Economic conditions are the current state of the economy and are usually characterized by macroeconomic measures, including aggregate output, INFLATION, UNEMPLOYMENT, and INTEREST RATES. Aggregate output is measured by GROSS DOMESTIC PRODUCT (GDP). Changes in aggregate output and changes in aggregate INCOME are closely related. Changes in GDP are the most widely watched measure of current economic conditions. The U.S. Department of Commerce issues monthly estimates of percentage change in GDP. Changes in GDP result in changes in DEMAND for natural resources, workers, and credit, causing prices to rise or fall. Declining GDP reduces DEMAND for oil and in LABOR MARKETS, and it tends to reduce interest rates. Because the United States is the largest economy in the world, changes in U.S. economic conditions impact industries and economies globally. OPEC (Organization of Petroleum Exporting Countries) oil ministers know expanding or declining output in the United States directly affects demand for oil. Major trading partners of the United States are also affected by changing conditions in the United States. One exaggeration frequently used is: “If the United States sneezes, the world economy gets a cold.” As changes in aggregate output/income cause changes in demand, the overall level of prices, inflation, also changes, and as inflation changes, interest rates change. Inflation causes lenders to demand higher interest rates to compensate them for the reduced purchasing power associated with inflation. Changes in output also cause changes in demand for workers. Cyclical unemployment is unemployment caused by changes in BUSINESS CYCLES, the ups and downs of economic activity. A 1-percent decrease in GDP results in over a million jobs lost in the U.S. economy. Economic conditions are usually evaluated using leading and coincident INDICATORS. Coincident indicators change at the same time as changes in real output in the economy. Coincident indicators include
• payroll employment
• industrial production
• personal income
• manufacturing and trade sales

Leading indicators project future economic conditions. Leading indicators of the U.S. economy include
• average workweek
• UNEMPLOYMENT claims
• manufacturers’ new orders
• stock prices
• new plant and equipment orders
• new building permits
• delivery times of goods
• interest-rate spread
• money supply
• consumer expectations
STOCK MARKET reporters frequently say, “The stock market anticipates changes in the economy.” Historically, the U.S. stock market has gone up or down six to eight months in advance of changes in economic conditions. Similarly, consumer expectations are measured by the University of Michigan’s Consumer Expectations Index and the CONFERENCE BOARD’s Consumer Confidence Index.
See also MACROECONOMICS.