Fundamental Economic Reports: Major Market Movers !!!

The following Economic Reports are the most closely followed Economic Report in the trading market. These reports will cause volatility after they are announced, meaning there will be some pip movement in currency pairs after these news reports are announced. The amount of pip(point) movement will depend on the volatility rating of each news data reports, news labeled with importance of three exclamation marks cause high volatility, followed by those of 2 exclamation marks and then those of 1 exclamation mark.

Most investors will mainly trade 3 and 2 exclamation mark news, as these reports will generally cause between 30 & 100 pip(point) movement once these news reports are announced.

The news reports followed by traders are shown below and reports of these news can be found within an Financial Economic Calendar.

Employment Report

Importance: !!!
Source: Bureau of Labor Statistics, U.S. Department of Labor.
News Data Report Announcement Time: First Friday of the month at 8:30 EST, reports data for the prior month

The employment report survey produces the Non-Farm payrolls, Average Work Week, and Average Hourly Earnings figures, to name a few. Both surveys cover the pay roll period.

Non-Farm Payrolls The single most important piece of data contained in the employment report generally & the establishment survey particularly is Non-Farm Payrolls. As the name implies, Non-Farm Payrolls measure the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be quite volatile, occasionally varying by more than 200K from one month to the next. Non-Farm Payrolls figures offer the most timely and thorough snapshot of the economic environment, these is a measure of American Middle Class & this figure translates to people withwho--have money and are ready to spend. American economy is fueled highly by consumerism with about 75% of GDP driven by consumers, the higher the Non-Farm Payrolls number the more the consumers.

Average Work Week The Work Week, also referred to as hours worked, is an often under rated indicator in the establishment survey. The average number of hours worked by employees on Non-Farm Payrolls is an important determinant of both industrial production and personal income in any given month.

Average Hourly Earnings The last trading indicator from the establishment survey which is worthy of close inspection is the Average Hourly Earnings, which's important for 2 reasons. Alongside total man-hours, average earnings data gives us a good indication of personal income growth during that month. Second, the earnings numbers are closely watched during periods of strong economic growth for evidence of increasing and rising wage pressures.

Unemployment Rate

Unemployment Rate - Percentage of employable people actively seeking work, out of the total number of employable people determined in a monthly survey by the Bureau of Labor Statistics.

An unemployment rate of about 4% - 6 % is considered "healthy". Lower rates are seen as inflationary due to the upward pressure on salaries; higher rates threaten a decrease in consumer spending.

Jobless Claims

Jobless Claims - A weekly compilation of the number of individuals who signed up & filed for unemployment insurance for the first time. This fundamental technical indicator, & more importantly, its four-week moving average, portrays the employment situation in the labor market.

Jobless claims are an easy way to rate the momentum of the job market. The fewer people filling for unemployment benefits, the more the people having jobs, & that tells investors a great deal about the economic environment.

Nearly every job comes with an income which gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so the stronger the job hiring, the healthier the economic environment.

By tracking the number of the jobless claims, traders can gain an insight and idea of how the job market is doing. If wage inflation threatens, there is a good chance that the interest rates will rise, bond & stock prices will fall, and the only traders/investors that will be in a happy mood will be the ones that tracked the jobless claims & adjusted their portfolios to anticipate these events. The lower the number of unemployment claims, the stronger the job hiring is, and vice versa.

Gross Domestic Product - (GDP)

Importance: !!!
Source: Bureau of Economic Analysis, U.S. Department of Commerce.
News Data Report Announcement Time: Third or fourth week of the month at 8:30 EST for the prior quarter

Gross Domestic Product - GDP is the broadest measure of the economic activity. Annualized quarterly % changes in the GDP reflect the growth rate of total economic output. The figures can be quite volatile from one quarter to next quarter. Inventory & net export swings in particular can produce significant and major volatility in GDP. The final sales figure, which excludes inventories, sometimes can be helpful and useful in identifying under-lying growth trends as inventories represent unsold goods and products, and a large inventory increase will boost GDP but may be indicative of weakness rather than momentum. The broad components of GDP are: consumption, investment, net exports, government purchases, and inventories. Consumption is by far the biggest component, totaling two thirds of the GDP.

Retail Sales report

Importance: !!!
Source: The Census Bureau of the Department of Commerce.
News Announcement Time: 8:30 EST around the 13^th of the month (data for one month prior).

The retail sales report is a gauge of the total receipts of retail stores. The changes in the sales are widely followed as the most timely trading indicator of broad consumer spending patterns. Retail sales are often viewed ex-autos, because auto sales can vary sharply from month to month. It is also important to keep a close watch on the gas & food components, because changes in these 2 reports are often a result of price change rather than shifting consumer demand.

Retail sales can be quite volatile and the advance reports are subject to rather big revisions. Retail sales don't include spending on services, which makes up over half of total consumption. Total personal consumption is not available until the personal income & consumption reports are released, commonly 2 weeks after retail sales data.

Housing Starts and Building Permits

Importance: !!!
Source: The Census Bureau of Department of Commerce
News Announcement Time: 8:30 EST around the 16th of the month (data for 1 month prior).

Housing Starts are a measure of the number of residential units on which construction has started each month. A begin in construction is defined as the beginning of excavation of the foundation for the building & is comprised primarily of residential housing. Building permits are permits taken out so as to allow excavation. An increase in building permits and starts generally occurs a couple of months after a reduction in mortgage rates. Permits lead the starts, but permits are not required in all regions of the country, & the level of permits thenceforth tends to be than the level of the starts over time.

Existing Home Sales

Importance: !!
Source: National Association of Realtors.
News Announcement Time: 10:00 EST around the 2fifth of the month (data for month prior).

The name speaks for and explains itself - this report provides an estimate of the level of sales of existing home sales. The report is considered a decent technical indicator of the activity in the housing sector. Housing starts precede this report every month, but starts are a supply rather than demand side trading indicator. Existing home sales precede the other key demand side technical indicators of housing - new houses sales - thus boosting the visibility of the report. Sales are highly dependent on mortgage rates, & tends to react with a few months lag to changes in rates. Sales are also determined by the level of pent-up demand for housing - immediately after recession, sales are mostly quite strong because of the demand that accumulated through the recession.

Chicago PMI

Importance: !!!
Source: Chicago Purchasing Managers Association.
News Announcement Time: The last business day of the month at 10:00 EST for the current month.

Philadelphia and Chicago surveys are more closely watched and monitored due to their timeliness & the fact that these regions represent a justifiable cross section of national manufacturing activities.

Trade Balance

This is statement of a country’s trade in goods (merchandise) and services. It covers products such as and like manufactured goods, raw materials and agricultural goods, and also travel & transportation.

It is the difference between the value of the goods and services that a country exports and the value of the goods & services which it imports.

If a country’s exports exceed its imports, it has a trade surplus and the balance is said to be positive. If imports exceed exports, the country has got a deficit & its trade balance is said to be negative.

A positive or negative balance might simply reflect a change in relative cost of the domestic products compared and analyzed with international prices. For industries which rely heavily on exports, such as and like the auto sector, a positive balance may reflect a higher international demand, which can mean more jobs in that sector.

Purchasing Managers Index (PMI)

Purchasing Managers Index PMI - The National Association of Purchasing Managers (NAPM), now called the Institute for Supply Management, releases a monthly composite index of national manufacturing conditions, constructed from info on new trade orders, production, supplier delivery times, backlogs, inventories, prices, employment, export orders, & import orders.

It is divided into manufacturing and non-manufacturing sub-indices.

Producer Price Index (PPI)

Producer Price Index (PPI) - PPI is a measure of the average price level for a fixed basket of capital & consumer goods paid by producers.

PPI gauges price changes in the manufacturing sector. It gauges average changes in selling prices received by the domestic producers in manufacturing, mining, agriculture, and electric utility industries for their output.

Inflation at this producer level often gets passed through to the Consumer Price Index, (CPI).

The relationship between inflation & interest rates is the key to understanding how data like the PPI influence the markets and your investments.

Philadelphia Fed Survey

Philadelphia Fed Survey - A composite diffusion index of manufacturing factors and conditions within the Philadelphia Federal Reserve district.

This survey is widely followed as an indicator of manufacturing sector trends since it is correlated with the ISM survey & the index of industrial production.

The Philly Fed survey gives and generates a thorough look at the manufacturing sector, how busy it is and where things are headed. Because manufacturing is one of the major sector of the economy, this report has a big influence on the currency prices moves & behavior.

Some of the Philly Fed sub-indexes also provide insight on commodity prices and other clues on inflation.

Personal Income

Personal Income - Personal income is the dollar value of the income received from all sources by individuals. Personal outlays include consumer purchases of durable & non-durable goods and services.

The income & outlays data are another handy way to gauge the momentum of the economic situation and where it's headed. Income gives and provides households the power to spend &/or save.

Spending greases the wheels of the economy & keeps it growing. The consumption (outlays) part of the report is even more directly tied to the economic environment, which we know generally dictate and influence how the markets perform.

Consumer spending accounts for a two thirds of the economy, hence if you know what the consumers are up to, you'll have a pretty good handle on where the economic situation is headed. Needless to say, that’s a big advantage for investors.

New home sales

New home sales - number of newly constructed homes and houses with a committed sale during that month. The level of new home sales reflects housing price trends.

This provides a gauge and measure of not only the demand for housing, but the economic energy. People have to be feeling comfortable and confident in their own financial position to buy and purchase a house.

Furthermore, this narrow piece of data has got a powerful multiplier effect through the economic environment, & thenceforth across the markets and your investments.

By tracking economic info such as new home sales, traders can gain specific investment ideas and also broad guidance for managing a portfolio.

Each time construction of a new house starts, it translates to additional/more construction jobs, and income that will be pumped back into the economy.

Once the home is sold, it generates revenues for the home builder & the realtor. Trends in the new home sales information carry valuable clues for the stocks of construction builders, mortgage lenders and furnishings corporations.

Money supply

Money supply - These monetary aggregates are alternative estimates of the money supply by degree of liquidity. Changes in the monetary aggregates indicate the thrust of monetary policy and also the outlook for economic activity & inflation pressures.

The monetary aggregates (know individually as M1, M2 and M3) used to be all the rage a few years back because the data revealed the Fed’s (tight or loose) hold on credit conditions in the economy.

The Fed issues target ranges for money supply growth. In the past, if actual growth moved outside those ranges it often was a prelude/precursor to an interest rate move by the Fed.

Today, monetary policy is understood more clearly by level of the federal funds rate. Money supply fell out of fashion in the nineties, due to a variety of changes in the financial system and the way the Federal Reserve conducts monetary policy.

Fed is working on some new estimates of money supply, & given the way economic indicators ebb and flow in popularity, don't be surprised if the monetary aggregates make a comeback in the future.

International Trade

Measures the difference between imports & exports of both tangible goods and services. The level of the international trade balance, and also changes in exports & imports, indicate trends in the foreign trade.

Changes in the level of imports and exports, along with the difference between the two (the balance) are a valuable gauge of economic trends here & abroad. Furthermore, the info can directly impact all financial trading markets, but especially the value of the dollar.

Imports indicate demand for foreign goods and services here & the USA exports show the demand for USA goods in overseas countries. The dollar can be especially sensitive to changes in deficit run by the United States, since this imbalance creates more demand for foreign currencies.

This report provides a breakdown of USA trade with major countries as well, so it can be instructive for traders who are interested in diversifying globally. For illustration, a trend of accelerating exports to a specified country might signal economic momentum & investment opportunities in that country.

Industrial production and capacity utilization

Industrial production and capacity utilization - The Index of Industrial Production is a chain-weight measure of the physical output of the nation’s factories, mines and utilities.

The capacity utilization/usage rate reflects usage of the available resources. Investors and Traders want to keep their finger on the pulse and performance of the economic situation because it dictates how various types of investments will perform.

Industrial production show much factories, mines & utilities are producing. Since the manufacturing industry sector trading accounts for one-quarter of the economy, this report has a large influence on currency price behavior.

The capacity utilization/usage rate provides an estimate of how much factory capacity is in use. If the utilization rate gets to high (above 85 %) it can lead to inflationary bottlenecks in production.

The Federal Reserve watches this report closely & sets interest rates policy on the basis of whether if production constraints are threatening to cause inflationary pressures.

Housing starts

Housing starts - Housing starts measure the number of residential units on which construction is begun each month. Home builders don't start a house unless they are fairly confident it will sell upon or before its competition.

Changes in the rate of housing starts tell us a lot about demand for homes and the outlook of the construction industry. Furthermore, each time a new house is started, construction employment rises & income will be pumped back into the economy.

Construction Spending

Construction Spending - Dollar value of new construction activity on the residential, non-residential and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

Businesses only put money in to construction of new factories or offices when they are confident that the demand is strong enough to justify the extension.

The same goes for individuals making the investment in a home. That’s why construction spending is a good indicator of the economy’s momentum.

Consumer Confidence Index

Consumer Confidence Index - The Survey of consumer attitudes concerning both present situation and also expectations regarding the economic conditions carried out by The Conference Board. Five thousand consumers across the country are surveyed each month.

The level of consumer confidence is directly related to the momentum of consumer spending. Consumer spending contributes and accounts for a two thirds of the economy, so the markets are always dying to know what consumers are up to and how they may behave in the near future.

The more confident consumers are about the economy and their own personal finances, the more likely they are to spend.

With this in mind, it’s easy to see how this index of consumer attitudes gives and provides an insight to the pulse of the economic environment. Changes in consumer confidence and retail sales don't move in tandem month by month.

Consumer Price Index (CPI)

Consumer Price Index (CPI) - Measure of the average price level of a fixed basket of goods & services purchased by consumers. Monthly changes in the CPI represents the rate of inflation.

CPI is the most followed trading indicator of inflation in the United States. Inflation is a general increase in the price of goods & services. The relationship between inflation and interest rates is the key to understanding how data like the CPI influence the markets.

By tracking the trends in inflation, whether high or low, rising or falling, traders can anticipate how various types of investments will perform.

Durable goods order

The durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hardwoods. Orders for the durable goods show how busy factories will be in the months to come, as the manufacturers work to fill the orders. The data not only provides insight to demand for things like refrigerators & cars, but also business investment going forward.

If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduce the prospects for inflation. It tells traders what to expect from manufacturing industry sector, a major component of the economy & therefore a major factor of influence on their investments.

Existing home sales

Existing home sales - Number of previously constructed homes and houses with a closed sale during that month. Also known as home resales) are a large share of the market than new homes and indicate housing price trends. This provides a gauge and measure of not only the demand for housing, but the economic energy.

People have to be feeling pretty comfortable & confident in their own financial position to buy and purchase a house. Even though home resales don't always create new output, once a home is sold, it generates income revenues for the realtor agent.

Gross Domestic Product (GDP)

The sum of all goods and services produced either by domestic or foreign corporations. GDP shows the pace at which a country’s economy is growing (or shrinking) and is regarded the broadest trading indicator of economic output and growth. Investors need to closely monitor the economic situation because it mostly dictates how investments will perform.

The GDP report contains a treasure-trove of info which not only paints a picture of the overall economy, but tells investors about important trends within the large picture. GDP components like consumer spending, business and residential investments and price (inflation) indexes illuminate the economy’s undercurrents, which can translate to investment opportunities & guidance in managing a portfolio.

Retail Prices Index

Retail Prices Index (RPI) - The RPI is the UK’s principal measure of consumer price inflation. It is defined as an average measure of change in the prices of goods & services brought for the purpose of consumption by vast majority of households in UK.

It is complied and published monthly. Once published, it's never revised. RPI includes date on food and drink, tobacco, housing, household goods & services, personal goods and services, transport fares, motoring costs, clothing & leisure goods and services.

Measures of inflation are vital tools for economists, business & government. The Bank of England’s Monetary Policy Committee sets UK interest rates on the basis of a target figure for inflation set by Chancellor of the Exchequer.

Wage agreements, pensions and change in benefit levels are often linked directly to the RPI. Utility regulators impose restrictions on price movements based on the RPI.

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