Full Article Link: Yahoo Finance – I’m an Economist: The No. 1 Economic Indicator I Rely On
“Prices don’t lie. If costs are rising, you have to explain why. It’s a market-driven signal that cuts through a lot of noise.”
—Stephan Shipe, Founder of Scholar Financial Advising
Key Takeaways
- GDP, Unemployment, and Inflation Are the Standard Trio
Economists often look at gross domestic product (GDP), unemployment rates, and inflation to gauge the economy’s health. While GDP growth of around 2% is typically considered healthy, Dr. Stephan Shipe notes that it can sometimes be misleading. Government spending, for example, can artificially inflate GDP figures. - Inflation as a Clear Signal
Shipe prefers to focus on inflation data—specifically the Consumer Price Index (CPI)—as a primary indicator. “Prices don’t lie,” he explains, adding that rising costs are a market-driven signal that provides clear insight into economic pressures. - The LEI Is Another Comprehensive Tool
Chris Motola, a financial analyst, favors the Conference Board Leading Economic Index (LEI), which combines 10 data points to track the economy’s direction. Recent LEI data shows a continued decline (down 0.1% in May following a 1.4% drop in April), suggesting a more cautious economic outlook. - Recession Unlikely for Now
Both Shipe and Motola believe the U.S. is unlikely to enter a recession in the second half of 2025. However, Shipe warns that persistent inflation could threaten long-term solvency, especially regarding national debt and entitlement systems. - GDP Alone Doesn’t Tell the Whole Story
While GDP is a widely used metric, it can mask underlying issues. Shipe points out that headline growth figures don’t always reflect the real, on-the-ground economic experience of businesses and households.