The Consumer Price/ Produce Price Indexes
The cold hand of inflation could also be a real bear on portfolio returns. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) measure the price changes of baskets of goods. The Consumer Price Index points out the average change in the price of consumer goods and services across more than 200 different categories. The data contains prices for homes, energy, food and medical items that people use on a daily basis, while the Producer Price Index (PPI) tracks the average price of over 10,000 commodities that companies will use to transform into finished goods.
For investors, periods of high consumer and producer inflation can spell the death knell for corporate profits. Higher consumer prices for basic goods can mean that there won’t be any leftover money to buy discretionary items, like Starbucks lattes. At the same time, higher PPI numbers could prevent a firm from expanding or hiring more workers, as the cost of producing goods increases. The stock market can rise or fall based on the signals these two indicators provide.
Finally, with retail sales accounting for up to 70% of the United States GDP, the monthly measure of consumer confidence and actual retail sales data is of utmost importance. Any period of extended drop-offs in retail spending - especially around seasonal highs, like Christmas - can trigger a downturn in the economy by lowering tax receipts to the government and forcing companies to reduce head counts due to decreasing profits.
Additionally, the retail sales report is one of the timeliest as it provides data that is only a few weeks old. Individual retail companies often give their own sales figures around the same time per month, and poor reports from these companies can trigger sell-offs across the entire spectrum as investors fear a stock decrease.
The Bottom Line
There are far more influences on stock holdings than just sales, earnings and debt measures; various changes in the economy can affect portfolios, as well. The smart investor knows to keep an eye on all indicators, economic and otherwise, that can signal a change in the markets. The previous measures are just some of the economic data that can be used to help shape a macroeconomic picture of the economy.
II. Look through text 1C and fill the table
|Basic Concepts of Research||Definition||Data|
|Produce Price Indexes|
TEXT 1D. GREAT COMPANY OR GROWING INDUSTRY?
I. Read text 1D and answer the questions
How is competitive and technological forces shaped?
It is no accident that companies within a particular industry move in lock-step with one another. Companies in a single industry are forever bound by the type of product or service that they provide, and they are constantly competing with one another for market share, consumer acceptance and technological leadership in their particular sub-sectors. These competitive and consumer forces
|shape an industry's corporations and determine the status of the industry as a whole. These forces have followed roughly the same patterns over time. Here we take a look at these stages and how they affect the companies that follow them.|
What helps businessmen to jumpstart an entire industry?
All companies have to start somewhere, and it takes only a single company or small group of companies to jumpstart an entire industry. Looking back in time, we see that it was not even a company but an individual by the name of Alexander Graham Bell who, with the invention of the telephone, started the entire industry of telecommunications. More recently, companies like Texas Instruments and Fairchild Semiconductor Corporation pioneered the semiconductor industry with the invention of the microchip, the central component of all computers and most high-tech electronics gear.
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