Glossary: US indicators

The importance of each indicator for the foreign exchange and bond markets is marked out of five in parentheses. So (1/3) means that an indicator is very important for foreign exchange and reasonably important for the bond market.

Auto sales
Balance of trade
Business/wholesale inventories
Capacity utilisation
Chicago PMI
Columbia University price index
Construction spending
Consumer confidence
Consumer credit
Consumer price index
Durable goods orders
Employment cost
Existing home sales
Factory goods orders
Federal Reserve beige book
GDP advance, GDP provisional, GDP final
Housing starts/permits
Humphrey Hawkins testimony
Index of industrial production
Initial claims
Johnson Redbook
Leading indicator
Michigan consumer sentiment index
National Association of Purchasing Managers' index
New home sales
Non-farm payroll
Personal consumption
Personal income
Philadelphia Fed survey of manufacturing conditions
Producer price index
Productivity
Retail sales
Treasury statement
Unemployment
Wholesale trade

Non-farm payroll (1/1)

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.
NFP is generally released on the first Friday of each month at 08:30 ET.

Humphrey Hawkins testimony (1/1)

A testimony given in January and July by the Federal Reserve chairman. He appears before the two Congressional banking committees over two days (within a week of each other). The Senate and House alternate who hears testimony first. The testimony unveils the Fed's latest economic projections and monetary targets. It is very closely-watched for hints of future Fed interest rate action.
Fed chairman Alan Greenspan gave his most recent Humphrey Hawkins testimony on July 19 1996.

Producer price index (2/1)

The producer price index (PPI) measures the monthly increase in a basket of produced goods, and is divided into the output - or factory gate - price and the input price, which reflects the cost of raw materials. The output price incorporates the cost of labour, thus giving a view on wage-led inflation.
The producer price index is more reliable once the volatile food and energy sectors are removed; this is known as the core rate.

Consumer price index (2/1)

The consumer price index (CPI) measures the cost in shops of a basket of key goods. It is a solid indicator of inflation. Its core rate, once volatile food and energy prices are excluded, is closely monitored.

Employment cost (2/1)

Expressed as an index. Employment cost includes benefits as well as wages and can therefore be seen as an indicator of inflationary pressure. Alan Greenspan, the Federal Reserve chairman, has pointed to the employment cost index as one of the indicators the Fed watches closely.

Balance of trade (1/3)

International trade figures are released once a month and tend to focus on trade with Japan and, more recently, China. The breakdown in the figures is logical: imports, exports and overall trade balance.

Retail sales (2/2)

Retail sales are an indication of consumer spending and demand. They are broken down into cars and everything else as sales of cars tend to be very volatile. The figure, excluding cars, is made up of chain-store, department store and supermarket sales.

GDP advance (2/2)

The first stage of the three levels of gross domestic product data released each quarter. Advance is followed by provisional and then final. GDP is the broadest indicator of total economic activity.

Capacity utilisation (3/2)

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.

Philadelphia Fed survey of manufacturing conditions (3/2)

A monthly survey by the Philadelphia branch of the Federal Reserve asking manufacturers to give a current view as well as a 6-month forecast for various costs.
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 survey is released during the third week of each month at 10:00 ET.

National Association of Purchasing Managers' index (3/2)

NAPM is a monthly survey based around a par at 50. An index score above 50 is a sign of expansion in the manufacturing sector. Anything below 50 is a sign that manufacturing production is weakening, or showing signs of decline.

Productivity (3/2)

An indication of output per employee. The stronger it grows, the faster the economy can grow without igniting inflation, so the less likely interest rates are to rise. The Federal Reserve is debating whether productivity can sustain the fast pace of growth it has enjoyed in recent years thanks to the IT revolution.
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.

Personal income (3/3)

Personal income is calculated from the wages and salaries component of non-farm payroll. It gives an idea of average earnings before tax. The market does not pay it much attention unless it rises sharply and threatens a radical rise in consumer spending.

Personal consumption (3/3)

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.

GDP provisional (3/3)

Provisional gross domestic product is an update of the advance figure. There is seldom much revision between the provisional and final numbers. GDP is the broadest measure of total economic activity.

Housing starts/permits (3/3)

Measures the number of houses on which construction is begun each month. A start is when construction work on a new residence begins. Housing permits is the number of permits for housing starts. Unlike housing starts, housing permit statistics are not measured over the whole country.

Durable goods orders (3/3)

Gauges the prevailing business conditions, measuring the number of orders for durable goods (not including consumer durables) in the economy. Durable goods are seen as an important indicator, but are often volatile.

Index of industrial production (3/3)

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.
The index of industrial production is released at 09:15 ET on or around the 15th of each month.

Initial claims (3/3)

Also referred to as jobless claims. The numbers are released each week by the US Department of Labor 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.
The report on initial claims is released every Thursday at 08:30 ET.

Chicago PMI (4/3)

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. The Chicago figure gives a good idea of what the national figure will be.

Federal Reserve beige book (4/3)

An anecdotal description of business and economic conditions in the US.
Produced once a month by the twelve Federal Reserve districts, the beige book is an economic survey covering manufacturing, services, real estate, financial institutions, agriculture, labour markets and wage and price pressures.
The beige book is important because the Federal Reserve considers it relevant. When there are rumours of a rate change, the section on wages and prices is closely monitored.
Since there is very little hard statistical data included in the report, the book is not helpful as a forecasting tool. It is more helpful in confirming a trend or determining that a different sector of the economy is the Fed's new focus.

New home sales (4/4)

Monthly report indicating the number of one-family houses sold and for sale. The figure tends to go up after mortgage rates go up. However, buying doesn't go up until interest rates (and hence mortgage rates) are perceived to have bottomed out.
The report is seasonally variable. A four-month moving average or a year-on-year measure is more useful.

GDP final (4/4)

Final gross domestic product is an updating of the provisional numbers. About one month separates the announcement of final and provisional GDP but very little revision is made.
GDP is the broadest measure of total economic activity. It gives an overall view of economic performance, from personal consumption to investment by companies.
Since final GDP is preceded by provisional, its numbers do not tend to surprise the market.

Leading indicator (4/4)

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.
All the same, once a month, towards the beginning of the month, at 08:30 ET, the US Department of Commerce's Bureau of Economic Analysis makes its leading economic indicators announcement.

Construction spending (4/4)

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.

Consumer confidence (4/4)

Released on the 25th of each month, or thereabouts. The index was started with a par of 100 in 1967. It is a monthly survey that attempts to measure consumer optimism. The market does not regard it highly because it is a reflection of uninformed opinion rather than economic indicators. However, it has traditionally managed to pre-empt economic and unemployment trends.

Unemployment (4/4)

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.
The number is released at 08:30 EDT.

Auto sales (5/4)

Car sales are tremendously important to the US economy but their volatility makes 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 as indicating higher future production if demand is sustained over three or four months.

Existing home sales (5/4)

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.

Columbia University price index (5/4)

The Columbia University price index is the leading composite inflation index based on pre-existing data. Although it is useful, all of its information is already known and accounted for. Its shock factor is low.

Johnson Redbook (5/4)

A weekly report based on a survey of 15 stores to determine the sales outlook. The first survey compares the first week of the month with the first week of the previous month. The second report compares the first two weeks of the month with the first two weeks of the previous month and so on. An accurate picture of what the Johnson Redbook is likely to be can be built up by the end of the month.
It is not very useful in forecasting market movements. The problems are its fair degree of volatility and the lack of breadth in the survey: only 15 stores surveyed.
The Redbook is released each Tuesday at 14:55 ET.

Consumer credit (5/5)

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 consumer demands. But the figure is often revised and is seasonally volatile - it goes up before Christmas. It is therefore is given only cursory attention.

Wholesale trade (5/5)

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.

Michigan consumer sentiment index (5/5)

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.

Business/wholesale inventories (5/5)

Business inventories are an insight into gross domestic product, but are generally closely monitored only by economists; they hold little importance for the markets.
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.

Factory goods orders (5/5)

More than 50% of factory goods orders are accounted for by durable goods orders which have an earlier release. Therefore, the market impact is minimal. The number gives an indication of a possible pick-up in production, assuming that the goods orders are for immediate production needs.

Treasury statement (5/5)

The Treasury statement registers the outcome of the Treasury's monthly budget: either surplus or deficit.

Money supply (5/5)

Money supply is now largely ignored by the financial markets.
There are two main monetary aggregates. M1 measures funds readily available for spending: currency and current accounts. M2 is M1 plus relatively accessible savings held for the most part by households.
Numbers for percentage and dollar changes are announced for M1 and M2 each week and month.