What is Economic Performance?

The term “Economic Performance” refers to the health of an economy over a period. It is a broad term that encompasses various indicators that collectively give us an idea of how well an economy is doing.

These indicators include:

  • Gross Domestic Product (GDP) growth.
  • Unemployment Rate.
  • Inflation Rate (Consumer Price Index or CPI).
  • Interest Rates.
  • Balance of Trade.
  • National Debt.
  • Stock Market Indexes (e.g., S&P 500, Dow Jones, FTSE 100).
  • Consumer Confidence Index.
  • Industrial Production.
  • Retail Sales.
  • Housing Market Statistics (e.g., Home Sales, Housing Starts).
  • Exchange Rates.

We also use the term “economic performance” when talking about the measurement and assessment of how well a company is doing.

Springer Link has the following definition of the term:

“Economic performance indicates the way in which a country or a firm functions, that is the efficiency with which they achieve their intended objectives.”

Understanding economic performance is important for analysts and journalists. It also helps businesspeople and policymakers make informed decisions.

Economic performance – the most popular indicators

  • GDP

GDP growth is probably the most popular indicator, that is, the one that people check out the most. It represents the value of everything a country produces – all its products and services – over a specific period, which is usually one year.

When GDP is growing, it is a sign that economic performance is strong. Conversely, when it is shrinking, it indicates that performance is poor.

However, GDP alone does not paint the full picture of economic health. Other factors such as income distribution and the sustainability of growth are also important.

4 people looking at monitors showing graphs - a definition of Economic Performance
Image created by Market Business News.
  • Unemployment rates

High unemployment suggests that the economy is underperforming, with not enough jobs available for those who want to work.

Low unemployment, on the other hand, indicates that economic performance is robust.

  • Inflation

Inflation refers to price rises, specifically, by how much the general level of prices for goods and services is rising.

Most country’s central banks aim for an inflation rate of about 2%, that is, overall prices rising by two percent per year. This is classed as moderate inflation.

Moderate inflation is a sign of positive economic performance, as it generally occurs when there is an increase in demand.

If inflation is too low or too high, it suggests either a lack of demand or an overheated economy, respectively; neither is good.

  • Other indicators

To get a good idea of how well or badly an economy is performing, it is necessary to gather and analyze data on all the economic indicators. This is what specialized economists and analysts do.

Economic performance matters to all of us

Even at an individual level, understanding economic performance may help us make important decisions.

For example, before borrowing money for a major purchase, such as a new home, you may want to find out what the economic outlook is, as this may affect your job security and ability to take on a long-term financial commitment.

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