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Economic Indicators in the USA and their Interpretation

When someone decides to trade Forex, he should know which economic indicators to follow, especially those related to the currency pair he wants to trade. Below is a list of economic indicators in the United States, obviously, there are many more in other leading economies such as Germany, the UK, Japan, etc.

In general, the numerical value of economic indicators are important, but also the expected and the previous one as well. But what really counts is the difference between the expected and actual numbers; it is the driver for the impact on prices in the market. 
Although the “quality” of the published data may differ, such macro economic indicators are followed by the vast majority of traders worldwide. The value of the indicator’s data is considered important if it presents new information, or is vital to reach conclusions which couldn’t be evident with other reports or data. Furthermore, an indicator is highly valuable if the trader can use it to better forecast future trends.

Each one of the economic indicators is marked with HighMedium or Low – according to its level of importance; though these levels may change over time.

1)    CCI – Consumer Confidence Index High

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, the respondents numbers questions the economy’s average income, the market condition as participants see it, and the chances to see increase in their income. The idea behind consumer confidence is that when the economy warrants more jobs, increase wages, and lower interest rates, it increases the confidence and spending power. Confidence is considered one of the most accurate economic indicators of as private consumption, it is monitored closely by the Federal Reserve when determining interest rates and considered to be a big market mover.

2)    CPI – Consumer Price Index; Core-CPI High

Bureau of Labor and Statistics; Around the 20th of each month, 8:30am EST, covers previous month’s data

The CPI is among the important economic indicators and is considered the most widely used measure of inflation and the effectiveness of the government financial policy. The CPI is a basket of consumer goods and services tracked from month to month (excluding taxes). It is considered to be a very big market mover. A rising CPI indicates inflation, which is good in periods of economic expansion because it will lead to an increase in the interest rate. Government financial policies effectiveness will be reflected in the stability of inflation. The Core-CPI (CPI, excluding food and energy, expense items which are subject to seasonal fluctuations) gives a more stringent measure of prices.

3)    Employment ReportHigh

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 indicators, both for the fact that it discloses new up-to-date information and that, together with NFP, it gives a good picture of the total state of the economy.

4)    Employment Situation ReportHigh

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 second part of the report indicates average weekly hours and average hourly earnings. This data is important for determining the strength of the labor market, which is a major determinant of inflation; the better the wages the more services and goods are bought, the more money circulation there is then the higher the currency price becomes. The Bureau of Labor surveys over 250 regions across the United States and covers almost every major industry. This indicator is definitely one of the most watched indicators by market participants and the report almost always moves markets. Traders value the fact that information in the employment report is very timely, less than a week old.

5)    FOMC Meeting (Federal Open Market Committee): Rate announcement High

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 the USA) is responsible for managing the US monetary policy, controlling 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. The interest rate announcement is a very important indicator as it affects the rate of inflation and a big market mover. 
There is great importance to the FOMC announcement, however – the content of the deliberation held in the meeting (and published 2 weeks afterwards) is almost as important as the release itself.

6)    GDP – Gross Domestic Product High

BEA (Bureau of Economic Analysis); Last day of the quarter, 8:30am EST, covers previous quarter data.

The GDP is one of the important economic indicators. The US Commerce department publishes the GDP in 3 modes: advance; preliminary; 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 specific 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 releases the “preliminary report” and then the “final report” after another month. The most recent GDP figures have a relatively high importance to market participants. GDP indicates the pace at which a country’s economy is growing or shrinking.

7)    ISM (Institute for Supply Management) Manufacturing Index High

Institute for Supply Management; The first business day of the month, 10:00am EST, covers previous month data

The Manufacturing ISM Report is based on data compiled from monthly replies to questions asked to 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 an expansion of economic activities and data under 50 points shows a contraction.

8)    MCSI – Michigan Consumer Confidence Index High

University of Michigan; First of each month, covers previous month data

A survey of consumer confidence conducted by the University of Michigan. The index is becoming more and more useful for traders. It gives a idea of whether consumers feel like spending money or not.

9)   NFP – Changes in non-farm payrolls High

Department of Labor; The first Friday of each month, 8:30am EST, covers previous month data

The NFP is one of the important economic indicators and maybe the most anticipated by traders. This data is intended to represent changes in the total number of paid U.S. workers in any business, excluding the following: 
- general government employees;
- private household employees;
- employees of nonprofit organizations that provide assistance to individuals and farm employees.
The total number of the non-farm payroll accounts for approximately 80% of workers who produce the entire gross domestic product of the United States.  It is a very big market mover and it is used to assist government policy makers and economists determine the current state of the economy and predict future levels of economic activity.

10)     PMI – Purchasing Managers Index High

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 economic indicators; 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 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 popular for detecting inflation as well as manufacturing economic activity. The PMI is not as strong as the CPI in detecting inflation, but because data is released on the first day of 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 new orders, which predicts the growth in manufacturing activity in future months.

11)     Retail Sales Data; Retail Sales less Automotive High

Bureau of Census; Around the 12th of each month, 8:30am EST, covers previous month data

The Retail Sales is one of the important economic indicators. Retail sales are a key driving force in US economy, this indicator tracks the merchandise sold by companies within the retail market. This indicator 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 retail goods. Every month the data is released showing the percent change from the previous month data. A negative number indicates that sales decreased from the previous months sales, higher sales figures would indicate increased economic activity. This indicator is a very big market mover because it is used as a gauge of consumer activity and confidence.

12)        TIC (Treasury International Capital) Data on transactions in long term securities High

Department of the Treasury; Around 12th working day of each month, 9:00am EST, covers month before previous data

The TIC data is considered as a big market mover and it provides information about the way the US is using to finance its ongoing current account deficit. There are ways of financing a deficit, such as borrowing from foreign banks or selling long-term securities to foreigners. Most of the financing the US makes comes 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.

13)        Trade Balance High

Department of Commerce; The second week of each month, 8:30am EST, covers month before previous data

The Trade Balance is one of the important economic indicators. The largest component of a country’s balance of payments. The trade balance measures the difference between the value of goods and services that a nation exports and the value of goods and services it imports. A country has a trade deficit if it imports more than it exports, and the opposite is a trade surplus. It is considered as a very big market mover.

14)     Beige Book Low

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’s report entitled: “Summary of Commentary on Current Economic Conditions by Federal Reserve District”. It is published just before the FOMC interest rates’ meeting and is used to inform members about changes in the economy since the last meeting. This report is published eight times per year but is not considered to be a big market mover as it is a gauge on the strength of the economy and not a commentary on the views of Fed members. Occasionally it can move markets if the findings are a big surprise from analyst expectations.

15)    ECI – Employment Cost Index Low

Bureau of Labor and Statistics; The last Thursday of Apr, Jul, Nov and Jan, 8:30 am EST, covers previous quarter data
The ECI tracks movement in the cost of labor which includes wages, fringe benefits, and bonuses for employees at all levels in 3,000 private sector firms and over 500 local governments, schools and other public sector organizations. This indicator isn’t the most followed, but it is among a select group of indicators that have enough power to move the markets, especially during inflationary times. The idea behind the ECI is that inflation will rise because compensation and wages pressures’ increase.

16)    PCE – Personal Consumption Expenditure Low

BEA (Bureau of Economic Analysis); Last day of each month, 8:30am EST, covers previous month data

PCE is a measure of price changes in consumer goods and services. The PCE is a fairly predictable report that usually has little impact on the market. The Core PCE, is the index less prices of food and energy, it predicts inflation trends accurately.

17)    Budget Statement Monthly Medium

A monthly report by the 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 estimates the level of tax collected by the government, which is evident to the activity level of the economy. In such regard, the April report, the yearly tax remittance month, is even more important than other months’ reports.

18)    Composite Index of Leading Indicators Medium

The Conference Board; Around the 20th of each month, 10:00am EST

The Composite Index of Leading Economic Indicators is 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 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’s 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 components are already known at the time of its publication.

19)    Current Account Medium

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 them. 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, therefore, it is considered as a big market mover.

20)    Durable Goods Medium

of Census; The fourth week of each month, 8:30 am EST, covers previous month data

Durable Goods Orders measures new orders placed with domestic manufacturers for immediate and future delivery of factory 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 lead to higher short-term interest rates, which are often supportive to a currency at least in the short term.

21)    GDP Price Deflator Medium

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.” This data is among the medium importance economic indicators for financial markets.

22)    Housing Starts

Bureau of Census; Around the middle of each month, 8:30 am EST, covers previous month data

This economic indicator tracks how many new single-family homes or buildings were constructed throughout the month. For the survey each house and each single apartment are counted as one housing start. This indicator isn’t a huge market mover, but it has been reported by U.S. Census that the housing industry represents over 25% of investment dollars and a 5% value of the overall economy. Declining housing starts show a slowing economy.

23)    Industrial Production Capacity; Production Utilization Medium

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, their industrial capacity and how many available resources are being used (commonly known as capacity utilization). In addition, the Capacity Utilization Index provides an estimate of how much of the factory’s capacity is in use. They are important economic indicators as the manufacturing sector accounts for one-quarter of the economy.

24)    Initial Jobless Claims Medium

Department of Labor; Once a week on Thursday at 8:30am EST, covers previous week data

This economic indicator states the number of people who applied to receive unemployment pay for the first time. It has low to medium importance since it is a weekly data measure which has high fluctuations; average of four weeks is more stable.

25)    Philadelphia Fed Index (Business Outlook Survey) Medium

Federal Reserve Bank of Philadelphia; Around the 17th of each month, 10:00am EST, covers previous month data

The Business Outlook Survey is a monthly survey of manufacturers located in Pennsylvania, New Jersey and Delaware. The survey indicates 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.

26)    PPI – Producer Price Index; Core-PPI Medium

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 among the good economic indicators 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.

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About Razi Hammoudeh

Razi’s professional experience was gained over the course of more than a decade working with leading Forex market makers in the Middle East, Asia and Europe where he learned about trading, financial instruments and global markets. Being exposed to the wide range of skills he acquired along the years, he continued to develop his trading strategies and further improving his track record in Forex trading. He used innovative business development strategies to find FXLORDS, helping it to rapidly become a major provider of education and trading tools to the successful trader. He is an enthusiastic individual, motivated by challenge and renowned for pushing the limits, always looking to gain some more experience and help as much as possible along the way.

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