The US dollar is the most traded currency in the world and
an understanding of US economic indicators is important in
understanding the US dollar and its role in the currency
trading system. Some of the most important U.S. economic
indicators include the gross domestic product (GDP),
producer price index (PPI), consumer price index (CPI),
industrial production (IP), durable goods & services,
employment cost index (ECI), retail sales index (RSI) and
housing starts. These indicators have the potential to
generate volume and move market prices around the globe.
Gross Domestic Product (GDP) - The gross domestic product
is a measure of all economic activity in the economy. The
GDP represents the total market value of all goods and
services produced by both domestic and foreign companies
within the borders of the US. The GDP should measure
between 3% and 5% for advanced industrialized nations such
as the U.S., Europe and Japan. A growth of less than 3%
indicates a stalling economy and a growth of more than 5%
indicates that the economy is on the verge of inflation.
The U.S. Bureau of Economic Analysis (BEA) publishes two
measures of the GDP. One measure is based on expenditures
while the other measure is based on incomes. The GDP
publishes an advance release of the GDP following each
quarter of the year, which contains, among other things,
estimates for data not previously released, trade balances
and inventories. This is considered to be the most
important release while other BEA releases are considered
less significant.
Producer Price Index (PPI) - The PPI measures price changes
in the manufacturing sector as the average change that
domestic producers in manufacturing, agriculture, forestry,
electric utilities, natural gas, mining and fisheries
receive in selling prices. The PPIs used most often in US
economic analyses are measures for crude, intermediate and
finished goods.
Consumer Price Index (CPI) - The CPI measures the average
price paid by urban consumers for a fixed basket of goods
and services. Urban consumers are largest base of
consumers, totaling about 80% of the U.S. population More
than 200 categories of goods and services are included in
the calculation of the CPI. The measure of the CPI includes
taxes and user fees connected with goods and service, but
it excludes the volatile food and energy components of
consumer spending.
Industrial Production (IP) - IP is a chain-weighted measure
of the change in production for the nation's factories,
utilities and mines. An IP is determined for types of
industries and types of markets. Since the IP is a measure
of industrial capacity and available industrial resources,
IP may also be called capacity utilization. Since
manufacturing accounts for about one-fourth of the economy,
IP rates indicate the capacity of the country's factories.
Durable Goods and Services - Durable goods and services are
a measure of new orders placed with domestic manufacturers
for immediately delivery and delivery in the future. A
durable good or service is a good that lasts or a service
that extends for a period of more than three years.
Employment Cost Index (ECI) - The ECI is an estimated
measure of the number of full-time and part-time employees
in businesses and government. It is based on more than 500
industries in 50 states and 255 metropolitan areas. Data
are collected from surveys of employer payrolls and
includes wage as well as non-wage costs of employment.
Retail Sales Index (RSI) - The RSI is an estimate of the
total monthly sales from retailers. It is a measure of
consumer consumption and confidence. Data are collected
from a sampling of retail establishments throughout the
country. Retail sales include the sale of services, durable
goods and non-durable goods. It includes excise taxes and
excludes sales taxes.
Housing Starts - Housing starts is an estimate of the
number excavations for foundations of residential
properties. An analysis of housing starts measures the
change in housing start levels from month to month.
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