We always need to be aware of NEWS. Economic reports make up a large portion of the news. Below is a list of Economic Events that can affect the action of the market. Many other countries have similar economic reports as the USA and those can influence the US markets as well that country’s market. We must remember that trading is now affected globally.
Let’s look at some of the more watched economic reports and begin to get an understanding of these.
Monetary Policy Statement = This report contains the outcome of the Central Bank’s decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, it projects the economic outlook and offers clues on the outcome of future rate decisions.
In the US, this is the FOMC (Federal Open Market Committee) report. There are eight regularly scheduled FOMC meetings during the year to set key interest rates, such as the discount rate and to decide about increasing or decreasing money supply.
Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services. The meetings of the committee, which are secret, are the subject of much speculation on Wall Street, as analysts try to guess whether the Fed will tighten or loosen the money supply.
GDP = The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time. You can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. A significant change in GDP, whether up or down, usually has a significant effect on the stock market. Investors really worry about negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession. In the USA, this report is released the third or fourth week of the month at 8:30 ET for the prior quarter.
Retail Sales = The retail sales report captures in-store sales as well as catalog and other out-of-store sales. The report also breaks down sales figures into groups such as food and beverages, clothing, and autos. The results are often presented two ways: with and without auto sales being counted, because the high sticker price can add extra volatility to the data. This report is released monthly, about 50 days after the month ends in the USA.
Consumer Confidence= This is a survey that measures how optimistic or pessimistic consumers are with respect to the economy soon. The idea is that if the consumers are optimistic, they will tend to purchase more goods and services. The increase in spending will inevitably stimulate the whole economy.
PPI / CORE PPI= The Producer Price Index (PPI) program measures prices of goods at the wholesale level. The prices included in the PPI are from the first commercial transaction for many products and some services. Core producer price index (Core PPI) is a measurement of prices assessed by producers on goods and services, but excluding those items that fall into the food and energy category.PPI is precursor to the CPI and includes food and energy categories. This report is released around the 11th of each month at 8:30 ET for prior month in the USA.
CPI / Core CPI= (The Consumer Price Index) Core CPI shows change in the price of goods and services purchased by consumers, excluding food and energy. CPI report includes food and energy. Food and energy prices account for about a quarter of CPI, but they tend to be very volatile and distort the underlying trend. The FOMC usually pays the most attention to the Core data and so do traders. CPI is the most widely cited inflation indicator and used to calculate cost of living adjustments for government programs.
Unemployment Rate/ Jobless Claim / Initial Claim= This report is the number of individuals who filed for unemployment insurance for the first time during the past week. This is the nation’s earliest economic data. The market impact fluctuates from week to week and there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes. This report is released weekly, 5 days after the weekends.
Non Farm Payroll= Reported by the U.S. Bureau of Labor -which represent the total number of paid U.S. workers of any business, excluding general government employees, private household employees, employees of nonprofit organizations that provide assistance to individuals and farm employees. Nonfarm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States. Reported FIRST FRIDAY of each month. It’s to assist government policymakers and economists determine the current state of the economy and predict future levels of economic activity.
How do I know when these events are taking place you might ask? Go to Forex Factory, Yahoo Finance, your broker. The US stock market is the most traded market due to the large number of listed stocks followed by Bombay, Canada, Frankfort and London.