TradeSense: Economic Indicators, 28 August
This page is updated daily with information that can help expand your knowledge of CFDs and add to your trading armoury.
Here we cover details of some of the more important economic reports of the day, including when they are released (times shown are the local time for the relevant economic area), what they mean and how they may affect the financial markets.
Visit us daily for the latest posting from the TradeSense databank (the complete databank resides in the client area of our website and contains a full full list of reports for every economic indicator that we cover).
Australia- Conference Board Australia Leading Index (April)
Released by: The Conference Board
Time: 10.00 (EST)
What is it?
It is an index composed of eight indicators which measure future trends of economic activity in the short to mid-term.
Why is it important?
In calculating the index, the Conference Board of Australia considers indictors such as; gross operating surplus, sales to inventories ratios, building permits for new housing construction, rural goods exports, stock prices, money supply, employment, and yield spread. Generally changes in these indicators usually precede economic developments with an increase pointing to economic expansion and a decrease forecasting a contraction.
Australia - Private Capital Expenditure (Q2)
Released by: Australian Bureau of Statistics (quarterly)
Time: 11.30 (EST)
What is it?
It is the value of purchases of new capital.
Why is it important?
This includes investing in new machinery and plants or improving and adding to existing assets. If companies anticipate high future demand to cover costs, they will be more willing to invest in productive capacity such as these.
A rising figure usually indicates that business confidence is high and reflects a healthy economy.
What can we expect?
A survey by Bloomberg shows analyst estimates of +2.0% from a previous figure of -2.5%.
Eurozone - M3 (Money supply) (July)(YoY)
Released by: European Central Bank (3 month average)
Time: 10.00 (CET)
What is it?
It is a measure of all currency in circulation, large time deposits, institutional money-market funds, repurchase agreements, debt securities and larger liquid assets.
Why is it important?
It is an important inflationary indicator, as the exchange rate is affected by monetary expansion.
An increase in M3 is positive (bullish) for the euro whereas a decrease is seen as negative (bearish).
What can we expect?
A survey of Bloomberg analysts predicted a figure of 9.0%, slightly less than a previous figure of 9.5%.
U.S. - Initial and Continuing Jobless Claims
Released by: US Department of Labor (weekly)
Time: 08.30 (EST)
What is it?
This is a simple measure of the job market in the US. Initial jobless claims reports the numbers of individuals who are signing on for unemployment insurance for the first time.
Continuing Jobless Claims measure the number of individuals who are unemployed and are currently receiving unemployment benefits.
Therefore, a rising movement in the number indicates a weakening labour market and a downward movement in the figure indicates a stronger job market.
Why is it important?
Generally speaking, a strong labour market should have a positive influence on the economy, as it implies increased household spending power (generated by the income that comes from the increased number of jobs).
A very strong labour market can be a cause of inflationary pressures, however, as a tight labour market – where employers face competition for new workers as a result of the relatively low number of people looking for work – can lead to increased labour costs. Such wage inflation increases the likelihood that interest rates will be raised by the Federal Reserve. This will, in turn, have an impact on bond and stock prices.
What are market expectations?
A Bloomberg survey forecasts Initial Jobless Claims of 425K, compared with the previous figure released which was 432K. A similar survey predicts 3,390K for continuing claims, compared with the previous figure of 3,362K.
U.S. - GDP Annualised (2nd Quarter)
Released by:Bureau of Economic Analysis, Department of Commerce (quarterly)
Time: 08.30 (EST)
What is it?
Gross Domestic Product (GDP) is the broadest overall benchmark of economic activity and quantifies the production of goods and services within the US.
It is calculated by adding up all expenditures on all final goods and services produced during the year as shown:
GDP = C + I + G + (X - M)
Where:
C = Consumption
I = Investment
G = Government expenditure
(X-M) = Net exports (exports minus imports)
The headline figure is the annualized percentage change.
Why is it important?
An increasing GDP indicates an improving economy, which is generally good for the dollar and for the financial markets. Extremely robust economic expansion can create inflationary concerns which may contribute to tightening of monetary policy.
Most of the components that comprise the report are known well in advance, meaning that GDP tends to be well anticipated. If, however, the figure does differ from expectations, it does have the potential to cause significant market movement.
What can we expect?
Economists polled by Bloomberg gave a median prediction of +2.7%, from the previous release of +1.9%.
U.S. - Personal Consumption Expenditure
Released by: Bureau of Economic Analysis, Department of Commerce (monthly)
Time: 08.30 (EST)
What is it?
This is a measure of how much consumers are spending each month.
The report takes into account expenditures on durable goods, consumer products and services.
The headline figure is a percentage change from the previous month.
There is also a 'core' figure that is released, which excludes components such as food and energy. These are not included as they are particularly volatile, and may be skewed by seasonal factors. Such short-term fluctuations may distort the data, so that the core figure may present a more stable depiction of expenditure.
The headline Core PCE figure is reported as a percentage change for the quarter.
Why is it important?
Robust levels of personal spending shows that consumers are ploughing money into the economy, which should fuel growth. Personal expenditure can therefore provide an indication of economic trends. It also has a direct affect on inflation: high levels of consumption may push up prices.
Significantly, one of the Fed's primary measures of inflation is derived from PCE.
What can we expect?
Analysts surveyed by Bloomberg forecast a change in PCE of +1.6%, from 1.9% the previous month. Core PCE is expected to be +2.1% (for the 2nd quarter), which is the same figure as the last release.