Economic indicators and announcements are crucial factors in fundamental analysis for traders, investors, and analysts. These indicators and announcements provide an insight into how an economy is performing and give an indication of how it might perform in the future. Even if you don’t plan to use fundamental analysis in your trading or investing, it’s still worth keeping an eye on these indicators as they can affect market sentiment and provide valuable information.
Here are six key economic indicators and announcements that you should watch out for:
- Non-farm payrolls (NFP) The non-farm payrolls report estimates the net number of jobs gained in the US in the previous month, excluding those in farms, private households, and non-profit organizations. The report is released on the first Friday of the month in an ‘Employment Situation’ report that also includes the US unemployment rate, average hourly earnings, and participation rate.
The Federal Reserve has the mandate to maintain ‘maximum employment’ in the US as well as stable prices. Therefore, they pay close attention to NFP when setting interest rate policy. If employment looks strong, they may consider raising interest rates. If it is weak, lower rates could be on the cards.
- Consumer price index (CPI) CPI measures the changing prices of a group of consumer goods and services. It is the chief measure of inflation, and most developed countries prefer CPI to be around 1-3%. If it comes in much higher or lower than that, a change in monetary policy may follow.
- Central bank meetings Each central bank will have its own regular meetings to make decisions on monetary policy. Traders watch for any announcements from these meetings, such as rate hikes or cuts, forward guidance on future policy, or any other new monetary measures.
- Consumer and business sentiment reports Multiple organizations survey consumers and business leaders to create sentiment reports. These reports tend to be leading indicators and can give an insight into what’s going to happen next.
- Purchasing manager index (PMI) PMIs measure the prevailing direction of economic trends in a given industry according to the view of its purchasing managers. They are used as an indicator of the overall health of a sector.
- Retail and vehicle sales Retail and vehicle sales are two indicators that measure demand for finished goods and demand within the motor industry, respectively.
It’s essential to remember that while these are some of the most important economic indicators and announcements, there are many others that can affect the markets’ behavior. Each economy has its own set of indicators and announcements, which can differ in significance and impact depending on the country.
It’s also important to note that these indicators and announcements can be volatile, causing significant market moves. Therefore, it’s crucial to keep an eye on economic calendars and be prepared for any market volatility that may arise.
In conclusion, economic indicators and announcements play a significant role in fundamental analysis. They provide valuable insight into how an economy is performing and give an indication of how it might perform in the future. While it’s not necessary to use fundamental analysis in your trading or investing, keeping an eye on these indicators can help you make informed decisions and anticipate market movements.
