Economic Indicator
GDP
Definition & Significance
Change in the inflation-adjusted value of all goods and services produced by the economy. It’s the broadest measure of economic activity and the primary gauge of the economy’s health.
Formula
GDP = Consumer Spending + Investments + Government Spending + Balance Of Trade
Released quarterly (for most economies), about 30 days after the quarter ends. However, Canada is an exception as they release GDP every month
MANUFACTURING PURCHASING MANAGERS INDEX (PMI)
Definition & Significance
Level of a diffusion index based on surveyed purchasing managers in the manufacturing industry.Above 50.0 indicates industry expansion, below indicates contraction. Source first released in Jun 2011.
It’s a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.
US CRUDE OIL INVENTORIES
Definition & Significance
Change in the number of barrels of crude oil held in inventory by commercial firms during the past week; While this is a US indicator, it most affects the loonie due to Canada’s sizable energy sector.
Care. It’s the primary gauge of supply and demand imbalances in the market, which can lead to changes in production levels and price volatility;
US ADP NON-FARM EMPLOYMENT CHANGE
Definition & Significance
Estimated change in the number of employed people during the previous month, excluding the farming industry. This data provides an early look at employment growth, usually 2 days ahead of the government-released employment data that it’s designed to mimic. Source changed the series calculation formula in Feb 2007, Dec 2008, and Nov 2012, to better align with government data.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
AVERAGE HOURLY EARNINGS
Definition & Significance
Change in the price businesses pays for labor, excluding the farming industry. This is the earliest data related to labor inflation. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer.
NON-FARM EMPLOYMENT CHANGE REPORT (NFP)
Estimated change in the number of employed people during the previous month, excluding the farming industry. This data provides an early look at employment growth, usually 2 days ahead of the government-released employment data that it’s designed to mimic.
Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity
UNEMPLOYMENT RATE
Percentage of the total workforce that is unemployed and actively seeking employment during the previous month. Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.
Formula
(Total Number of Unemployed People/Total Workforce) x 100%
RETAIL SALES
Definition & Significance
Change in the total value of sales at the retail level. This is the earliest and broadest look at vital consumer spending data. It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
CORE RETAIL SALES
Definition & Significance
Change in the total value of sales at the retail level, excluding automobiles. Automobile sales account for about 20% of Retail Sales, but they tend to be very volatile and distort the underlying trend. The Core data is therefore thought to be a better gauge of spending trends.
OPEC-JMMC
Definition & Significance
OPEC-JMMC meetings are attended by representatives from the 13 OPEC members and 11 other oil-rich nations. They discuss a range of issues regarding energy markets and, most importantly, agree on how much oil they will produce. The meetings are closed to the press but officials usually talk with reporters throughout the day, and a formal statement covering policy shifts and meeting objectives is released after the meetings have concluded. Source first met in Jan 2017;
CONSUMER PRICE INDEX (CPI)
Definition & Significance
Change in the price of goods and services purchased by consumers. This is the earliest major inflation data released by any country, coming just days after the month ends. Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.
FEDERAL OPEN MARKET COMMITTEE STATEMENT (FOMC)
Definition & Significance
The FOMC usually changes the statement slightly at each release. It’s these changes that traders focus on. It’s the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes.
TRADE BALANCE
Definition & Significance
Difference in value between imported and exported goods and services during the reported month. A positive number indicates that more goods and services were exported than imported.
Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation’s exports. Export demand also impacts production and prices at domestic manufacturers.
UNEMPLOYMENT CLAIMS
Definition & Significance
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 – there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes.
Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.
CONSUMER CONFIDENCE
Definition & Significance
Level of a composite index based on surveyed households, excluding single-person homes. Financial confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity. Survey of about 5,000 households which asks respondents to rate the relative level of economic conditions including overall livelihood, income growth, employment, and climate for major purchases.
EUROPEAN CENTRAL BANK MAIN REFINANCING RATE
Definition & Significance
Interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system. The rate decision is usually priced into the market, so it tends to be overshadowed by the ECB Press Conference, held 45 minutes later. Source changed release frequency from monthly to eight times per year as of Jan 2015. Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future.