Explanations of economic indicators

Hi guys,

Just wandering if there is information somewhere on this forum that describes the effects on the currencies certain economic indicators have?

For example- increase in CPI= increase in the local currency

Sorry I accidentally pressed enter and my post posted before I finished. But hopefully you understand my request. Just a table or something that tells us if results for X economic indicator are above expectation than the local currency will move in X direction.

Cheers

Major Indicators

The Gross Domestic Product (GDP) - The sum of all goods and services produced either by domestic or foreign companies. GDP indicates the pace at which a country's economy is growing (or shrinking) and is considered the broadest indicator of economic output and growth.

Industrial Production - 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 among factories, utilities and mines are being used (commonly known as capacity utilization). The manufacturing sector accounts for one-quarter of the economy. The capacity utilization rate provides an estimate of how much factory capacity is in use.

Purchasing Managers Index (PMI) - The National Association of Purchasing Managers (NAPM), now called the Institute for Supply Management, releases a monthly composite index of national manufacturing conditions, constructed from data on new orders, production, supplier delivery times, backlogs, inventories, prices, employment, export orders, and import orders. It is divided into manufacturing and non-manufacturing sub-indices.

Producer Price Index (PPI) - The Producer Price Index (PPI) is a measure of price changes in the manufacturing sector. It measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries for their output. The PPIs most often used for economic analysis are those for finished goods, intermediate goods, and crude goods.

Consumer Price Index (CPI) - The Consumer Price Index (CPI) is a measure of the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services. It reports price changes in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods and services.

Durable Goods - 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.

Employment Cost Index (ECI) - Payroll employment is a measure of the number of jobs in more than 500 industries in all states and 255 metropolitan areas. The employment estimates are based on a survey of larger businesses and counts the number of paid employees working part-time or full-time in the nation's business and government establishments.

Retail Sales - The retail sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. It is the timeliest indicator of broad consumer spending patterns and is adjusted for normal seasonal variation, holidays, and trading-day differences. Retail sales include durable and nondurable merchandise sold, and services and excise taxes incidental to the sale of merchandise. Excluded are sales taxes collected directly from the customer.

Housing Starts - The Housing Starts report measures the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing. Housing is very interest rate sensitive and is one of the first sectors to react to changes in interest rates. Significant reaction of start/permits to changing interest rates signals interest rates are nearing trough or peak. To analyze, focus on the percentage change in levels from the previous month. Report is released around the middle of the following month.





Hope this is of help. taken from http://www.forex.com/forex_economic_indicators.html

http://www.forex.com/images/top.gif

Thanks for the descriptions money talks. Very much appreciated.

If I was to ask if those indictaors were above the forecast level if that would trigger a rise or fall in the local currency, can I find out, or it's pretty much self explainatary:

So if US CPI is above forecast than the USD would rise due to the fact it costs more to buy things thus the USD has to be stronger?

Um yah, more or less right. If the CPI is rising it means cost of goods to consumers is rising which means inflation is rising. This means higher interest rates to try bring down inflation, which means the currency is stronger.

Trying the formula of if motor sales up then currency up won't work as there are two many factors at play and one may overshadow another. Get a handle on all the major ones above and their direction and you'll have an excellent base for the way a currency is heading.

Don't ever assume a certain news will create a certain move in the market. In theory it is correct that certain reports should cause an equivalent move in the market but I've been killed by this many times which is why the key is to wait at least 15 mins after the news, at least I do. This past month there has been many examples of bad US data that has made teh USD stronger. Remember there are other factors. geopolitical, oil gold and other such factors that affect the currency so its never a good idea to assume a positive USD news will cause a bull run of the USD.