Fundamental Economic Reports: Medium Market Movers !!
Durable Goods Orders
- Importance: !!
- Source: The Census Bureau of the Department of Commerce.
- Release Time: 8:30 ET around the 26th of the month (data for month prior).
The durable orders release measures the dollar volume of orders, shipments, and unfilled orders of durable goods (defined as goods whose intended lifespan is three years or more). Orders are considered a leading indicator of manufacturing activity
Conference Board Consumer Confidence
- Importance: !!
- Source: The Conference Board.
- Release Time: 10:00 ET on the last Tuesday of the month (data for current month).
The Conference Board conducts a monthly survey of 5000 households to ascertain the level of consumer confidence. The report can occasionally be helpful in predicting sudden shifts in consumption patterns, though most small changes in the index are just noise. Only index changes of at least five points should be considered significant.
- Importance: !!
- Source: Federal Reserve.
- Release Time: 9:15 ET around the 15th of the month (data for month prior).
The index of Industrial Production is a fixed-weight measure of the physical output of the factories in a country, mines, and utilities. Manufacturing production, the largest component of the total, can be accurately predicted using total manufacturing hours worked from the employment report.
Initial Jobless Claims
- Importance: !!
- Source: The Employment and Training Administration of the Department of Labor.
- Release Time: 8:30 ET each Thursday (data for week ended prior Saturday).
Initial jobless claims measure the number of filings for state jobless benefits(number of people out of a jobs). This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signaling slowing (accelerating) job growth.
There are two other statistics in this report -- the number of people receiving state benefits and the insured unemployment rate; neither is watched closely by the market. Some analysts track the number of people receiving state benefits from month to month as a guide for job growth, though this series has a poor track record in predicting the monthly employment report. The insured unemployment rate changes little on a weekly basis and is never a factor for the market.
- Importance: !!
- Source: The Census Bureau and the Bureau of Economic Analysis of the Department of Commerce.
- Release Time: 8:30 ET around the 20th of the month (data for two months prior).
The trade report is most widely watched for trends in the overall trade balance. But trends in both exports and imports of goods and services bear watching as well. The export data in particular are important to watch for indications that a strengthening competitive position at home and/or strengthening economies overseas are boosting U.S. growth. Imports provide an indication of domestic demand, but given the severe lag of this report relative to other consumption indicators, it is not particularly valuable for this purpose.
The volatility in the monthly trade balance can play an important role in GDP forecasts. Net exports are a relatively volatile component of GDP, and the trade report provides the only early clues to the net export performance each quarter.
Producer Price Index - PPI
- Importance: !!
- Source: Bureau of Labor statistics, U.S. Department of Labor.
- Release Time: Around the 11th of each month at 8:30 ET for the prior month.
The Producer Price Index measures prices of goods at the wholesale level. There are three broad subcategories within PPI: crude, intermediate, and finished. The market tracks the finished goods index most closely, as it represents prices for goods that are ready for sale to the end user.
University of Michigan Consumer Sentiment Index
- Importance: !!
- Source: The University of Michigan .
- Release Time: Preliminary: 10:00 ET on the second Friday of the month (data for current month); Final: 10:00 ET on the fourth Friday of the month (data for current month).
The Michigan index is almost identical to the Conference Board Consumer Confidence index, though there are two monthly releases, a preliminary and final reading. Like the Conference Board index, it has two sub-indices - expectations and current conditions. The expectations index is a component of the Conference Board Leading Indicators index.
Institute for Supply Management (ISM)
Institute for Supply Management (ISM) – Formerly known as the NAPM. Change was effective in January 2002. ISM is a composite diffusion index of national manufacturing conditions.
Readings above 50% indicate an expanding factory sector. Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform.
By tracking economic date like the ISM, investors will know what the economic backdrop is for the various markets. The ISM gives a detailed look at the manufacturing sector, how busy it is and where things are headed.
Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation.
The Federal Reserve keeps a close watch on this report which helps it to determine the direction of interest rates when inflation signals are flashing in these data.
Leading Indicators – A composite index of ten economic reports that typically lead overall economic activity.
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform.
By tracking economic data like the index of leading indicators, investors will know what the economic backdrop is for the various markets.
The index of Leading Indicators is designed to predict turning points in the economy such as recessions and recoveries. Incidentally, stock prices are one of the leading indicators in this index.
Import and export prices
Import and export prices – The prices of goods that are brought in the United States but produced abroad and the prices of goods sold abroad but produced domestically.
These prices indicate inflationary trends in internationally traded products. Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar.
Inflation leads to higher interest rates and that’s bad news for stocks as well. By monitoring inflation gauges such as import prices, investors can keep an eye on this menace to their portfolio.
IFO Business Climate in industry and trade
IFO Business Climate in industry and trade – The IFO Business Climate Index is a widely early indicator for economic development in Germany. Every month the IFO Institute surveys more than 7,000 enterprises in west and east Germany on their appraisals of the business situation (good/satisfactory/poor) and their expectations for the next six months (better/same/worse).
The replies are weighted according to the importance of the industry and aggregated. The percentage shares of the positive and negative responses to both questions are balanced and a geometric mean is formed from the balances divided according to east and west Germany. The series of balances thus derived are linked to a base year (currently 1991) and seasonally adjusted.
APICS Survey – Composite diffusion index of national manufacturing conditions. The APICS survey gives a detailed look at the manufacturing sector.
This survey is less well known that the ISM, but can also indicate trends in production. The diffusion index does not move in tandem with the ISM index every month, but sometimes the two do move in the same direction.
Since manufacturing is a major sector of economy, investors can get a feel for the general economic backdrop for various investments. An index level of 50 means no growth, but every 10 points signals gains of 4% in manufacturing.
Beige Book - District banks have been printing summaries of the economic conditions in their districts since 1970. Initially this “Red Book” was prepared for policymakers only and was not intended for public consumption.
It was made public in 1983. To mark this change, the color of the cover was changed and the publication became known as the Beige Book.
The Beige Book is released two weeks prior to each FOMC meeting eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from bank and branch directors and interviews with key businessmen, economists, market experts, and other sources.
The Beige Book summarizes this information by district and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis. The report is primarily seen as an indicator of how the Fed might act at its upcoming meeting.
Blue Book Report
Blue Book – A day after the green book, the FOMC members receive the blue book. All blue books present the Board staff’s view of monetary and financial developments for the few months surrounding the meeting in question. Each book first reviews recent developments in policy variables, including the Federal Funds rate, reserve measures, and the monetary aggregates. The blue book also presents two or three alternative policy scenarios for the upcoming inter-meeting period. The blue books written for the February and July meetings contain two extra sections to assist the Committee in its preparation for the Humphrey-Hawkins testimony. The first of these sections provides longer term simulations, covering the next five or six years. This section also offers estimates of how different assumptions about factors such as fiscal policy, the equilibrium unemployment rate, or the speed of adjustment to changed inflationary expectations would affect the predicted outcome. The second additional section in the February and July blue books sets out alternative annual ranges for growth of the monetary aggregates.
Red Book - Published every Tuesday, this report presents the detail sales of some 30 US stores produce the previous week and compared to the previous month. It is always a forecast which counts for the request of the households but a rather volatile measurement taking into consideration the more or less significant months for the detail business.
Business Inventories – Dollar amount of inventories held by manufacturers, wholesalers and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity.
Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. Rising inventories can be an indication of business optimism that sales will be growing in the coming months.
By looking at the ratio of inventories to sales, investors can see whether production demands will expand or contract in the near future. The business inventory data provide a valuable forward-looking tool for tracking the economy.
Chain Stores Sales
Chain Stores Sales – Monthly sales volumes from department, chain, discount and apparel stores. Sales are reported by the individual retailers. Chain store sales are an indicator of retail sales and consumer spending results.
Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you will have a pretty good handle on where the economy is headed.
Sales are reported as a change from the same month a year ago. It is important to know how strong sales actually were a year ago to make sense of this year’s sales. In addition, sales are usually reported for “comparable stores” in case of company mergers.
Consumer sentiment – Survey of consumer attitudes concerning both the present situation as well as expectations regarding economic conditions conducted by the University of Michigan.
Five hundred consumers are surveyed each month. The level of consumer sentiment is directly related to the strength of consumer spending. Consumer spending accounts for two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future.
The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it’s easy to see how the index of consumer attitudes gives insight to the direction of the economy.
Changes in consumer sentiment and retail sales don’t move in tandem month by month.
Current account – Measure of the country’s international trade balance in goods, services and unilateral transfers. The level of the current account, as well as the trends in exports and imports, are followed as indicators of trends in foreign trade.
U.S. trade with foreign countries hold important clues to economic trends here and abroad. The data can directly impact all the financial markets, but especially the foreign exchange value of the dollar.
Factory orders – Dollar level of new orders for manufacturing durable goods and nondurable goods. It gives more complete information than durable goods orders which are reported one or two weeks earlier in the month.
The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel.
In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production.
All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.
Green Book - The green book is prepared by staff members at the Board of Governors five days in advance of an FOMC meeting. It presents the staff’s interpretations on several economic and financial variables and is divided into two parts.
The first part of the green book describes and interprets significant developments in U.S. economic activity, prices, interest rates, flows of money and credit, and the international sector that have occurred in recent months or quarters.
This section also presents forecasts of a number of variables for the next six to eight quarters. The second section of the green book provides additional information on recent developments.
It describes trends in employment, production, and prices and the factors influencing them. This section also includes sector-by-sector analyses, commenting on such areas as housing, motor vehicle production, inventories, and spending by federal, state, and local governments.
It reviews a range of developments in domestic financial markets, including credit patterns for banks, other financial intermediaries, non-financial businesses, and consumers.
Finally, international developments are reviewed, with commentary on trade statistics, international financial transactions, foreign exchange markets, and economic activity in a number of foreign countries.