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Thank you for accessing this Economic Indicators page.
Not too many years ago, the only economic indicator was the length of soup kitchen lines. (Undoubtedly some Depression era bureaucrat was counting noses and making regular reports to FDR.) Today, there are more indicators and indices than are days of the year. A cynic would remark that there are almost as many indices and indicators as there are government agencies to create them. A kinder observer would note that economic complexity makes for a lot of things to measure.
Today’s investment world is vastly more complicated than just a few years ago. Information flashes instantaneously across the globe and bad news in Tokyo is moving American markets even before the opening bell. Early investors had it easier in some respects. They sometimes had to wait months until sailing ships or caravans brought news that affected the worth of their investments. They had no indicators to worry about and no markets that move on the mere expectation of news.
During the first week of June 2004 alone, these indicators were released: Auto Sales, Truck Sales, Construction Spending, ISM Index, Revised Productivity, Initial Claims, Factory Orders, ISM Services, Non-farm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek.
Traders make decisions based on what these indicators show. But they also make trades based on what they THINK the indicator will show. Not long after the creation of a new economic indicator comes the creation of an indicator watch service. Some media outlet, brokerage house or advisory service will assign a person or team to watch the indicator in question and make projections on what it will show.
This is profitable because accurate prediction of various indicators can mean millions in profits for savvy traders. Today, the market moves earlier and earlier in advance of the release of the indicators. Most often, the watch services are pretty close to the target, and as a result the release of actual indicators is usually an anticlimax. But, when the watch services miss the mark, a significant change in the market can happen.
A couple of fairly recent examples: Intel was projected to have earnings of 27 cents per share, but came in at 26. A great result, but less than expected. The stock fell. On April 28th, 2004 the GDP report showed growth of 4.2 percent, well below the 5 percent consensus prediction. The market moved.
For individual investors, keeping up with all of the various indicators is difficult at best. Staying on top of economic news is more than a full time job in a world soaked with news, analysis and commentary. Following the economic indicators now available underscores something that thousands of day traders learned the hard way: the number of do-it-yourself investors who can consistently make a profit is small. Those who make decisions based on what the indicators show often will lose because their decision-making process is lagging behind the market’s faster-than-instantaneous reflexes.
Information – and indicator – overload is a good reason to subscribe to Internet-based news and advisory services that help you sort out what to watch and what the importance of the news is. The regular media can’t keep track of everything going on, either. Services such as theRootofAllGoodisMoney.com should be a daily stop for serious investors.
If you are watching indicators to determine which way to move your portfolio, here are some tips.
Unless you are dealing with industry-specific indicators (housing starts, car sales, etc.), making broad decisions based on what most indicators show is not a good idea. The market can grow even in a bad economy and certain market segments respond favorably to what is bad news for others.
Most indicators are just indicators, not a directional sign, ie., indicators only indicate, they do not signal. Too many investors make decisions on isolated pieces of news instead of taking whole things in context.
Taken as a whole, indicators provide a pretty good means to predict the short-term future of the economy. This seems self-evident, but tunnel vision is not uncommon among those of us whose job it is to focus on specific things.
Those who predict indicators are wrong about as often as those who predict stocks. Don’t put all your faith in what the expert consensus is. Many “experts” missed the April, 2004 GDP by almost 1 percentage point.
If you want to watch economic indicators for signs of where the market is going, I recommend you concentrate on these 17: Car Sales, Purchasing Managers’ Index, Employment, Producer Price Index, Retail Sales, Industrial Production, Housing Starts/Business Permits, Consumer Price Index, Durable Goods Orders, GNP, Personal Income/Consumer Spending, Index of Leading Indicators, New Home Sales, Merchandise Trade Deficit, Construction Spending, Factory Orders, and Business Inventories/Sales.
Not too many years ago, the only economic indicator was the length of soup kitchen lines. (Undoubtedly some Depression era bureaucrat was counting noses and making regular reports to FDR.) Today, there are more indicators and indices than are days of the year. A cynic would remark that there are almost as many indices and indicators as there are government agencies to create them. A kinder observer would note that economic complexity makes for a lot of things to measure.
Today’s investment world is vastly more complicated than just a few years ago. Information flashes instantaneously across the globe and bad news in Tokyo is moving American markets even before the opening bell. Early investors had it easier in some respects. They sometimes had to wait months until sailing ships or caravans brought news that affected the worth of their investments. They had no indicators to worry about and no markets that move on the mere expectation of news.
During the first week of June 2004 alone, these indicators were released: Auto Sales, Truck Sales, Construction Spending, ISM Index, Revised Productivity, Initial Claims, Factory Orders, ISM Services, Non-farm Payrolls, Unemployment Rate, Hourly Earnings, and Average Workweek.
Traders make decisions based on what these indicators show. But they also make trades based on what they THINK the indicator will show. Not long after the creation of a new economic indicator comes the creation of an indicator watch service. Some media outlet, brokerage house or advisory service will assign a person or team to watch the indicator in question and make projections on what it will show.
This is profitable because accurate prediction of various indicators can mean millions in profits for savvy traders. Today, the market moves earlier and earlier in advance of the release of the indicators. Most often, the watch services are pretty close to the target, and as a result the release of actual indicators is usually an anticlimax. But, when the watch services miss the mark, a significant change in the market can happen.
A couple of fairly recent examples: Intel was projected to have earnings of 27 cents per share, but came in at 26. A great result, but less than expected. The stock fell. On April 28th, 2004 the GDP report showed growth of 4.2 percent, well below the 5 percent consensus prediction. The market moved.
For individual investors, keeping up with all of the various indicators is difficult at best. Staying on top of economic news is more than a full time job in a world soaked with news, analysis and commentary. Following the economic indicators now available underscores something that thousands of day traders learned the hard way: the number of do-it-yourself investors who can consistently make a profit is small. Those who make decisions based on what the indicators show often will lose because their decision-making process is lagging behind the market’s faster-than-instantaneous reflexes.
Information – and indicator – overload is a good reason to subscribe to Internet-based news and advisory services that help you sort out what to watch and what the importance of the news is. The regular media can’t keep track of everything going on, either. Services such as theRootofAllGoodisMoney.com should be a daily stop for serious investors.
If you are watching indicators to determine which way to move your portfolio, here are some tips.
Unless you are dealing with industry-specific indicators (housing starts, car sales, etc.), making broad decisions based on what most indicators show is not a good idea. The market can grow even in a bad economy and certain market segments respond favorably to what is bad news for others.
Most indicators are just indicators, not a directional sign, ie., indicators only indicate, they do not signal. Too many investors make decisions on isolated pieces of news instead of taking whole things in context.
Taken as a whole, indicators provide a pretty good means to predict the short-term future of the economy. This seems self-evident, but tunnel vision is not uncommon among those of us whose job it is to focus on specific things.
Those who predict indicators are wrong about as often as those who predict stocks. Don’t put all your faith in what the expert consensus is. Many “experts” missed the April, 2004 GDP by almost 1 percentage point.
If you want to watch economic indicators for signs of where the market is going, I recommend you concentrate on these 17: Car Sales, Purchasing Managers’ Index, Employment, Producer Price Index, Retail Sales, Industrial Production, Housing Starts/Business Permits, Consumer Price Index, Durable Goods Orders, GNP, Personal Income/Consumer Spending, Index of Leading Indicators, New Home Sales, Merchandise Trade Deficit, Construction Spending, Factory Orders, and Business Inventories/Sales.