From the course: Economic Tips for Everyone

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Percentages and levels in economic data

Percentages and levels in economic data

From the course: Economic Tips for Everyone

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Percentages and levels in economic data

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- When you're looking at data, there's really two ways to talk about it, levels and percent changes. Even if construction spending and retail sales are usually quoted in percent changes, there are still real dollars behind those changes. And the same's true with company earnings. The difference between percent changes and levels is important, and which one you use will depend on what kind of analysis you're doing. For example, the level of new home sales is really important if you're trying to assess the business case for selling furniture or appliances or bath tubs. You want to know how many new homes could become customers. But if you're looking to invest in construction companies, the level of sales is less important than the growth rates of housing sales and prices. Pro-tip, when data's rising from a low level, percent changes can look really big. This is called a base effect because you're starting from a low base.…

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