Indicators of Business Cycle
Understanding the indicators of business cycle will provide basic information regarding the market and business condition especially for those who are beginners in the business.
So, if you are about to start your own venture, sit first and read this article.
When you know what the indicators of business cycle are, you have an idea of the possible outcome of your investments. Thus, you can avoid some unnecessary investments that will just take your money away from you.
Leading indicators are the first indicators of business cycle. These are composed of the statistics that is helpful in determining the turning points of the economy. This indicator is also helpful in helping the investors to determine if they need to stay in the game, to change positions in companies or businesses, to have protection against possible turn around as well as to develop defensive measures. This indicator has its own components. These are the building permits and weekly working hours. These are the particular leading indicator components that supplies investors an idea on how the economy is promising to them. Generally, this is a good indicator of the market and effective in leading the investors to the right venture that they should put their investments. However, this is a measurable factor that is not constant all the time.
Next are the coincident indicators. These are very much vital in knowing the daily business and economic activity. When an investor knows the daily activity in the market, he is able to plan his marketing strategy properly. Aside from that, an investor will also be given the right background on what to market to avoid and to partner with. Under this indicator, unemployment can be its sub indicator.
Lagging indicators are also helpful in determining the business cycle. This indicator is pertinent in knowing the possible discrepancies that will lead to coincident indicators. Example of this is that increase in the number of building permits is useless if the lagging indicator which is the Customer Price Index is in negative state. Yet, in waiting for logging indicator, it may lead to loss of opportunity for profit growth. But you must put in your mind that lagging indicators help in confirming trends that are long term yet, it is not responsible in predicting it.
Pros and Cons of These Indicators
Using the indicators discussed will sometimes give the investor a hard time. Especially those who are just new in the field of investment, they will surely find it hard to utilize the information that they can get out of these indicators. However, it is a must that when you are planning to invest in a particular business, you know these indicators. These will generally provide you helpful background on whether it is time to invest or not. Furthermore, you will also benefit from avoiding your investment to be taken away from you if you know these indicators.