Economic Indicators Educational Resource Center

The PPI is not as widely used as the CPI, but it is still considered to be a good indicator of inflation. This indicator reflects the change of manufacturers' cost of input (raw materials; semi-finished goods; etc.). Formerly known as the "Wholesale Price Index", the PPI is a basket of various indexes covering a wide range of areas affecting domestic producers. Each month approximately 100,000 prices are collected from 30,000 production and manufacturing firms. It is not as strong as the CPI in detecting inflation, but because it includes goods being produced it is often a forecast of future CPI releases.

The Business Outlook Survey is a monthly survey of manufacturers located around the states of Pennsylvania, New Jersey and Delaware. Companies surveyed indicate the direction of change in their overall business activity and in the various measures of activity at their plants. The index signals expansion when it is above zero and contraction when below. This index is considered to be a good indicator of changes in everything from employment, general prices, and conditions within the manufacturing industry. It isn't a big market mover, but the results found in the survey can indicate what to expect from the Purchasing Managers' Index (which comes out a few days later and covers the entire U.S.).

The data states the number of people who applied to receive unemployment pay for the first time. It has low to medium importance as this relates to weekly data with high fluctuations; average of four weeks is more stable.

It is a chain-weighted measure of the change in the production of the nation's factories, mines and utilities as well as a measure of their industrial capacity and of how many available resources are being used (commonly known as capacity utilization). In addition the Capacity Utilization Index provides an estimate of how much factory capacity is in use. They are important indicators as the manufacturing sector accounts for one-quarter of the economy.

This economic indicator tracks how many new single-family homes or buildings were constructed throughout the month. For the survey each house and each single apartment are counted as one housing start. This indicator isn't a huge market mover, but it has been reported by U.S. Census that the housing industry represents over 25% of investment dollars and a 5% value of the overall economy. Housing starts are considered to be a leading indicator, meaning it detects trends in the economy looking forward. Declining housing starts show a slowing economy, while increases in housing activity can pull an economy out of a downturn.

The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level. Also known as the "GDP implicit price deflator." Because it isn't based on a fixed basket of goods and services, the GDP deflator has an advantage over the consumer price index (CPI). Changes in consumption patterns or the introduction of new goods and services are automatically reflected in the deflator. This data is a medium importance indicator for markets.

Durable Goods Orders measures new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. A durable good is defined as a good that lasts an extended period of time (over three years) during which its services are extended. Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates that are often supportive to a currency at least in the short term.

The difference between a nation's total exports of goods, services, and transfers, and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities. The level of the current account is followed as an indicator of trends in foreign trade so it is considered as a big market mover.

An index used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. These components include: the average weekly hours worked by manufacturing workers; the average number of initial applications for unemployment insurance; the amount of manufacturers' new orders for consumer goods and materials; the speed of delivery of new merchandise to vendors from suppliers; the amount of new orders for capital goods unrelated to defense; the amount of new building permits for residential buildings; the S&P 500 stock index; the inflation-adjusted monetary supply (M2); the spread between long and short interest rates; and consumer sentiment. By looking at this index in the light of business cycles and general economic conditions, investors and businesses can form expectations about what's ahead and make better-informed decisions.

The level of deficit or surplus affects the level of US bonds issued by the government, hence their price. In addition, this report reflects the level of tax collected by the government, which is indicative of the activity level of the economy. In such regard, the April report (the yearly tax remittance month) is even more important than other months' reports.

PCE is a measure of price changes in consumer goods and services. The PCE is a fairly predictable report that usually has little impact on the markets. The Core PCE, which is the index less prices of food and energy, estimates inflationary trend more precisely.

The ECI tracks movement in the cost of labor which includes wages, fringe benefits, and bonuses for employees at all levels of involvement in the companies. The Bureau of Labor surveys over 3,000 private sector firms and over 500 local governments, schools and other public sector organizations. This indicator isn't the most watched, but it is among a select group of indicators that have enough power to move the markets, especially during inflationary times. The idea behind the ECI is that as wage pressures increase so does inflation. This is mainly because compensation tends to increase before companies increase prices for consumers.

Beige Book is the commonly used term for the Fed report entitled: "Summary of Commentary on Current Economic Conditions by Federal Reserve District". It is published just before the FOMC meeting on interest rates and is used to inform the members on changes in the economy since the last meeting. This report is published eight times per year. The Beige Book is not considered to be a big market mover. It is a gauge on the strength of the economy and not a commentary on the views of Fed members. Occasionally it can move markets if the findings are a big surprise from analyst expectations.

The largest component of a country's balance of payments. The balance of trade measures the difference between the value of goods and services that a nation exports and the value of goods and services that it imports. A country has a trade deficit if it imports more than it exports, and the opposite scenario is a trade surplus. It is considered a very big market mover.

The TIC data provides information about the most important way the US is financing its ongoing current account deficit: selling long-term securities to foreigners, or exporting debt. It is important to remember that there are other ways of financing a deficit: borrowing from foreign banks or attracting net FDI inflows. But since FDI flows have been negative and bank flows tend to be small, most of the financing the US needs has come from the sale of long-term securities to foreigners. TIC data are a good measurement of how much a country is trusted in the international investment community. It is considered a big market mover.

An economic survey of Japanese business issued by the central Bank of Japan, which it then uses to formulate monetary policy. The survey covers thousands of Japanese companies with a specified minimum amount of capital, although firms deemed sufficiently influential may also be included. The companies are asked about current trends and conditions in the business place and their respective industries as well as their expected business activities for the next quarter and year. It is considered a big market mover for JPY currency pairs.

Retail sales are a key driving force in the US economy. This indicator tracks the merchandise sold by companies within the retail trade and measures total consumer spending on retail sales (not including service costs). The retail revenues are a major part (two thirds) of the US economy. The Census Bureau surveys hundreds of various sized firms and businesses offering some type of retail trade. Every month the data is released showing the percent change from the previous month. A negative number indicates that sales decreased from the previous month. This indicator is a very big market mover because it is used as a gauge of consumer activity and confidence as higher sales figures indicate increased economic activity.

The PMI is a composite index based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment. Each indicator has a different weight and the data is adjusted for seasonal factors. The Association of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20 different industries. A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting. The PMI report is an extremely important indicator for the financial markets as it is the best indicator of factory production. The index is popular for detecting inflationary pressure as well as manufacturing economic activity.

The data represents changes in 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. The total non-farm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States and is used to assist government policy makers and economists determine the current state of the economy and predict future levels of economic activity. It is a very big market mover mainly due to the high deviations in the forecasting.

A survey of consumer confidence conducted by the University of Michigan. The index is becoming more and more useful for investors. It gives a snapshot of whether or not consumers feel like spending money.

The Manufacturing ISM Report On Business is based on data compiled from monthly replies to questions asked of purchasing executives in more than 400 industrial companies. It reflects a compound average of 5 main economic areas: new customers' orders 30%; manufacturing 25%; employment 20%; supply orders 15%; inventories 10%. Any data over 50 points shows the expansion of economic activities and data under 50 points shows a contraction.

The US Commerce department publishes the GDP in 3 modes: advance; preliminary; final. GDP is a gross measure of market activity. It represents the monetary value of all the goods and services produced by an economy over a specified period. This includes consumption, government purchases, investments, and the trade balance. The GDP is perhaps the greatest indicator of the economic health of a country. It is usually measured on a yearly basis, but quarterly stats are also released. The most recent GDP figures have a relatively high importance to the markets. GDP indicates the pace at which a country's economy is growing or shrinking.

The FED (the Federal Reserve of USA) is responsible for managing the US monetary policy, controlling the banks, providing services to governmental organizations and citizens, and maintaining the country's financial stability. There are 12 Fed regions in the USA (each comprising several states), represented in the Fed committee by regional commissioners. The rate of interest on a currency is in practice the price of the money. The higher the rate of interest on a currency, the more people will tend to hold that currency and in that way strengthen the value of the currency. This is a very important indicator affecting the rate of inflation and is a very big market mover.

The Employment Situation Report is a monthly indicator which contains two major parts. One part covers unemployment and new jobs created, the report tells the unemployment rate and the change in unemployment rate. The second part of the report indicates average weekly hours worked and average hourly earnings, important for determining the tightness of the labor market, which is a major determinant of inflation. The Bureau of Labor surveys over 250 regions across the United States and covers almost every major industry. This indicator is definitely one of the most watched by the financial markets, the report almost always moves markets.

The collection of the data is gathered through a survey among 375,000 businesses and 60,000 households. The report reviews: the number of new work places created or cancelled in the economy, average wages per hour and the average length of the work week. The report is considered as one of the most important economic publications, both for the fact that it discloses new up-to-date information and due to the fact that, together with NFP, it gives a good picture of the total state of the economy. The report also shows separately the picture in the different sectors such as manufacture, service, building, mining, public, and others.

This is the most extensively used measure of inflation and is viewed as an indicator of the efficiency of government policy. This basket of consumer goods and services is tracked monthly and excludes taxes. Considered a big market mover; a rise in CPI signposts inflation. The Core-CPI does not include food or energy as they are subject to seasonal changes, and gives more weight to general prices.

This is a survey based on a sample of 5,000 U.S. households measuring consumer confidence based on wages, interest rates and overall spending power. The Fed follows this indicator when setting interest rates and it is considered a major mover of the markets.