The main economic indicators (United States)

News releases with the greatest volatility

FOMC - Federal Open Market Commitee

Definition: the FOMC report takes stock of the economic situation in the U.S. It sets the level of the key U.S. interest rate and it announces the Fed's activities regarding the government bond markets. The Federal Open Market Committee meets eight times a year. It is made up of 7 members of the board and 5 of the 12 regional bank presidents, including the president of the Federal Reserve Bank of New York.

Date of release: every 6 weeks, on a Tuesday or Wednesday. The minutes of the meeting are made public three weeks later: "FOMC minutes".

Relevance: interest rate announcements are sometimes known in advance, but surprises are possible. Movements in the financial markets will depend on the expectations that economists have (their overall consensus); the announcement will therefore have a significant impact on the forex market if expectations are far away from reality. A lower interest rate reduces the return on dollar-denominated investments, which in turn lowers the value of the dollar against other currencies and vice versa if the interest rate increases.

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The Monetary Policy Report

Definition: this report on monetary policy is established by the Board of Governors of the Federal Reserve before being presented to the United States Congress. The first part of this report summarizes recent government policy decisions and the economic impact that is expected. The second part focuses on the latest financial and economic developments.

Date of release: twice a year, in February and July.

Relevance: the growth and inflation figures are forecasts, however, the Federal Reserve president's speech before Congress can lead to immediate movements on the forex market.

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The Beige Book

Definition: the beige book is a report published by the Federal Reserve which summarizes the economic situation in each region of the United States.

Date of release: 8 times a year, on the Wednesday 2 weeks before the FOMC meetings.

Relevance: this report gives a good idea of what the country's economic situation is. It has an influence on interest rate policy.

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NFP - Non Farm Payrolls

Definition: the Non Farm Payroll report indicates the number of jobs created in the United States in the nonagricultural sector during the previous month, so it therefore demonstrates the U.S. economy's level of activity and overall health. The NFP is one of the market's most closely watched economic growth indicators. It is a "market mover" that significantly influences forex and financial market prices.

Date of release: the first Friday of each month at 1:30 PM (GMT), for the previous month.

Relevance: it allows one to estimate the number of jobs that were created, however, the margin of error is high since only 60% of the responses are published on time.

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Initial Jobless Claims

Definition: this index measures the amount of new unemployment claims and therefore the jobs that were lost.

Date of release: weekly, every Thursday.

Relevance: requires that one take into account a monthly average so as to predict the labor market's trend.

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Conference Board

Definition: a consumer confidence survey of 5,000 households. The survey focuses on current and future employment, economic conditions and household incomes.

Date of release: monthly, the last Tuesday of the month

Relevance: the indicator has low correlation with household consumption, but it gives a good idea of the evolution of the labor market.

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ECI - Employment Cost Index

Definition: this index measures the changes in wage levels. Wage inflation can cause an increase in interest rates, leading to an increase in the value of the local currency.

Date of release: quarterly, 4 weeks after the end of each quarter, in January, April, July and October.

Relevance: this index is very reliable for measuring the cost of labour, but it provides data from the previous quarter. The information is therefore partially already known in advance.

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CPI - Consumer Price Index

Definition: the CPI measures price changes for a basket of goods, and therefore the level of inflation in the United States. A rise in inflation may prompt central banks to raise their interest rates to bring prices down. Rising interest rates attract foreign investment and so they therefore increase the demand for dollars. A CPI that is trending upward has a positive effect on the country's currency.

Date of release: monthly, 2 weeks after the end of the month.

Relevance: The CPI is a useful indicator which allows investors to spot inflationist tensions and measure the evolution of prices.

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MCSI - Michigan Consumer Sentiment Index

Definition: this survey on consumer confidence has been around for over 50 years. It provides a good snapshot of long term consumption trends.

Date of release: the preliminary report (60% of total results) is released on the 2nd Friday of each month. The final report is published on the last Friday of each month for the prior month.

Relevance: an increase of the indicator will benefit the dollar, 2/3 of U.S. GDP is made up of household consumption.

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GDP - Gross Domestic Product

Definition: the GDP measures the value of goods and services produced in the United States. A high GDP accelerates inflation while a low GDP means the U.S. economy is weak.

Date of release: quarterly, 1 month after the end of the quarter, the third or fourth week of the month.

Relevance: allows one to measure the strength of economic growth and to compare the country's wealth. Nevertheless, the figure is not really up to date due to late publication (1 month delay).

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New Home Sales

Definition: this report indicates the number of new homes sold in the market during the previous month.

Date of release: monthly, 4 weeks after the end of the month, usually on the last day of the month.

Relevance: this indicator is important as it gives us an idea of which way the real estate market is going in the short term, but the figure can sometimes be revised later.

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Existing Home Sales

Definition: this report indicates the number of already existing homes sold in the market during the previous month.

Date of release: monthly, on or close to the 25th of each month.

Relevance: this indicator provides us with an idea of the market's overall demand, an upward trend has a positive effect on the country's currency.

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Housing Starts

Definition: the number of residential housing projects started by type of house and region.

Date of release: monthly, 2 to 3 weeks after the end of the month

Relevance: this indicator is very volatile (especially during the winter) and sensitive to interest rate changes. It allows us to follow the direction of the real estate market and to forecast residential investments, which accounts for 5% of GDP.

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Retail Sales

Definition: this index measures the total sales made by retail stores in dollars (sales of services are not included).

Date of release: monthly, 15 days after the end of the month.

Relevance: this indicator provides information on household consumption, but it only represents 1/3 of total consumption. It is important to monitor retail sales excluding cars and trucks in order to avoid extreme volatility.

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Durable Goods Orders

Definition: the Durable Goods Orders figure measures the volume of orders for durable goods (3 years or more, machine tools, automobiles, etc.) received by manufacturers.

Date of release: monthly, 3 to 4 weeks after the end of the month.

Relevance: it's a good indicator for predicting the evolution of production, the industrial outlook, the labour market and for measuring retail players' confidence in the country's growth. However, the volatility of the index may rise sharply because of the defense and transport industries, which aren't necessarily linked to the country's economic health.

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PPI - Producer Price Index

Definition: the PPI measures the average price of capital goods in industry, mining, agriculture and other commodities.

Date of release: monthly, 2 weeks after the end of the month.

Relevance: the PPI is a good indicator for predicting price trends and possible inflationary pressures.

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ISM - Institute for Supply Management

Definition: this index measures changes in the manufacturing sector. It covers indicators such as production, new orders, employment, delivery times and inventories.

Date of release: monthly, the first business day for the previous month's data.

Relevance: allows us to anticipate the health of the U.S. economy, if the index is above 50 the economy is experiencing growth, while a figure below 50 indicates a probable recession.

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Trade Balance

Definition: detailed report of exports and imports of goods and services by product and by country.

Date of release: monthly, 6 weeks after the end of the month.

Relevance: gives a good indication of the balance of trade and of the share of foreign trade in GDP calculations. The indicator is very volatile because of fluctuations in the dollar against other currencies as well as other seasonal factors.

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