Short-term Economic Indicators: October 2019

1.     International Economic Situation

Economic forecasting is process of attempting to he predict future condition of the economy using a combination of important and widely followed indicators. Government officials and business managers use economic forecasts to determine fiscal and monetary policies and plan future activities.

When we look to the ´Economic Growth Forecasts for 2018-2019-2020`, we can see that risks to the forecast come mainly from the downside. The pressing need include reducing trade and technology tensions and expeditiously resolving around trade agreement (including between the United Kingdom and the European Union and the free trade area encompassing Canada, Mexico and the United States).

When we check ‘World Trade’ year by year, we can see: the slowdown in merchandise trade volume growth in 2018 was broad based, reflecting weaker import demand in both developed countries and developing countries.

The U.S. economic outlook is healthy according to the key economic indicators. The most critical indicator is the gross domestic product. The GDP rate is expected to remain between the 2% to 3% ideal range. Unemployment is forecast to continue at the natural rate. There isn't too much inflation or deflation. That's a Goldilocks economy. The Japan economic outlook is expected to soften in the final quarter of 2019 and in 2020. Rising trade and a cooling global economy are key downside.

When we look at Portugal Economy table, we can say that Portugal’s GDP grew in the first quarter of 2019. Private consumption growth slowed down slightly but investment rebounded strongly, supported by all main components. At the same time, this pushed up imports and contributed to the more negative contribution of net exports. GDP growth is projected to ease marginally over the forecast horizon, reflecting mainly a less supportive external environment. Growth in private consumption is also set to weaken, while investment is forecast to accelerate, maintained by the absorption cycle of EU funds.

The Gross Domestic Product (GDP) in Portugal was worth 237.98 billion US dollars in 2018. The GDP value of Portugal represents 0.38 percent of the world economy. GDP in Portugal averaged 94.52 USD Billion from 1960 until 2018, reaching an all time high of 262.01 USD Billion in 2008 and a record low of 3.19 USD Billion in 1960. Employment Rate in Portugal increased to 55.50 percent in the second quarter of 2019 from 55.10 percent in the first quarter of 2019. Employment Rate in Portugal averaged 55.35 percent from 1998 until 2019, reaching an all time high of 59.20 percent in the second quarter of 2002 and a record low of 48.80 percent in the first quarter of 2013.

2.     National Economic Situation

Leading indicators measure economic activity in which shifts may predict the onset of a business cycle. Examples of leading indicators include average weekly work hours in manufacturing, factory orders for goods, housing permits and stock prices. Changes in these metrics could signal a shift in business cycle. Other leading indicators include the index of consumer expectations, average weekly claims for unemployment insurance and the interest rate spread.

The leading indicators are: Stock Market, Manufacturing Activity, Inventory Levels, Retail Sales, Building Permits, Housing Market Level of New Business Startups.

Zeynep Naz Özhan

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]