While the indicators can be numerous, there are three broad categories of economic indicators:
The Big Three Economic Indicators Jim Graham Traders are always trying to understand the factors that cause the market to rise and fall. The truth is that there are a multitude of factors, and millions of investors make decisions that impact the market every day.
Corporate earnings and news, political news, and general market sentiment can all move the market. But economic factors have the most influence on long-term market performance.
There is a lot of economic data available on the US economy, and almost every day some economic report or another is being released. When reading these releases I always try to assess the importance of each item and how it fits into the current economic situation.
For the most important reports, especially those that may impact an industry that contains companies you are trading, it is often better to not rely solely on the analysis offered by financial journalists but to look at and try to understand the original sources. Of all the economic indicators, the three most significant for the overall stock market are inflation, gross domestic product GDPand labor market data.
I always try to keep in mind where these three are in relation to the current stage of the economic cycle. That gives me a framework to work with that allows me to estimate how any individual piece of economic data may affect these three indicators, and to then project its probable effect on the stock market as a whole.
INFLATION Inflation is a significant indicator for securities markets because it determines how much of the real value of an investment is being lost, and the rate of return you need to compensate for that erosion.
So investors who buy stocks do so expecting they will get a return equal to or better than that risk premium adjusted by the inflation rate. So a higher rate of inflation means you should get a higher return for investments in the equity markets. But the effect inflation has on the stock market is more complicated than that.
So all other things being equal, a favorite phrase of all economistslow inflation is better for the market than high inflation. There are many causes of inflation. But the single most important determinant of inflation is the output gap, which is the balance between supply and demand in the economy.
When actual output is below its potential, inflation should be low because excess workers and unused plant and equipment are available. The actual level of output is easy to get, and is measured by GDP.
But potential output is harder to calculate and requires estimates to determine its value. So while the output gap is important to always keep in mind when interpreting economic data, its exact amount is never known.
For that reason it is not a realistic indicator for investors to use. That is why a proxy is needed, so that you have a single number to estimate it. The Labor Department issues a CPI figure every month, measuring the increase in the price of a given "basket" of goods and services purchased by the average consumer.
That basket supposedly includes a number of items commonly purchased by all or most consumers, such as food, housing, clothes, transportation, medical care, and entertainment.Do you rely on indicators to make an investment move?
Find out these key economic and market indicators to watch and react to market movements. Cash flows from investing activities is the second section of a statement of cash flows which details cash flows related to acquisition and disposal of a company's long-term investments such as property, plant and equipment, investment in subsidiaries and associates, etc.
5 economic indicators to watch. Hidden Clues to Future Economic Trends and Investment Opportunities.” for instance — all of that spending activity increases the new-home market to.
Investment in energy with private participation (current US$) Investment in transport with private participation (current US$) Investment in water and sanitation with private participation (current US$). Some people may prefer to understand a couple of specific indicators really well and use this expert knowledge to make investment plays based on their analyses.
Others may wish to be a jack of all trades, understanding the basics of all the indicators without relying on any one too much.
Economic Indicators for China including actual values, historical data charts, an economic calendar, time-series statistics, business news, long term forecasts and short-term predictions for China economy.