Key Indicators Traders Follow

Key Indicators Traders Follow

A traders’ financial calendar can be very busy; if trader’s tried to follow every single economic event, they would not be able to. Each week there are countless reports, announcements and data issued – by both governmental bodies, as well as NGO’s – which indicate different levels of a countries’ economy or a particular commodities’ performance.

 

Luckily, not all of them are necessary to follow; the trader may consider the following announcements which are more relevant to what is being traded. For example, if the Canadian Dollar is being traded, then the trader would want to be aware of all the different hints and indicators which derive from Canada. The CAD is also considered a commodity-dollar due to the reliance it has on energy exports, and oil reports, as well as gas prices should be paid attention to.

 

There are some indicators which can modify all global markets, and such indicators should be tended to. Some of the top indicators can be found below, and should be checked on a monthly basis.

 

Key Indicators to Follow

Non-farm Payrolls (NFP)

Employment data is one of the key signals which relate to the state of a nation’s economy; the US department of labor and statistics releases the previous months’ employment report and the NFP. The more people with jobs, the more money there is to spend and circulate, which is a positive thing for the health of the economy of the said nation. Traders follow this indicator with close attention, as a rise or drop against the expectations may mean big moves in the markets.

 

Purchasing Managers Index (PMI)

Released by the Institute for Supply Management, this report surveys 400 purchasing managers on new orders, inventory levels, production, supplier deliveries and the employment environment. Though it is a relatively small sample size that is primarily focused on manufacturing, it has historically shown to be a good predictor of Gross Domestic Product (GPD).

 

Producer Price Index (PPI)

As well as the CPI, the Producer Price Index is also a key measure of inflation as it notes the rate of change in producer goods. A rise in PPI means increased costs for corporations which will pass the price increases onto consumers. Both CPI and PPI are often taken into account without food and energy which have highly volatile prices changes.

 

Oil Prices

Announcements from agencies like the US Energy Information Association (EIA) are given a lot of attention. Oil and energy in general are key to economic activity so price levels give important insights into the health of an economy. Higher prices of oil lead to higher prices of other goods that require energy to be manufactured. As well as being key in the distribution of goods, oil is also a key ingredient in many goods themselves.

 

Consumer Confidence Index (CCI) and Retail Sales

Consumer spending is directly linked to corporates’ bottom line. The Conference Board release this report which survey’s 5,000 households in the US and measures perceptions on the state of the economy and their personal spending power. The more confident people feel about the future, the more likely they are to spend. While CCI is forward looking, another confidence figure, Retail Sales, looks at historical shopping levels. It measures consumers demand for goods and is an important macroeconomic indicator for a contracting or expanding economy.

 

Consumer Price Index (CPI)

The CPI is a measure of the change in consumer prices and is a signifier of inflation. Essentially it shows if life is getting more or less expensive for the consumer. The CPI is a key inflation figure that central banks monitor closely and apply changes to their fiscal policies based on what is reported. Central banks aim to encourage economic growth and bring stability to their nation’s currency and this is measure by the rate of change in inflation. By keeping an eye on CPI, investors can get forewarnings on possible future moves on the bank’s monetary policies.

 

Durable Goods Report (DGR)

This report surveys manufacturers of goods that have a life expectancy of three plus years and is a reliable indicator for the health of heavy industry. A high reading shows an increase in business confidence stemming from a rise in consumer confidence.

 

Housing Starts / Building Permits / New Home Sales

These last indicators are good measures on the overall growth of an economy. Building or buying a house is a very large purchase for most consumers making these reports important indicators to how solid an economy’s growth is both currently and in the future.

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