Today we will continue to discuss the economic data that you can find on the economic calendar, knowledge of which will help you make more profit on the forex market.
Business Environment: Indicators and Surveys
These indicators and surveys reflect observational data on the business climate. These surveys are interesting because they are conducted among companies that produce goods and services within the economy.
They are important because they can provide early warning of changes in the business cycle. They are also important because this information comes directly from the companies that provide jobs. The companies surveyed express their level of confidence, which can be used to determine their intentions regarding the hiring and firing of employees.
They provide important data on the economic opinions of manufacturers and their expectations regarding general business conditions.
Inventory data measures the stock level of manufactured products stored by the manufacturer. They also measure the stock level of distributors on behalf of the manufacturer of these products.
This type of data is important because it reflects the dynamics of demand for finished products. This dynamic taking the form of possible sales.
If the inventory level is low, it may mean that demand exceeds supply. This is a good sign for companies, because it shows that the economy is in a phase of growth, and that they can start to increase production and, if they are lucky, make more profit.
But it can also be a bad sign. Low inventory levels can also mean that growers are not optimistic about demand and therefore produce less.
Here you need to find out the balance of supply and demand. It is best to use this indicator in combination with others to determine the strength or weakness of a particular economy.
Economists study the relationship between stocks and sales. This helps determine if low inventory is due to production not keeping up with demand or product manufacturers not being optimistic about future demand. If the ratio is higher than usual, production and imports may be reduced until demand increases. And if the ratio is lower, outputs and imports are likely to grow until demand declines.
Industrial and Mass Production
In this type of data, the conditionally net production of manufacturing companies and mines for the extraction of natural resources is measured.
It is important because it is an indicator of current levels of industrial activity. Many economists believe that industrial production can be used as a general indicator of the state of the economic cycle of the countries in which the industrial sector is developing.
All the currencies that we will track for our trade belong to countries with a developed industrial sector.
Industries that produce capital goods and consumer durables tend to suffer the most during an economic downturn. This is due to the fact that ordinary people stop buying things that are not necessary for survival. That accounts for the bulk of spending in most of the world’s major economies. In turn, this leads to an increase in the number of layoffs, which only exacerbates the problem.
This type of data measures how actively factories and equipment are used to produce goods. All producers in the country participate in the measurement, which is necessary to obtain an average value of production efficiency.
It is important because it is an indicator of the level of economic productivity, it can give us clues about inflation. Strong economic growth, together with a high utilization of production capacities, implies an increase in inflation, because all the country’s equipment is used to the max. That is, in a nutshell, companies work efficiently, and production cannot be increased without adding capacity and hiring more workers.
If demand is expected to remain high and interest rates are low, manufacturers may invest in new plant and equipment, which will also cause inflation to rise. Rising inflation is a good thing (as long as it doesn’t become excessive).
It can all be boiled down to one question: are people and businesses spending money, is production increasing? If so, this is usually good news for the business cycle as it indicates a phase of growth.
This type of data measures the total number of new orders received by manufacturing companies during a specific time period.
It is important because it can be used to reach a conclusion about the economic result in the near future.
In a short time, a high level of orders is an indicator of increased employment and production. This can cause inflation to rise, provided unemployment is already low, capacity utilization is high, and inventory data is low. It is better to use this indicator in combination with others.
The order level can also provide advance notice of changes in the business cycle. An increase in orders can be a sign of the end of the recession, and its decline is a sign that the phase peak has come in the business cycle. But it all depends on the current and recent state of the economy. The same values of the indicators can have different meanings depending on the part of the economic cycle in which we find ourselves.
The name speaks for itself. This type of data measures industrial activity related to the production of cars and trucks.
It is important because it is an indicator of the industrial production of cars and trucks. Based on these data, conclusions can be drawn regarding the demand for expensive goods or durable goods.
Car sales data is not unreasonably considered a leading indicator, because rising demand for cars implies rising consumption. In addition, the production of vans and trucks is an indicator of business investment, because companies use large vehicles in their activities, for example, to transport and deliver their products.
Construction orders for buildings and structures and results
(Building and production orders)
This type of data measures activity in the construction sector.
It is important because it is an indicator of new investments and possible future economic results in the form of new construction projects.
Construction is very subject to cyclical conditions, because obviously it’s much easier to do it when there’s not a foot of snow on the ground.
Construction is highly sensitive to interest rates and expectations about future demand. And all because positive expectations are exactly what people are buying new houses or apartments for themselves (usually on credit).
High order numbers may mean higher demand for building materials and more active use of labor in the coming months. Low levels mean the opposite.
Number of new constructions
completion of construction, sales
(Start, Completion and Sale of homes)
In this type of data, the number of new house constructions, their delivery and sales are measured (previously built houses are also taken into account in sales).
They are important because they are an indicator of the level of activity in the construction sector and can indicate an increase in industrial and consumer demand. Obviously, the more construction, the better the country’s economic prospects. In addition, it helps stimulate inflation.
New construction implies an increased demand for raw materials and labor, without which a house cannot be built. Both are related to employment and interest rates.
Renting houses implies sales. This may mean an increase in the demand for mortgages in the future. If mortgages have already been issued, this can lead to increased demand for durable goods such as household items and cars. Good times!
Sales are come positively affected by personal income growth and lower interest rates. Low interest rates make home buying more affordable because people can get cheaper loans.
What we don’t want to see is a lot of construction completions – and a lack of sales. This may mean that many of the built objects have remained empty. This situation will have a negative impact on the real estate market, on the banks that issue mortgages and will cause an increase in unemployment. This is exactly what happened in the United States during the Great Recession of 2007.
an overview of the rest of the economic data can be found in the following article.