The most important economic indicators, part 2

The most important economic indicators, part 229.03.2016

Consumer Confidence Index (US)

This survey is an indicator that reflects the optimism of consumers. It is calculated since 1967, when the initial value was 100.

The index has a limited impact on the market, as it cannot reflect the real state of the economy. However, it is traditionally used to forecast employment and general economic trends. The growth of the index is a positive factor for the development of national economy and leads to an increase in the dollar. Its value is published after the 20th day of each month at 10:00 EST.

Consumer sentiment index (by the University of Michigan – USA)

It is a leading economic indicator, which is better than others is correlated with future economic activity.

The index is derived by a monthly telephone survey of about 500 consumers. Each of them is given 5 questions regarding their financial situation and opinions about the current state (2 questions) and future state (3 questions) about the economy. From the percentage of respondents who reported improvement in economic conditions, there is subtracted the percentage of those who said that was the situations is worsen, and to the resulting number is added 100. From the answers to the first two questions from the survey there is viewed the current economic situation, and from the last 3 ones, there is formed the index of consumer expectations. Thus, expectations are responsible for about 60% of the index.

The report is published twice a month: on the second week (usually on Friday) about the 15th day of the reporting month (preliminary) and after two weeks (the final one). The growth of index value leads to an increase in the dollar.

New home sales, existing home sales (USA)

The indicator reflects the supply and demand in the real estate sector. It lags behind the rates on mortgage loans, and is quite unstable, being revised from month to month. Analysts pay more attention to the report on sales of existing homes.

It is published at 10:00 EST at the end of each month (data for the previous month is separated in new and existing houses).

Housing starts and building permits (USA)

The indicators are one of real-estate type of economic indicators. The housing starts refer to the number of construction sites appearing every month. Building permits is the number of orders at the beginning of the excavation. For the US economy, these figures are especially significant. Growth in construction activity is only possible with a good state of the economy, so it contributes to strengthening of the national currency. Long-term decline in the level of housing construction is a strong sign of weakening (possibly recessionary) economy, and vice versa, its growth shows the growth of economic activity.

It is published at 8:30 EST in the middle of the month (data refers to the previous month).

IFO survey

It is a survey of the German research institute IFO. The review evaluates the level of business activity in the country. The indicator value may range from 80 to 120, 100 being the level of business activity in 1991. It is published monthly and has a significant impact on the market.

Personal spending, personal consumption (US)

It is an economic indicator reflecting the change in spending to meet personal needs. The index includes three components: the spending for purchasing durables, non-durables and services.

A significant deviation of the index from the projected values may influence the rate of national currency. The growth of its value is a positive factor for the development of the economy and leads to an increase in the dollar. It is published at 8:30 EST at the end or beginning of the month simultaneously with the Personal income.

Personal income (US)

The economic indicator shows the total income from all sources, including wages, rental income, government subsidies, dividend income, etc. It is a secondary indicator of future consumer demand. It is published and considered together with the Personal Spending index.

The increase contributes to the dollar strengthening. It is published at 8:30 EST at the end or beginning of the month (data refers to the previous 2 months).

Gross Domestic Product – GDP

It is the main indicator that reflects the state of the national economy.

According to the keynesian model of economic development, GDP can be represented as follows:

GDP = C + I + S + E – M, where C is consumption, I - investment, S - government spending, E - export, M - import. GDP is expressed as an index relative to the previous period, and in the form of the absolute value of price amount of produced goods and services. It has a significant impact on the market. GDP growth leads to an increase in the national currency.

RPI – retail price index (UK)

It is an economic indicator that measures changes in the level of prices on the "basket" of consumer goods. The varieties of the index are RPI-X and HICP. If the index growth rate exceeds the planned value, usually the Bank of England raises interest rates. It is published monthly. It has a significant impact on the market.

IP – Industrial production (US)

It is the economic indicator showing the total output of the nation's factories, mines, etc. There is quite a high correlation between the level of production and the size of GDP. One advantage of this indicator is that it is measured by the volume of production, rather than its monetary value.

The index is determined on a monthly basis by the Board of Governors of Fed as a percentage of the volume of production of 1997, together with an index of Capacity Utilization. The media usually published its change in relation to the previous month.

An increase of the indicator supports the US dollar. It is published at 9:15 EST, in the middle of the month (data refers to the previous month).  

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