The highly anticipated FED tapering over last months is taking shape with economic data, markets will prepare for the same. The
economic data which indicates economic health is analysed below. Strong numbers from various economic indicators would be deciding factor for FED’s Taper/ No Taper.
The key, critical economic indicators for analysis of any country economic health are
GDP growth rate
Unemployment rate
Inflation rate
The supporting economic indicators to boost further confidence in country economy health are
Current Trade Balance
Retail Sales
New home sale.
FED’s purchase program of USD 85 million per month has to end in coming months, it is interesting to make a note how it will come to end, either reducing pace or at one go both the possibilities are possible.
We will take a look at all the above key as well as supporting indicators to analyse the current situation of US economy.
GDP Growth Rate

GDP growth rate is on rise since beginning of year 2013, it has rose from 0.1 to 3.6% indicating a strong recovery is on the way, next
couple of months it should stabilize.
Unemployment Rate
Unemployment Rate is decreasing on steady basis since Jan 2013, strong jobs market is sign of recovery. Jobs market stability further influences retail sales and new and existing home sale which are enough to start a upward spiral. As per Fed’s the threshold is 6.5% to start a QE taper,so tapering is on radar but will take another couple of months to actually get started.
Inflation rate

Current inflation below 2% is not a good sign, it has to be above 2% which will indicate a reviving economy, 2 to 5% a stable economy, 5 to 7% heated economy, above 7% is sign is super heated economy. (Though this has to be studied with different economic data, inflation alone is not enough to arrive at a decision)
Supporting factors
Trade Balance
Trade balance is on decrease, a number above average or green line is expected in coming months and by mid 2014 it should be in healthy range.
Retail Sales

Retail sale in range of 3 to 5% indicates subdued economy. With jobs market on rise this factor will soon be on rise.
New Home Sales
New home sales market is definitely on the rise and the sales has on rise as compared to 2012, year 2013 was more stable sales
indicating the consumer confidence and further growth in sales in year 2014 and 2015.
Conclusion
US economy is showing a sign of recovery. Yet is has to be confirmed with stable numbers from unemployment rate, inflation and GDP growth rate. Unemployment below 6.5% is yet to be achieved. Inflation above 2% is yet to be achieved. Thus justifying FED’d purchase program to be in place for next couple of month before they start tapering.
Trading and Investment
Dollar Demand will boost up in next couple of months, just before FED announces tapering, accumulation phase is yet to be witnessed on technical charts
Note.
The article has been only written for educational purpose
Any comments and suggestion are most welcomed.
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