Glossary: Nordic indicators

1) Producer price index
The output measure of the PPI measures the monthly increase in the price at the factory gate of a basket of goods. The index includes labour costs and is therefore a good indicator of wage pressures but it is backward looking, and unless food and energy prices are removed, it tends to be fairly volatile. The measure excluding food and energy is called the core rate. A three-month moving average, or a year-on-year change on a specific month, is more useful for analysis than month-on-month changes.

2) Consumer price index
The consumer price index measures the cost of a basket of key goods to consumers. It is a reliable indicator of inflation; its core rate, once volatile food and energy prices are excluded, is closely monitored. But it is a lagging index and therefore does not tend to be a useful forecasting tool.

3) Money supply
Used to be seen as a forward indicator of inflation but increasingly unreliable and disregarded as international financial deregulation increases. Important only insofar as confirms other trends.

4) Retail sales
The key indicator of consumer demand in the economy, ahead of GDP consumption figures. Its strength compared with industrial production can be a predictor of future inflation. If demand growth outpaces supply growth, this can cause inflation.

5) Industrial production
The key indicator on the supply-side of the economy, but less significant as the service sector makes up more and more of the economy.

6) Capacity utilisation (Sweden only)
If near historic highs, can be a forward indicator of inflationary bottlenecks.

7) Gross domestic product
The conventional measure of output growth, it is a lagging indicator and is therefore looked at to confirm, rather than to predict, a trend.

8) Unemployment
The ultimate lagging indicator. Important either in terms of its political impact or as an indicator of a tight labour market, which can lead to wage pressures and hence inflation.

9) Current account, trade balance
Figures are highly volatile, even over a three-month moving average. Less important than before now that capital flows are the prime determinant of exchange rates and that large deficits can be easily financed.