Indicators of construction
Construction - one of the major components of GDP. The development of this sector is a sign of a healthy economy. Due to a number of historical reasons, the construction is particularly important element for the U.S. economy. For this reason, closely monitored all phases of construction and for each of them, the following indicators:
- Housing Starts and Permits (permit and beginning construction)
- New and Existing Home Sales (sales of new and old housing)
- Construction Spending (construction costs)
Construction indicators are very sensitive to the level of interest rates, since the construction of a very important role of credit. In addition, the industry is a significant dependence on the level of income, so the increased activity in the construction industry is only possible with a good state of the economy. Thus there is a process of strengthening the national currency and stock market growth. The downturn in the construction industry may be one of the first alarm troubled state of the economy, while there is a weakening currency, and possibly the fall of the stock market. In the analysis of these indicators should take into account the seasonal cycle in the construction.
There are optimum values for the indicator Housing Starts and Permits. If its value is between 1.5 million and 2 million, this corresponds to a healthy state economy. The decrease of this index indicates possible difficulties in the economy.
The index is published monthly.
Leading Indicators Index - The index of the main indicators
This index is derived from the set of key economic indicators monthly with different weights. Thus, it appears an indicator of the general state of the economy. Increasing its value corresponds to the improvement of the economy and leads to higher exchange rates and stock market. Based on this index can predict long-term direction of economic development. Due to the fact that it is made up of other, previously published indices (index data does not reflect the past, and last month), he carries a novelty for the markets.
The index is published monthly.
Personal Income - Personal income. This refers to the collection of revenues from all sources, including wages, income from rents, government subsidies, dividend income, etc. Personal income is a secondary indicator of future consumer demand. Recessions usually occur when consumers stop spending. With the growth of this indicator are observed rise in stock prices, the increase in the degree of return on securities, foreign currency appreciation. If the monitor only the increase in income, then you can skip the turning point when consumers stop spending.
Personal Income is considered, along with another index, Personal Spend, which reflects the personal consumption expenditure on services and durable goods and nondurable.
With the growth rate observed in PS increase in the price of the shares, an increase in profitability of the credit market instruments, foreign currency appreciation. It is published in the last working Friday of every month.
One of the current concepts of macroeconomics are the monetary aggregates. They can be represented in a conditional sequence of M0, M1, M2, M3, M4, where the M0 = cash;
M1 = M0 + checking deposits;
M2 = M1 + time deposits, deposits of less than $ 100,000;
M3 = M2 + time deposits, deposits over $ 100,000;
M4 = total monetary aggregate (total).
Rapid growth is seen as the inflationary process, and a sharp decline - as a sign of recession. Earlier (in the early 80's) message of change in the amount of money immediately led to a change in interest rates, stock prices, exchange rates. Then the idea existed that the increase in money supply will cause increased federal rate (the threat of inflation), resulting in interest rates rose and the dollar, falling stock prices.
Now for the Fed's monetary aggregates are not subject to strict control. The Fed closely examining a broader set of indicators, mainly aimed at keeping inflation. Monetary aggregates as one of the major macroeconomic indicators have ceased to have a decisive impact on the financial authorities from the moment when it became clear that the velocity of money is changed inappropriately change the money supply. In the early nineties, the velocity of circulation has increased dramatically, prompting the abandon monetary measures impact on the economy.
In general, the value of money is important as the goal of economic policy in conjunction with nominal GDP (inflation rate in this case, is predictable and stable). The effects of money growth on prices and output depend on the velocity of money.
For economists, monetary aggregate is still an important macroeconomic parameter, a sharp increase which may lead to a jump in inflation, and hence to an increase in interest rates and falling stock prices.
This index is published in the last working Friday of every month.
Treasury Budget (Budget of the Treasury) - Treasury is balance the budget. It is a measure of the difference of costs and revenues of the government. This is a purely macro-economic indicator used for long-term forecasts. Its value can have a big impact on the market for government obligations, especially in the event of discrepancies in the numbers. For example, if government revenues due to the stability of the economic situation turned out to be higher than previously planned, it can be interpreted as the emergence of the possibility of reducing government borrowing in the market, and (or) reducing interest rates. The highest value for the market index balance the budget gets in April, when it is possible to determine the tax revenues to the Treasury for the first quarter, and forecast their annual volume.
Treasury balance is being published Monday in the fourth week of each month.
Official interest rates (BASE rate, FED FUNDS rate, Discount rate, Overnight rate).
Great influence on the markets the Fed's actions have. Therefore, it is great attention to changes in interest rates, operations, FOMC (Federal Open Market Committee) on the government securities market and easy to representatives of the Federal Reserve (for example, A. Greenspan). FOMC meeting was held eight times a year (once a month and a half, usually on Tuesdays). At the meeting considered the economic situation in the country, and on the basis of the analysis is determined by the direction of future monetary policy, adopted policy documents, and identifies the following indicators:
- The level of credit interest rate sales of federal funds Federal Funds Rate (only the target level, the bet can vary from a few tenths to two percent);
- The value of the Discount Interest Rates - Discount Rate (as a first approximation analog of the refinancing rate).
The final minutes of the meeting (Minutes of the Federal Open Market Committee) published a few days after the next. The decision to change rates can be made between the announced dates of meetings. At higher rates in the short term, there is a speculative capital inflows, because you can invest a greater percentage, it reinforces currency. For example, raising the BOE June 4, 1998 BASE RATE of 7.25% to 7.5% of the movement created at the rate of GBPUSD over 100 points in less than a quarter of an hour, and if not followed by comments that this increase - the last in this cycle, the movement continued to be on.
A meeting of the Monetary Committee of the central bank announced in the economic calendar.
In addition to these macroeconomic indicators, we can also note the following
PMI - PMI for the manufacturing sector in Germany, England, Italy, etc.
IFO - business climate index of German Institute for Economic Research;
CBI - Confederation of British record producer;
BRC - an overview of sales of British Confederation of Industrialists.
Upcoming news can cause a reaction of the market are three options:
- When the market participants' expectations are justified fully, and the dynamics of the movement does not undergo any particular changes;
- When the participants' expectations not only met, but are completely wrong, and we should expect changes in the opposite direction, before reversing the market is sometimes during the comprehension of the news;
- When, due to underestimation of the value of the influence of news on the economy increased driving dynamics in the original direction.
Summarizing, we can say that all the fundamental factors must be evaluated from two points of view as news (LED) will affect the decision of the monetary committee of the central bank and how it will affect the whole economic situation in the whole country.
The information is not always appropriate, because or change only slightly, or it is already taken into account by the market, and the LED indicator of the general served as a background. It makes sense to try to comprehend any changes to the views of other market participants. The only way you can buy so-called sense of the market (market sentiment), which is a vital element in the analysis and prediction. In modern conditions, access to information, its processing - a warmhearted and speed the process, and the trader himself must be able to decide what data is important to recognize how to interpret them, and what significance they attach. And do it immediately.