Economic data is released every week, with many business news tracking figures from government and other statistics department. However, you as an investor have to know which data really matters. Here are some of the most important economic indicators you should follow.
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Employment may be the most important indicator of economic health. Every first Friday of every month, the US Bureau of Labor Statistics released a couple of two closely monitored reports.
The first is the unemployment rate, which tracks the number of workers that are currently out of jobs (jobless claims). The other one is the nonfarm payrolls report, which tracks the number of jobs that have been added or eliminated in the overall economy.
These reports are given monthly, and they can trigger the biggest intraday movement in the financial markets.
In the US, the Federal Reserve’s mandate is to promote economic growth and price stability, which is measured as the rate of change in inflation.
For inflation, investors and analysts follow different indicators.
Consumer Price Index (CPI)
The consumer price index or CPI is arguably the most closely watched inflation indicator. It measures the changes in the prices of ordinary products that most consumers buy, like medical services and clothing.
Producer Price Index (PPI)
Apart from the CPI, another important measure is the producer price index or PPI. This indicator, meanwhile, focuses on the prices related to manufacturing goods. Increases in these prices are inevitably passed to the consumers.
Increases in oil prices can result in higher prices for a wide variety of products since oil is an ingredient in many materials and products. It also hikes the cost of transporting goods that need to be sold and the costs where they will sell.
Consumers account for 70% of the overall economic activity in the US. As a result, their spending activity and even their confidence about their economic well-being are very important to track.
Consumer Confidence Index (CCI)
The consumer confidence index is considered a leading indicator. This indicator shows how positive people are regarding their own economic prospects. By extension, this indicator also describes how willing they are to spend their money.
Meanwhile, indicators that show the actual spending habits of consumers are considered to be lagging indicators. Retail spending data is one such indicator. The US Census Bureau publishes this report monthly based on a survey of around 4,900 businesses.
Another extremely vital indicator is the housing market. Although housing is an extremely localized business (making it difficult to measure on a nationwide basis), participants still keep closed tabs on the monthly releases
And last but not the least, investor activity. Readings of investor sentiment is equally important as those mentioned above.
Large investment firms and research companies usually publish a variety of indicators that tell something about the bullishness or bearishness of investors. They do this by periodically conducting a survey to their clients to determine market consensus.
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