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Consumer Confidence Survey

Importance: Average **

Influence: Forex, Equity Markets

US Release: Monthly by the Conference Board

EU Release: Monthly by Eurostat (flash estimate between the 21st and 23rd day of each month)

 

Introduction to the Consumer Confidence Survey

The Consumer Confidence Survey is considered a key economic indicator as it is able to forecast the level of future demand for goods and services in the economy (leading indicator). The more confident consumers feel today the more money they will spend tomorrow. The more money they will spend tomorrow the greater the future expected economic growth (as measured by GDP changes).

 

The US CB Consumer Confidence Survey

In the US the “Conference Board Consumer Confidence Survey” is considered the most influential to investors. The Conference Board Consumer Confidence Survey contains data deriving from 5,000 US households. The participants are answering a questionnaire based on 5 topics:

(1) Their current employment condition

(2) Their future employment condition (6 months ahead)

(3) Their current business condition

(4) Their future business condition (6 months ahead)

(5) Their family income over the next six months (6 months ahead)

The results of the questionnaire are compared with the results of 1985 which are given the value =100 (benchmark year).

 

The University of Michigan Consumer Sentiment Index

The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan and Thomson Reuters. The index is normalized to have a value of 100 (December 1964). Each month at least 500 telephone interviews are conducted (50 questions) to US consumers except the citizens of Alaska and Hawaii.

 

The Effect of Consumer Confidence Affects in the Forex and Equity Markets

The higher the Consumer Confidence Survey the better for the domestic currency and the domestic equity markets.

 

Related Links: The Conference Board | ► Eurostat

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Interest Rates Decision

Importance: Enormous *****

Influence: Forex, Equity Markets, Commodity Markets, Bonds Market

US Release: US interest rates decisions are made by FED 8 times per year

EU Release: The European Central Bank (ECB) meets monthly to decide about its interest rates policy (Between the 10th and the 14th day of each month)

This is maybe the top economic indicator which can lead to extreme volatility and straightforward movements.

 

Interest Rates as the main Monetary Tool of Central Banks

Central Banks tend to change the level of interest rates in order to be able to apply their monetary policy. The monetary policy of every economic zone has to deal constantly with two problems -Inflation and Unemployment.

■ Interest Rate increase (↑) leads to lower (↓) Inflation lower (↓) consumer spending and higher (↑) unemployment

■ Interest Rate decrease (↓) leads to higher (↑) Inflation higher (↑) consumer spending and lower (↓) unemployment

Changes in the level of interest rates can be seen as signals of upcoming long-term changes in the monetary policy. Therefore, even tiny changes between the actual and forecasted interest rate level (0.05%) can highly influence any financial market and create trading opportunities.

US Rates

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Consumer Price Index (CPI) / Inflation Report

Importance: Great ****

Influence: Forex, Equity Markets, Commodity Markets

US CPI Release: The CPI report is released on a monthly basis by the US Bureau of Labor Statistics between the 15th and the 22nd day of each month

Europe’s (HICP): Eurostat announces the HICP Harmonised Indices of Consumer Prices) each month:

- The HICP of the previous month (middle of the month)

- A flash estimate of the current month (end of each month)

(HICP): -Harmonised Indices of Consumer Prices

The US CPI Index

The consumer price index is the measure of inflation for a country. The CPI measures the price of many different products and services. There are over 200 categories of goods and services weighted in the CPI:

1. Food & Beverage

2. Education

3. Housing

4. Transportation

5. Medical Care

6. Recreation

7. Apparel

8. Communications

Consumer Price Index (CPI)

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Purchasing Manufacturing Index (PMI)

Importance: Average **

Influence: Forex, Equity Markets

US PMI Release: Monthly, The first business day of the month (Each Month the previous month data)

EU Industrial Production Release: Monthly between the 12th and the 14th day of each month, (two months prior -each month is released the figure of two months ago)

 

PMI in the US

The two principal producers of PMIs in the US are the Markit Group, and ISM. The Markit Group measures the PMIs for over 30 countries worldwide. ISM (Institute for Supply Management) measures the PMI solely for the US. The US Purchasing Manufacturing Index measures the activity of 400 manufacturers. This is a simple explanation of the PMI index:

◙ PMI above 50 indicates expansion

◙ PMI below 50 indicates contraction

This is how the US PMI is calculated:

PMI Breakdown:

1. New orders: weight 30%

2. Production: weight 25%

3. Employment: weight 20%

4. Supplier Deliveries: weight 15%

5. Inventory: weight 10%

Purchasing Manufacturing Index (PMI)

 

Europe’s Industrial Production

In the European Union, Eurostat measures Europe’s Industrial Production in a monthly basis.

 

The Effect of PMI in the Forex and Equity Markets

The higher the PMI readings the better for the domestic currency and the domestic equity markets. Note that in order to trade based on PMI results you should seek for changes of at least 50 basis points (0.5%). That means in other words that the actual PMI results must be at least 50 points (0.5%) higher or lower than the forecasted PMI results.

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Gross Domestic Product (GDP)

Importance: Enormous *****

Influence: Forex, Equity Markets, Commodity Markets, Bonds Market

US GDP Release: US Advance GDP released 1 month after the end of the quarter by the Bureau of Economic Analysis (BEA). Final GDP released 3 months after the quarter’s end. GDP releases during the last week of each month.

Europe’s GDP Release: Monthly updates

 

What is GDP

The Gross Domestic Product or GDP is a key economic indicator that measures any country's economic growth. GDP represents the total dollar value of all goods and services produced over a specific time period in an economy or an economic zone. GDP is also expressed as a comparison to the previous quarter or each year.

Calculating GDP -2 Methods

 

Measuring GDP is very complicated and it can be done either by adding up what everyone earned in a single year (GDP income approach) or by adding up what everyone spent in a single year (GDP expenditure approach).

 

Eurostat Yearly GDP Calendar

Eurostat, yearly Calendar as follows:

-January, 10th –3rd Estimate Q3 of the previous year

-February, 14th –1st estimate Q4 of the previous year

-March, 5th –2nd estimate Q4 of previous year

-April, 2nd –3rd Estimate Q4 of the previous year

-May, 15th –1st estimate Q1 of the current year

-June, 4th –2nd estimate Q1 of the current year

-July, 2nd –3rd Estimate Q1 of the current year

-August, 14th –1st estimate Q2 of the current year

-September, 5th –2nd estimate Q2 of the current year

-November, 14th –1st estimate Q3 of the current year

-December, 5th –2nd estimate Q3 of the current year

GDP means Gross domestic product and it is a measure of a country’s economic activity and economic growth.

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Retail Sales

Importance: Great ***

Influence: Forex, Equity Markets

US Release: US retail sales are released monthly, about 15 days after the end of the month reviewed (08:30, New York time).

EU Release: Europe’s Retail Trade figure is released monthly between the 3rd day and the 6th day of each month (two months prior) by Eurostat

 

The US Retail Sales

The US retail sales measure the value of retail merchandise sold by consumer-selling businesses. Retail sales include food prices, transportation, accommodation and many other consumer-related goods. The US release consists of Core Retail Sales, which excludes automotive sales.

The US Retail Sales Report includes two separate reports:

(i) Consumer Durable Goods (total value of all sold manufactured goods expected to last for at least three years)

(ii) Consumer Non-Durable Goods (total value of all sold manufactured goods expected to last less than three years)

US Retail Sales

 

The Effect of Retail Sales in the Forex and Equity Markets

The higher the retail sales figures the better for the domestic currency and the domestic equity markets.