Monitoring Economic Data Improves Your Trades
Microeconomic data is financial information supplied by various governments and authorized agencies, and are a critical part of your trading strategy. These statistics help investors make timely and informed decisions based on the latest financial news.
Monitoring economic data not only helps you consider trades around these events, it helps explain otherwise fluctuated price actions during those periods.
Economic indicators have tremendous potential to generate volume and to move prices. Here is a list of the most popular indicators:
Gross Domestic Product (GDP)
The total of all goods and services produced either by domestic or foreign companies. GDP indicates the rate at which a country’s economy is growing and is considered the most efficient indicator of economic output and growth.
A measurement of the change in the production of the nation’s factories, mines and utilities, industrial production also measures the country’s industrial capacity and how fully it’s being used.
The manufacturing sector accounts for one-quarter of the major currencies’ economies, so it’s critical to watch the health of factories and whether their capacity is being maximized.
Purchasing Managers Index (PMI)
The Institute for Supply Management releases a monthly report of national manufacturing conditions. This report includes data on new orders, production, supplier delivery times, backlogs, inventories, prices, employment, export and import orders. It is divided into manufacturing and non-manufacturing sub-indices.
Producer Price Index (PPI)
This monthly index measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries.
Consumer Price Index (CPI)
This monthly report measures the average price level paid by urban consumers for a fixed basket of goods and services. It reports price changes in over 200 categories.
The index also includes various user fees and taxes on specific goods and services.
Durable Goods Orders measures new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. A durable good is a product that lasts over three years, during which its services are extended.
Companies and consumers sometimes put off purchases of durable goods during tough economic times – so this figure is a useful measure of certain kinds of customer demand.
Employment Cost Index (ECI)
Payroll employment is a measures the number of jobs at larger companies in more than 500 industries in all 50 U.S. states and 255 metropolitan areas. This report includes the number of paid employees working part-time or full-time in the nation’s businesses and government establishments.
This report measures the number of residential units built each month. A “start” refers to mining the foundation of a residential home.
Home development is usually one of the first sectors to react to interest rate changes. Significant reaction of start/permits to changing interest rates signals changes in interest rates.