One strategy in stock or forex investing is by using fundamental analysis. The idea of fundamental analysis is to find the fair value of an asset. The analysis can be done through economic indicators. Here are they:
- Gross Domestic Product (GDP) measures the dollar value of all goods and services produced within the US. This is the most comprehensive measure of the US economy. Data will be available on the third or fourth week of the month for the prior quarter.
- Employment data, like non-farm payroll which list the number of payroll jobs at all non-farm business and government agencies. This data will greatly affect the market psychology. Another important data is unemployment rate. The economy is considered at full employment when the unemployment is between 5.5% and 6%. Higher employment means higher economic growth. The data will be available on the first Friday of the month.
- Inflation. The overall general upward price movement of goods and services in an economy. It is usually measured by the Consumer Price Index and the Producer Price Index. Consumer Price Index(CPI) measures the change in price of groups of goods and services that the consumer buy. CPI excluding food and energy prices is called “core CPI”. The core CPI gives a clearer picture of the inflation trend. CPI will be available on the 13th of the month.
- Consumer Confidence Index. A survey of 5,000 consumers about their opinion on economic condition. When the consumers confidence drops, usually consumer spending will drop too. So it will gives us insight of the economy. This is a monthly data which is available on last Tuesday of the month.
- Durable Goods Order measures the dollar volume of orders, shipments, and unfilled orders of durable goods. Durable goods generally have three years or more life expectancy. Higher Durable Goods Order means higher demand for US manufactured durable goods. The data is available on 26th of the month.
- Existing Home Sales. Measures the selling rate of pre-owned houses. High Existing Home Sales is a good sign of economy growth, because people only buy house when they are confident of their financial. It will available on the 25th of the month.
- ISM Manufacturing Index is a survey of purchasing executives regarding manufacturing activities. Reading above 50% shows expansion while below 50% shows contraction. Data is available on the first business day of the month.
- ISM Service Index is a survey of purchasing executives in service industries. Reading above 50% shows expansion while below 50% shows contraction. Data is available on the third business day of the month.
- Personal Income and Consumption. Personal income represents the income that households receive. While consumer spending represents households expenditure. Higher income will make higher consumption and this will profit companies. Data is available on the first business day of the month.