The economic calendar is one investor tool used to forecast economic activity. It gives structure to economic news ahead and data streams to focus on.
Traders research previous announcements and the impact on the market. Market expectations are also taken into account as they are matched against upcoming announcements.
By following released schedule a trader can anticipate markets movement and know what are influencing its investments.
Employment Change: measures the change in the number of employed people during the previous month. Job creation is an important leading indicator of consumer spending which accounts for a majority of overall economic activity.
The Consumer Price Index is one of the leading economic gauges to measure the pace of inflation. Simply put, CPI measures the acceleration of price in a fixed basket of goods and services.
Higher CPI indicates that prices of the basket as a whole have increased and as such, it costs more of the local currency to buy the same basket of goods. CPI is also broken down to a core level which strips out the volatile components of the index, which usually include food and energy, but this various by country.
Usually, central banks pay far greater importance to the core numbers than the headline numbers. Excessive inflation will induce a central bank to consider raising interest rates while falling inflation would give them the flexibility to lower interest rates.
Industrial Production Index: measures the total value of output produced by factories, mines, and utilities. The industrial sector combines the manufacturing and energy sector. A rising trend has a positive effect on the nation’s currency because high levels of production are a sign of a strong economy.
Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. The Industrial Production figure can be adjusted for the number of working days in the given time period and/or seasonally to account for weather related changes in production.
Retail Sales Index: measures the total value goods and services sold each month at retail outlets. A rising trend has a positive effect on the nation’s currency because Retail Sales make up a large portion of consumer spending, which is a major driver of the economy and has a sizable impact on GDP.
Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behaviour and is susceptible to surprises. The headline is the monthly and annual percentage change in retail sales.
Producer Price Index: measures changes in the selling price producers charge for goods and services, and tracks how prices feed through the production process. Because producers tend to pass on higher costs to consumers as higher retail prices, the PPI is an early indicator of inflation.
A higher PPI, especially when combined with high figures for other measures of inflation, will make the European Central Bank more inclined to raise interest rates. A low or falling PPI is indicative of declining prices, and may suggest an economic slowdown.