The most important economic indicators, part 1

The most important economic indicators, part 122.03.2016


Retail sales

USA – The index shows the change in the volume of sales in the retail trade. It consists of two parts: the "car sales" and "sells of the rest." As the number of cars sold is very volatile, the most accurate information derives from that segment of the indicator, which does not take into account car sales. The growth of volume of retail sales is a positive factor for the development of national economy and leads to an increase in the national currency. It has a limited impact on the market. It is published at 8:30 EST, in the middle of the month (for the previous month).

United Kingdom – the indicator characterizes the level of consumption. If it is above the level of production, it usually leads to inflation. Since the value per month is quite variable, the index averaged over the previous three months describes the situation better. It is published every month and is taken into account by the market.

Japan – the indicator reflects the change in the level of sales, consumer spending and demand. Statistics includes department stores and supermarkets. It is published monthly and has little impact on the market.

PMI

The indicator is based on the method of development of a diffusion index. It reflects the level of business activity of the industrial sector.

If, after a period of growth PMI turns down, it predicts the business cycle will turn downwards. Conversely, if the PMI after drop, reaching a minimum, is turning up, then this is an indication of future recovery. According to 40-year-old US statistics, PMI predicts growth cycle peaks on average 7 months ahead and lows of growth cycles 3 months ahead.

In the Eurozone, the PMI index is calculated since 1999. In the United States there is Chicago PMI, in Japan, it is called Tankan index. PMI is published monthly, while Tankan - quarterly.

The Consumer Price Index (US) - CPI

It is an indicator that determines the change in the level of retail prices for the "basket" of goods and services. The consumer price index is considered more reliable if it does not take into account food and energy industries. When calculating the index, there are considered the prices of imported goods and services. CPI is the main indicator of inflation in the country. This index is analyzed together with the PPI.

If the economy develops in normal conditions, the CPI and PPI growth could lead to an increase in key interest rates in the country. This in turn leads to an increase in the dollar, as it increases the attractiveness of investing in a currency with a higher interest rate. Its value is published in the middle of each month (shortly after PPI release) at 08:30 EST.

Producer Price Index (US) - PPI

It reflects the dynamics of change in wholesale prices of goods and services. PPI is the first coming inflation indicator. Unlike CPI, it does not account for the service sector.

PPI is calculated in relation to prices of extensive range of commodity to their prices in the base period and is used by analytics as an indicator showing the inflation in the future. The index is not monitored separately but its dynamics over a time period.

The index is published in the third week of each month at 8:30 EST. It has a limited impact on the market.

Nonfarm Payrolls – NFP

It is an index showing the number of new jobs created in non-agricultural sectors of the US economy in the previous month.

Payroll is a payment roll based on which there salary of employees is issued. The indicator is very strong: it shows the change in the level of employment in the country. The growth of this index leads to an increase in the dollar. It is called the "indicator that moves markets." There is a rule that says that an increase in NFP value by 200 000 per month is equivalent to an increase in GDP by 3.0%. It is published usually the first Friday of each month at 08:30 EST.

The number of applications for unemployment benefits (USA)

It is an economic indicator that is not always reliably indicating the status of unemployment. It is susceptible to distortion by short-term factors, such as federal or local holidays. However, this indicator can give an idea of what will be the next Nonfarm payrolls indicator. For example, if during the month the unemployment benefits indicator value is consistently reduced, then it is likely that the value of the Nonfarm payrolls will be higher.

It has a limited impact on the market. The drop in the number of applications for unemployment benefits is a favorable factor for the growth of the US dollar. It is published at 8:30 EST each Thursday, making reference to data for the week ending the previous Saturday.

ISM Indicator (US)

It is an important economic indicator. A value greater than 50 is usually considered as an indicator of the growth of industrial activity, but when there is less than 50, respectively, then the industrial activity has negative dynamics. As a general rule, when the ISM value approaches the level of 60, investors start to worry about a possible overheating of the economy, inflation growth and consequent measures (increase of discount rate) by the Federal Reserve Bank. In it reached the level of 40, there is considered a recession.

The index is calculated on the basis of five components having the following specific values: New Orders (30%), Production (25%), Employment (20%), Supplier Deliveries (15%), and Inventories (10%). Its value can range between 0 and 100% with different characteristic ranges: 50% means the absence of any changes; more than 50% - an improvement; and less than 50% means a reduction.

It is published on the first working day of the month at 10:00 EST. The impact on the dollar exchange rate is insignificant.

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