Key Economic Indicators to Watch in 2012

As the economy begins another uncertain year, these major measures will chart our progress.

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About the only certainty in 2012 forecasts is their uncertainty. The signs that are anchored in measurable performance point to a year of modest gains—some growth, disappointing progress on reducing unemployment, and further belt-tightening for most Americans.

The uncertainties, however, are enormous—presidential elections, Congressional gridlock, European debt problems, Mideast strife, and slowing growth in many world economies are the ones we know about. Toss in what seem to be rising odds of natural and man-made catastrophes, and it's no wonder the groundhog may feel like staying in his burrow all year.

[See 10 Trends From 2011 We Don't Want to See in 2012.]

With that, here are some of the major scorecard items that we'll be watching as the year unfolds. We have listed their 2011 performance, based on year-end results and the latest reports on key indicators.

Investments, Money Rates, and Commodities

Stock indexes:

Dow: 12217.56, up 5.53 percent

Nasdaq: 2605.15, down 1.80 percent

S&P: 1257.60, unchanged

Bond indexes:

U.S. Government/Credit: 1916.62, up 9.14 percent

U.S. Corporate: 2126.64, up 8.72 percent

Interest rates and loans:

3-Month Treasury Bill: 0.01 percent, down 0.12 percentage point

2-Year Note: 0.24 percent, down 0.36 percentage point

10-Year Note: 1.88 percent, down 1.42 percentage points

30-Year Bond: 2.89 percent, down 1.44 percentage points

5-Year CD: 1.42 percent, down 0.65 percentage point

30-year Fixed Mortgage Rate: 4.10 percent, down 0.97 percentage point

New Car Loan (48 months): 3.86 percent, down 1.57 percentage points

Dollar:

Dollar-Euro: 1.30, down 3.22 percent

Yen-Dollar: 76.92, down 5.18 percent

Canada-Dollar: 1.02, up 2.64 percent

Commodities:

Gold: $1,565.80, up 10.18 percent

Crude Oil (Brent contract): $107.38, up 13.33 percent

Gasoline (regular): $3.278, up 6.7 percent

Natural Gas: $2.99, down 32.15 percent

[See 10 Steps to Fine-Tune Your Retirement Plan.]

Major Economic Indicators:

Unemployment Rate

The unemployment rate dropped to 8.6 percent in November from 9.0 percent in October and 9.8 percent in November 2010. Still, 13.3 million people in the labor force were unemployed, 8.5 million were working part-time but wanted more hours, and 6.2 million had dropped out of the labor force but still wanted a job. As the presidential election heats up in 2012, the nation's unemployment rate is likely to be the most-watched economic indicator.

Gross Domestic Product

The GDP rose at an annual rate of 1.8 percent during the third quarter. That was higher than the 1.3 percent second-quarter growth rate and the anemic 0.4 percent first-quarter rate. But it badly trailed 2010's recovery performance (quarterly growth rates of 3.9 percent, 3.8 percent, 2.5 percent, and 2.3 percent during the year), and sets the stage for modest consensus forecasts for the economy in 2012. Growth rates well above 3 percent will be needed for several years before the economy recovers the jobs lost during the Great Recession.

Consumer Price Index

The CPI was flat in November and up 3.4 percent for the year. Economists do not forecast inflation becoming a problem as long as consumer demand remains weak. However, increases in some commodity prices have created some troubling trends. Prices for food consumed at home, for example, rose by nearly 6 percent in the year that ended last November, while gasoline was up nearly 20 percent and fuel oil prices jumped 25 percent.

Weekly Jobless Claims

Weekly claims are a closely watched indicator of current hiring trends, and lower numbers of claims pointing to better employment trends. The seasonally adjusted four-week moving average for claims was 375,000 in the week that ended December 24. A year earlier, the average was 419,750.

Consumer Confidence

Consumer confidence improved as the year ended, but the Conference Board's December index reading of 64.5 was nearly unchanged from 63.4 at the end of 2010. In the summer of 2007, in what have become the good old days, the index was about 112.

[See Deficit Crisis Threatens Once-Untouchable Tax Breaks.]

S&P/Case-Shiller Home Price Index

The Case-Shiller index measures home-price changes in major U.S. cities. In late December, it reported that home prices for October fell in 19 of the 20 cities it tracks, and that prices across all cities were down 1.2 percent for the month and 3.4 percent from October 2010.

U.S. Trade Deficit

The nation's trade deficit was $43.5 billion in October, down from $44.2 billion in September but up from $38.8 billion in October 2010. The United States has long run trade deficits, due primarily to oil imports. Foreign sales are seen as increasingly necessarily to boost the U.S. economy. That's because growth rates in China, Brazil, and other emerging economies have been much stronger than in the United States, making exports a more important source of domestic growth. A weak dollar and rising U.S. energy production are also helping reduce trade deficits.

Industrial Production and Capacity Utilization

Factory output rose 3.7 percent during the 12 months ended in November. Weak consumer demand was reflected in output gains for consumer goods of only 2 percent, while production of business equipment was up by 10 percent. The nation's factories operated at 77.8 percent of capacity in November, down slightly from October and up from 75.8 percent in November 2010. Rising utilization rates are a reliable sign of growing demand, which will eventually be reflected in business expansion and rising employment.

Labor Productivity

During the third quarter of 2011, nonfarm business productivity increased at a 2.3 percent annual rate. However, for the year beginning in the third quarter of 2010, productivity rose a disappointing 0.9 percent. Productivity measures output per hour worked and is widely viewed as a major driver of non-inflationary economic growth and higher wages.

Twitter: @PhilMoeller