Fundamental analysis is a method of forecasting future price movements of a
financial instrument based on economic, political, environmental and other
relevant factors, as well as data that will affect the basic supply and demand
of whatever underlies the financial instrument. In practice, many market
players use technical analysis in conjunction with fundamental analysis to
determine their trading strategy. One major advantage of technical analysis is
that experienced analysts can follow many markets and market instruments,
whereas the fundamental analyst needs to know a particular market
intimately. Fundamental analysis focuses on what ought to happen in a
market. Among the factors considered are: supply and demand; seasonal
cycles; weather; government policy.
The fundamental analyst studies the causes of market movements, while the
technical analyst studies the effect. Fundamental analysis is a macro, or
strategic, assessment of where a currency should be traded, based on any
criteria but the movement of the currency's price itself. These criteria often
include the economic conditions of the country that the currency represents,
monetary policy, and other “fundamental” elements.
Many profitable trades are made moments prior to, or shortly after, major
economic announcements.
Leading economic indicators
The following is a list of economic indicators used in the USA. Obviously, there
are many more, as well as those of other leading economies (such as
Germany, the UK, Japan, etc.). In general, it is not only the numerical value
of an indicator that is important, but also the market’s anticipation and
prediction of the forecast, and the impact of the relation between
anticipated and actual figures on the market.
Such macro indicators are followed by the vast majority of traders worldwide.
The “quality” of the published data can differ over time. The value of the
indicator data is considered greater if it presents new information, or is
instrumental to drawing conclusions which could not be drawn under other
reports or data. Furthermore, an indicator is highly valuable if one may use it
to better forecast future trends.
Note that in the USA most indicators are published on certain weekdays,
rather than on a particular monthly date (e.g. the second Wednesday in each
month, as opposed to the 14
of each month, etc.).
th
Each indicator is marked as High (H), Medium (M) or Low (L), according to the
importance commonly attributed to it.
CCI - Consumer Confidence Index
[H]
The Conference Board; last Tuesday of each month, 10:00am EST, covers current
month's data
The CCI is a survey based on a sample of 5,000 U.S. households and is considered one of the
most accurate indicators of confidence. The idea behind consumer confidence is that when
the economy warrants more jobs, increased wages, and lower interest rates, it increases our
confidence and spending power. The respondents answer questions about their income, the
market condition as they see it, and the chances to see increase in their income. Confidence
is looked at closely by the Federal Reserve when determining interest rates. It is considered
to be a big market mover as private consumption is two thirds of the American economy.
CPI - Consumer Price Index; Core-CPI
[H]
th
Bureau of Labor and Statistics; around the 20
of each month, 8:30am EST, covers
previous month's data
The CPI is considered the most widely used measure of inflation and is regarded as an
indicator of the effectiveness of government policy. The CPI is a basket of consumer goods
(and services) tracked from month to month (excluding taxes). The CPI is one of the most
followed economic indicators and considered to be a very big market mover. A rising CPI
indicates inflation. The Core-CPI (CPI, excluding food and energy, expense items which are
subject to seasonal fluctuations) gives a more stringent measure of general prices.
Employment Report
[H]
Department of Labor; the first Friday of each month, 8:30am EST, covers previous
month data
The collection of the data is gathered through a survey among 375,000 business and 60,000
households. The report reviews: the number of new work places created or cancelled in the
economy, average wages per hour and the average length of the work week. The report is
considered as one of the most important economic publications, both for the fact that it
discloses new up-to-date information and due to the fact that, together with NFP, it gives a
good picture of the total state of the economy. The report also breaks out data by sector
(e.g. manufacturing, services, building, mining, public, etc.)
Employment Situation Report
[H]
Bureau of Labor and Statistics; the first Friday of each month, 8:30am EST, covers
previous month data
The Employment Situation Report is a monthly indicator which contains two major parts. One
part is the unemployment and new jobs created: the report reveals the unemployment rate
and the change in the unemployment rate. The second part of the report indicates things like
average weekly hours worked and average hourly earnings. This data is important for
determining the tightness of the labor market, which is a major determinant of inflation. The
Bureau of Labor surveys over 250 regions across the United States and covers almost every
major industry. This indicator is certainly one of the most watched indicators and almost
always moves markets. Investors value the fact that information in the Employment report is
very timely as it is less than a week old. The report provides one of the best snapshots of the
health of the economy.
FOMC Meeting (Federal Open Market Committee): Rate announcement
[H]
The meeting of the US Federal Bank representatives, held 8 times a year. The
decision about the prime interest rate is published during each meeting (around
14:15 EST).
The FED (the Federal Reserve of USA) is responsible for managing the US monetary policy,
controlling the banks, providing services to governmental organizations and citizens, and
maintaining the country’s financial stability.
There are 12 Fed regions in the USA (each comprising several states), represented in the Fed
committee by regional commissioners.
The rate of interest on a currency is in practice the price of the money. The higher the rate
of interest on a currency, the more people will tend to hold that currency, to purchase it and
in that way to strengthen the value of the currency. This is very important indicator affecting
the rate of inflation and is a very big market mover.
There is great importance to the FOMC announcement, however – the content of the
deliberation held in the meeting, which is published 2 weeks after the rate announcement, is
almost as important to the markets.
The FED’s announcement has shaken the Forex market? Learn about
economic indicators; read the online financial calendar onboard
.
Easy-Forex™ Trading Platform
GDP - Gross Domestic Product
[H]
BEA (Bureau of Economic Analysis); last day of the quarter, 8:30am EST, covers
previous quarter data.
The US Commerce department publishes the GDP in 3 modes: advance; preliminary
and final.
GDP is a gross measure of market activity. It represents the monetary value of all the goods
and services produced by an economy over a specified period. This includes consumption,
government purchases, investments, and the trade balance. The GDP is perhaps the greatest
indicator of the economic health of a country. It is usually measured on a yearly basis, but
quarterly stats are also released.
The Commerce Department releases an "advance report" on the last day of each quarter.
Within a month it follows up with the "preliminary report" and then the "final report" is
released yet a month later. The most recent GDP figures have a relatively high importance to
the markets. GDP indicates the pace at which a country's economy is growing (or shrinking).
ISM (Institute for Supply Management) Manufacturing Index
[H]
Institute for Supply Management; the first business day of the month, 10:00am EST,
covers previous month data
The Manufacturing ISM Report on Business is based on data compiled from monthly replies to
questions asked of purchasing executives in more than 400 industrial companies. It reflects a
compound average of 5 main economic areas (new customers’ orders 30%; manufacturing 25%;
employment 20%; supply orders 15%; inventories 10%). Any data over 50 points shows the
expansion of economic activities, and data under 50 points shows a contraction.
MCSI - Michigan Consumer Sentiment Index
[H]
University of Michigan; first of each month, covers previous month data
A survey of consumer sentiment, conducted by the University of Michigan. The index is
becoming more and more useful for investors. It gives a snapshot of whether or not consumers
feel like spending money.
NFP - Changes in non-farm payrolls
[H]
Department of Labor; the first Friday of each month, 8:30am EST, covers previous
month data
The data intended to represent changes in the total number of paid U.S. workers of any
business, excluding the following:
- general government employees;
- private household employees;
- employees of nonprofit organizations that provide assistance to individuals;
- farm employees.
The total non-farm payroll accounts for approximately 80% of the workers responsible for
the entire gross domestic product of the United States. The report is used to assist
government policy-makers and economists in determining the current state of the economy
and predicting future levels of economic activity. It is a very big market mover, due largely to
high fluctuations in the forecasting.
PMI - Purchasing Managers Index
[H]
Institute for Supply Management; the first business day of each month, 10:00am EST,
covers previous month's data
The PMI is a composite index that is based on five major indicators including: new orders;
inventory levels; production; supplier deliveries and the employment environment. Each
indicator has a different weight and the data is adjusted for seasonal factors. The Association
of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20
different industries. A PMI index over 50 indicates that manufacturing is expanding, while
anything below 50 means that the industry is contracting. The PMI report is an extremely
important indicator for the financial markets as it is the best indicator of factory production.
The index is popularly used for detecting inflationary pressure as well as indicating
manufacturing activity. The PMI is not as strong as the CPI in detecting inflation, but because
the data is released one day after the month, it is very timely. Should the PMI report an
unexpected change, it is usually followed by a quick reaction in market. One especially key
area of the report is growth in new orders, which predicts manufacturing activity in future
months.
Retail Sales Data; Retail Sales less Automotives
[H]
th
Bureau of Census; around the 12
of each month, 8:30am EST, covers previous
month’s data
Retail sales are a key driving force in US economy. This indicator tracks the merchandise sold
by companies within the retail trade and measures the total consumer spending on retails
sales (not including service costs). The retail revenues are a major part (two thirds) of the US
economy. The Census Bureau surveys hundreds of various sized firms and business offering
some type of retail trade. Every month the data is released showing the percent change from
the previous month’s data. A negative number indicates that sales decreased from the
previous months sales. This indicator is a very big market mover because it is used as a gauge
of consumer activity and confidence, as higher sales figures indicate increased economic
activity.
The data is very timely because retail sales data is released within 2 weeks of the
previous month.
Tankan Survey
[H]
BoJ (Bank of Japan); four times a year in April, July, October and mid-December;
10:50pm GMT
An economic survey of Japanese business issued by the central Bank of Japan, which it then
uses to formulate monetary policy. The survey covers thousands of Japanese companies
with a specified minimum amount of capital, although firms deemed sufficiently influential
may also be included. The companies are asked about current trends and conditions in the
business place and their respective industries, as well as their expected business activities for
the next quarter and year. It is considered a big market mover for JPY currency pairs.
TIC (Treasury International Capital) Data on transactions in long term
[H]
securities
th
Department of the Treasury; around the 12
working day of each month, 9:00am EST,
covers month before previous data
The TIC data provides information about the most important way the US is financing its
ongoing current account deficit: selling long-term securities to foreigners, or exporting debt.
It is important to remember that there are other ways of financing a deficit: borrowing from
foreign banks or attracting net FDI inflows. But since FDI flows have been negative and bank
flows tend to be small, most of the financing the US needs has come from the sale of long-
term securities to foreigners. TIC data are a good measurement of how much a country is
trusted in the international investment community. It is considered a big market mover.
Trade Balance
[H]
Department of Commerce; the second week of each month, 8:30am EST, covers
month before previous data
A country’s trade balance is the largest component of a country's balance of payments. The
balance of trade measures the difference between the value of goods and services that a
nation exports, and those it imports. A country has a trade deficit if it imports more than it
exports. The opposite scenario is a trade surplus. It is considered a very big market mover.
Budget Statement Monthly
[M]
A monthly report by US government (the Treasury Department), showing the monthly
budget deficit or surplus
The level of deficit/surplus affects the level of US bonds issues by the government, hence –
their price. In addition, this report reflects the level of tax collected by the government,
which is indicative of the level of economic activity. Consequently, the April report (the
month in which Americans submit their tax returns) is even more important than those
released in other months.
Composite Index of Leading Indicators
[M]
th
The Conference Board; around the 20
of each month, 10:00am EST An index used
to predict the direction of the economy's movements in the months to come. The index is
made up of 10 economic components, whose changes tend to precede changes in the overall
economy. These 10 components include:
1. the average weekly hours worked by manufacturing workers;
2. the average number of initial applications for unemployment insurance;
3. the amount of manufacturers' new orders for consumer goods and materials;
4. the speed of delivery of new merchandise to vendors from suppliers;
5. the amount of new orders for capital goods unrelated to defense;
6. the amount of new building permits for residential buildings;
7. the S&P 500 stock index;
8. the inflation-adjusted monetary supply (M2);
9. the spread between long and short interests rates;
10. consumer sentiment.
By looking at the Composite Index of Leading Indicators in the light of business cycles and
general economic conditions, investors and businesses can form expectations about what's
ahead, and make better-informed decisions. It has medium importance, as its many
components are already known at the time of its publication.
Current Account
[M]
BEA (Bureau of Economic Analysis); quarterly, around six weeks after quarter end
The difference between a nation's total exports of goods, services and transfers, and its total
imports of the same. Current account balance calculations exclude transactions in financial
assets and liabilities. The level of the current account is followed as an indicator of trends in
foreign trade, so it is regarded as a big market mover.
Durable Goods
[M]
Bureau of Census; the fourth week of each month, 8:30am EST, covers previous
month data
Durable Goods Orders measures new orders placed with domestic manufacturers for
immediate and future delivery of factory hard goods. A durable good is defined as a good that
lasts an extended period of time (over three years) during which its services are extended.
Rising Durable Goods Orders are normally associated with stronger economic activity, and can
therefore lead to higher short-term interest rates. Higher rates often support a currency, at
least in the short term.
GDP Price Deflator
[M]
BEA (Bureau of Economic Analysis); last day of the quarter, 8:30am EST, covers
previous quarter data
The GDP deflator shows how much a change in the base year's GDP relies upon changes in the
price level. Also known as the "GDP implicit price deflator." As it is not based on a fixed
basket of goods and services, the GDP deflator has an advantage over the consumer price
index (CPI). Changes in consumption patterns, or the introduction of new goods and services,
are automatically reflected in the deflator. This indicator is of medium importance to the
markets.
Housing Starts
[M]
Bureau of Census; around the middle of each month, 8:30am EST, covers previous
month data
This economic indicator tracks how many new single-family homes or other residential
buildings were constructed through the month. For the survey, each house and each single
apartment is counted as one housing start. This indicator is not a huge market mover, but it
has been reported by U.S. Census that the housing industry represents over 25% of all
investment dollars, and a 5% value of the overall economy. Housing starts are considered to
be a leading indicator, meaning it detects trends in the economy looking forward. Declining
housing starts show a slowing economy, while increases in housing activity can pull an
economy out of a downturn.
Industrial Production Capacity; Production Utilization
[M]
Federal Reserve; middle of the month, 9:15am EST, covers previous month data
It is a chain-weighted measure of the change in the production of the nation's factories,
mines and utilities as well as a measure of their industrial capacity and of how many available
resources are being used (commonly known as capacity utilization). In addition, the Capacity
Utilization Index provides an estimate of how much factory capacity is in use. They are
important indicators, as the manufacturing sector accounts for one-quarter of the economy.
Initial Jobless Claims
[M]
Department of Labor; once a week on Thursday at 8:30am EST, covers previous week
data
The data states the number of people who applied to receive unemployment pay for the first
time. It has low to medium importance as this relates to weekly data with high fluctuations;
the average of four weeks is more stable.
Philadelphia Fed Index (Business Outlook Survey)
[M]
th
Federal Reserve Bank of Philadelphia; around the 17
of each month, 10:00am EST,
covers previous month data
The Business Outlook Survey is a monthly survey of manufacturers located around the states
of Pennsylvania, New Jersey and Delaware. Companies surveyed indicate the direction of
change in their overall business activity and in the various measures of activity at their
plants. The index signals expansion when it is above zero and contraction when below. This
index is considered to be a good indicator of changes in everything from employment, general
prices, and conditions within the manufacturing industry. It isn't a big market mover, but the
results found in the survey can indicate what to expect from the Purchasing Managers' Index
(which comes out a few days later and covers the entire U.S.).
PPI - Producer Price Index; Core-PPI
[M]
Bureau of Labor and Statistics; the second full week of each month, 8:30am EST,
covers previous month data
The PPI is not as widely used as the CPI, but it is still considered to be a good indicator of
inflation. This indicator reflects the change of manufacturers’ cost of input (raw materials,
semi-finished goods, etc.). Formerly known as the "Wholesale Price Index", the PPI is a basket
of various indexes covering a wide range of areas affecting domestic producers. Each month
approximately 100,000 prices are collected from 30,000 production and manufacturing firms.
It is not as strong as the CPI in detecting inflation, but because it includes goods being
produced, it is often a forecast of future CPI releases.
Beige Book
[L]
Federal Reserve Board; two Wednesdays before every FOMC meeting, 8 times per
year, 2:15pm EST
Beige book is the commonly used term for the Fed report entitled: "Summary of Commentary
on Current Economic Conditions by Federal Reserve District". It is published just before the
FOMC meeting on interest rates and is used to inform the members on changes in the
economy since the last meeting. This report is published eight times per year. The Beige Book
is not considered to be a big market mover. It is a gauge of the strength of the economy and
not a commentary on the views of Fed members. Occasionally it can move markets if the
findings are substantially different from analyst expectations.
ECI - Employment Cost Index
[L]
Bureau of Labor and Statistics; the last Thursday of Apr, Jul, Nov and Jan, 8:30am
EST; covers previous quarter’s data
The ECI tracks movement in the cost of labor which includes wages, fringe benefits, and
bonuses for employees at all levels of involvement The Bureau of Labor surveys over 3,000
private sector firms and over 500 local governments, schools and other public sector
organizations. This indicator is not widely watched, but it is among a select group of
indicators that have enough power to move the markets. This is particularly true in
inflationary times. The idea behind the ECI is that as wage pressures increase, so does
inflation. This is mainly because compensation tends to increase before companies increase
prices for consumers (inflation).
PCE - Personal Consumption Expenditure
[L]
BEA (Bureau of Economic Analysis); last day of each month, 8:30am EST, covers
previous month data
PCE measures price changes in consumer goods and services. The PCE is a fairly predictable
report that usually has little impact on the markets. The Core PCE, which is the index less
prices of food and energy, estimates inflationary trend more precisely.
financial instrument based on economic, political, environmental and other
relevant factors, as well as data that will affect the basic supply and demand
of whatever underlies the financial instrument. In practice, many market
players use technical analysis in conjunction with fundamental analysis to
determine their trading strategy. One major advantage of technical analysis is
that experienced analysts can follow many markets and market instruments,
whereas the fundamental analyst needs to know a particular market
intimately. Fundamental analysis focuses on what ought to happen in a
market. Among the factors considered are: supply and demand; seasonal
cycles; weather; government policy.
The fundamental analyst studies the causes of market movements, while the
technical analyst studies the effect. Fundamental analysis is a macro, or
strategic, assessment of where a currency should be traded, based on any
criteria but the movement of the currency's price itself. These criteria often
include the economic conditions of the country that the currency represents,
monetary policy, and other “fundamental” elements.
Many profitable trades are made moments prior to, or shortly after, major
economic announcements.
Leading economic indicators
The following is a list of economic indicators used in the USA. Obviously, there
are many more, as well as those of other leading economies (such as
Germany, the UK, Japan, etc.). In general, it is not only the numerical value
of an indicator that is important, but also the market’s anticipation and
prediction of the forecast, and the impact of the relation between
anticipated and actual figures on the market.
Such macro indicators are followed by the vast majority of traders worldwide.
The “quality” of the published data can differ over time. The value of the
indicator data is considered greater if it presents new information, or is
instrumental to drawing conclusions which could not be drawn under other
reports or data. Furthermore, an indicator is highly valuable if one may use it
to better forecast future trends.
Note that in the USA most indicators are published on certain weekdays,
rather than on a particular monthly date (e.g. the second Wednesday in each
month, as opposed to the 14
of each month, etc.).
th
Each indicator is marked as High (H), Medium (M) or Low (L), according to the
importance commonly attributed to it.
CCI - Consumer Confidence Index
[H]
The Conference Board; last Tuesday of each month, 10:00am EST, covers current
month's data
The CCI is a survey based on a sample of 5,000 U.S. households and is considered one of the
most accurate indicators of confidence. The idea behind consumer confidence is that when
the economy warrants more jobs, increased wages, and lower interest rates, it increases our
confidence and spending power. The respondents answer questions about their income, the
market condition as they see it, and the chances to see increase in their income. Confidence
is looked at closely by the Federal Reserve when determining interest rates. It is considered
to be a big market mover as private consumption is two thirds of the American economy.
CPI - Consumer Price Index; Core-CPI
[H]
th
Bureau of Labor and Statistics; around the 20
of each month, 8:30am EST, covers
previous month's data
The CPI is considered the most widely used measure of inflation and is regarded as an
indicator of the effectiveness of government policy. The CPI is a basket of consumer goods
(and services) tracked from month to month (excluding taxes). The CPI is one of the most
followed economic indicators and considered to be a very big market mover. A rising CPI
indicates inflation. The Core-CPI (CPI, excluding food and energy, expense items which are
subject to seasonal fluctuations) gives a more stringent measure of general prices.
Employment Report
[H]
Department of Labor; the first Friday of each month, 8:30am EST, covers previous
month data
The collection of the data is gathered through a survey among 375,000 business and 60,000
households. The report reviews: the number of new work places created or cancelled in the
economy, average wages per hour and the average length of the work week. The report is
considered as one of the most important economic publications, both for the fact that it
discloses new up-to-date information and due to the fact that, together with NFP, it gives a
good picture of the total state of the economy. The report also breaks out data by sector
(e.g. manufacturing, services, building, mining, public, etc.)
Employment Situation Report
[H]
Bureau of Labor and Statistics; the first Friday of each month, 8:30am EST, covers
previous month data
The Employment Situation Report is a monthly indicator which contains two major parts. One
part is the unemployment and new jobs created: the report reveals the unemployment rate
and the change in the unemployment rate. The second part of the report indicates things like
average weekly hours worked and average hourly earnings. This data is important for
determining the tightness of the labor market, which is a major determinant of inflation. The
Bureau of Labor surveys over 250 regions across the United States and covers almost every
major industry. This indicator is certainly one of the most watched indicators and almost
always moves markets. Investors value the fact that information in the Employment report is
very timely as it is less than a week old. The report provides one of the best snapshots of the
health of the economy.
FOMC Meeting (Federal Open Market Committee): Rate announcement
[H]
The meeting of the US Federal Bank representatives, held 8 times a year. The
decision about the prime interest rate is published during each meeting (around
14:15 EST).
The FED (the Federal Reserve of USA) is responsible for managing the US monetary policy,
controlling the banks, providing services to governmental organizations and citizens, and
maintaining the country’s financial stability.
There are 12 Fed regions in the USA (each comprising several states), represented in the Fed
committee by regional commissioners.
The rate of interest on a currency is in practice the price of the money. The higher the rate
of interest on a currency, the more people will tend to hold that currency, to purchase it and
in that way to strengthen the value of the currency. This is very important indicator affecting
the rate of inflation and is a very big market mover.
There is great importance to the FOMC announcement, however – the content of the
deliberation held in the meeting, which is published 2 weeks after the rate announcement, is
almost as important to the markets.
The FED’s announcement has shaken the Forex market? Learn about
economic indicators; read the online financial calendar onboard
.
Easy-Forex™ Trading Platform
GDP - Gross Domestic Product
[H]
BEA (Bureau of Economic Analysis); last day of the quarter, 8:30am EST, covers
previous quarter data.
The US Commerce department publishes the GDP in 3 modes: advance; preliminary
and final.
GDP is a gross measure of market activity. It represents the monetary value of all the goods
and services produced by an economy over a specified period. This includes consumption,
government purchases, investments, and the trade balance. The GDP is perhaps the greatest
indicator of the economic health of a country. It is usually measured on a yearly basis, but
quarterly stats are also released.
The Commerce Department releases an "advance report" on the last day of each quarter.
Within a month it follows up with the "preliminary report" and then the "final report" is
released yet a month later. The most recent GDP figures have a relatively high importance to
the markets. GDP indicates the pace at which a country's economy is growing (or shrinking).
ISM (Institute for Supply Management) Manufacturing Index
[H]
Institute for Supply Management; the first business day of the month, 10:00am EST,
covers previous month data
The Manufacturing ISM Report on Business is based on data compiled from monthly replies to
questions asked of purchasing executives in more than 400 industrial companies. It reflects a
compound average of 5 main economic areas (new customers’ orders 30%; manufacturing 25%;
employment 20%; supply orders 15%; inventories 10%). Any data over 50 points shows the
expansion of economic activities, and data under 50 points shows a contraction.
MCSI - Michigan Consumer Sentiment Index
[H]
University of Michigan; first of each month, covers previous month data
A survey of consumer sentiment, conducted by the University of Michigan. The index is
becoming more and more useful for investors. It gives a snapshot of whether or not consumers
feel like spending money.
NFP - Changes in non-farm payrolls
[H]
Department of Labor; the first Friday of each month, 8:30am EST, covers previous
month data
The data intended to represent changes in the total number of paid U.S. workers of any
business, excluding the following:
- general government employees;
- private household employees;
- employees of nonprofit organizations that provide assistance to individuals;
- farm employees.
The total non-farm payroll accounts for approximately 80% of the workers responsible for
the entire gross domestic product of the United States. The report is used to assist
government policy-makers and economists in determining the current state of the economy
and predicting future levels of economic activity. It is a very big market mover, due largely to
high fluctuations in the forecasting.
PMI - Purchasing Managers Index
[H]
Institute for Supply Management; the first business day of each month, 10:00am EST,
covers previous month's data
The PMI is a composite index that is based on five major indicators including: new orders;
inventory levels; production; supplier deliveries and the employment environment. Each
indicator has a different weight and the data is adjusted for seasonal factors. The Association
of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20
different industries. A PMI index over 50 indicates that manufacturing is expanding, while
anything below 50 means that the industry is contracting. The PMI report is an extremely
important indicator for the financial markets as it is the best indicator of factory production.
The index is popularly used for detecting inflationary pressure as well as indicating
manufacturing activity. The PMI is not as strong as the CPI in detecting inflation, but because
the data is released one day after the month, it is very timely. Should the PMI report an
unexpected change, it is usually followed by a quick reaction in market. One especially key
area of the report is growth in new orders, which predicts manufacturing activity in future
months.
Retail Sales Data; Retail Sales less Automotives
[H]
th
Bureau of Census; around the 12
of each month, 8:30am EST, covers previous
month’s data
Retail sales are a key driving force in US economy. This indicator tracks the merchandise sold
by companies within the retail trade and measures the total consumer spending on retails
sales (not including service costs). The retail revenues are a major part (two thirds) of the US
economy. The Census Bureau surveys hundreds of various sized firms and business offering
some type of retail trade. Every month the data is released showing the percent change from
the previous month’s data. A negative number indicates that sales decreased from the
previous months sales. This indicator is a very big market mover because it is used as a gauge
of consumer activity and confidence, as higher sales figures indicate increased economic
activity.
The data is very timely because retail sales data is released within 2 weeks of the
previous month.
Tankan Survey
[H]
BoJ (Bank of Japan); four times a year in April, July, October and mid-December;
10:50pm GMT
An economic survey of Japanese business issued by the central Bank of Japan, which it then
uses to formulate monetary policy. The survey covers thousands of Japanese companies
with a specified minimum amount of capital, although firms deemed sufficiently influential
may also be included. The companies are asked about current trends and conditions in the
business place and their respective industries, as well as their expected business activities for
the next quarter and year. It is considered a big market mover for JPY currency pairs.
TIC (Treasury International Capital) Data on transactions in long term
[H]
securities
th
Department of the Treasury; around the 12
working day of each month, 9:00am EST,
covers month before previous data
The TIC data provides information about the most important way the US is financing its
ongoing current account deficit: selling long-term securities to foreigners, or exporting debt.
It is important to remember that there are other ways of financing a deficit: borrowing from
foreign banks or attracting net FDI inflows. But since FDI flows have been negative and bank
flows tend to be small, most of the financing the US needs has come from the sale of long-
term securities to foreigners. TIC data are a good measurement of how much a country is
trusted in the international investment community. It is considered a big market mover.
Trade Balance
[H]
Department of Commerce; the second week of each month, 8:30am EST, covers
month before previous data
A country’s trade balance is the largest component of a country's balance of payments. The
balance of trade measures the difference between the value of goods and services that a
nation exports, and those it imports. A country has a trade deficit if it imports more than it
exports. The opposite scenario is a trade surplus. It is considered a very big market mover.
Budget Statement Monthly
[M]
A monthly report by US government (the Treasury Department), showing the monthly
budget deficit or surplus
The level of deficit/surplus affects the level of US bonds issues by the government, hence –
their price. In addition, this report reflects the level of tax collected by the government,
which is indicative of the level of economic activity. Consequently, the April report (the
month in which Americans submit their tax returns) is even more important than those
released in other months.
Composite Index of Leading Indicators
[M]
th
The Conference Board; around the 20
of each month, 10:00am EST An index used
to predict the direction of the economy's movements in the months to come. The index is
made up of 10 economic components, whose changes tend to precede changes in the overall
economy. These 10 components include:
1. the average weekly hours worked by manufacturing workers;
2. the average number of initial applications for unemployment insurance;
3. the amount of manufacturers' new orders for consumer goods and materials;
4. the speed of delivery of new merchandise to vendors from suppliers;
5. the amount of new orders for capital goods unrelated to defense;
6. the amount of new building permits for residential buildings;
7. the S&P 500 stock index;
8. the inflation-adjusted monetary supply (M2);
9. the spread between long and short interests rates;
10. consumer sentiment.
By looking at the Composite Index of Leading Indicators in the light of business cycles and
general economic conditions, investors and businesses can form expectations about what's
ahead, and make better-informed decisions. It has medium importance, as its many
components are already known at the time of its publication.
Current Account
[M]
BEA (Bureau of Economic Analysis); quarterly, around six weeks after quarter end
The difference between a nation's total exports of goods, services and transfers, and its total
imports of the same. Current account balance calculations exclude transactions in financial
assets and liabilities. The level of the current account is followed as an indicator of trends in
foreign trade, so it is regarded as a big market mover.
Durable Goods
[M]
Bureau of Census; the fourth week of each month, 8:30am EST, covers previous
month data
Durable Goods Orders measures new orders placed with domestic manufacturers for
immediate and future delivery of factory hard goods. A durable good is defined as a good that
lasts an extended period of time (over three years) during which its services are extended.
Rising Durable Goods Orders are normally associated with stronger economic activity, and can
therefore lead to higher short-term interest rates. Higher rates often support a currency, at
least in the short term.
GDP Price Deflator
[M]
BEA (Bureau of Economic Analysis); last day of the quarter, 8:30am EST, covers
previous quarter data
The GDP deflator shows how much a change in the base year's GDP relies upon changes in the
price level. Also known as the "GDP implicit price deflator." As it is not based on a fixed
basket of goods and services, the GDP deflator has an advantage over the consumer price
index (CPI). Changes in consumption patterns, or the introduction of new goods and services,
are automatically reflected in the deflator. This indicator is of medium importance to the
markets.
Housing Starts
[M]
Bureau of Census; around the middle of each month, 8:30am EST, covers previous
month data
This economic indicator tracks how many new single-family homes or other residential
buildings were constructed through the month. For the survey, each house and each single
apartment is counted as one housing start. This indicator is not a huge market mover, but it
has been reported by U.S. Census that the housing industry represents over 25% of all
investment dollars, and a 5% value of the overall economy. Housing starts are considered to
be a leading indicator, meaning it detects trends in the economy looking forward. Declining
housing starts show a slowing economy, while increases in housing activity can pull an
economy out of a downturn.
Industrial Production Capacity; Production Utilization
[M]
Federal Reserve; middle of the month, 9:15am EST, covers previous month data
It is a chain-weighted measure of the change in the production of the nation's factories,
mines and utilities as well as a measure of their industrial capacity and of how many available
resources are being used (commonly known as capacity utilization). In addition, the Capacity
Utilization Index provides an estimate of how much factory capacity is in use. They are
important indicators, as the manufacturing sector accounts for one-quarter of the economy.
Initial Jobless Claims
[M]
Department of Labor; once a week on Thursday at 8:30am EST, covers previous week
data
The data states the number of people who applied to receive unemployment pay for the first
time. It has low to medium importance as this relates to weekly data with high fluctuations;
the average of four weeks is more stable.
Philadelphia Fed Index (Business Outlook Survey)
[M]
th
Federal Reserve Bank of Philadelphia; around the 17
of each month, 10:00am EST,
covers previous month data
The Business Outlook Survey is a monthly survey of manufacturers located around the states
of Pennsylvania, New Jersey and Delaware. Companies surveyed indicate the direction of
change in their overall business activity and in the various measures of activity at their
plants. The index signals expansion when it is above zero and contraction when below. This
index is considered to be a good indicator of changes in everything from employment, general
prices, and conditions within the manufacturing industry. It isn't a big market mover, but the
results found in the survey can indicate what to expect from the Purchasing Managers' Index
(which comes out a few days later and covers the entire U.S.).
PPI - Producer Price Index; Core-PPI
[M]
Bureau of Labor and Statistics; the second full week of each month, 8:30am EST,
covers previous month data
The PPI is not as widely used as the CPI, but it is still considered to be a good indicator of
inflation. This indicator reflects the change of manufacturers’ cost of input (raw materials,
semi-finished goods, etc.). Formerly known as the "Wholesale Price Index", the PPI is a basket
of various indexes covering a wide range of areas affecting domestic producers. Each month
approximately 100,000 prices are collected from 30,000 production and manufacturing firms.
It is not as strong as the CPI in detecting inflation, but because it includes goods being
produced, it is often a forecast of future CPI releases.
Beige Book
[L]
Federal Reserve Board; two Wednesdays before every FOMC meeting, 8 times per
year, 2:15pm EST
Beige book is the commonly used term for the Fed report entitled: "Summary of Commentary
on Current Economic Conditions by Federal Reserve District". It is published just before the
FOMC meeting on interest rates and is used to inform the members on changes in the
economy since the last meeting. This report is published eight times per year. The Beige Book
is not considered to be a big market mover. It is a gauge of the strength of the economy and
not a commentary on the views of Fed members. Occasionally it can move markets if the
findings are substantially different from analyst expectations.
ECI - Employment Cost Index
[L]
Bureau of Labor and Statistics; the last Thursday of Apr, Jul, Nov and Jan, 8:30am
EST; covers previous quarter’s data
The ECI tracks movement in the cost of labor which includes wages, fringe benefits, and
bonuses for employees at all levels of involvement The Bureau of Labor surveys over 3,000
private sector firms and over 500 local governments, schools and other public sector
organizations. This indicator is not widely watched, but it is among a select group of
indicators that have enough power to move the markets. This is particularly true in
inflationary times. The idea behind the ECI is that as wage pressures increase, so does
inflation. This is mainly because compensation tends to increase before companies increase
prices for consumers (inflation).
PCE - Personal Consumption Expenditure
[L]
BEA (Bureau of Economic Analysis); last day of each month, 8:30am EST, covers
previous month data
PCE measures price changes in consumer goods and services. The PCE is a fairly predictable
report that usually has little impact on the markets. The Core PCE, which is the index less
prices of food and energy, estimates inflationary trend more precisely.
