Most Important
Preliminary GDP : Presented quarterly and annually the GDP represents the total value of all goods and services produced, and the real GDP reflects total economic activity after adjusting for inflation.
The four components of the GDP figure includes:
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Production/Output – sums the value of production less input costs by all businesses.
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Expenditure – adds all spending of private nature, government consumption, investment and exports less imports.
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Income – Total income from production including employees wages and salaries, income from self-employment, business profits, rental and trading surpluses both for government and corporations.
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High GDP growth could show inflationary pressures if the economy is close to full capacity, which in turn will lead to higher interest rates.
Interest Rate Announcement ( Example – BOE Announcements ) :
In effect an interest rate is the cost of borrowing money, or the compensation for the service and risk of lending money. In the case of the Bank of England, the members meet monthly to determine the near-term direction of the monetary policy, and changes are announced immediately after the meetings with details only available in the minutes published two weeks later. The MPC consists of the Governor, two Deputy Governors, two Bank executive Directors and four experts, and has an established fixed inflation target of 2.5%. World wide investors speculate on the possible outcome of these meetings and results way off expectations could have dramatic effects in the short term market. The level of interest rates effect the economy, as higher interest rates tend to slow economic activity and lower interest rates tend to stimulate economic growth, influencing the sales environment directly.
Example: Fewer homes and cars will be purchases if the interest rates are high, or rises.
Certainly one of the most important indicators to the Currency Market, and consists of a set of labor market Indicators. The Unemployment Rate measures the number of unemployed individuals as a percentage of the labor force, and the Non Farm Payroll counts the number of paid employees working part or full time in Business and government sectors. Average hourly earnings reflect the basic hourly rate for major industries. Investors far and wide keep a close eye on this Indicator and it is known as an Indicator that can move the market significantly. By analyzing the report investors can take strategic positions and manage portfolios accordingly. The report gives a very good idea on how many people are looking for jobs, how many have jobs, what are they getting paid and how many hours are being worked. Investors use these numbers to get a pretty good idea of the future direction of the economy and give a nice insight on trends in wages and inflation. One can identify how tight the job market is, thus if wage inflation sets in it’s a good bet that interest rates will rise.
A monthly number done by Ifo Institute on the
assessments of about 7000 enterprises in manufacturing,
construction, wholesale and retail of the current business situation
and their expectations for the next few months. This is
characterized as “good”, “satisfactory” or “poor” and
the expectations for the next 6 months as “ more favorable”,
“unchanged” or “more favorable”. The balance value is
calculated using difference in responses on “good” and
“poor” and for expectations the difference in percentage is
taken using “more favorable” and “more unfavorable”.
The Consumer confidence Index is prepared by the Conference Board are based on a household survey that comes out on a monthly basis. It is critical to assess the trend over the last five months as this is seen as the undeniable benchmark. It becomes very misleading when only focusing on the single monthly figures without looking at the developing trend.
Consists of five major indicators:
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New orders
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Inventory Levels
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Production
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Supplier Deliveries
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Employment Environment
The Association of Purchasing Managers survey consists of over 300 purchasing managers who represent 20 different industries. A PMI over 50indicates an expanding manufacturing sector while a number below 50 would typically mean an industry contracting. The PMI is the best indicator to show factory production and detects inflationary pressures as well as manufacturing economic activity. The indicator’s strengths are seen in the fact that the data is one day old, it is used to predict the PPI released later on in the month, and it gives a good snapshot of the factory sector.
Weaknesses are seen in the fact that results are not specific, and it leaves out employment costs.
It is a chain-weight measure of the physical output of the nation’s factories, mines and utilities, and the usage of available resources is measured in the capacity utilization rate. The Industrial Production Indicator shows how much factories, mines and utilities have been producing, and has a big influence on the market since the manufacturing sector accounts for one quarter of the economy. If the capacity Utilization gets too high, which is normally above 85%, it can lead to inflationary pressures in production.
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