Educational

Economic Calendar: What is it?

An economic calendar, also called a forex calendar, is one which is designed to help traders and investors learn about upcoming major economic information, such as the consumer price index, private medical insurance rates, and the nonfarm payroll. Even government reports are included. Economic calendar operate on a much shorter timescale and they are generally released every hour.

Economic business planning and charts as concept.

For traders, decision making is very important. Planning an investment goal and choosing a specific financial tool to trade on can only bring the expected return on investment if you know what moves the market and when it is the best time to enter or exit your trades.

There are many tools that traders use to base trading decisions on. You can’t consistently make successful trades without knowing the recent state of the market. Using an economic calendar is an easy fast way to stay on top of fast shifting markets. Even small events can cause brief ripples in the market and give a patient, observant investor time to slip in and make an orderly profit. This, in conjunction with sharing trade strategies or advice across the web, could give a relatively new trader that extra edge.

Why use an economic calendar

  • Traders can track occurring of market moving events and measure their effects
  • Expect major market events and act on their performances
  • Stay up-to-date of crucial market movements that can affect your open trades
  • Follow important economic and non-economic indicators
  • Events that influence the movements of a specific currency can be closely monitored

Economic Calendar Indicators

An economic calendar contains a list of many significant economic indicators that are required to make an up-to-date decision. Economic indicators help you consider trades in the context of economic events and understand price actions in these events.

Money and graphs for finance concept.

By following indicators for GDP, for example, or inflation and employment strength, you can expect market volatility and gain potential trading opportunities in good time.

Consumer Confidence Index

The consumer confidence index (CCI) survey is an index by the conference board that measures how optimistic or pessimistic consumers are with respect to the economy in the near future. The consumer confidence index is based on the concept that if consumers are optimistic, they tend to buy more goods and services. This increase in spending naturally stimulates the entire economy.

Consumer Price Index

A consumer price index measures changes in the price level of market basket of consumer goods and services bought by households. The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.

Durable Goods Orders

Durable goods orders are an economic indicator released once-a-month by the Bureau of Census. That reflects new orders placed with domestic manufacturers for delivery of factory hard goods in the near term or future. Durable goods orders come in two releases per month: the advance report on durable goods and the manufacturers’ shipments, inventories, and orders.

Employment Cost Index

The employment cost index is a monthly economic series published by the Bureau of Labor Statistics that details the development of total employee compensation. The index is prepared and published by the Bureau of Labor Statistic, a unit of the United States Department of Labor. It tracks movement in the cost of labor, as measured by wages and benefits, at all levels of a corporation.

Gross Domestic Product Deflator

It indicates the economic growth of a country, and it is determined by product output, income and expenditure. GDP is often connected with the living standard. It is the market value of all services and goods produced in a country in a certain time period.

Industrial Production

The industrial production is a measure of output of the industrial sector of the economy. The industrial sector includes manufacturing, mining, and utilities.  Even though these sectors contribute only a small portion of gross domestic product they are very sensitive to interest rates and consumer demand.

This makes industrial production a significant tool for predicting future GDP and financial performance. Industrial production figures are also used by central banks to measure inflation, as high levels of industrial production can lead to unrestrained levels of consumption and rapid inflation. The industrial productions came about during the industrial revolution.

See also: Commodities: What You Should Know

Industrial Production and Capacity Utilization

The industrial production and capacity utilization is a measure of financial activity, released on a monthly basis by the United States Federal Reserve. The IPCU report for every month contains data for preceding months about the overall amount of US industrial production for that month, expressed as a percentage of the gross production for a prior baseline year.

International Trade

International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product. While international trade has existed throughout history its economic, social, and political importance has been on the rise in recent centuries.

Institute of Economic Research

A business survey based on the latest economic data of over 7,000 German business leaders. It provides assessment of the current and upcoming economic climate in Germany and Europe.

National Association of Purchasing Manager Index

The national association of purchasing manager index is a monthly index of U.S. manufacturing compiled by the Institute of supply management. Before known as the National Association of Purchasing Management Index, the NAPM Index is derived from the institute’s “Report on Business” survey of purchasing and supply managers across the nation.

Non-farm Payroll Employment

Nonfarm payroll employment is a compiled name for goods, construction and manufacturing businesses in the US. It does not include farm workers, private household employees, or non-profit organization employees.

Producer Price Index

The Producer Price Index (PPI) is a weighted index of prices measured at the wholesale, or producer level. A monthly release from the Bureau of Labor Statistics (BLS), the PPI shows trends in the wholesale markets (the PPI was once called the Wholesale Price Index), manufacturing industries and commodities markets. All of the physical goods-producing industries that make up the U.S. economy are included, but imports are not.

Purchasing Managers Index

The Purchasing Managers’ Index (PMI) is an indicator of economic health for manufacturing and service sectors. The purpose of the PMI is to give information about present business conditions to firm decision makers, analysts and purchasing managers.

Retail Sales

Retail sales are the purchases of finished goods and services by consumers and businesses. These goods and services have made it to the end of the supply chain. The chain begins with the goods producer or provider and ends with the retailer.

The start of the supply chain includes commodities and other raw materials. Manufacturers create the product. The middle of the supply chain is wholesale sales. They allocate the goods and services to retailers. The retailers sell them to the consumer.

Tankan (Short-period Economy Observation)

A quarterly business poll issued by the Bank of Japan on the status of Japanese economy. It significantly affects currency rates and stocks, and as such, it is considered a major financial indicator in Japan.

Unemployment Rate

The percentage of unemployed people, measured by the ratio of individuals who are out of work and who are willing and able to work as opposite to the total number of individuals in the work force. It is lagging indicator as it changes along with economy, and it shows future interest rates and monetary policies.

Fundamental analysis for Economic Calendar

Fundamental Analysis written word.

Expert traders know how to plan and perform their trades according to the calendar both before and subsequent the events. Using the economic calendar is part of fundamental analysis, trying to predict which way the market will go in order to make informed and wise trades.

Before an event from the calendar takes place, the trader will study the overall state of the economy, review similar past events and more. Based on those factors and others, he will try to risk the effects the event will have on various instruments. This is the basis of fundamental analysis – predicting the market trends based the existing finance situation, past patterns and volumes etc.

Some traders, usually more experienced ones, will open positions before the financial event. If such a trader speculates that the announcement will bring to a rise of the instrument’s value, he will open a buying position prior to it, in order to sell it once it will go up and take profit. Other traders, however, will remain with their trades until after the announcement as part of their risk management.

Final Thoughts

Without an economic calendar, investors would hardly know when to act. For budding investor (or long-time traders who want to be sure to stay updated with the market) pay close attention to the info existing. If you are going to react rapidly and effectively to the ever-changing currency markets, you will have to make absolutely sure you know what is trendy, and when. It probably is not a bad idea to check a calendar several times a day and record any changes to the market, which would enable the savvy investor to react accordingly.

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