In addition to events surrounding a specific industry or company, analysts carefully watch what they call economic indicators - general trends that signal changes in the economy.

A key indicator is the change in the rate of economic growth as measured by the Gross National Product (GNP). GNP measures the total production of goods and services in our economy. If it is rising, then short-term business prospects are improving. Another important indicator is the inflation rate. Inflation occurs when prices are rising rapidly. During an inflationary period, a company's costs may rise faster than it can increase its prices; so its profits shrink.

The inflation rate has a major influence on another key indicator, interest rates. Rising interest rates means that the government, businesses and consumers must pay more to borrow money. As a result, the government's budget deficit increases, businesses may delay their plans for new projects, and consumers don't spend as much. That can set the stage for a recession - a period of slow economic growth.

Analysts also monitor the budget deficit. When the deficit grows, the government has to increase its borrowing of money that would otherwise be available to businesses to expand and consumers to spend.

Many other indicators signal changes in the economy. Among them are stock prices, unemployment rates, and changes in the value of the currency of the country.

These indicators are more than just numbers. They point to changes in the way ordinary people spend their money - and, in turn, how the economy is likely to perform. If unemployment rates are falling, or if people are getting good values for their money, they are probably going to feel optimistic about the economy. They are more likely to spend money, benefiting companies and stock prices.