Here at FX Explained we have looked at the importance of macroeconomic data on domestic economies in our educational video and article Fundamental Analysis, in our Master Academy series. This “big picture” data can provide an insight into the overall state of a domestic economy and assists traders and investors in their decision making processes and strategies.
Economic data and indicators reflect the state of an economy and whether it is in an expansionary or contraction phase. Many indicators are released on a monthly basis by various government agencies, although some are produced on a weekly of quarterly basis. These macroeconomic data points can be compared to the prior month, quarter or year to indicate the current and future path of the economy.
Although each domestic economy has its own sets of data, in this article we are going to focus on the most important US economic data and indicators. Not only are these significant because of their impact on US financial markets, but they can also help as a broader guide to data releases for other economies. Furthermore, given that the US economy is the largest globally, this data also has important global implications.
The Employment report
Arguably the most watched and therefore most significant data release each month is the US Employment report. The US Department of Labor publishes a monthly report on employment, which includes; the number of jobs created the previous month by the private sector, with the keenly watched Non-Fram Payroll number the standout, the national unemployment rate and importantly during stages of expansion the Average Hourly Earnings data.
Industrial production measures manufacturing-based industries output. This would include companies producing goods for both businesses and consumers. The report is released on a monthly basis by the Federal Reserve and also includes capacity utilization in the factory sector.
In the US, Consumer Spending makes up approximately two-thirds of all economic activity. It is, therefore seen as a strong measure of the consumer. The data is released by the Department of Commerce’s and also includes data on Personal Income and Outlays, plus a measure of inflation through a Price Index that highlights changes in the amount consumers have to spend to buy various items.
The Department of Commerce produces monthly data for the number of houses that builders started building alongside the amount of permits that they given to start the construction of new houses. This indicator reflects the confidence of real estate developer and is provided on both a regional and national level.
The Department of Commerce publishes the change in national construction spending, which is a monthly data release and includes spending on numerous construction expenses. This would include; materials, labour and engineering works and covers both private and public construction projects, both nonresidential and residential.
Again from the The Department of Commerce, this is a report on the inventories for manufacturers and their shipments. Therefore, the data reflects the demand for manufactured goods.
This data release from the Department of Commerce is posted monthly and measures sales of retail and food services, and as with Consumer Spending reflects the health of the US consumer. The report breaks down retail sales into various sectors, e.g. sales in department stores, furniture and home furnishing stores.
New Home Sales
The Department of Commerce’s report on new residential sales is issued monthly and is an important indicators as it represents a large purchase for individuals. Therefore, this data reflects consumer sentiment. (In addition, The National Association of Realtors, publishes a report on (closed) sales of existing homes, on a monthly basis).
Gross Domestic Product (GDP)
The Department of Commerce publishes the Gross Domestic Product (GDP) data, which is the total value of all the goods and services produced within the US economy. The GDP data, therefore, reflects whether the US economy is contracting or hopefully growing. The data is broken down in terms of changes in business investment , consumer spending and government spending, alongside net foreign trade. The data is published in stages with a preliminary estimate, a second reading and then a final third report.
Institute of Supply Management Manufacturing Report
The ISM publishes data on national activity in the manufacturing sector through an index. The report is an overall reflection of the manufacturing sector and includes data for employment, production and new orders in the manufacturing sector.
So there are our 10 US Top Ten Economic Data Points. Investors and traders, whether taking a fundamental or technical approach to trading, or even if stock picking and looking at individual equities should be aware of the timings for these data releases. Awareness and reaction to these economic indicators can assist in fine-tuning trading and investing decisions. Although no one indicator should be viewed as dominant, by monitoring the release of a number of data points it is possible for traders and investors to gauge the state of the economy and the possible future direction of financial markets assets.