8 Watch Lists for 2010

When it comes to economic indicators, the list is almost endless. One economic indicator follows another, filling an entire calendar - weekly, monthly, quarterly, and annually.
On the specific day an indicator is announced, it seems to be the biggest deal going with commentators’ comment, pundits pontificate, analysts and economics analyze, predict and forecast, and financial markets around the world react - often violently. The next day brings a new batch of indicator reports. Yesterday is forgotten as the frenetic cycle plays itself out all over again.

Given this pattern, it's not surprising that the economic-indicator game seems confusing - and perhaps even pointless. In the eyes of many investors, the only thing these indicators seem to "indicate" about the economy is that it can be highly confusing and extremely difficult to predict.
Question - what do they all mean - and which indicators are truly important? Importance of these key variables depends on its relationship to the business cycle, frequency and its timing relative to overall economic activity. The timing value of various indicators can be classified in three ways. "Leading" indicators are the most important, because they tend to move ahead of the overall economy, providing investors with clues about what's coming next.
In most cases, the true predictive value of any specific indicator comes not from a single reading, but from the progression of numbers it posts over time, thereby establishing trends and making key turning points easier to recognize and act on. In singling out his favorite indicators, I place particular emphasis on trends, noting that progressive analysis of major economic conditions is the key to recognizing long-term investment opportunities. These "essential eight" are the indicators every investor needs to understand and watch if they want to be successful.

Firstly, long term growth in national productivity. Secondly, inflation rate compared to short-term interest rates. Thirdly, trends in the balance of payment and international debt levels. Fourthly, trends in the domestic budget balance and levels of public debt. Fifth, government spending as a percentage of GDP. Sixth, actual GDP growth. Seventhly, consumer sentiment and lastly, the savings rate. Simply put, the higher the savings rate, the better the outlook is for the long haul. More savings means there will be more money available for consumption and investment in the future, both of which tend to provide an overall economic boost.

Obviously, all of these indicators are subject to interpretation (that's why they're called "indicators," rather than "absolutes"). The economy can also be a very contrary creature, often defying both logic and reason. However, the more of these indicators you find showing positive (or negative) readings, the greater the odds you'll be correct when making your own personal economic and investment decisions.