Market Moving Economic Reports Every Trader Must Know
Ever wondered why index futures suddenly rally or sell-off during pre-market trading? Chances are, unless there is some important geopolitical event, it could be the result of one of the following economic indicators being released to the public:
Nonfarm Payrolls and Unemployment Rate
The Nonfarm Payrolls report is issued by the Bureau of Labor Statistics (BLS) on the first Friday of every month. It highlights the number of nonfarm jobs created countrywide, minus the jobs lost through attrition. The BLS also issues the unemployment rate which is defined as the number of unemployed workers who are in the job market actively seeking but are unable to find a job, as a percentage of the entire labor force. Although these reports are lagging indicators i.e. they report conditions after the fact, they are huge market moving numbers as they highlight the strength of the economy.
Producer Price Index (PPI)
The PPI measures the change in prices at the wholesale level at different stages of production and is normally released in the middle of each month. There are two numbers reported - the overall PPI and the core PPI, which excludes food and energy as these are highly seasonal. PPI is a good gauge of inflationary pressures and is a leading indicator as it gives advance notice of price changes i.e. manufacturers adjusting prices and passing it to consumers.
Consumer Price Index (CPI)
The CPI is a significant number to the public as it eventually affects their salaries, pensions and Social Seurity payments. Compiled by the US Department of Labor Statistics, the CPI measures the cost of living for the public by using a basket of goods and services. The CPI is also broken down into 2 numbers i.e. the overall CPI and the core CPI, less food and energy. The CPI is a lagging indicator.
Gross Domestic Product (GDP)
Another important market moving number is the GDP, calculated by the US Department of Commerce. The GDP is a lagging indicator which reveals how well the entire economy is doing and whether it is expanding or contracting. The GDP release, reported every quarter and calculated on an annual basis, consists of two numbers - the real GDP in constant dollars and nominal GDP in current dollars. As real GDP measures GDP relative to a base year, it takes inflation into consideration whereas nominal GDP is not adjusted for inflation.
Retail Sales Report
This is an important number to gauge the strength of consumer expenditures as two-thirds of the GDP is made up of durable and non-durable consumer spending. the Dept of Commerce releses this number in the middle of the month for previous month's data.
Durable Goods Orders Report
Another leading indicator is the Durable Goods Orders Report which shows the willingness of businesses to invest capital spending for future needs. This may be due to increasing capacity is response to higher consumer demand. Durable goods are defined as non-perishable goods that can last for more than 3 years. The reported number also includes a number without defense as defense spending does not relate to the business cycle.
Consumer Confidence Index
This number reflects the optimism or pessimism of consumers, which directly impacts their expenditures and subsequently the entire economy. the Consumer Confidence Index is obtained by conducting monthly surveys to gauge consumer outlooks on:
- the economy
- personal finances
- employment
- plans for big-ticket items
Housing Starts and Building Permits
This number gauges consumer confidence as housing is a big-ticket item due to it's hight cost. This is a leading indicator of where the economy is headed as historically, housing starts reverses it's trend six months before the rest of the economy.
**NB - The release dates and times of all these reports can be obtained at Yahoo Economic Calendar.