Measuring performance



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Performance indicators

The performance of an economy is usually assessed in terms of the achievement of economic objectives. These objectives can be long term, such as sustainable growth and development, or short term, such as the stabilisation of the economy in response to sudden and unpredictable events, called economic shocks.

Economic indicators

To know how well an economy is performing against these objectives economists employ a wide range of economic indicators. Economic indicators measure macro-economic variables that directly or indirectly enable economists to judge whether economic performance has improved or deteriorated. Tracking these indicators is especially valuable to policy makers, both in terms of assessing whether to intervene and whether the intervention has worked or not.

Useful indicators include:

  1. Levels of real national income, spending, and output. National income, output, and spending are three key variables that indicate whether an economy is growing, or in recession. Like many other indicators, income, output, and spending can also be measured in per capita (per head) terms.

  2. Growth in real national income.

  3. Investment levels and the relationship between capital investment and national output.

  4. Levels of savings and savings ratios.

  5. Price levels and inflation.

  6. Competitiveness of exports.

  7. Levels and types of unemployment.

  8. Employment levels and patterns of employment.

  9. The productivity of labour, which influences other economic variables, including an economy's competitiveness in international markets.

  10. Trade deficits and surpluses with specific countries or the rest of the world.

  11. Debt levels with other countries.

  12. The proportion of debt to national income.

  13. The terms of trade of a country.

  14. The purchasing power of a country's currency.

  15. Wider measures of human development, including literacy rates and health care provision. Such measures are included in the Human Development Index (HDI).

  16. Measures of human poverty, including the Human Poverty Index (HPI).


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