Most Important Economic Indicators

Economic indicators are in fact economic statistics that indicate how the economy is doing.

These indicators are important to investors when defining their strategy and making their decisions. Below you can find a list of major economic indicators:

Beige Book

The book is a summary of current economic conditions in each of the Federal Reserve Bank's districts. It contains reports from bank and branch directors as well as interviews with key businessmen, economists, market experts, and other sources.

The report is considered as an indicator of how the Fed might act on its upcoming meeting, whether they will increase or decrease interest rates. If the Book reflects inflationary pressure, the Fed may increase interest rates.

The Beige Book is published 8 times a year, two Wednesdays before each FOMC meeting at 2:15 pm EST.

Consumer Confidence Index (CCI)

The index portrays a survey of 5000 consumers asked about their attitudes concerning the present situation and expectations regarding economic conditions. It measures how confident consumers are about the state of the economy and their spending power. CCI is helpful in predicting changes in consumers' behavior. The more confident people feel about the stability of their incomes, the more likely they are to make purchases.

As consumer spending accounts for two-thirds of the economy, consumer confidence is seen as a important part of the economic picture. Yet, only index changes of at least five points should be considered significant. The index is published on the last Tuesday of the month at 10 am EST.

Consumer Price Index (CPI)

The CPI measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, education and entertainment. The bundle includes about 200 types of goods and thousands of actual products. It's also known as the cost-of-living index. The index is the most widely used measure of inflation

In addition to the overall CPI number, the"core rate" that excludes volatile goods like food and energy is also released. This is regarded as a closer measure of real inflation.

The index is published around the 15th of each month and reflects the previous month's data. 

Durable Goods Orders

This index measures how much people are spending on long-term purchases. Durable goods are products with a normal life expectancy of three years or more. The report is broken down by industry in order to eliminate the effects of volatile industries like defense spending.

A decreasing index shows a weakening demand for durable goods, which may result in decreasing production volume and employment.

The report is released around the 26th of each month.

Employment Cost Index (ECI)

The ECI reflects the change in the cost of labor (including wages, benefits, and bonuses), it is an important measure of inflation. If wages increase, the added cost might be passed to consumers in the form of higher prices.

The index is published at 8:30 am EST on the last Thursday of January, April, July, and November.

Employment Indicators

Other employment indicators include the unemployment rate, the number of new jobs, the average hours worked per week, and average hourly earnings. A major employment announcement is made on the first Friday of every month at 8:30 am EST.

In addition to the monthly report, a weekly report is released on initial jobless claims, i.e. on the number of people filing for unemployment benefits for the first time.

Gross Domestic Product (GDP)

GDP is the most important indicator measuring the value of all goods and services produced within the borders of a country. It is the most comprehensive measure of the performance of the economy. When calculating this, all output is taken into consideration, regardless of who owns the assets or the nationality of the labor used. The key number to analyze is the growth rate of GDP.

The figure is published at 8:30 am EST on the last day of each quarter and reflects the previous quarter. Each initial GDP report is revised twice before the final figure is released, an "advance" report is made first, a "preliminary" report is published about a month later and the final number is settled a month after that.

Gross National Product (GNP)

GNP is similar to GDP, but does not include goods and services produced by foreign producers in the country, but does include goods and services produced by domestic firms operating in foreign countries. If a U.S. company has a factory in Canada, the goods and services produced by this factory are not be included in the GDP, but they are included in the GNP.

Producer Price Index (PPI)

The PPI measures the average price of a fixed basket of capital and consumer goods at the wholesale level. It is one of the two most important indexes to measure inflation along with the CPI.

There are three primary categories of the PPI: industry, commodity, and stage-of-processing.

The PPI excluding food and energy prices is called the core PPI, This index gives a clearer picture of the inflation trend.

The PPI is published at 8:30 am EST during the second full week of each month and reflects the previous month's data.

Retail Sales Index

The Retail Sales Index measures the total sales of goods by all retail establishments in a country by taking a sampling of a set of retail stores. It does not contain services, so it represents less than half of total consumption. The data are adjusted for seasonal, holiday and trading-day differences between the months of the year. The index reflects the trends among different types of retailers as well.

The index is published around the 12th of the month, the report reflects data from the previous month.



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