A Dashboard of Macroeconomics Graphics for Extension ...
A DASHBOARD OF MACROECONOMICS GRAPHICS FOR EXTENSION AGRIBUSINESS MANAGEMENT Forrest Stegelin Agricultural & Applied Economics University of Georgia What is a dashboard? In management information systems, a dashboard is an easy to read, often single page, real-time user interface, showing a graphical presentation of the current status (snapshot) and historic trends of an organizations key performance indicators to enable instantaneous and informed decisions to be made at a glance.
An economic dashboard is not a predictive or market timing tool regarding the future performance of any economic or financial market nor is it intended to predict or guarantee future investment performance of any sort. The dashboard is intended as a tool for agribusiness owners and managers to set context and perspective when evaluating the current state of the economy. Microeconomics and Macroeconomics Microeconomics: the area of economics that
deals with individual decision units people, firms, or markets within the economy. Macroeconomics: the area of economics that deals with a nations (or industrys) economy as a whole; the study of the effects of changes in the production of goods and services and employment and how they interact to influence economic performance. Agribusiness Any firm (on-farm or off-farm) involved in the food and fiber production and marketing system.
The ever-changing food and agribusiness industries characterized by firms that: Move final products through the food and fiber system to the ultimate consumer or end-user; Transform raw agricultural products into the final products desired by consumers or endusers; Produce raw food and fiber products; or Supply inputs to the farm or production sector. Agribusiness management programs offered to a variety of off-farm agribusinesses. Managerial decision-making and problem-solving. Prognostications and forecasts and outlook.
Explain and predict economic behavior influencing the need or demand for an agribusinesss products or service. Understand government programs and environmental policy, interest rates, business cycles and the economy, general mega trends, and impact of global economics on the agribusiness firms, organization, industries, and their clientele/customers. Economic reports and indicators (leading, lagging, or roughly coincident and procyclical or countercyclical) to provide metrics for evaluating the health of the economy and the agribusiness sector, the latest business cycles, an dhow the agribusiness customers are faring economically. Areas of macroeconomics
incorporated in the extension agribusiness economics programming Business cycles, including the recessiongrowth pendulum swings; Inflation, and adjusting price series for inflation; Interest rates, comparing real versus nominal and adjustments to the risk free interest rates; Unemployment and the labor market;
Measuring the economys output and income; Exchange rates, as they impact trade; and Monetary and fiscal policy. Macroeconomics topics arise with agribusiness concerns of: Conducting a feasibility study; Developing a marketing plan; Preparing a business plan;
Forecasting sales and growth; Evaluating product or service opportunities; Completing a sensitivity analysis; Performing what-if.? scenario evaluations; Anticipating results of implementing alternative strategies;
Making assumptions and evaluating risks for goals/objectives. Unique/distinguishing features of the food and agribusiness marketplace:
Perishability of inputs, raw products, and finished goods; an implied use-by date to ensure quality. Food as a product vital to the survival and health of every individual. Biological nature of production agriculture (livestock and crops). Seasonal nature of business ebbs and flows in supply and demand. Uncertainty of the weather. Types of firms function, size, legal structure, goals/purpose. Variety of market conditions risk characteristics, global/local, perfect competition, etc.
Rural ties/roots and relationships in small towns and rural counties. Government involvement policies and regulations, Caveats Being able to understand the economys health and direction can help guide agribusiness decisions doesnt provide succinct answers to the questions. Materials are not perfect crystal balls, but are better than operating in uncertainty about the driving forces and trends affecting agribusiness growth and
investments. Many small- to medium-sized agribusinesses lose focus on the industry metrics and general economic environment because they have a micro or myopic view of the business. Does not mean provide a graduate course on macroeconomics and the money flow equations. Macroeconomic Flow Equation Gross National Product (GNP) Consumption of Fixed Capital (CFC) = Net National Product (NNP); NNP Indirect Business Taxes (IBT) + Subsidies, less current surpluses of government enterprises (S) Business Transfer Payments (BTP) = National Income (NI); NI Corporate Profits (C)P) Net Interest (I) Social Insurance Contributions (SIC) + Government Transfer Payments (GTP) + Personal Interest Paid (PIP) + Personal Dividends Paid (PDP) + BTP =
Personal Income (PI); PI Personal Taxes (PT) = Disposable Personal Income (DPI); DPI Personal Savings (PS) = Personal Consumer Expenditures (PCE); and PCE + Gross Private Domestic Investment (GDPI) + Use a variety of economic indicators to develop a representative snapshot on the nature of the economy in the short run. An economic indicator is any economic statistic, such as the GDP, inflation rate, or unemployment rate, which indicates how well the economy is doing and how well the economy is going to do in the future identifying factors that influence the buying decisions of the agribusiness
clients/customers. The agribusiness may decide to change their marketing, production, finance, or human resource strategies if the economy is going to do better or worse than previously expected. Economic indicators can have one of 3 different relationships to the economy: A procyclic economic indicator is one that moves in the same direction as the economy if economy is doing well, number or value is usually increasing, whereas in a recession, this indicator is decreasing [GDP is example].
A countercyclic economic indicator is one that moves in the opposite direction as the economy [unemployment rate is example as gets larger as economy gets worse]. An acyclic economic indicator is one that has little or no relation to the health of the economy [are rare and generally of little use]. Timing of economic indicator changes relative to how economy as whole changes: A leading economic indicator is an indicator that
changes before the economy changes suggests directional changes about six months before the economy actually changes [stock market]. A lagged economic indicator is one that does not change until a few quarters after the economy does suggests magnitude of changes, as well as verifying directional changes [unemployment rate]. A roughly coincident economic indicator is one that moves at nearly the same time as the economy does [GDP]. Sample list of economic indicators having greatest potential for reflecting changes
in economic variables affecting agribusinesses: Stock market, S&P 500
Leading Economic Index (Conference Board) Chicago Fed National Activity Index (FRB Chicago) Bloomberg Financial Conditions Index Daily Consumer Leading Indicators (Consumer Metrics Institute) Conference Board Consumer Confidence Index Real Personal Income Levels (Bureau of Economic Analysis) Employment & Employment Trends Index (Conference Board) Unemployment Claims (US Department of Labor) Existing Home Sales and Inventory Months of Supply (National Association of Home Builders) Commercial and Industrial Loans, by Banks Global Trade Oil Price More economic indicators:
New Residential Homes Sales and Inventory Months of Supply Interest Rate, 30-Year Mortgage Residential Investment (Bureau of Economic Analysis) Inflation (Personal Consumption Price Index)
Real GDP/GDP Growth (Bureau of Economic Analysis) Industrial Production (FRB St. Louis) ATA Truck Tonnage Index (American Trucking Association) WSJ Growth Forecasts (Wall Street Journal Survey) Risk of Recession (Wall Street Journal Survey) World Economic Growth (IMF Forecast) Federal Surplus/Deficit (CBO Projections) Retail Sales CEO Economic Outlook Survey (Business Roundtable) Value of Euro; Shanghai Stock Market Money Supply Growth [M-2] Graphic dashboard provided for the visual learner. Bar or line charts showing quantitative time series information.
Look for trends, cycles, seasonality, etc. for value in forecasts as well as discuss implications of data on agribusiness, clients/customers, policy, products/services. Have the numerical data, if needed, to look at rates of change or inflation effects. To truly look at business cycles, need 2 3 decades. Part Chart, Part Science: The Evolution of Economic Indicators
1919, Consumer Price Index (CPI) 1923, S&P 90 1926, Hemline Index [George Taylor, economist] 1937, Gross National Product (GNP)
1940, Current Population Survey [Census] 1946, Survey of Consumer Sentiment 1951, Monthly Retail Trade Survey 1961, Index of Leading Economic Indicators (ILEI) 1967, Unemployment Insurance Claims 1986, Big Mac Index (The Economist) 2001, Lipstick Index (Leonard Lauder of Estee Lauder Cosmetics) Which indicators to use depends on the agribusiness and its situation/goals. Thanks for your interest and attention. Are there any questions or comments?
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