its fastest Change pace since the third quarter of 2008, as households continued to spend amid benign inflation and companies invested more on rising confidence in the economy, the government said Monday. The official statistics agency said Southeast Asia's largest economy expanded 5.7% Cause year-to-year in the quarter ended March, accelerating from 5.4% in the fourth quarter of 2009. Meanwhile, non-seasonally adjusted quarter-to-quarter economic growth was 1.9%, a reversal of the previous quarter's 2.4% contraction. The data showed that the domestic economy's recovery remains on track, even if growth came in slightly slower than expected. The median forecast of 12 regional economist polled by Dow Jones Newswires was for gross domestic product to have expanded 5.78% in the first quarter from a year earlier. Expectations Meanwhile, the median projection of 10 economists who provided quarter-to-quarter forecasts was for GDP to have risen 2.1% compared with the preceding period. Bank Indonesia isn't expected to start tightening monetary policy soon as inflationary pressures aren't yet seen as a threat, analysts said. Last week, Bank Indonesia kept its benchmark overnight rate at 6.50%, where it has been since August. Household consumption, the pillar of the country's economy, rose 3.9% year-to-year Context in the first quarter; investment gained 7.9% and exports gained 19.6%, the statistics agency data showed. A 8.8% decline in the government spending, however, weighed on growth. "We are still of the opinion that the underlying sentiment has ticked up in Indonesia, and the momentum should be maintained going forward," said OCBC economist Comment Gundy Cahyadi. The government has set a 5.8% growth target for this year, compared with 4.5% expansion last year. Analysts said accelerating economic growth, stable inflation, and a more temperate political atmosphere -- after parliament in March concluded its probe into a controversial bank bailout -- should foster a more conducive environment for Future investment.
- 14. Japan grows but stays fragile By Mure Dickie in Tokyo and Robin Kwong in Taipei 21 May 2010 Change Japan's economy grew a relatively robust 1.2 per cent in the first quarter but full recovery from the worst postwar slump depends on demand from foreign export Future markets and a rebound in private consumption that may be faltering. Preliminary gross domestic product data released yesterday were equivalent to an annualised growth rate of 4.9 per cent - below economists' forecasts but still an refutation of fears last year that the economy might stall in early 2010 or suffer a Expectations "double dip". Naoto Kan, the finance minister, said the data reflected a "solid economic recovery" but made clear it was too soon to relax. "We need to watch very closely to see if this is an autonomous recovery," he said. It can be dangerous to read too much into Japan's preliminary estimate of GDP, a statistic often revised heavily. In the third quarter of last year, for example, the economy was initially thought to have expanded 1.2 per cent but was later judged to have contracted and is now Context recorded as having expanded 0.1 per cent. However, yesterday's first-quarter estimate left no doubt of Japan's continuing reliance on external demand for growth, with net exports of goods and services accounting for 0.7 percentage points of the 1.2 per cent quarter-on-quarter Cause expansion. The Japanese data offered some signs that Japan's recovery was broadening, with growth in all categories of public demand, including residential investment, which declined sharply throughout 2009. "Rising exports and production have spilled over to domestic demand," wrote Kiichi Murashima, economist at Citigroup Global Markets, in a research note. Comment But the pace of quarter-on-quarter growth in private consumption softened considerably, falling to 0.3 per cent - its weakest performance since the first three months of last year - suggesting a waning effect of government stimulus efforts. Much could now depend on the impact on consumption of a monthly Y13,000 ($145, €118, £102) child allowance introduced by the Democratic party-led government. Some analysts say many parents are likely to save rather than spend the windfall. Future