In the business section of any paper, week after week, month after month, quarter after quarter, we are told about economic data of other countries besides Bermuda. While the focus seems far too often on the United States, our nearest neighbour, we will see significant tracking of the UK, Canadian, European, Japanese, and Asian economies as well.

For the average person, these statistics may seem boring and on a bad day more than a bit of overkill. However, the patterns that other economies exhibit over time periods can tell us a great deal about how our economy (and our personal savings patterns) should prepare (or react) when trends change dramatically.

An abrupt or unanticipated change in one of the ten vital economic indicators can have a chilling ? or euphoric ? effect on capital markets. To understand the ramifications, one only has to stand in front of a large screen TV and watch CNBC live reports just before and just after the earliest of the economic trends, the Current Employment Statistics, are announced.

A lower rate of new hires can spark a major sell-off if the market did not anticipate such a number. Conversely, an upward swing in employment rate may trigger a rapid buying day. Each indicator, viewed in isolation, however, may not truly measure the health of an economy, but correlating the whole landscape may suggest a significantly different picture.

As the CFA Institute suggests in an article written for Horsesmouth LLC in October, 2002, economic reports and indicators provide measurements for evaluating the health of an economy, as well as how consumers are spending and generally faring. Separately and collectively, they provide a report card on how we are all doing, how we did in the past and how we will project to do in the future. The ten major indicators are: real GDP (Gross Domestic Product), M2 (Money Supply), Consumer Price Index, Producer Price Index, Consumer Confidence Survey, Current Employment Statistics, Retail Trade and Food Service Sales, Housing Starts, Manufacturing, Trade Inventories & Sales, and the S&P Stock Index, also known as the S&P 500. Any major financial news network, particularly Bloomberg, will list a current schedule of when these results are announced.

1. Real GDP is the market value of all goods and services produced in a nation during a specific time period. It measures a society's wealth by indicating how fast profits may grow and the expected return on capital, i.e. China has had explosive growth in GDP in the last couple of years. The US Federal Reserve tracks GDP and other related economic indicators to control monetary policy.

2. M2 Money Supply represents the aggregate total of all money in circulation in a country. The Federal Reserve, or other Central Banks, monitor this cash flow closely, using it to predict cyclical recessions, recoveries, and changes in stock prices. The Fed, for instance, in a sluggish environment will lower interest rates to increase money supply, stimulating cheap borrowing, and a pick up in the economy.

3. CPI Consumer Price Index this measures changes in cost-of-living for consumers using a data sampling of several hundred goods and services from 87 urban areas in the US. CPI components are food and beverages, including dining out and alcohol, housing costs, apparel, transportation (car insurance and airfares), education costs and software, medical care, utilities, recreation (cable, pets, sports), personal services (salons, haircuts etc.) and sales taxes.

4. Producer Price Index This is the CPI equivalent for business and measures costs at a wholesale level to produce goods and services as tracked from 25,000 businesses monthly. There is a strong correlation between crude price rises and increase in corporate earnings.

5. Consumer Confidence Survey Not everything can be quantified mathematically. If you don't feel good about yourself, your job, and your personal finances, particularly in times of political and economic crises, you aren't going to spend money, period. Germany recently reported starkly lowered consumer confidence, over 12 percent unemployment, and a nation moving down into another recession.

6. Current Employment Statistics Directly related to the Consumer Confidence. More work, more jobs, happier customers, simple as that. Whether we realise it or not, work is what defines who we are. Surveys are taken of 300,000 businesses spread across 600 industries.

7. Retail Trade and Food Services Sales Data is gathered from a random sampling of retail (including automobiles) and food service firms, weighted and benchmarked to represent the nation's three million retail and food service firms.

8. Housing Starts need no explanation, but is a highly volatile indicator, sensitive to mortgage rates which are again affected by interest rates.

9. Manufacturing and Trade Inventories and Sales Businesses that can control their inventory growth can be highly profitable. Higher inventories mean slower sales translating into slower economic growth. Low inventories mean high sales because the goods cannot be kept in stock, but can also mean that production is cut because things aren't selling.

10. S&P 500 Stock Index This market value-weighted index of 500 public US stocks has become the industry standard and benchmark for the overall performance of the US equity market and is used not only as an investment but as a gauge of future business and consumer confidence.

So to Summarize: If the money supply is loose, the consumer and producer price index is steady, consumer confidence is cheery, unemployment is down and new hiring is up, retail trades and food services have increased modestly (the mister is still taking the family out for a modest meal), housing starts are increasing steadily and the S&P index is tracking upward, then real GDP must be increasing. Consumers can rewarding themselves! Everything for now is right with the world, at least, that is, the North Atlantic World.

Martha Harris Myron CPA/PFS CFP? is a VP and Senior Private Banker, Bank of Bermuda Member HSBC Group. She can be reached at 299-5578 Confidential e-mail can be directed to marthamyronnorthrock.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor The Royal Gazette has final right of approval over headlines, content, and length/brevity of article.