Macroeconomic indicators which every trader needs to know
Thanks to knowledges of macroeconomic indicators Forex trading might be very profitable. So we introduce you top-7 of the main indicators which every trader should be familiar with.
- Gross Domestic Product
Gross Domestic Product reflects an overall value of all services and goods produced by residents or non-residents in a particular country. The modern concept of the indicator was first developed in the United States. GDP indicates the pace of economic growth and changes in prices of goods and services for a certain period of time.
It is calculated as a sum of consumption, investment, government spending, and exports minus imports.
GDP growth points to a healthy economy. If GDP of a particular country rises compared to GDP of other countries, the country’s economy has good prospects in terms of investments.
- Foreign-exchange reserves
Foreign-exchange reserves is one of the basic macroeconomic indicators. Monetary gold and foreign currency assets of every country are stored in its central bank or other financial organizations. The value of reserves is not kept in secret. If a particular country has large reserves of gold and currency, it has a better investment prospects.
- Consumer Price Index
Consumer Price Index shows changes in prices of a basket of consumer goods and services. For the first time the indicator was calculated in the United States. It is based on the expenditures of almost all residents. CPI is one of the most frequently used indicators for identifying the inflation level. Its changes are used to assess price changes associated with the cost of living. Besides, it is also necessary to track changes in Core CPI that excludes prices for food and energy. The data is published in the middle of each month.
- Producer Price Index
Producer Price Index estimates an average change in prices of raw materials and goods, including labor costs. The most accurate data is provided by the core of the index that excludes food and energy prices. Besides, the indicator does not include import prices and services.
The indicator’s expansion leads to a rise in cost inflation. Thus, there is an increase in production costs while prices remain unchanged. The indicator is published every month seven days after the non-farm payrolls report.
- Current account balance
Current account balance reflects a ratio between cash coming from and to abroad. A positive current account balance or surplus indicates that payments from abroad outweigh transfers to other states. The opposite situation points to the current account deficit. Current account deficit is negative for the national currency growth.
In the United States, data on the current account balance is disclosed every quarter; in Japan, in the middle of each month; and in Europe, after the 20th of each month.
- Consumer credit
Consumer credit is an amount of credits used by consumers to purchase goods and services. The sum always changes especially before popular holidays when it reaches the highest levels. Thus, holidays have a positive effect on a country’s economy and give a boost to the national currency.
In the US, the consumer credit data is updated on the 7th of every month and in the UK it is disclosed at the end of each month.
- Industrial production
Industrial production of a particular country is one of the most important macroeconomic indicators. Industrial production includes production in manufacturing, mining, and forest industries as well as utilities.
Industrial production reflects state of economy of a particular country. However, it does not determine direction of economic development.
The indicator’s growth leads to an increase in national currency rate.
The industrial production data is unveiled every month. In the United States, the figures are released in the middle of each month, in Germany and the UK, the data is published after the 10th of each month, in the Eurozone, the report is unveiled after the 20th of each month, and in Japan, it is disclosed only at the end of the month.