Most crucial indicators

Economic indicators are very important topics in the investment world, their release can have an immediate effect on the volatility of asset prices. There are three categories of indicators: leading, coincident and lagging. Leading indicators are believed to change before certain aspects of the economy change. They can give you a view of what might happen before it actually happens. Coincident indicators mirrors changes in the economy which happen at the same time they are actually happening. Lagging indicators shows their changes after the changes in the economy have happened and are not useful at all for prediction. Interest rates are a crucial driver of market behaviours and all economic indicators are observed very carefully by the central banks since they decide on their monetary policy.

► Gross Domestic Product (GDP)

The GDP report is the number one indicator for all economies. It is the clearest mirror of the overall state of the economy. The GDP is announced on the last day of each quarter and it reflects the previous quarter’s activity. The GDP is the total value of all the goods and services produced by the entire economy during the quarter GDP is being released; this does not include exports anyways. The total value is expressed in monetary value, the important number to look for is the growth rate of GDP.

► The Producer Price Index (PPI)

The GDP report is the number one indicator for all economies. It is the clearest mirror of the overall state of the economy. The GDP is announced on the last day of each quarter and it reflects the previous quarter’s activity. The GDP is the total value of all the goods and services produced by the entire economy during the quarter GDP is being released; this does not include exports anyways. The total value is expressed in monetary value, the important number to look for is the growth rate of GDP.

► Consumer Price Index (CPI)

The CPI report is used for measuring the inflation. This report is released on the 15th of each month and it shows the previous month’s data. CPI measures how much more or less can a consumer buy goods and services with the same amount of money from month to month.

► Retail Sales Index

The Retail Sales Index shows goods sold within the retail industry, from huge chains to smaller local stores, it takes a sampling of a set of retail stores across the country. The Retail Sales Index is released around the 12th of the month; it reflects data from the previous month.

► Durable Goods Orders

The durable goods orders report shows how much people are spending on long term purchases. Long term purchases are considered to be products which last more than three years. DGO report is released on the 26th of each month and it is said that it has a good impact into the future of the manufacturing industry.

► Employment Indicators

The most important employment announcement is released on the first Friday of every month. It represents the unemployment rate; which includes the percentage of the workforce that is able to work but does not have a job; the number of new jobs created by governments and companies; the average working hours per week and average earnings per hour. This report always has a significant impact on the market movement.

► Consumer Confidence Index

This index presents consumers spending power and how confident they feel about the state of the economy. It is released on the last Tuesday of the month. The more confident consumers feel about their economy, the more they will spend, the more money will be on the move, the more the economy gets stronger.

► NAPM

NAPM stands for the National Association of Purchasing Management index and it measures conditions in the manufacturing sector. It is released on the first business day of the month and it reflects the previous month’s data.

► Beige Book

The Beige Book report is part of the FOMC’s preparations for its meetings and is published 8 times per year. The report is released two Wednesdays before each Federal Open Market Committee meeting. The Beige Book report summarizes economic conditions in each of the Fed’s regions. This report is seen as an indicator of how the Fed might act at its upcoming meeting.

► Interest Rates

Interest rates are the main drivers in forex markets; the other indicators mentioned above are observed by Federal Open Market Committee in order to have a full view of the economy. The Fed can use the tools at its disposable to lower, raise, or leave interest rates unchanged, depending on the evidence it has gathered on the health of the economy.