Massive volumes of Economic data
Economists, analysts, individual investors and even traders want to keep a pulse on the Economy. But no one wants to wade through the massive volume of Economic Statistics that are put out by various entities, both governmental and private.
Economic Reports and Indicators are those often-voluminous statistics put out by government agencies, non-profit organizations and even private companies.
They provide measurements for evaluating the health of our economy, the latest business cycles and how consumers are spending and generally faring. Various economic indicators are released daily, weekly, monthly and quaterly.
While it is important to keep a pulse on the economy, few analysts or economists wade throuh all these masssive volumes of data. An understing of the Top 13 Economic Reports can help you narrow your focus.
We have categorized data into 13 Economic Reports
These 13 Economic Reports are the most common and vital economic indicators and can have a huge impact on the market; therefore, knowing how to interpret and analyze them is important for all investors and traders.
These are reports that shape the entire trading session. The state of the current economic cycle also has an impact on how anticipated each of these reports are.
Who should follow these Reports: Traders and Investors
Even if you consider yourself a trader, (and not a long term investor), with little consideration of outside market influences, you should know how markets interact with and influence one another.
Even if you don't follow these economic reports yourself, it is helpful to know where the "experts" are drawing their opinion from. If you do peruse these reports. remember that the data can change rapidly, and that broad trends are not judged by one isolated economic data point.
Why is it important?
The Federal Reserve use most of this Economic data to assess the current economic and financial conditions to alter its monetary policy, which includes raising and lowering interest rates to control money supply.
For example, during peak periods of the business cycle when the economy is experiencing rapid growth in real GDP, employment will increase, and unemployment decrease, as businesses seek workers to produce a higher output.
A period of rising commodity prices arouses fears of inflation which prompts monetary authorities to raise interest rates to combat that inflation. Eventually, the rise in interest rates chokes off the economic expansion which leads to the inevitable economic slowdown and recession. During the recession demand for raw materials and money decreases, resulting in lower commodity prices and interest rates.
Activity in the bond and commodity markets can tell a lot about which way the economy is heading.
Read more about The Federal Reserve....
Control Inflation while avoiding a Recession
The primary job of the Federal Reserve is to control inflation while avoiding a recession.
The most widely accepted definition of a recession is that when a country experiences two consecutive negative GDP prints, it is in recession.
It does this with monetary policy. To control inflation, the Fed must use contractionary monetary policy to slow economic growth. If the GDP growth rate is more than the ideal of 2-3%, excess demand can generate inflation by driving up prices for too few goods.
The Fed can slow this growth by tightening the money supply, which is the total amount of credit allowed into the market. The Fed's actions reduces the liquidity in the financial system, making it becomes more expensive to get loans. This slows economic growth and demand, which puts downward pressure on prices.
The Stages of the Business Cycle
There are four stages that describe the business cycle. At any point in time you are in one of these stages:
- Contraction - When the economy starts slowing down.
- Trough - When the economy hits bottom, usually in arecession.
- Expansion - When the economy starts growing again.
- Peak - When the economy is in a state of "irrational exuberance."
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