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The Complete Idiot’s Guide® To: Economic Indicators

Book Description

This book explains all of the major factors that directly impact the financial sector--and how you can invest wisely with this information. It includes valuable explanations and analysis about all of the terms you hear everyday in the news--gross domestic product, factory orders, unemployment claims, consumer reports, housing starts and more. You’ll also learn about the Federal Reserve’s Monetary Policy.

Table of Contents

  1. Copyright
    1. Dedication
  2. Introduction
    1. How to Use This Book
    2. Extras
    3. Acknowledgments
    4. Trademarks
  3. 1. Economic Indicators and You
    1. 1. Economic Indicators: A High Impact on Markets and You
      1. Getting in the Game
        1. First-Tier Economic Indicators: The A Team
        2. Your Ticket to the Action: Economic Calendars
        3. Economic Calendars on the Web
      2. Consensus Forecasts: The Experts Weigh In
      3. News Affecting the Impact of Economic Indicators
      4. So, What Am I Looking For?
      5. The Key Financial Markets
        1. Stock Market
        2. Bond Market
        3. Commodities Markets
        4. Currency Markets
        5. Tracking the Markets
      6. Is This Good News or Bad News?
      7. Prepping Before an Indicator News Release
        1. The Least You Need to Know
    2. 2. Basics About Indicators and Business Cycles
      1. Business Cycles Matter
      2. Picking the Start and End of Recession
      3. What Causes a Recession?
        1. U.S. Business Cycles Since the Great Depression
        2. Rising Interest Rates and the Fed
        3. Inventory Build-Up
        4. When Asset Bubbles Burst
        5. Oil Price Shocks
        6. Decrease in Exports
      4. Key Facts About Leading Indicators
        1. Key Data Series
        2. What’s in Each Composite Index?
      5. What Are Important Cyclical Characteristics?
      6. Market Focus on the Leading Economic Indicators Report
      7. Key Forms of Economic Data—Starting with Levels
        1. Types of Measures
        2. Percent Changes and Other Change Formats
      8. What Are Seasonally Adjusted Numbers?
        1. The Least You Need to Know
    3. 3. Gross Domestic Product: The Big Picture
      1. The Big Picture
      2. Key Facts About the GDP Report
        1. Real GDP vs. Fake GDP
        2. Consumer Spending: The Economy’s Heavy Lifter
      3. What Are Real Investments? (Hint: Not the Stock Market!)
        1. Fixed Investment
        2. Inventory Investment: The Tail That Wags the Dog
      4. Government Purchases
      5. Net Exports
        1. The Least You Need to Know
    4. 4. GDP and Monthly Indicators
      1. Monthly Indicators and GDP Components
        1. Consumer Fundamentals
      2. Investment Fundamentals
        1. Government Consumption Expenditures and Investment Fundamentals
        2. Net Export Fundamentals
      3. Monthly Source Data for GDP
      4. GDP Price Indexes
      5. GDP Measured by Income
      6. Market Reaction to the GDP News Release
        1. The Least You Need to Know
  4. 2. The Consumer in the Economy
    1. 5. The Employment Report
      1. The Employment Report Sets the Tone
      2. Key Facts About the Employment Report
        1. Key Data Series
        2. The Household Survey
        3. The Primary Categories for Work Status
        4. The Unemployment Rate over the Business Cycle
        5. The Establishment Survey
        6. Behind the Establishment Survey Numbers
      3. The Components of Payroll Employment Data
      4. Comparing Household and Establishment Employment
      5. Comparison of Household and Establishment Employment Surveys
      6. Other Key Payroll Series
      7. Use of Payroll Employment Data in Other Economic Indicators
      8. How Financial Markets React to the Employment Report
        1. The Least You Need to Know
    2. 6. More Employment Indicators
      1. Other Employment Data
      2. Key Facts About the Unemployment Claims Report
        1. Key Data Series
        2. Initial Claims and Insured Unemployment Rate, November 29, 2008
        3. Behind the Claims Data
      3. Key Facts About the ADP Employment Report
        1. Key Data Series
        2. Behind the ADP Numbers
      4. How Financial Markets View ADP Employment
      5. Key Facts About the Monster Employment Index
        1. Behind the Monster Employment Index
        2. Key Data Series
      6. Market Focus on the Monster News Release
        1. The Least You Need to Know
    3. 7. Retail Sales: Going Malling and More
      1. Key Facts for the Retail Sales Report
        1. What Are Retail and Food Services Store Sales?
        2. What’s in the Components?
      2. Retail Sales, the Business Cycle, and Price Factors
        1. Retail Sales as Source Data
        2. How Markets Move on the News Release
        3. How’s the Weather?
      3. The Number of New Motor Vehicle Sales
      4. Key Facts from the Vehicle Sales Reports
      5. Motor Vehicle Sales and the Economy
        1. Light Trucks: A Heavier Category Than You Think
        2. Truck Sales and the Price of Gasoline
        3. Unit New Motor Sales as Related to Other Indicators
      6. Buy American—Even If It’s an Import!
      7. How Markets Move on the News Release of Unit New Auto Sales
      8. Key Facts for Weekly Numbers on Retail Sales
      9. How Financial Markets React to Weekly Sales Numbers
        1. The Least You Need to Know
    4. 8. Personal Income: Don’t Spend It All in One Place
      1. What Is Personal Income?
      2. Key Facts About the Personal Income Report
        1. The Major Components of Personal Income
        2. The What-You-Do-With-It Side of Personal Income
      3. What’s Left? Personal Saving
      4. What Are the Differences Between PCEs and Retail Sales?
      5. PCE Price Indexes: The Fed Is Watching!
      6. Special Events and Personal Income, Spending, and Price Indexes
      7. How Markets Move on the News Release
        1. The Least You Need to Know
    5. 9. Consumer Sentiment and Confidence
      1. The Two Consumer Attitude Surveys
      2. The Consumer Sentiment Index
        1. Key Facts About the Consumer Sentiment Index
        2. Behind the Consumer Sentiment Index
        3. Other Questions in the Surveys of Consumers
      3. The Consumer Confidence Index
        1. Key Facts About the Consumer Confidence Index
        2. The Major Components of the Consumer Confidence Index
        3. Differences Between the Two Surveys
      4. How Markets Move on Release of Sentiment and Confidence
        1. The Least You Need to Know
  5. 3. Inflation Numbers
    1. 10. Consumer and Producer Price Inflation
      1. So, What Is Inflation?
      2. The Consumer Price Index Report
        1. Key Facts About the Consumer Price Index Report
        2. Let’s Talk About the Key Components of the CPI
      3. Quality Adjustments: Understating Real Costs
      4. Uses of the CPI
      5. Headline vs. Core CPI
      6. The Misery Index
      7. Key Facts About the Producer Price Index
        1. The Stage-of-Processing Indexes
        2. Inflation Information from Stage-of-Processing PPIs
      8. Comparison of Price Indexes
      9. Market Reaction to the CPI and PPI News Releases
        1. The Least You Need to Know
    2. 11. What About Inflation from Labor Costs?
      1. The Importance of Productivity for the Economy
      2. Key Facts About the Productivity and Costs Report
        1. The Productivity and Costs Report
        2. Series in the Report
        3. Productivity and Labor Cost Trends
        4. Productivity in the Short Term
      3. Key Facts About the Employment Cost Index Report
      4. The Key ECI Series
      5. Productivity and Costs Report vs. the ECI
      6. Market Reaction to Productivity and ECI Reports
        1. The Least You Need to Know
    3. 12. Oil, Gold, and Other Commodities Prices
      1. Basics on Commodities and Inflation
      2. Oil—The Commodity That Makes or Breaks Inflation
        1. The Big Names for Oil
        2. Tracking Oil Prices
        3. Factors Affecting the Price of Oil
        4. Tracking Oil Futures
        5. Key Facts About EIA’s Weekly Petroleum Status Report
        6. Market Reaction to the Weekly Petroleum Status News Release
      3. Commodity Price Indexes
        1. The Commodity Research Bureau Spot Index
        2. Differences Between Futures and Spot Indexes for CRB
        3. How the CRB Spot Index Relates to Overall Inflation
      4. Gold as a Commodity
        1. The Least You Need to Know
  6. 4. Housing and Construction
    1. 13. Housing Starts: Keeping Homebuilders Busy
      1. Housing Starts: The Rock Star of Housing Data
      2. Who Cares About Housing Starts?
      3. Housing Starts Move the Financial Markets
      4. Key Facts About the Housing Starts Report
        1. Where Do Housing Permits Fit In?
        2. Behind the Numbers
      5. Housing Starts: A Roller Coaster Within the Economy
        1. How Housing Starts Are Related to Other Economic Data
      6. How Markets Move on the News Release
      7. Sneak Peek: Where Are Housing Starts Headed?
        1. NAR Pending Home Sales Index
        2. NAHB Housing Market Index
        3. MBA Mortgage Applications
        4. New Home Sales
        5. NAR Existing Home Sales
      8. Effects of Changes in Building Codes
      9. Key Facts About the Construction Spending Report
        1. Key Numbers in the Report
        2. Behind the Numbers
      10. Construction Expenditures and Market Reaction
        1. The Least You Need to Know
    2. 14. Home Sales: Is Your Real Estate Broker Happy?
      1. Why Existing Home Sales Are Important
      2. Used Home Sales—No Hammers, But Big Impact
      3. Key Facts for Existing Home Sales
      4. Why Prefer Median Home Sales Prices to Average Prices?
      5. Developers’ Delight: New Single-Family Home Sales
      6. Key Facts for New Home Sales
        1. The Census Bureau/HUD Joint Report
        2. Differences in the Home Sales Reports
      7. Home Sales and Market Reaction
      8. Home Values, Housing Activity, and the Economy
        1. How Home Values Affect Mortgage Financing
        2. House Price Effects on Broader Credit Markets
      9. What Are the Traditional House Price Indexes?
      10. Key Facts for the Case-Shiller Home Price Index
      11. Key Facts for the FHFA House Price Index
      12. What Do Markets Watch for in House Price Indexes?
        1. The Least You Need to Know
    3. 15. Early Warnings on Housing
      1. Key Facts About the Pending Home Sales Index
        1. Behind the Numbers in the Pending Home Sales Index
        2. Pending Home Sales Index Trends
      2. Key Facts About the Housing Market Index (HMI)
        1. What’s in the HMI Survey?
        2. Putting Together the HMI Indexes
        3. HMI Trends
      3. Key Facts About the MBA Weekly Mortgage Applications Survey
      4. Market Reaction to the Reports
        1. The Least You Need to Know
  7. 5. Manufacturing and International Trade
    1. 16. Industrial Production: Keeping the Assembly Lines Running
      1. Key Facts About the Industrial Production and Capacity Utilization Report
      2. The Key Components of the Industrial Production Index
        1. Industry Groups
        2. Market Groups
        3. Auto Assemblies
        4. Capacity Utilization
        5. Market Reaction to the Industrial Production News Releases
      3. Key Facts About the Durable Goods Orders Report
        1. The M3 Survey
        2. The Key Components of Durable Goods Orders
        3. Market Reaction to the Durable Goods Orders News Releases
      4. Key Facts About the Factory Orders Report
        1. The Key Components of Factory Orders
        2. Market Reaction to the Factory Orders News Releases
        3. The Least You Need to Know
    2. 17. Manufacturing Surveys: An Early Glimpse
      1. The ISM Manufacturing Report
      2. Key Facts About the ISM Manufacturing Index
        1. Reviewing Diffusion Indexes
        2. More Fun with Diffusion Indexes
        3. Supplier Deliveries: A Leading Indicator
      3. Market Reaction to the ISM Manufacturing News Releases
      4. Federal Reserve District Manufacturing Surveys
        1. Key Facts About the Philadelphia Fed Manufacturing Survey
        2. Philly Fed Diffusion Indexes
        3. The Philly Fed Headline and Prices Indexes
        4. Key Facts About the New York Fed’s Manufacturing Survey
        5. Market Reaction to the Philly Fed and Empire State News Releases
        6. Key Facts About Other Regional Federal Reserve Bank Manufacturing Surveys
      5. Non-Manufacturing Surveys
        1. Key Facts About the ISM Non-Manufacturing Survey
        2. Key Facts About the ISM-Chicago Business Survey
        3. The Least You Need to Know
    3. 18. International Trade: How Our Dollars Come and Go Overseas
      1. Key Facts About the International Trade Report
      2. More Facts About the International Trade Report
        1. End-Use Categories
        2. Services Exports and Imports
        3. Country Data on International Trade
        4. Market Reaction to the International Trade News Release
      3. Key Facts About the Import and Export Prices Report
        1. Data Sources for Import and Export Prices
        2. Market Reaction to the Import and Export Prices News Releases
      4. Key Facts About the Treasury International Capital Report
        1. Behind the TIC Data
        2. Market Reaction to the TIC News Release
        3. The Least You Need to Know
  8. 6. Fed Watching: The Best for Last
    1. 19. The Federal Reserve and Monetary Policy
      1. What Is Monetary Policy?
      2. The Fed’s Monetary Policy Tools
        1. The Board of Governors
        2. The District Fed Banks
        3. Open Market Operations
        4. The Federal Open Market Committee
        5. The District Bank Presidents and the FOMC
      3. Yes, There Is an FOMC Cycle
      4. The Discount Rate
        1. How Is the Discount Rate Determined?
        2. How Does the Discount Rate Fit in with Monetary Policy?
      5. Brand-New Policy Tool: The Fed Pays Interest on Reserves
        1. Reserve Requirements
        2. The Least You Need to Know
    2. 20. Fed Reports on the FOMC Meeting
      1. Key Facts About the Beige Book
        1. Looking Closer at the Beige Book
        2. Market Reaction to the Beige Book
      2. Key Facts About the FOMC Meeting Statement
        1. Looking Closer at the FOMC Meeting Statement
        2. An Anti-Inflation Bias Example
        3. Dissent at the FOMC
        4. Hawks vs. Doves
        5. Market Reaction to the FOMC Statement
      3. Key Facts About the FOMC Meeting Minutes
        1. Looking Closer at the FOMC Meeting Minutes
        2. Market Reaction to the FOMC Meeting Minutes
      4. The Fed’s Economic Forecast
      5. Fed Forecasts over Time
        1. The Least You Need to Know
    3. 21. More Fed Reports and Quantitative Easing
      1. Key Facts About the Monetary Policy Report to the Congress
        1. Looking Closer at the Monetary Policy Report to the Congress
      2. Key Facts About the Discount Rate Meeting Minutes
        1. Looking Closer at the Discount Rate Meeting Minutes
        2. Market Reaction to the Discount Rate Meeting Minutes
      3. Quantitative Easing and the Fed’s Balance Sheet
      4. Key Facts About Money Supply
        1. Tracking Money Supply
        2. Key Facts About the Reserve Balances and the Monetary Base
        3. Key Facts About Factors Affecting Reserve Balances
        4. The Least You Need to Know
    4. 22. What Financial Markets Tell Us About Fed Policy
      1. So, What Are Fed Funds Futures?
      2. The Implied Fed Funds Futures Rate
      3. Charting Implied Fed Funds for the Big View
      4. Yield Curves Tell You What Bond Traders Think About Fed Policy
        1. Yield Curve and Treasuries Defined
        2. Finding the Market Data for Yield Curves
        3. Key Characteristics of the Normal Yield Curve
        4. Fed Policy Effects on the Yield Curve
        5. Inflation and the Yield Curve
        6. Flight-to-Safety and the Yield Curve
        7. Reading Recent Yield Curves
      5. The “Real” Fed Funds Rate
      6. So, How Do I Come Up with Real Fed Funds?
      7. The TED Spread: Is the Fed Soothing the Markets?
        1. The Least You Need to Know
  9. Economic Indicators Glossary