NOTES ON THE “SECRETS OF ECONOMIC INDICATORS”
based on the book by Bernard Baumohl
Prepared by Don Gimpel
"The Secrets of Economic Indicators" by Bernard Baumohl, published by Wharton School Publishing, is one of the most useful books on the
market published. It identifies key econometric indicators for the stock, bond and dollar markets. It also lists the indicators in order of importance, tells you
where they can be found in very specific terms and how they are to be interpreted. Those who are serious about the market can use this information to construct
their own "market health" composite indexes.
These notes were prepared as a personal study aid and as a way of easily locating sections of the book for the complete explanation. They are not intended as a
replacement for the material in the book. Indicators with high market sensitivity are in bold type.
TABLE SET 1: INDICATORS BY CLASSIFICATION (Note 1)
ECONOMIC DATA
SOURCE
(click on underlined internet address)
B= Available in
Barron’s Weekly/Market
Week/Market Laboratory/
Economic Indicators
NOTES
SCHEDULE OF RELEASES OF ECONOMIC INFORMATION
Economic release catalog
http://money.cnn.com/markets/IRC/economic.html
B
Economic release catalog
www.nber.org/releases/
B
Economic release catalog
http://fidweek.econoday.com/
B
News
www.bloomberg.com/news/
B
News
News
News
http://money.cnn.com/news/economy
http://cbs.marketwatch.com/news
http://news.yahoo.com/fc?tmpl=fc&cid=34&in=b
usiness&cat=us_economy
B
B
B
ECONOMIC NEWS
1
ECONOMY, US
Economic Indicators,
Leading, Coincident and
Lagging
GDP, historical data
www.globalindicators.org/us/latestreleases/
B
Bonds, Stocks and $: Little or no effect. Page 168
GDP, most recent report
www.bea.gov/newsreleases/rels.htm
B
Industrial Production and
Capacity Utilization
www.federalreserve.gov/releases/g17/current
B
Bonds: if growth<expected growth is a plus. Stocks:>3.5%
is a minus, <3.5% is a plus. $: growth is a plus and inflation
is negative. Page 115.
Bonds: Sells off on jumps when Cap. Util.>80%. Stocks: rising
is positive for stocks. $: modest reaction to moves. Page 146
Inventories, Business,
(Manufacturing and Trade
Inventories and Sales)
Non-manufacturing
(service) activity from the
Orders, Durable Goods,
Advance Report
Orders, Factory
(Manufacturers’
Shipments, Inventories and
Orders)
Purchasing Managers
Report, Chicago, NAPM
www.census.gov/mtis/www/current.html
B
Recessions and
Expansions, dates and
lengths
Supply Mgmt.
Manufacturing Survey
(ISM)
www.nber.org/cycles.html/
Academic interest only.
www.ism.ws/ismreport/index.cfm
Bonds: If >50 bearish, <45 is bullish. Stocks: Up if
trending up. $: moves up if >50Page 153
http://research.stlouisfed.org/fred2/categories/18
www.ism.ws/ISMReport/index.cfm
Bonds: Faster than expected growth is negative for bonds.
Stocks: No significant effect. Page 136
Bonds, Stock and $: No real effect Page 156
www.census.gov/indicator/www/m3/adv/
B
www.census.gov/indicator/www/m3/adv/
B
Bonds: Surprises are negative. Stocks: growth is a plus if
CU<84%. $: growth is a plus. Page 122
Bonds: Prices up on weakening economy. Stocks: inch up on
strengthening. $: unaffected. Page 129 Note 6
www.napm-chicago.org
2
CONSUMER BEHAVIOR
Bankruptcy Filings,
Personal & Business
Consumer Comfort
Index, ABC
News/Money Magazine
www.abiworld.org/template.cfm?section=news_ro
om
http://abcnews.go.com/sections/us/PollVault/Poll
Vault.html
Consumer Confidence,
Conference Board
www.conferenceboard.org/economics/consumerConfidence.cfm
Bonds: sharp increase negative. Stocks and $: declines
negative. Pg 90
Consumer Sentiment, U.
Of Mich.
Debt, Consumer
www.sca.isr.umich.edu/main.php
Debt, Consumers
Handling (Cambridge
Consumer Credit Index
Debt, Credit Card
Delinquencies
Debt, Household
www.cambridgeconsumerindex.com/index.asp?co
ntent=survey
Bonds: advance is a negative, Stocks: advance is a positive, $:
no effect. Page 99
Bonds: jump gives upward pressure on interest rates. Stocks
and $: little effect. Page 79
Bonds, Stocks and $: little effect. Page 85
Earnings, Real
Bonds, Stocks and the $: No response. Page 96
www.federalreserve.gov/releases/g19
www.aba.com/press+room/pr_releasesmenu.htm
www.federalreserve.gov/releases/housedebt/defaul
t.htm
www.bls.gov/bls/newsrels.htm
Bonds, Stocks and the $: Not sensitive to real earnings. Page
288
Income and Spending,
Personal
www.bea.doc.gov/bea/newsrel/pinewsrelease.htm
Investor Confidence
(UBS Index of Investor
Optimism)
Sales, Chain Store,
Weekly
Sales, Retail
www.ubs.com/investoroptimism
B
www.chainstoreage.com
B
Purchasing Managers
Index, Chicago
Sales, Retail, ECommerce
www.census.gov/svsd/advretl/view/advt2.txt
Compute the month-month change in retail
sales in %.
www.napm.chicago.org
www.census.gov/mrts/www/current.html
Bonds: positive on sluggish growth, gains are negative while a
jump may lead to sell-off. Stocks: higher personal income
positive except on strong economy. $: goes up on increase.
Page 61
Bonds: up is negative and for Stocks: up is positive. $: no
effect. Page 99
Bonds: strong sales make bond traders nervous. Stocks:
generally positive on rise. $: no reaction. Page 74. Note 6.
Bonds decline on increasing sales, Stocks advance. $
declines on jumps. Page 66
Bonds: Upsurge causes bonds to fall. Stocks: Little effect, $:
Little effect. Page 160
Bonds, stocks and $: little reaction. Page 69
3
EMPLOYMENT CONDITIONS
Employment Situation
http://stats.bls.gov
B
Help wanted advertising
www.conferenceboard.org/economics/
B
Layoffs, mass
www.bls.gov/mls
Unemployment
Insurance, weekly claims
www.ows.doleta.gov/unemploy/claims_arch
Bonds sell of on surge particularly when Cap. Util>80%,
When weakening is Bullish for Bonds. Robust employment
is positive for bonds. High employment drives interest rates
up. Page 37
Little or no impact. Page 44
Jump in layoffs bullish for Bondx. Page 46
B
Claims jump>30,000/week positive for Bonds. A drop leads
to lower bond prices. Persistant increases lead to down
markets. $ declines on rising claims. Page 41 Note 6
HOME SALES AND CONSTRUCTION
Affordability Index,
Home (National Assn. of
Realtors)
Housing Market IndexBuilders perception of the
current and future market
for new single-family
homes (NAHB)
Housing Starts
www.realtor.org/research.nsf/pages/housinginx
Mortgage Applications,
weekly (Mortgage
Bankers Assn.)
www.mortgagebankers.org/newsar
Sales, Existing single
family
www.census.gov/
Sales, New Home
www.census.gov/const/newressales.pdf
B
Spending, construction
www.census.gov/c30
B
www.realtor.org/research.nsf/pages/ehsdata
www.census.gov/const/www/newresconstindex.ht
ml
Bonds, Stocks and $: Little or no impact. Page 190 Note 6.
B
Bonds: Good news is bad news for bonds. Stocks: Weakness
is alarming, strength is positive. $: Strong housing report is
bullish. Page 173.
Bonds: Surges might cause a sell-off.
Bonds: little reaction unless CU > 83. Jumps scare bond
buyers. Stocks: Strong report helps stocks. $: Strong sales
help the $. Page 180.
Bonds: High impact if near peak or trough of economic cycle.
Stocks and $: little effect. Page 185
Bonds, Stocks and $: Little impact. Page 196
4
INTERNATIONAL TRADE
Current Account Balance
www.bea.gov/bea/rels.htm
Prices, Export and Import
Trade, International
www.bls.gov/mxp
www.bea.gov/bea/newsreel/tradnewsrelease.h
Bonds and Stocks: Little impact. $: A deficit will lower value
of the dollar while a surplus is highly bullish. Page 244.
Bonds, Stocks and $:No great impact. Page 273
Bonds and Stocks: Tricky to interpret. $: Improvement in
trade balance is davorable. Page 236
INFLATION PRESSURES
Employer Costs for
Employee
Compensation
www.bls.gov/
Bonds, Stocks and the $: Little impact. Page 285.
Employment Cost Index
www.stats.bls.gov/news.release/eci.toc.htm
B
Inflation effect on the
dollar
http://woodrow.mpls.frb.fed.us/research/data/us/cal
c/hist1913.cfm
B
Inflation Effect on the
Dollar
Inflation, US to 1800
www.eh.net.ehresources/howmuch/dollarq.plp
B
Inflation, US, Historic
Rates from 1913
http://woodrow.mpls.frb.frd.us/research/data/us/cal
c/hist1913.cfm
Price Index, Consumer
(CPI)
www.bls.gov/cpi/
B
Price Index, Producer
(PPI)
www.bls.gov/ppi/
B
Productivity & Costs
www.bls.gov/news.release/prod2.t02.htm
Bonds: A larger than expected jump upsets bond investors. A
stable or week ECI is positive for the bond market. Stocks:
Increase in labor costs is bearish. $: No pattern.
http://woodrow.mpls.frb.fed.us/research/data/us/cal
c/hist1800.cfm
Bonds: A jump cuts bond values and raises yields. A
benign report is bullish. Stocks: Sharp increases are very
negative. $: Inflation lowers value of the dollar (and raises
the value of gold). Page 254
Bonds: A jump in the PPI is a leading indicaor of CPI
inflaion and is important because of its early release.
Stocks: Reaction is similar to that of bonds. $: response
may go up or down depending on other conditions. Page
361..
Bonds and Stocks: No real significance. $: Gains in
productivity increase US competitiveness. Page 281.
5
FEDERAL RESERVE SURVEYS
Beige Book
www.federalreserve.gov/frbindex.htm
Chicago
www.chicagofed.org/eonomic_research_and_data/d
ata_index.cfm
www.kc.frb.org/mfgsurv/mfgmain.htm
Kansas City
New York
www.ny.frb.org/research/regional_economy/empire
survey_overview.html
Philadelphia
Richmond
www.phil.frb.org/econ/bos/index.html
www.rich.frb.org/research/surveys/
Value summary of US Economy. Bonds: Any softening of
economy is bullish. Stocks: Softening with little inflation is a
positive for stocks. $: If up and confirmed by other indicators,
it may help the $. Page 222.
Bonds, Stocks and $: Little effect. Page 218.
Bonds: Upside surprises make investors edgy. Stocks and $:
No effect. Page 212
Bonds: NY Report is timely, modest growth helps bond
prices. Stocks: Weakness has negative effect. $: No effect.
Page 203
Bonds, Stocks and $: Little effect.
Bonds, Stocks and $: Little effect. Page 214
FEDERAL BUDGET
Current Projections
www.cho.gov/
Proposed Budget
www.whitehouse.gov/comb/budget
INTEREST RATES
Mortgages
www.bankrate.com/brm/rate/avg_natl.asp
Federal Funds and
Treasury Sec., Historical
rates
Federal Funds and
Treasury Sec. Current
rates
Federal Funds and
Treasury Sec., Current
rates
www.federalreserve.gov/releases/h15/data.htm
B
www.federalreserve.gov/releases/h15/update/
B
www.bloomberg.com/markets/rates/
B
6
MONEY AND CREDIT
Bank Reserves, US
www.federalreserve.gov/releases/h3/
Commercial & Industrial
Loans, Commercial
Banks
Consumer Loans, all
commercial banks,
historical figures
Money Supply, US
http://research.stlouisfed.org/fred2/series/BUSLO
ANS/49
http://research.stlouisfed.org/fred2/series/CONSU
MER/49
www.federalreserve.gov/releases/h6/current
B
Exchange Rates
www.x-rates.com/
B
Exchange Rates
www.xe.com/ucc/
B
Exchange Rates
www.oanda.com/converter/classic
B
Exchange Rates,
Historical
Exchange Rates,
Historical
Exchange Rates, vs
Major Trading Partners
www.federalreserve.gov/releases/h10/hist/
US DOLLAR
www.oanda.com/converter/classic
www.federalreserve.gov/releases/h10/summary
B
ECONOMIC STATISTICS-ONE STOP SHOPPING
Common Economic
Indicators
Joint Economic
Committee, Congress
President’s Economic
Report
Raw data
www.economicindicators.gov
www.gpoaccess.gov/indicators/
http://w3.access.gpo.gov/eop/
www.economagic.com/
7
OTHER USEFUL SITES
Flow of Funds, Fed. Res.
Bd.
Glossary of Econ. & Fin.
Terms
Glossary of Econ. & Fin.
Terms
Glossary of Econ. & Fin.
Terms
www.federalreserve.gov/releases/zl/
www.exchange-handbook.co.uk/glossary.cfm?
www.digitaleconomist.com/glossary_macro.html
http://moneycentral.msn.com/investor/glossary/glo
ssary.asp?
8
TABLE SET 2: INDICATORS WITH HIGH MARKET SENSITIVITY
In declining order of sensitivity
CLASS
INDICATOR
B= Available in
Barron’s Weekly/Market
Week/Market Laboratory/
Economic Indicators
NOTES
BOND MARKET – TEN SIGNIFICANT INDICATORS
Employment
Conditions
Employment situation
B
Inflation
Pressures
US
Economy
Inflation
Pressures
Employment
Conditions
Prices, Consumer
(CPI)
Manufacturing ISM
Report
Price Index, Producer
(PPI)
Unemployment
Insurance, Weekly
Claims
Sales, Retail
B
Housing Starts
B
Consumer
Behavior
Home Sales
& Const.
Activity
`US
Economy
Economy
Economy
B
B
B
National Activity
Index, Chicago Fed.
Production, Industrial
and Capacity
Utilization
GDP
B
B
Bonds sell off on strong jobs report especially when it is unexpected. This might result in a sell-off
particularly if nearing the peak of the business cycle (high Capacity Utilization). Weak reports are
bullish for Bonds.
An unexpected jump can cut bond values particularly if the core-CPI also surges. A benign report is
bullish for bonds.
If the ISM Report is > 50, it is Bearish for the Bond Market. If <45, it is Bearish. The effect is benign
if >45 snd <550.
The Bond Market reacts when there is a jump in the PPI because it signals impending inflation which
cuts Bond values and raises yields. No change or a decrease is favorable for bond holders.
Increasing unemployment claims are favorable for bonds especially if it jumps by 30,000 or more. A
continuous drop in new claims is bad for bonds because it hints at more difficult conditions ahead.
Bonds decline on increasing sales because it signals accelerating growth. Falling or weak sales are
beneficial for the Bond Market.
Good news for housing is bad news for the fixed income markets because it implies a robust economy
and possible inflation.
From the Chicago Fed, the CFNAI is the National (Manufacturing) Activity. Because of volatility, it is
best to use the 3-month moving average of the change in h index. It is interpreted as follows:
Less than –1.5 – the economy is in a recession
Less than –0.7, the chance of a recession has risen
Greater than 0.2, the recession is likely over
Greater than 0.7, there is accelerating recession
Greater than 1.0, the economy is overheating
A sell-off can occur if production jumps by more than the expected amount. This is particularly the
case if CU is above 80%. Slower production with falling CU could raise Bond prices and lower
interest rates.
If the economy is growing at or below expectations as forecast by economists, then the Bond Market
reaction is likely to be positive, If growing faster than expecttions with the CPI ccelerating, this can be
very negative.
9
STOCK MARKET – TEN SIGNIFICANT INDICATORS
Employment
Conditions
Economy
Employment
Conditions
Inflation
Pressures
Inflation
Pressures
Consumer
Behavior
Consumer
Behavior
Economy
Economy
Economy
Employment Situation
Report
Mfg. Report ISM
Unemployment
Insurance Weekly
Claims
Prices, Consumer
(CPI)
B
B
Sharp increases are negative for the Stock Market because it implies inflation. This is especially true if
the non-core index also goes up. If inflation is quiescent, this is bullish for stocks.
Price, Producer (PPI)
B
Sales, Retail
B
Sharp increases are negative for the stock market because it signals higher product5ion costs and
decreased profits.
Stocks advance on upward trending Retail Sales because it signals increasing corporate profits.
Consumer Confidence
and Sentiment
Durable Goods
Advanced Report
Production, Industrial
and Capacity
Utilization
GDP
B
B
B
B
B
Increasing employment is bullish for stocks unless Capacity Utilization nears full capacity, 84%. Little
or no growth is bad for stocks.
The stock market reacts favorably to a rising PMI. Investors worry when nearing 84% Capacity Util..
A persistent increase in jobless claims is negative for the stock market because it means decreasing
imployment and disposable income which further implies lower sales and corporate profits.
Declining Consumer Confidence is negative for the stock market. High Consumer Co9nfidence is
Bullish. Stock investors like to see high values of Consumer Sentiment.
Generally, a jump in Durable Goods Orders leads tgo higher Corporate Profits and this is favorable
unless tha Capacity Utilization rate nears 84%.
Strong production is supportive of the Stock Market. Jumps in industrial production when nearing full
Capacity Utilization are negative for Stocks.
If the economy is rising faster than 3.5% for several quarters may get investors nervous and this is
negative for the Stock Market. Negative growth is negative for the Stock Market.
10
VALUE OF THE DOLLAR – TEN SIGNIFICANT INDICATORS
Employment
Conditions
International
Economy
Employment Situation
Report
Trade, International
GDP
International
Current Account
Balance
Production, Industrial
and Capacity
Utilization (CU)
Manufacturing ISM
Report
Sales, Retail
B
Prices, Consumer
(CPI)
Unemployment Ins.
Wkly. Claims
Productivity and
Costs
B
Economy
Economy
Consumer
Behavior
Inflation
Pressures
Employment
Conditions
Inflation
Pressures
B
B
B
A vigorous jobs report can drive interest rates higher making the $ more attractive to investors.
Anemic jobs report is negative for the $.
Any improvements in the trade balance is favorable for the $.
Rising GDP indicates a strong economy and this is favorable for the $ unless there is strong inflation
which makes the Market less appealing.
A deterioration in the Current Account Balance will eventually erode the value of the $. A trend
towards a surplus Balance of Payments is highly Bullish for the $.
A jump in Production is positive for the $ since it signals economic growth or at least prevent a decline
in the $.
The $ will move up if the Report is greater than 50.
B
B
B
A jump in retail sales implies a jump in imports which increases the demand for non-dollar currencies.
That can hurt the dollar.
A surge in the CPI affects interest rates and makes the dollar more attractive.
The $ declines on a steady climb in claims because of potentially lower retail sales which turns
foreigners away from US investments.
The $ strengthens if there are gains in productivity.
11
TABLE SET 3: DATA ACQUISITION FORM
This form is designed to provide a simple method for collecting the economic indicator data and entering the value obtained in the “Value” column. The data
can be obtained from the original source, following the instructions in the second column. Or, those items with a B in the value column can be obtained from
Barron’s Weekly/Market Week/Market Laboratory/Economic Indicators. Items with X in the value column may be of less interest because they are are not listed
in the top 10 indicators in Mr. Baumohl’s book, but are provided in case you need them.
DATE _______________
INDICATOR
SOURCE & ACCESS INSTRUCTIONS
DATA ITEMS
VALUE
(declining sensitivity)
BOND MARKET – TEN SIGNIFICANT INDICATORS
http://stats.bls.gov/
(1) Click on Economic News Releases bar then
(2) under major Economic Indicators, choose Employment
Situation then
(3) Employment situation summary.
(4) Scroll down to find Table A. The right hand column is
the change.
Weekly data on New Jobless Claims can be obtained from:
www.ows.doleta.gov/unemploy/claims.asp
(1) Choose range of data then press “submit.”
Monthly change in Nonfarm employment can be obtained
from http://data.bls.gov/cgi-bin/surveymost?ce
Available on the First Friday of every month
Employment/Employed
(1) Change in household employment
Prices,
Consumer, CPI
www.bls.gov/cpi/
Available on the second or third week following the month
being covered. Most of the data can be found in Barron’s
Section M, Market Laboratory/Economic Indicators.
Manufacturing
ISM Report
www.ism.ws/ismreport/index.cfm
(1) Click on Latest Manufacturing ROB
(2) Scroll down to the “Manufacturing at a Glance” Table.
Available on the first business day after the close of the
reporting month.
Employment
Situation
Report
_______
(2) Latest Unemployment Rate for all workers
B______
(3) Monthly change in Non-farm employment easiest
from Barron’s
(4) Average hourly earnings.
(5) Average weekly earnings
(6) Labor overtime change
_______
(1) Rate of Inflation/Consumer Price Index.
(2) Producer Price Index, PPI
(3) Unemployment Rate
(4) Gross Domestic Product, GDP
(5) Balance if Payments including services
Click on Latest Manufacturing ROB/ISM Report on
Business/Latest Manufacturing ROB.
(1) Record the PMI
(2) Look at the New Order Table Index,
(3) Employment Index,
(4) Supplier Delivery Index,
(5) Prices Index
(6) Production change
B______
B______
B______
_______
B______
_______
_______
_______
_______
_______
_______
_______
_______
_______
12
Price Index,
Producer (PPI)
Unemployment
Insurance,
Weekly Claims
Sales, Retail
Housing Starts
Chicago
Purchasing
Managers
Report
Production,
Industrial and
Capacity
Utilization
GDP, yr-yr
change
www.bls.gov/ppi/
(1) Use Barron’s Section M, Market Laboratory Economic
Indicators.
(2)See Commodity Data then Finished Goods at right
Available two weeks following the close of the month being
reported.
www.ows.doleta.gov/unemploy/claims_arch
Use Barron’s Section M, Market Laboratory Economic
Indicators. Available every Thursday for the preceding
week.
Note 6
www.census.gov/svsd/advretl/view/advt2.txt
(1) Click on “Full Publication in HTML” and record %
change found in the Reports first paragraph.. Scroll down to
Table 2 for more detail. Available about two weeks after the
month ends. Note 6..
www.census,gov/const/www/newresconstindex.htm
(1) Under History Table select Housing Starts then
(2) Seasonally Adjusted Annual Rate.
www.chicagofed.org/economic_research_and_data/cfnai.cfm
On left hand column, choose data series. Use the CFNAIMA3 data
Inflation/Inflation Rate yr-yr
B______
Employment/Initial Jobless Claims
B_______
Consumption and Distribution/Retail sales
B_______
http://www.federalreserve.gov
(1) Select Economic Research and Data in left hand column
then
(2) Statistics: Releases and Historical Data.
(3) Industrial Activity/Industrial Production and Capacity
Utilization then Current Monthly Release
(4) Scroll down and select Tables 1, 2 and 10.
(5) For history of indicator select Data from 1986 to present,
seasonally adjusted.
Note 6.
www.bea.gov/bea/rels.htm
Use Barron’s Section M. Advanced estimates are released
quarterly after the final week of January, April, July and
October.
Economic Growth and Investment/
(1) Capacity Utilization and
(2) Industrial Output
_______
Construction/New Housing Starts
CFNAI-MA3
Economic Growth and Investment/Gross Domestic
Product
B_______
_______
B______
_______
B_____
13
STOCK MARKET – TEN SIGNIFICANT INDICATORS
Employment
Situation Report
Manufacturing
ISM Report
Unemployment
Insurance
Weekly Claims
Price, Consumer
(CPI)
Price, Producer
(PPI)
http://stats.bls.gov/
(1) Click on Economic News Releases bar then
(2) under major Economic Indicators, choose
Employment Situation then
(3) Employment situation summary.
(4) Scroll down to find Table A. The right hand
column is the change.
Weekly data on New Jobless Claims can be
obtained from:
www.ows.doleta.gov/unemploy/claims.asp
(1) Choose range of data then press “submit.”
Monthly change in Non-farm employment can be
obtained from http://data.bls.gov/cgibin/surveymost?ce
Available on the First Friday of every month
Employment/Employed
(1) Change in household employment
www.ism.ws/ismreport/index.cfm
(1) Click on Latest Manufacturing ROB
(2) Scroll down to the “Manufacturing at a Glance”
Table.
Available on the first business day after the close of
the reporting month.
www.ows.doleta.gov/unemploy/claims_arch
Use Barron’s Section M, Market Laboratory
Economic Indicators. Available every Thursday for
the preceding week.
www.bls.gov/cpi/
Available on the second or third week following the
month being covered. Most of the data can be
found in Barron’s Section M, Market
Laboratory/Economic Indicators.
www.bls.gov/ppi/
(1) Use Barron’s Section M, Market Laboratory
Economic Indicators.
(2)See Commodity Data then Finished Goods at
right
Available two weeks following the close of the
month being reported.
(1) Record the PMI
(2) Look at the New Order Table Index,
(3) Employment Index,
(4) Supplier Delivery Index, (5) Prices Index
X
Employment/Initial Jobless Claims
X
Inflation/Consumer Price Index
X
Inflation/Producer Price Index
X
X
(2) Latest Unemployment Rate for all workers
(3) Monthly change in Non-farm employment easiest from
Barron’s
(4) Average hourly and weekly earnings.
(5) Labor overtime change
14
Sales, Retail
Consumer
Confidence and
Sentiment
Durable Goods
Advanced Report
Production,
Industrial and
Capacity
Utilization
GDP, Yr-Yr
change %
www.census.gov/svsd/advretl/view/advt2.txt
(1) Click on “Full Publication in HTML” and
record % change found in the Reports first
paragraph.. Scroll down to Table 2 for more detail.
Available about two weeks after the month ends.
Note 6.
www.conferenceboard.org/economics/consumerConfidence.cfm
Available on the last Tuesday of the month being
surveyed.
Consumption and Distribution/Retail store sales
Also available on the internet.
X
Other Indicators/Consumer Confidence
B______
research.stlouisfed.org
Look at new orders for data
Available 3 to 4 weeks after the end of the reporting
month. Note 6.
http://www.federalreserve.gov
(1) Select Economic Research and Data then
(2) Statistics: Releases and Historical Data.
(3) Principal Economic Indicators/Industrial
Production and Capacity Utilization then
(4) Scroll down and select Tables 1, 2 and 10.
(5) Select Data from 1986 to present, seasonally
adjusted.
Note 6.
www.bea.gov/bea/rels.htm
Use Barron’s Section M. Advanced estimates are
available after the final week of January, April, July
and October.
Data from the St. Louis Fed
_______
Economic Growth and Investment/Capacity Utilization and
Industrial Output
X
Economic Growth and Investment/Gross Domestic Product
X
15
$ - TEN SIGNIFICANT INDICATORS
Employment
Situation Report
Trade,
International
GDP, Yr-Yr
change
Current Account
Balance
Production,
Production,
Industrial and
Capacity
Utilization
Manufacturing
ISM Report
http://stats.bls.gov/
(1) Click on Economic News Releases bar then
(2) under major Economic Indicators, choose
Employment Situation then
(3) Employment situation summary.
(4) Scroll down to find Table A. The right hand
column is the change.
Weekly data on New Jobless Claims can be
obtained from:
www.ows.doleta.gov/unemploy/claims.asp
(1) Choose range of data then press “submit.”
Monthly change in Nonfarm employment can be
obtained from http://data.bls.gov/cgibin/surveymost?ce
Available on the First Friday of every month
Employment/Employed
(1) Change on household employment
X
www.bea.gov/bea/newsreel/tradnewsrelease.h
Available the second week of the month for the
trade of two months earlier.
www.bea.gov/bea/rels.htm
Use Barron’s Section M.
Advanced estimates are available after the final
week of January, April, July and October.
www.bea.gov/bea/rels.htm
Use Barron’s Section M Market Laboratory
Economic Indicators. Data is released two and a
half months after the end of the reference quarter.
www.federalreserve.gov/releases/g17/current
Released about the fifteenth of the month for the
preceding month.
(1) Trade/Exports and
(2) Imports
B______
B______
Economic Growth and Investment/Gross Domestic Product
X
Trade/Balance of Payments
B______
Economic Growth and Investment/Capacity Utilization and
Economic Growth and Investment/Capacity Utilization and
Industrial Output
X
www.ism.ws/ismreport/index.cfm
Click on Latest Manufacturing ROB
Available on the first business day after the
reporting month.
Click on Latest Manufacturing ROB/ISM Report on
Business/Latest Manufacturing ROB.
(1) Record the PMI
(2) Look at the New Order Table Index,
(3) Employment Index,
(4) Supplier Delivery Index,
(5) Prices Index
X
(2) Latest Unemployment Rate for all workers
(3) Monthly change in Non-farm employment easiest from
Barron’s
(4) Average hourly and weekly earnings.
(5) Labor overtime change
16
Sales, Retail
Price, Consumer
CPI
Unemployment
Insurance,
Weekly Claims
Productivity and
Costs
www.census.gov/svsd/advretl/view/advt2.txt
(1) Click on “Full Publication in HTML” and
record % change found in the Reports first
paragraph.. Scroll down to Table 2 for more detail.
Available about two weeks after the month ends.
Note 6.
www.bls.gov/cpi/
Available on the second or third week following the
month being covered. Most of the data can be
found in Barron’s Section M, Market
Laboratory/Economic Indicators.
www.ows.doleta.gov/unemploy/claims_arch
Use Barron’s Section M, Market Laboratory
Economic Indicators. Available every Thursday for
the preceding week.
www.bls.gov/news.release /prod2.t02.htm
(1) Go to the bottom of the table and record the YrYr change in output per hour of all persons.
(2) Record the Yr-Yr change in the increase in the
labor force as hours of all persons.
(3) The sum of both is the safe limit on economic
growth.
The data is released about 5 weeks after the end of
the quarter.
Consumption and Distribution/Retail Store Sales (Barron’s)
X
Inflation/Consumer Price Index
X
Employment/Initial Jobless Claims
X
Unit labor costs Index, % change.
_______
Output per hour Yr-Yr change %
_______
17
ECONOMIC INDICATORS
Based upon The Atlas of Economic Indicators by Carnes and Slifer
INDICATOR
GNP
Employ. Payroll
Unemployment Rate
Producer Price Index
Retail Sales
Industrial Product.
Capacity Utilization
Housing Starts
Building Permits
Personal Inc./Cons
Leading Econ. Ind.
Car Sales
IMPORT BOND
Note 1
++++
++++
++++
+
+++
+++
+++
+++
+++
+++
+++
+++
++
-
STOCK
Note 1
+
+
+
+
+
+
+
+
+
+
Purchasing Mgr. Ind
Durable Goods Ord.
++
++
-
+
+
New Home Sales
Construction Spend.
Balance of Payments
++
++
++
-
+
+
Factory Orders/Inv.
Business Inventories
+
+
0
0
0
MONEY WHEN AVAIL.
COMMENTS
Note 1
Note 2
Q +21-30D
The most important indicator
+
M + 1-7D
Provides a first look at the economy
+
M + 1-7D
Provides a early look at the economy
M + 9-16D
The first look at inflation
0
M + 11-14D
Signals major market movements
0
M + 14-17D
Signals what is happening in mfg.
0
M + 14-17D
Signals level at which econ. heats up
0
M + 16-20D
First to turn down in a recession
0
M + 16-20D
First to turn down in a recession
0
M + 22-28D
Comprises over half of GDP
+
M
Signals when econ. changes direction
+
Every 10D + First data released
+
3D
M + 1D
First look at manufacturing
+
M + 22-28D
Very volatile Index that must be somoothed
0
to be useful
M + 0-4D
A leading indicator
M + 2M
Constitutes 20% of GDP
+
M +2M + 15- Uncertain reaction but becoming more
+
17D
important
M
+
2M
+
6D
Not much information
0
M
+
2M
+15Not much information
0
17D
Note 1: A + indicates that change in the indicator signals a change in the market in the same direction. A – signals that a change in the
indicator causes an opposite change in the market.
Note 2. Q = Quarterly, M = Monthly, D = Days
18
IMPORTANT ECONOMIC INDICATORS
The following twenty indicators are used to measure the strength of the Bond, Stocks and $ Markets:
Business Barometer Index – From the NAPM Purchasing Managers Report available on the Internet – This is a
measure of business activity in the Midwest with medium to high market sensitivity. The index is published earlier
than others and that makes it significant. It provides tips on what the ISM report will release a few days later. It
provides information on the Business Barometer, New Orders and Backlogs, and Supplier Deliveries and Prices
Paid. If both the Chicago and the ISM report show large increases, this implies that profits are on the rise which is
good for the market. If Capacity Utilization is already high, then the market could respond perversely. As for
Bonds, a surge in the index could cause the bond market to drop. (Page 157)
Capacity Utilization Index –This index is a measure of the fraction of total production capacity is being utilized.
When this number approaches 84%, it signals that the economy is approaching full production and that any further
rise will cause inflation. It is used in conjunction with other indicators to signal a reverse in their properties. (Page
138) (Economic Growth and Investment/Capacity Utilization))
Consumer Confidence and Sentiment – This index measures how people feel about their jobs, the economy and
spending. Its sensitivity is medium but can be high at turning points. When the indicator starts to decline, this is not
favorable for stocks because it can presage declining sales and profits. High and stable confidence levels are bullish
for the stock market. High and advancing confidence levels are negative for the bond market because it can lead to
an advancing economy, borrowing and inflation. Bond traders like to see this index decline. (Pages 86, 91) (Other
Indicators/Consumer Confidence)
Durable Goods Advanced Report – This indicator is highly sensitive. It is also known as the “Advanced Report
on Durable Goods, Manufacturers Shipments, Inventories and Orders.” This indicator provides solid clues as to
what might happen to the economy and that is why it is carefully watched The table titled Durable Goods
Manufacturer’s Shipments and New Orders provides this information: (1) New Orders, (2) Orders excluding
transportation, (3) Orders excluding defense, (4) Details on orders for different industry groups, (5) Capital goods
orders and (6) Nondefense capital goods. The site also provides information on Durable Goods Manufacturers
Unfilled Orders and Total Inventories. Generally, a jump in orders is viewed favorably because it leads to higher
profits. However, if the economy is running close to full capacity (84%), then there is fear that interest rates will
rise which cuts earnings thus depressing share prices. If orders come in at a faster than expected pace, it could
pummel bond prices and raise yields. A sudden drop in orders is bullish for bonds. (Page 116) (Economic Growth
and Investment/Durable Manufacturing)
Employment Situation Report – This report is highly sensitive and its release is eagerly awaited for its economic
and political impact. The table obtained from the internet provides household data on the top and an establishment
survey on the bottom. The detailed report provides information on: (1) The size of the civilian labor force
(Employment/Civil Labor Force), (2) The latest monthly unemployment rates (Employment/Unemployment Rate),
(3) The monthly change in non-farm employment (This is the most important piece of data available)
(Employment/All non-farm payrolls), (4) Differences in hours worked, (5) The average hourly and weekly earnings,
(6) Part time employment, (7) The size of the unemployed population which gives information on how long they
have been without jobs, (8) The unemployment rate (Employment/Unemployment rate), (9) Temporary hiring of
workers. Robust employment signals disposable income and this is very good for the stock market. This is true
unless the economy is overheating, high Capacity Utilization Rates. Little or no employment growth is generally
bad for the Stock Market. A strong jobs report is generally bad news for the Bond Market. A week report is bullish
for bonds. A vigorous jobs report is very good for the $. (Page 25) (Employment/Employed)
19
Employment, Unemployment Insurance Weekly Claims – The stock market behaves badly when there is a
persistent increase in unemployment claims. An upward trend up claims implies a weakening job market and a drop
in disposable income and profits. The fixed income market responds positively to a weakening economy. A steady
climb in unemployment claims turns foreign investors away from US securities and weakens the dollar. (Page 38)
(Employment/Initial Jobless Claims)
Gross Domestic Product (GDP) – The market sensitivity to the GDP is medium to high. The GDP is a measure of
total goods and services produced and its rate-of-change is a measure of how fast or slow the economy is growing.
When studying the GDP look for the following: (1) the GDP itself, (2) Personal consumption expenditures, (3)
Gross private domestic investment, (4) Net exports of goods and services, (5) Government consumption
expenditures and gross investment, (6) final sales of domestic products and (7) Gross domestic purchases. All of
this information is found in a table titles: Gross Domestic Product and Related Measures: Level and Change from
Preceding Period. Also look at the table titled Price Indexes for Gross Domestic Product and Related Measures:
Percent Change from Preceding Period. Here look for (8) GDP Price Index and the GDP Implicit Price Deflator, (9)
Deflator for Gross Domestic Purchases, and (10) Deflator for Personal Consumption Expenditures. To evaluate the
GDP, assume a normal sustainable growth rate of 3.5% Sustained growth in excess of that value makes stock
investors nervous for its implications on inflation. Sluggish or nonexistent growth is also bad for the market. If the
GDP numbers exceed expectations and the inflation index is accelerating, this is very negative for bondholders
because of the possibility that the Fed will raise interest rates. The dollar tends to strengthen with strong domestic
growth. (Page 100) (Economic Growth and Investment/Gross Domestic Product)
Housing Starts – This indicator records the number of new homes being built and the permits for new construction.
This indicator comes close to being able to foresee the future direction of the economy. Except for one case (2001),
there has never been a recession when the housing sector stood strong. In the Table on New Privately-Owned
Housing Units Started, look for (1) Total Housing Units Started, (2) Single-Family Housing Starts and (3) Housing
Starts Regionally. Prolonged weakness in housing starts is often a precursor to a broader downturn.affecting the
Stock Market. A rebound can have a beneficial effect. The Bond Market reacts negatively to good housing news.
Traders prefer week or falling housing starts. A strong housing report is bullish for the dollar because it implies
stronger corporate profits. (Page 169) (Construction/New Housing Starts)
Industrial Production – This indicator records US industry’s output. It measures changes in the volume of goods
produced irrespective of the price of goods. This information is available from Federal Reserve Tables which
record: (1) The total index, the change in industrial activity over the last four-months (Economic Growth and
Development/Manufacturing), (2) The total amount of goods produced (Production/Industrial Output), (3) the
Manufacturing, mining and utility components of industrial production. (4) the percent change in production for all
these groups, (5) capacity utilization Economic Growth and Investing/Capacity Utilization), (6) business equipment,
(7) Defense and space equipment, (8) motor vehicles and parts, (9) the degree of investment in high-technology
products, (11) fluctuations in the automotive industry and (12) the capacity utilization rates (Economic Growth and
Development/Capacity Utilization). If higher production leads to excessively tight production, high Capacity
Utilization, this is negative for the stock markets and then the markets might react negatively. The bond market can
sell off on jumps greater than expected amounts especially if the capacity utilization is greater than 80%. Bond
prices go up with falling capacity utilization along with lower interest rates. (Page 137)
Manufacturing Index, Product, Manufacturing ISM Survey When this index is greater than this means that both
manufacturing and the economy are expanding. When between 43 and 50 this means that manufacturing is
contracting yet the overall economy is growing. When it sustains below 43 this means that both manufacturing and
the economy might be in a recession. This implies that the Fed is likely to lower the Fed Funds Rate to stimulate the
economy. A rising PMI causes a positive reaction in the stock market. When the index jumps when the economy is
already in full activity, the market could drop because of concerns about overheating and the possibility that the Fed
will raise rates. (Pages 150-153) (Economic Growth and Investment/Manufacturing NAICS)
20
Orders, New Index – From the NAPM Purchasing Managers Report This report measures business activity in
the Midwest. The NAPM is affiliated with the ISM. The Tables provide this information: (1) A business
barometer(Orders/Purchasing Managers Index), (2) New orders and backlogs (Orders/New Orders and Backlogs)
and (3) Supplier delivery and prices paid, This indicator is used in conjunction with the ISM Report. Hefty
increases signal confidence that corporate profits are rising and this is healthy for the stock market unless the
economy is well into its expansion phase as measured by Capacity Utilization above 84%. Boond traders are highly
sensitive to this report because it is a forerunner of the ISM Manufacturing Survey. An unexpected rise in the
Business Barometer will likely cause Bond prices to fall in anticipation of concurrence that the national survey will
show similar results. (Page 157) (Orders/New Factory Orders)
Price Index, Consumer (CPI) – An index representing the prices that consumers pay for selected goods and the
generally accepted measure of inflation. A jump in the CPI leads to higher bond rates (lower bond prices). Because
jumps in the CPI lead to higher bond rates, this signals increasing borrowing costs reducing profits. Investors like to
see benign CPI rates. (Page 245) (Inflation/Consumer Price Index)
Price Index, Producer (PPI) – An index representing the prices that producers pay for selected goods. It is believed
to be a leading indicator of price inflation. It is also the first key inflation gauge that the government publishes so
that it is watched closely. Rising PPI depresses the bond market and force interest rates up. No change or an actual
decline is viewed favorably by bond holders. A small increase in the PPI allows manufacturers to raise prices and
increase their profits which is healthy for the stock market. However, a large increase is viewed negatively. There
is no consensus as to where the inflection point is between a rising and declining market. (Page 255)
(Inflation/Producer Price Index)
Productivity and Costs – This indicator measures the change in goods and services workers efficiency.
Productivity growth helps exporters win markets oversees and enriches households and corporations. It is by far the
most important determinant of the long-term health and prosperity of an economy. Look for (1) The output per hour
of all persons, (2) The compensation per hour and (3) Unit labor costs. Higher productivity growth translates into
lower per unit labor costs and higher corporate profits. Both events cause the stock market to trend up while flat or
declining productivity is viewed as bearish. Higher productivity levels keep inflation in check and this is positive
for the bond market. A fall in production when the Capacity Utilization nears full production may lead to a Bond
Market sell-off. Improvements in productivity is positive for the $ because of this countries increased ability to
compete in world markets. (Page 275)
Sales, Retail - Look for the percent change in estimated advance monthly sales for retail and food services. When
there is a jump in retail sales this suggests that consumers are in a buying mood snf thst could accelerate economic
growth which can lead to lower bond prices. Weak or falling retail sales can cause bond prices to rise. On the other
hand, healthy retail sales increases corporate revenue and profits both of which are positive for stocks. There might
be some uncertainty of whether or not such sales are sustainable and that is negative for the stock market. (Page 62)
(Consumption and Distribution/Retail Store Sales)
Supplier Delivery Index – A measure of the lag time in product delivery that indicates how close manufacturing is
to full production. When hreater than 50%, it means that purchasing agents are having to wait longer to receive
ordered material. This implies strong demand. Suppliers can then regain pricing power which may cause inflation.
This index is a very effective predictor of economic activity. (Page 157)
Trade, Current Account Balance – This indicator is a measure of the pressure on the $. A deficit indicates that the
US is borrowing money which if continued for long periods signals a decline in the $. (Page 237) (American Debt
and Deficits/Trade Deficit)
Trade, International – Measures imports and exports. Look for positively trending exports and a positive account
balance. (Page 225) (Trade/Exports and Imports)
21