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UNDERSTANDING FUNDAMENTAL ANALYSIS

AUTO SALES
Car sales are tremendously important to the US economy but their volatility can make them an unreliable indicator. New models introduced at the end of summer and in early spring tend to have a disproportionate influence on sales figures. That said, strong figures are a good sign that consumer demand is picking up. They can be seen as indicating higher future production if demand is sustained over three or four months. The size of the item in question and the timeliness of the release allow auto sales to be a useful leading indicator of retail sales and personal consumption expenditures data.
Release Date: Around the 13th of each month
Forex Fundamentals

BALANCE OF PAYMENTS (BOP)
The Balance of Payments (BOP) is the method countries use to monitor all international monetary transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar year. All trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is going in and out of a country. If a country has received money, this is known as a credit, and, if a country has paid or given money, the transaction is counted as a debit. Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance. But in practice, this is rarely the case and, thus, the BOP can tell the observer if a county has a deficit or a surplus and from which part of the economy the discrepancies are stemming.

BALANCE OF TRADE
The largest component of a country's balance of payments. It is the difference between exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy, and foreign investments in the domestic economy. The US merchandise trade balance has been in a deficit since the mid-1970s. Rising deficits can be reflective of increased consumption, which can be a sign of a strengthening economy.
Release Date: Around the 12th of each month

BEIGE BOOK FED SURVEY
Officially known as the Survey on Current Economic Conditions, the Beige Book is published eight times per year by a Federal Reserve Bank, containing anecdotal information on current economic and business conditions in its District through reports from Bank and Branch directors, and interviews with key business contacts, economists, market experts, and other sources. The Beige Book highlights the activity information by District and sector. The survey normally covers a period of about 4-weeks in duration, and is released two weeks prior to each FOMC meeting, which is also held eight times per year. While being deemed by some as a lagging report, the Beige Book has usually served as a helpful indicator to FOMC policy decisions on monetary policy. The Beige Book isn't considered to be a big market mover. It is a gauge on the strength of the economy and not a commentary on the views of Fed members. Occasionally it can move markets if the findings are a big surprise from analyst expectations.
Release Date: Two Wednesdays before every FOMC meet. 8 times a yr

BUSINESS INVENTORIES AND SALES
Business inventories and sales figures consist of data from other reports such as durable goods orders, factory orders, retail sales, and wholesale inventories and sales data. Inventories are an important component of the GDP report because they help distinguish which part of total output produced (GDP) remained unsold. As a result, this presents us with important clues on the future direction of the economy. Before computerization allowed companies to trim inventories and use minimal stock on hand, inventory build up was indicative of falling demand and potentially a recession. If inventories decline significantly over a three month period it is an indication that demand has picked up and that production will have to increase to restock.
Release Date: Second Friday of each month

CAPACITY UTILISATION
Measures how much of the productive potential of the economy is being used. A level of 85% is a good balance of growth and inflation; anything above this level raises inflationary fears.
Release Date: Around the 14th of each month

CBI SURVEY
Britain’s largest organisation of business employers, aims at creating and sustaining favourable conditions for their optimal competition and prosperity. The CBI publishes monthly and quarterly surveys, on past, current and future assessments on the manufacturing and services sectors. The indexes reflect respondents’ views on various items such as, output, sales, prices, inventories, and export/import orders.
Release Date: Around the 27th of each month

CHICAGO PMI
A survey of Chicago-based managers, which covers, prices, durable goods orders and inventories. It is closely watched since it is announced before the National Association of Purchasing Managers' index (NAPM). The Chicago figure gives a good idea of what the national figure will be.
Release Date: Around the end of each month

CONSTRUCTION SPENDING
Construction spending data comes out after most of the housing data has already been released; its influence is therefore diminished. The indicator sometimes shocks the market if it shows a sudden pick-up in the amount spent on new home construction.
Release Date: Around the beginning of each month

CONSUMER CONFIDENCE INDEX (CCI)
The Consumer Confidence Index (CCI) is put out by The Conference Board. (There are others such as the Michigan Sentiment Index, which is put out monthly by the University of Michigan). The Consumer Confidence Survey is based on a sample of 5,000 U.S. Households and is considered one of the most accurate indicators of confidence. It even goes as far as calculating the number of "help wanted" ads in newspapers to detect how tight the job market are.

The idea behind consumer confidence is that when the economy warrants more jobs, increased wages, and lower interest rates, it increases our confidence and spending power. Should the index move above or below the moving average it is a good indication that consumer confidence is significant. Month to month changes are not considered to have as great an impact as the overall trend.

Confidence is looked at closely by the Federal Reserve when determining interest rates, which affect stock prices. Lowering interest rates make it easier to borrow which ultimately supports consumer spending and higher confidence - something the stock markets love to hear. Keep in mind that lowering interest rates is not an instantaneous confidence booster, it can take 6-8 months for rate cuts to work their way into the economy. On the other hand, if confidence is rising rapidly it could trigger higher inflation.
Release Date: Around the 25th of each month

CONSUMER CREDIT
Consumer Credit is an indicator of consumer spending and demand. It reflects the amount of credit Americans are using, month-on-month, through credit card purchases, personal loans, hire purchase orders or payment plans. A high consumer credit figure suggests the US consumer is not concerned to run up bills in order to finance his/her consumer demands. But the figure is often revised and is seasonally volatile – it goes up before Christmas. It is therefore given only cursory attention.
Release Date: Around 7th of each month

CONSUMER PRICE INDEX (CPI)
The Consumer Price Index (CPI) is considered the most widely used measure of inflation and is regarded as an indicator of the effectiveness of government policy. The CPI is a basket of consumer goods (and services) tracked from month to month (excluding taxes). Items included reflect prices of food, clothing, shelter, fuels, transportation, health care and all other goods and services that people buy for day-to-day living. CPI figures are collected in 87 areas throughout the U.S. from over 22,000 retail and service establishments. Rent paid by individuals is also collected from 50,000 landlords and tenants.

The CPI is one of the most followed economic indicators and considered to be a big market mover. A rising CPI indicates inflation, a large increase is something financial markets don't like to hear. Inflation is the rate at which the general price for goods and services is rising, and subsequently our purchasing power is falling. As inflation rises, this means that every dollar you own will buy a less percentage of a good or service. The Federal Reserve typically battles rising inflation by increasing short term interest rates. Rising rates are frowned upon by corporations and investors because the cost of borrowing money increases.
Release Date: Second Friday of each month

CURRENT ACCOUNT
The most important part of international trade data. It is the broadest measure of sales and purchases of goods, services, interest payments and unilateral transfers. The entire merchandise trade balance is contained in the current account.

DURABLE GOODS ORDERS
These include large ticket items such as capital goods (machinery, plant and equipment), transportation and defence orders. They are extremely important in that they anticipate changes in production and thus, signal turns in the economic cycle. Nevertheless, the large size of these items (aircrafts and civilian orders) means that they present equally large changes, which makes them extremely volatile. This also gives rise to sizeable revisions in the subsequent periods once more complete data becomes available one week later. Durable goods data are better used when omitting defence orders and transportation orders, while calculating a three-month moving average, and a year-to-year percent change.
Release Date: Around the 26th of each month

EMPLOYMENT COST INDEX (ECI)
The Employment Cost Index is a quarterly survey of employer payrolls in the final month of the quarter. The ECI tracks movement in the cost of labour that includes wages, fringe benefits, and bonuses for employees at all levels of involvement in the companies. Wages and salaries make up approximately 75% of the index value. The one benefit not included in the ECI is employee stock options, which actually do not cost employers anything to issue.

This indicator isn't the most watched, but it is among a select group of indicators that have enough power to move the markets, especially during inflationary times. The idea behind the ECI is that as wage pressures increase so does inflation. This is mainly because compensation tends to increase before companies increase prices for consumers (inflation).

The ECI is particularly useful when it's compared to inflation and productivity growth rates. Ideally, you would like to see wages increase at a similar rate as inflation and productivity. If employee costs are rising but productivity is not then it could spell trouble for companies.
Release Date: The last Thursday of Apr, Jul, Nov and Jan

EUROPEAN CENTRAL BANK (ECB)
The European Central Bank (ECB) and the national central banks together constitute the Eurosystem, the central banking system of the euro area. The main objective of the Eurosystem is to maintain price stability: safeguarding the value of the euro.
Release Date: First Thursday of each month

EXISTING HOME SALES
The number and value of old homes sold. Can give markets an insight into the strength of consumer confidence and spending power. Existing home sales also offer evidence of inflationary pressure if prices are rising rapidly.
Release Date: Around the 25th of each month

FACTORY ORDERS AND MANUFACTURING INVENTORIES
In many respects this report is a rehash of the durable goods release that became available a week earlier. However, the factory orders report merits review because it also contains data on orders and shipments of nondurable goods, manufacturing inventories, and the inventory/sales ratio. Order data is useful because it tells us something about the likely pace of production in the months ahead. They are extremely volatile and can fluctuate by three or four percent in any given month. They are subject to sizeable revisions and are very difficult to forecast.
Release Date: Around the 4th of each month

FEDERAL OPEN MARKET COMMITTEE (FOMC)
The body that sets the interest rates and credit policies of the Federal Reserve System. The FOMC is the most important monetary policymaking body of the Federal Reserve System.

The FOMC is composed of the seven members of the Board of Governors and five Reserve Bank presidents. The president of the Federal Reserve Bank of New York serves on a continuous basis, while the presidents of the other Reserve Banks serve one-year terms on a rotating basis.
Release Date: First Wednesday of the month

GROSS DOMESTIC PRODUCT (GDP)
GDP is a gross measure of market activity. It represents the monetary value of all the goods and services produced by an economy over a specified period. This includes consumption, government purchases, investments, and the trade balance (exports minus imports). The GDP is perhaps the greatest indicator of the economic health of a country. It is usually measured on a yearly basis, but quarterly stats are also released. The Commerce Department releases an "advance report" on the last day of each quarter. Within a month it follows up with the "preliminary report" and then the "final report" is released another month later.

The most recent GDP figures have a relatively high importance to the markets. GDP indicates the pace at which a country's economy is growing (or shrinking). If GDP growth fails to meet or beat the market expectations stocks can temporarily pay the price. Traditionally, the U.S. Economy's average growth rate has been between 2.5 - 3%. Economists believe that this range represents the sustainable long-run growth rate of output.
Release Date: Last day of the Quarter

HELP WANTED INDEX
An index published monthly by the Conference Board that shows the total number of help-wanted advertisements occurring monthly in 51 major newspapers from around the country.

This is an indicator of strength in the labour markets. Large numbers of ads imply that the labour market is strong and wages will need to increase in order to attract more workers. In contrast, if the number of ads are few, the labour market is weak and wages will decrease as workers will be willing to accept lower wages for jobs.
Release Date: Last Thursday of each month

HOUSING STARTS / BUILDING PERMITS
This economic indicator tracks how many new single-family homes or buildings were constructed throughout the month. For the survey each house and each single apartment are counted as one housing start, (a building with 200 apartments would be counted as 200 housing starts). The figures include all private and publicly owned units, with the only exception being mobile homes, which are not counted. Most of the housing start data is collected through applications and permits for building homes. The housing start data is offered in an unadjusted and a seasonally adjusted format.

This indicator is not a huge market mover, but it has been reported by U.S. Census that the housing industry represents over 25% of investment dollars and a 5% value of the overall economy. Housing starts are considered to be a leading indicator, meaning it detects trends in the economy looking forward.

Declining housing starts show a slowing economy, while increases in housing activity can pull an economy out of a downturn. However, a considerably stronger report is not good because it can be interpreted that growth is extremely strong and could lead to high inflation. The fact that housing is closely related to mortgage rates means that housing starts data has a strong effect on the bond market and predictions for interest rate movements. As interest rates rise it is expected that housing starts will decline.
Release Date: Around the middle of the following month.

IFO
Germany’s leading survey of business conditions. Published monthly by the Institute for Economic Research, one of the largest economic think tanks in Germany, the IFO Business Climate Index is a widely followed leading indicator of economic activity known for its track record in calling economic turns in German economic growth. The index surveys over 7,000 enterprises on their assessment of the current business situation and their resulting plans for the short-term. In addition to this aforementioned headline index, there is the Current Situation Index and Business Expectations Index.
Release Date: Around the end of each month

INDEX OF INDUSTRIAL PRODUCTION
This is an important measure of the nation's industrial output. It is expressed as a rate of change from the previous month, and gives markets a good idea of the strength of the US manufacturing sector. The index comprises data from the market and from industrial sectors. The market grouping consists of final products (consumer goods, business equipment, and construction supplies), intermediate products and materials. The industrial grouping covers manufacturing (divided into durable and non-durable goods), mining and utilities. Changes in industrial production are a significant indicator of manufacturing sector trends. However, from month to month the figures can be volatile. With this in mind, it is better to follow either the three-month moving average of the monthly change or year-on-year changes.
Release Date: The second Friday of each month

INITIAL CLAIMS (JOBLESS CLAIMS)
The numbers are released each week by the US Department of Labour and measure the weekly change in state applications for unemployment benefits. The financial markets regard the report as a good indicator of changing trends in the labour market and in the economy as a whole.

However, the figures do not always represent a true picture of economic trends. They are often distorted by short-term factors such as state and federal holidays. Therefore, a longer-term moving average of initial claims is a more reliable indicator. Initial claims also give hints about the non-farm payroll. If initial claims are down consistently over a month, there is a good chance the non-farm payroll will come in high.
Release Date: Every Thursday

INSTITUTE FOR SUPPLY MANAGEMENT (ISM)
This is leading survey on US manufacturing activity. The report is released on the first working day of the month, providing the first detailed look at the manufacturing sector before the release of the all-important employment report.

Highly valued for its timeliness and breadth of information, the headline figure is a function of six major components: prices paid; new orders; supplier deliveries; production, inventories and employment. Note that the latter three components reflect supply forces, while the former three cover demand forces. Watching the relative trend of these two groups (demand and supply) sheds light on the balance between demand and supply forces, and hence, provides insight on the Federal Reserve’s policy decisions since they lend much importance to these balances. The Prices Paid component is widely watched because it assesses price pressures ahead in the sector. A figure of 50 or above indicates expansion in the sector, while a number below 50 suggest a contraction.
Release Date: First Thursday of the month

LEADING INDICATOR
The leading indicator piles together already-announced data for new orders, jobless claims, money supply, average workweek, building permits, stock prices and durable goods. Its predictability gives it a low grade.
Release Date: Beginning of the month

MICHIGAN CONSUMER SENTIMENT
The Michigan consumer sentiment index is a survey of consumer confidence conducted by the University of Michigan at a national level. There are two reports a month: a preliminary released around the 10th of the month for that month, and a final released on the first of the next month for the prior month. The index is nothing more than a snapshot of whether consumers feel like spending their money or not.
Release Date: The second Friday of each month

MONETARY POLICY COMMITTEE (MPC)
Interest rates are set by the Monetary Policy Committee.

The MPC studies all the available economic data and looks at a range of domestic and international economic and monetary factors. There is a briefing meeting prior to the MPC where presentations are made to the MPC by the Bank's economists and its regional agents.
The Bank's Monetary Policy Committee (MPC) is made up of the Governor, the 2 Deputy Governors, the Bank's Chief Economist, the Executive Director for Market Operations and 4 external members appointed directly by the Chancellor.
Release Date: Wednesday / Thursday at the beginning of the month

MONEY SUPPLY
The entire quantity of a country's bills coins, loans, credit, and other liquid instruments in the economy.

Money supply is divided into three categories, M1, M2, and M3, according to the type and size of account the instrument is kept in. This number is important to economists trying to understand how policies will affect interest rates and growth.
Release Date: Around the beginning of each month

NEW HOME SALES
Monthly data new home sales data are released for the nation as a whole and for four geographical areas – the Northeast, the Midwest, the South, and the West. The report also contains information on home prices, and number of houses for sale. Housing is a crucial segment of the economy because it signals changes in consumer spending patterns that are indicative of economic activity. Volatility and revisions, however, are common in the report. The report is seasonally variable. A four-month moving average or a year-on-year measure is more useful.
Release Date: Around the 26th of each month

NON-FARM PAYROLL (NFP)
Non-farm payroll (NFP) is a monthly survey of the number of new jobs created. It is a very good indicator of the unemployment rate. NFP is the market mover, the most closely-watched by all in the bond and foreign exchange markets. NFP is also seen as having a reasonable correlation with GDP growth. There is a rule of thumb that a rise of 200,000 a month equates to a rise of 3% in GDP.
Release Date: First Friday of each month

PERSONAL CONSUMPTION
Personal consumption is an indication of the amount Americans spend on goods and services in a given month. The number is pre-empted by retail sales, which tend to give a more thorough view of similar expenditure.
Release Date: Around the end of each month

PERSONAL INCOME AND PERSONAL CONSUMPTION EXPENDITURES (PCE)
Personal Spending, also known as PCE, represents the change in the market value of all goods and services purchased by individuals. It is the largest component of GDP. Personal income represents the change in compensation that individuals receive from all sources including: wages and salaries; proprietors’ income; income from rents; dividends and interest; and transfer payments (Social Security, unemployment, and welfare benefits). The release of these two figures gives you the savings rate, which is the difference between disposable income (personal income minus taxes) and consumption, divided by disposable income. The ever-declining savings rate has become a key indicator to watch as it signals consumer spending patterns.
Release Date: Around the end of each month

PHILADELPHIA FED INDEX (BUSINESS OUTLOOK SURVEY)
The Philadelphia Fed Index is a monthly survey of manufacturers located around the states of Pennsylvania, New Jersey and Delaware. Companies surveyed indicate the direction of change in their overall business activity and in the various measures of activity at their plants. They are asked questions regarding employment, working hours, new and unfilled orders, shipments inventories, delivery times, prices paid, and prices received. The survey has been conducted each month since May 1968. The index signals expansion when it is above zero and contraction when below. It takes the difference between the number of positive and negative responses: if 30% of manufacturers think prices will go up and 39% think they will go down, the prices paid indicator would be –9.

The Philadelphia Fed Index is considered to be a good indicator of changes in everything from employment, general prices, and conditions within the manufacturing industry. Manufacturing is considered to be a precursor to future economic conditions and it lays the groundwork toward economic recovery. For example, in a poor economy if manufacturing starts to pick up there is an expectation that the economy will soon follow behind.
Release Date: Around the 17th of each month

PRODUCER PRICE INDEX (PPI)
The Producer Price Index is not as widely used as the CPI, but it is still considered to be a good indicator of inflation. Formerly known as the "Wholesale Price Index", the PPI is a basket of various indexes covering a wide range of areas affecting domestic producers. The PPI includes industries such as goods manufacturing, fishing, agriculture, and other commodities. Each month approximately 100,000 prices are collected from 30,000 production and manufacturing firms.

There are three primary areas that make up the PPI. These are industry-based, commodity-based, stage-of-processing goods. The PPI is another important indicator which investors pay close attention to. It is not as strong as the CPI in detecting inflation, but because it includes goods being produced, it is often a forecast of future CPI releases.

The PPI is also used extensively by company officials for determining future supply or sales contracts. For example, a sudden rise in the PPI could mean that future sales contracts will also rise.
Release Date: Second Thursday of the month

PRODUCTIVITY
An indication of output per employee. While productivity is helpful in the analysis of an economy, it is often misleading. This is because a reduction in personnel can, at times of recession for example, lead to an increase in productivity. Thus, output per employee may seem encouraging while overall economic performance is declining.

PURCHASING MANAGERS INDEX (PMI)
The Index is widely used by industrialised economies to assess business confidence. Germany, Japan and the UK use PMI surveys for both manufacturing and services industries. The numbers are arrived at through a series of questions regarding Business activity, New Business, Employment, Input Prices, Prices Charged and Business Expectations. In addition to the headline figures, the prices paid components is highly scrutinized by the markets for evaluating pricing power and inflationary risks. Also see National Association of Purchasing Managers (NAPM). A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.

The PMI report is an extremely important indicator for the financial markets as it is the best indicator of factory production. The index is popular for detecting inflationary pressure as well as manufacturing economic activity, both of which investors pay close attention to. The PMI is not as strong as the CPI in detecting inflation, but because the data is released one day after the month it is very timely.

Should the PMI report an unexpected change, it is usually followed by a quick reaction in stocks. One especially key area of the report is growth in new orders, which predicts manufacturing activity in future months.
Release Date: The first business day of the month

RETAIL SALES
Measures the percentage monthly change in total receipts of retail stores, and includes both durable and non-durable goods. It is the first real indication of the strength of consumer expenditure. The limits of the retail sales figure, however, lie in the fact that it focuses on goods while ignoring services and other items such as insurance and legal fees. In addition, the report is stated in nominal terms rather than real, thus, not accounting for inflation. The retail sales figure is also subject to sizeable revisions, even when excluding auto sales (core retail sales). Every month the data is released showing the percent change from the previous month data. A negative number indicates that sales decreased from the previous month’s sales.

This indicator is a big market mover, especially for retail stocks. The data is very timely because retail sales data is released within 2 weeks of the previous month.
Release Date: Second Thursday of each month

UNEMPLOYMENT
Unemployment is a key indicator. It has a lowly rating because there are previews to it that paint most of the picture before the actual figures are released. Most important of the previews are the initial claims figures, which report the numbers looking for unemployment benefit. All the same, unemployment can still contradict expectations and cause upsets.
Release Date: Around the 7th of each month

WHOLESALE TRADE
The trade conducted between wholesalers and the retail sector. Not watched particularly closely by markets, but gives an idea of economic activity that may later filter through to the wider economy.
Release Date: Around the 7th of each month.

 

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