Industrial Production is comprised of total output of nation’s plants, utilities, and mines.
This indicator is instrumental in fundamental analysis. The indicator reflects strength of economy, and by extrapolation strength of a national currency. Thus, the US dollar gains when the indicator reading posts a rise. This data is released every month.
Capacity Utilization indicator consists of total industrial output divided by total production capability.
A normal reading for a steady economic growth rate is 81.5%. The indicator has a nominal impact on the market staying near this level. If the figure reads 85% or more, the data suggests that the industrial production is overheating and the economy is close to its full capacity. Besides, high capacity utilization rates precede new inflation developments. In its turn, a central bank can raise interest rates to fight the inflation growth or avoid it.
National Association of the Purchasing Managers Index(NAPM) is driven from a survey of 250 managers at the largest industrial companies.
The survey unveils whether the performance of the manufacturing sector improves compared to the previous survey results, including changes in new orders, production output, employment, stock of finished products, and suppliers’ delivery times. A reading below 45-50 presents a contraction of the manufacturing sector in a certain country. The index was among first industrial sector indicators, so it can hardly be called perfect. Responds are mostly based on psychology rather than statistics. Besides, the survey is not conducted in California, which is one of the US largest states. Increasing production does not necessarily mean growing consumer demand. Traders rarely consider the indicator reading, only when the data changes. Meanwhile, the PPI helps forecast short-term developments in the market.
Factory Goods Orders reflects both durable and nondurable goods orders.
A list comprises food, light industrial products, and products designed for the maintenance of durable goods. The report makes minimal impact on the forex market.
Durable Goods Orders. This indicator refers to products with a lifespan over three years.
All durable goods can be divided into four major categories, including primary metals (jewelry), machinery, electrical machinery, and transportation. Besides, the orders can be broken down into two types - defense and nondefense. The indicator strongly influences the market. As a rule, durable goods are more expensive than non-durable ones, and increasing sales reflect mounting consumer confidence and an advancing propensity to spend money. So, a strong indicator reading is generally bullish for the domestic currency.
Construction Data is one of the most major economic indicators. It is included in the GDP calculation.
It is housing that pulled the US economy out of recession during the post-war period. Construction data is classified into the following:
housing starts and permits;
new and existing one-family home sales;
construction spending.
Construction indicators are cyclical and partially depend on the key interest rate. When 1.5-2.0 million new houses are reported to be sold within a month, the economy is assumed to be growing. The report which reads less than 1 million houses sold suggests that the economy is slipping into recession. The indicator is mostly used to appraise the general economic situation in the country.
Employment Indicators measure the rate of unemployment in the country. The indicator plays an important role in assessing the general economic situation in the country.
Besides, it is used for other economic indicators calculation.
Unemployment Rate is always released as a percentage. The indicator includes two groups of data.
The Business Firms (Establishments) Survey, which in its turn covers the following subjects:
Payroll — the total amount of money paid by a company to the people it employs;
Workweek — the average number of working hours per week;
Hourly earnings —average earnings per hour
Total hours of employment in the non-farm sector — the total amount of working hours in government, industrial sector, services sector, construction, mining, retail trade etc.
The Household Survey includes:
Unemployment rate — a percentage-based level of unemployment
The overall labor force — the total volume of industrial labor force
Number of people employed — the total number of employed people at the age of 16 and over
As these indicators reflect the economic health of a country, traders should closely monitor any changes in readings, which are monthly released. Employment indicators show whether the economy advance or live through the period of recession. The unemployment rate is the last economic indicator to rebound when the labor sector recovers. For this this reason, the national currency rise when unemployment contracts and vice versa.
Retail Sales he indicator plays a significant role in the forex market. It shows the strength of both consumer demand and consumer confidence, which influence the national currency.
If consumers have enough money to make purchases, then the industrial sector will advance as well as imports. A seasonal aspect is important for this economic indicator. September and December are most carefully watched by traders as the first is a back-to-school month and the latter is a period of Christmas gifts purchase. A rise in retail sales figures causes an increase in the national currency.
Consumer Sentiment is a survey of households. It was created to reveal middle-income individuals’ intention of spending money. The survey is conducted by the University of Michigan and National Family Opinion for the Conference Board. The figures have a limited impact on the forex market.
Auto Sales reports automobiles sales. The indicator is important for the economy in general, but is rarely used in foreign exchange analysis.
Leading Indicators comprise the following economic indicators:
Average workweek of production workers in manufacturing
Average weekly claims for state unemployment
New orders for consumer goods and materials
Vendor performance (companies receiving slower deliveries from suppliers)
Contract and orders for plant and equipment
New building permits issued
Change in manufacturers' unfilled orders, durable goods
Change in sensitive materials prices
Index of stock prices, including Dow, NASDAQ, S&P500, Russell 2000 etc.
Money supply, adjusted for the inflation rate
Index of consumer expectations
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