Economic indicators and announcements

Economic data and announcements play a key role in fundamental analysis. Although we do not focus on trading based on these data, it is useful to monitor the performance of the economy. Here is an overview of important indicators and announcements to watch:

1. Unemployment and Wages (NFP)

2. Consumer Price Index (CPI)

3. Central Bank Meetings and Decisions

4. Consumer and Business Sentiment Reports

5. Purchasing Managers' Index (PMI)

6. Retail Sales and Car Sales

1. Unemployment and wages (NFP)

The Non-Farm Payroll (NFP) report shows the number of jobs created in the USA for the previous month, excluding employment in agriculture, private households, and non-profit organizations. This report is typically released on the first Friday of each month as part of the "Employment Situation" report, which also includes unemployment data, average hourly earnings, and labor force participation.

Although its significance has slightly diminished in recent years, NFP remains one of the most important economic indicators. Analysts from various financial markets attempt to predict the NFP value each month and its potential impact on the markets.

Why is NFP important?

The Federal Reserve has committed to achieving "full employment" in the USA, alongside stable prices. Therefore, NFP plays a crucial role in determining interest rates. If job growth is strong, it may lead to an increase in interest rates, while weaker employment could lead the Fed to consider cutting rates.
Since the USA is the largest economy in the world, the Fed's decisions have a significant impact on global financial markets.

Consensus

Similar to other economic reports, markets often try to predict the NFP outcome before it is released. This prediction is usually based on the estimate set by a group of professional analysts. If the NFP significantly "beats" or "falls short of" this consensus, it can lead to significant market movement.
If the result is in line with expectations, market volatility is typically low.

2. Consumer price index (CPI)

Central banks have the responsibility not only to maintain employment but also to ensure "price stability," which means controlling inflation. The primary indicator of inflation is the Consumer Price Index (CPI), which tracks changes in the prices of selected consumer goods and services.

There are also other current measurement methods, including:

• Personal Consumption Expenditures (PCE)

• Producer Price Index (PPI)

• Import and Export Prices

• Wholesale Price Index (WPI)

Each country has its own CPI data, which is published by the relevant authority at different times. You can, for example, refer to the economic calendar in your demo account on y4trade.com for immediate access to upcoming reports.

Why is CPI important?

CPI tracks the prices paid by most consumers, which is why central banks consider this indicator one of the most important for determining monetary policy. Most developed countries target inflation in the range of 1-3%. If CPI significantly exceeds or falls below this range, central banks may adjust their monetary policy.

3. Central bank meetings

As mentioned, traders closely monitor economic data to predict the actions of central banks. Therefore, attention to the meetings themselves, where central banks make decisions, is also important.
Each central bank has its regular meetings. For example, the Federal Open Market Committee (FOMC), which is responsible for monetary policy within the Federal Reserve System, typically meets eight times a year.

Why are central bank meetings important?

Traders watch for any announcements from these meetings, such as interest rate changes, guidance on future policy, or new monetary measures (e.g., quantitative easing).
Meeting minutes are often released shortly after the meeting, providing key insights into whether the central bank members are more "hawkish" (voting for tightening policy) or "dovish" (voting for easing policy).

4. Consumer and business sentiment reports

Various organizations regularly survey consumer and business opinions and create reports on their sentiment. Although the number of reports is vast, each contributes to shaping future market expectations.

Why are sentiment reports important?

The economy requires businesses and consumers to spend money to support growth. If businesses and consumers are pessimistic about the economy, spending typically declines, which can negatively affect growth, employment, and inflation.

These reports are therefore often key indicators. While employment and inflation data reflect past periods, sentiment reports provide valuable information on future expectations.

5. Purchasing managers' index (PMI)

Purchasing Managers' Indices (PMI) measure the dominant trend in economic conditions of a sector based on the opinions of purchasing managers. They serve as an indicator of the overall health of industries.

Like price indices, there are several versions of PMI, each focusing on different sectors of the economy.

A PMI above 50 means managers view the current month as better than the previous one.

A PMI below 50 means managers have observed a decline compared to the previous month.

A PMI of 50 indicates the current month is the same as the previous one.

Why is PMI important?

PMI provides feedback on sector performance directly from the people working within it. If a key sector is stagnating, it may signal a slowdown in the broader economy. Conversely, if the sector is growing, it may indicate future economic growth.

6. Retail sales and vehicle sales

Retail sales and vehicle sales are two key indicators that measure demand for finished goods and demand in the automotive industry.

Why are retail sales and vehicle sales important?

Economies rely on consumer spending. Retail sales and vehicle sales provide a direct measurement of consumer expenditures and help traders determine whether consumption is rising or falling.

Retail sales data provide a broader view of consumption, with the government typically compiling these figures each month. Vehicle sales, however, can be more valuable as they are released by the companies themselves. Many traders consider vehicle sales to be a good indicator of general spending and often use it as a primary metric for retail value.