Many investors are trading currency pairs involving the British pound, so having some quick indicators to gauge the UK economy can be very helpful.
The list of economic indicators presented below is important for the United Kingdom and therefore for the British pound. Moreover, as the UK economy is currently service-oriented, it is very important for traders to pay attention to data related to this sector.
The UK's Office for National Statistics conducts a monthly survey aimed at dividing the working-age population into 3 distinct categories - the employed, the unemployed and the non-working - and to provide descriptive and complete information on each of them. This information gives market participants an overview of the various labour market trends, such as hours worked, changes in employment across industries, unemployment rates, and labour market participation. Because of the speed with which this study is published, it is a statistic much appreciated by the foreign exchange markets, as it is a good indicator of the evolution of the UK's economy.
The United Kingdom's Retail Price Index (RPI) is an indicator of price movements for a basket of consumer goods. Financial markets generally focus on the underlying RPI (RPI-X), which excludes mortgage interest payments. It is closely monitored when the Monetary Policy Committee sets inflation targets for the Bank of England. These targets are currently set at an annual growth of 2.5% of the underlying RPI.
The United Kingdom's Statistics Department produces a quarterly Gross Domestic Product report that measures the total production and consumption of goods and services in the United Kingdom. GDP is calculated by adding the expenditures of households, governments, enterprises and net foreign purchases. This data is used to see where the UK is in the business cycle. It is generally believed that rapid GDP growth is inflationary, while weak or negative growth signals a weak economy.
The UK Industrial Production Index (IPI) measures changes in the output of manufacturing, mines and quarries, electricity, gas and drinking water services. In this case, the term "product" refers to the physical quantity of goods produced, as opposed to the selling value that combines both price and quantity. This indicator covers the production of goods and energy for domestic sales in the UK and for export. This is an index which the market pays great attention to because it gives a good picture of the current state of the UK economy, with the IPI accounting for about one fourth of the gross domestic product.
The Housing Starts indicator measures the number of residential building projects that were launched in a given month. This is a relevant indicator for the UK because the housing market is one of the biggest industries to support the nation's economy.
The UK Purchasing Managers Index (PMI) is a monthly survey conducted by the Chartered Institute of Purchasing and Suppy. This indicator consists of a weighted average of seasonally adjusted output, order intake, inventory and employment measurements. Values over 50 indicate that the industry is expanding, whereas values below 50 indicate that the industry is contracting.
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