UNITED STATES INDICATORS

U.S. ECONOMIC INDICATORS


Fast facts of the U.S. economy
-Currently US is the largest economy in the world with a nominal GDP of 13.25 trillion USD, 3 times larger than its nearest competitor.
-US has a very large deficit (this because they are the most important in the majority of countries trading partner).
-In accordance with the BIS, the USD is involved in 89% of currency transactions.
-The Federal Reserve (or FED, central bank of US) has two main objectives:
1. price stability
2. constant growth
-The USD is perceived as a strong and reliable worldwide currency, as a result many (mostly developing) countries fixed their currencies to the USD.



Important US economic indicators



Non-Farm Payrolls - NFP (US-unemployment)
NFP is probably in the top 3 of the indicators that move more to the market.
The NFP shows the number of jobs created in the economy in a given month (jobs outside the Government sector and Agriculture). It is one of the best indicators of the strength of the market works, and as we all know, the labour market is always followed as an important diagnosis of the economy in general.
A strong number indicates a strong economy, therefore we would expect an appreciation of the USD.
A weak number indicates a weak economy, a depreciation of the USD would therefore be expected.
This report is published the first Friday of each month.
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Rate of interest
As we already mentioned, interest rates are a measure of the cost of money. Central banks use the rate of interest as a tool to meet its main objectives.
An increase in US interest rates typically increases the demand for USD, investors will sell their local currency to buy USD to take advantage of the improvement in performance by increasing their demand and thus the value of the USD.
A cut in US interest rates typically decreases the demand for USD, investors sold USD to exchange them for other currencies that generate better yields, this increases the offer of USD, decreasing its value.
When there is no change in interest rates can be interpreted as both feeling bullish or bearish depending on the circumstances. No change after a period where it fell continuously, it is perceived as bass player and after a period of increases, as bullish sentiment.
This report is announced 8 times a year.
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Trade balance
This indicator measures the exports and net imports of goods and services from US. This is the commercial flow of the balance of payments component, which measures the demand and supply of a country (as previously explained it).
It is important to note that US has a negative trade balance with almost all the countries of the world.
The USD tends to appreciate in a number,
The USD tends to depreciate at a bad number,
This report is published every two months (mid month).
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Consumer Price Index (CPI)
It is an index that measures changes in the price of a basket of commodities of products and services (inflation). The aim of this indicator is to measure price changes, leaving out the changes in the quality of goods and services.
If the CPI increases, the purchasing power of a low currency, having a negative impact with the USD
If the CPI decreases, the purchasing power of the currency climbs, having a positive impact with the USD.
This report is commonly published the second week of each month.
There is another related indicator, the Core CPI, which measures the same thing but excludes food and products related to energy, the more volatile components of the CPI. Therefore, it has more stability in the measurement of changes in prices.
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Consumer Confidence Index
The JRC is a survey of 5,000 consumers, how they perceive the conditions of the economy, the business climate and what to expect in the future. It shows that so confident are consumers in a given month.
A good number of ICC indicates an economy in good condition, affecting positively the USD.
A bad ICC number indicates an economy in poor state, affecting in a negative way to the USD.
This report is published near the end of each month.
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Retail Sales
Retail sales are an indicator of consumer spending. It measures sales of retailers (including durable and non-durable goods), but excludes services (the biggest disadvantage of this indicator).
A number indicates favorable economic conditions, therefore the USD tends to gain value.
A bad number indicates unfavorable economic conditions, therefore the USD tends to lose value.
This report is published in the middle of each month.
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Gross Domestic Product (GDP)
Measures the amount of goods and services (total production) produced within the territorial limits of US. GDP includes: consumption, private investment, expenditure Government and exports minus imports.
The most important component of this announcement is the change (in GDP) of the current number of the month, against the same month of the previous year.
A large number indicates a strong economy, and the USD tends to appreciate against other currencies.
A bad number indicates a weak economy, and the USD tends to depreciate against other currencies.
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ISM Manufacturing Index
The ISM is another survey applied to business executives and ask them about their vision of the future business conditions. This indicator is important because it is the first indicator that changes after a period of continuous growth or recession.
The range of values of the ISM is 50, where values above 50 means an "expansion", and values below 50 means "shrinkage" or bad expectations for the near future.
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Minutes of the FOMC (FED)
The minutes of the FOMC (Federal Open Market Committee) give reasons the decision of the monetary policy (three weeks after the decision).
Investors usually focus on key elements of how the Fed sees economic conditions, awaiting the future and general comments on other topics such as markets, inflation, etc.
The reaction of the market to the FED minutes varies, since the information is already discounted, but when they give evidence of a not-so-clear vision of the market and that will probably be changes in interest rates can have a big impact on the market.