Measuring the Level of Economic Activity
Gross National Product (GNP) and the Gross Domestic Product (GDP) are the two most widely used aggregates of the level of macroeconomic activity.
GNP and GDP are both used to estimate the level of economic activities and the future sales of consumption goods and services. Apart from these, these are three types of economic indicators: leading indicators, coincidental indicators, and lagging indicators.
For valuation based on discounting future cash flows, the leading economic indicators are the most relevant of all the three types of indicators. Though there are a few prominent indicators, which would help in predicting the future trends of the economy, each one of them may have some erratic behavior too. An aggregate of a few of these indicators would serve as a better indicative measure.