APICS Survey
Definition
A composite diffusion index of national manufacturing conditions. This survey is less well known than the ISM, but can also indicate trends in production. An index level of 50 means no growth, but every 10 points signals gains of 4% in manufacturing.
Why is it important for forex traders?
Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less robust growth and is extremely sensitive to whether the economy is growing too quickly, which could set the stage for inflation.
The APICS survey gives a detailed look at the manufacturing sector. The diffusion index does not move in tandem with the ISM index every month, but sometimes the two do move in the same direction. Since manufacturing is a major sector of the economy, investors can get a feel for the general economic backdrop for various investments.
- APICS Survey
- Bank Reserve Settlement
- Chain Stores Sales
- Constraction spending
- CPI (Consumer Price Index)
- Current Account
- Durable Good Orders
- Existing Home Sales
- Factory Orders
- HICP (Harmonised Index of Consumer Prices)
- Housing Starts
- IFO Business Climate In Industry And Trade
- International Trade
- Industrial Production and Capacity Utilization
- ISM (Institute for Supply Management)
- Jobless Claims
- Leading Indicators
- Money Supply
- New Home Sales
- Nonfarm Payroll
- Personal Income
- Philadelphia Fed Survey
- PPI (Producer Price Index)
- Retail Sales
- RPI (Retail Prices Index)
- Unemployment Rate
- ZEW
Bank Reserve Settlement
Definition
A two-week period that ends every other Wednesday during which commercial banks must meet reserve requirements stipulated by the Federal Reserve.
Why is it important?
This is primarily of interest to institutional investors and securities brokers who deal with extremely short-term financing (borrowing or lending) to meet cash management needs. For example, short term rates such as the overnight lending rate might be pressured upward by heavy demand for funds in the final few days of the Bank Reserve Settlement period.
Chain Stores Sales
Definition
Monthly sales volumes from department, chain, discount, and apparel stores. Sales are reported by the individual retailers. Chain store sales are an indicator of retail sales and consumer spending trends.
Why is it important?
The pattern of consumption spending is one of the foremost influences on stock and bond markets. Strong economic growth translates into healthy corporate profits and higher stock prices. The focus in the bond market is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth which is what happened through much of the nineties. As a result, investors in the stock and bond markets have enjoyed huge gains. If and when the party comes to an end, more than likely a change in the economic trend will tip us off.
Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you’ll have a pretty good handle on where the economy is headed. Needless to say, that’s a big advantage for investors.
Chain store sales not only give you a sense of the big picture, but also the trends among individual retailers and different store categories. Perhaps the discount chains such as Target and K-mart are doing well, but the high-end department stores are lagging. Maybe apparel specialty retailers are showing exceptional growth. These trends from the monthly chain store data can help you spot specific investment opportunities, without having to wait for the quarterly or annual reports.
Just a few words of caution. Sales are reported as a change from the same month, a year ago. It is important to know how strong sales actually were a year ago to make sense of this year’s sales. In addition, sales are usually reported for “comparable stores” in case of company mergers.
Constraction spending
Definition
The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.
Why is it important?
Since the economic backdrop is the most pervasive influence on financial markets, construction spending has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.
Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home. That’s why construction spending is a good indicator of the economy’s momentum.
Chain store sales not only give you a sense of the big picture, but also the trends among individual retailers and different store categories. Perhaps the discount chains such as Target and K-mart are doing well, but the high-end department stores are lagging. Maybe apparel specialty retailers are showing exceptional growth. These trends from the monthly chain store data can help you spot specific investment opportunities, without having to wait for the quarterly or annual reports.
Just a few words of caution. Sales are reported as a change from the same month, a year ago. It is important to know how strong sales actually were a year ago to make sense of this year’s sales. In addition, sales are usually reported for “comparable stores” in case of company mergers.
CPI (Consumer Price Index)
Definition
The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation.
Why is it important?
The consumer price index is the most widely followed indicator of inflation in the United States. Just knowing what inflation is and how it influences the markets can put an individual investor head and shoulders above the crowd.
Inflation is a general increase in the price of goods and services. The relationship between INFLATION and INTEREST RATES is the key to understanding how data like the CPI influence the markets ( and your investments.)
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation, because you know that the $100 won’t be able to buy the same amount of goods and services a year from now, as it does today. If you were in Brazil where prices can double every couple of months, you might want to charge 400% interest for a total payoff of $500 at the end of the year. In the United States, the CPI tells us that prices are rising about 2% a year, so you only have to charge 2% interest to recoup your purchasing power at the end of the year. You might want to add in a few more percentage points for default risk and the opportunity cost, but the key variable in what interest rate you charge is the rate of inflation.
That basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bonds and T-bills. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates accordingly. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking the trends in inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform.
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