Coincident macroeconomic indicators. What are they? Well, they are inflection points that are usually close to those of the overall economy peaks and troughs. Now, what does that mean? Well, it means that the indicators move step-in-step with the general economy and give you a possible, close to real-time sign of the direction of the economy. Now, unlike lagging and leading indicators, here in the U.S., we just have a handful of coincident indicators. First, non-farm payrolls, personal income, and the two that we'll concentrate on today, that are the two most widely used, industrial production and retail sales. Now, let's dig deeper into industrial production. Here in the U.S., it's measured by the Industrial Production Index, and it tracks raw data on a monthly basis for all the goods that are produced in the U.S., in the economy, and it includes facilities in manufacturing, mining, electric, and gas utilities within the country. So what it's essentially doing, it's measuring industrial output and therefore, capturing the behavior of what is likely the most volatile part of the economy, as opposed to the service sector, which is excluded from this measure, that sector tends to be more stable and therefore, probably less of a signal for the trend in economic activity. Now, as you'd expect, growth in the Industrial Production Index from month to month or year to year is an indicator of growth in industrial sector and therefore, the economy. It could also give you some insight potential into inflation as any uptick in prices is typically seen in the raw materials used by the industrial sector first. And again, speaking to its quasi real-time nature, it's released monthly in just a few weeks after the measurement is taken. And here's a historical chart of industrial production versus GDP over the last decade or so. You can see the recent financial crisis shaded in gray, and you'll see that industrial production during that span bottomed in Q2 2009, precisely in the same quarter as GDP bottom Q2 2009. So again, this is consistent to what we would expect for a coincident indicator, as they tend to move step-by-step. Now, a deeper look into retail sales. Here in the U.S., retail sales is tracked using the Advanced Monthly Retail Trade Survey, also known as MARTS. And it's a survey of a majority of the large retailers in the U.S., and it's an early indication of the retail sector and it's tied to inventory and manufacturing. Now, it was developed in response to requests by analysts, economists, government, and others, really, to provide an an early indication of the current retail environment in the U.S. Now, retail sales are a primary measure of consumer demand in all countries for both durable and non-durable goods. And therefore, it has a positive relationship with GDP. As retail sales increase, you would expect GDP to move along with it. Now, retail sales data is also released monthly, and it's released even faster than many other measurements, and it's released only nine working days after the close of the month. Now, one more important point, here we have retail sales labeled as a coincident macroeconomic indicator. However, some economists and analysts see it as having also a leading or a predictive power also. And here is our historical chart for retail sales. Again, the gray shaded area is the period of the financial crisis, and you would expect retail sales and GDP to closely match each other. And this graph, for the most part, confirms that. You can see retail sales bottoming in March 2009, and GDP bottomed in that same quarter.
