How to Deal with News Indices

[PCMNewsdesk]

U.S News Indicators: PPI - Producer Price Index

This indicator determines the changes in the costs regarding a producer, in fact it is an indication of inflation in initial manufacturing factors.
Manufacturers seek to reduce their costs to increase the power of winning in a competition and could make more benefit out of it.
As manufacturers increase the price of their products and services, if the index fuels up, it would lead to an increase in CPI index, weakening the consumer and having the dollar’s buying power down.
That’s why similar to CPI this index has an inverse relevance to the dollar as well.
Of course, note that very low level or negative figure for the index is an indication of deflation and this is the case to have the value of the dollar down as well.

Important consideration:
The market’s concentration on the index usually excludes food and energy costs.
That is why most of the countries have to buy the energy from overseas and global energy price changes has much effects on CPI and PPI indices.
In order to get a clearer and true view of inflation and inflationary forces of productive economies and service economies, these two factors will be removed and there will be a “Core” before the index such as Core CPI or Core PPI.

Impact: B
Release Time: ninth to twelfth of the month prior to CPI release at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Change in Non-farm Payrolls (NFP)

One of the most important economic U.S. indices is regarding to labor market indicators within the country.
These indices is about net hiring, unemployment rate, the labor weekly working hours, wages and so on.
This index shows the net employment in Non-farm sectors. It means that the total unemployed persons will be deducted from the total employed people during the month to get the net Non-farm employment sectors. This index is published based on thousand persons unit, meaning that if it shows 140k+, that calls for a net 140000 persons hiring during the previous month and this is deducted from unemployed people.

Tip: The total Nonfarm-payrolls fall into several subgroups as follows:

• Factory products
  
• Mining
• Service and the state
  
• Housing and Roads Development
• Market
• Healthcare and Education

The most important sector is the payrolls in factory products sector which usually constitutes the basis of the business in the most part of the national production including working hours, overtime working and the hourly average income/earning. There are two reasons which makes the weekly average working hours very important and it is considerable to be reviewed.
In fact, by reviewing the index, contractors understand they are encountering with lack of workforce tough condition, because they cannot find the person they are looking for

Increasing the rate of wages for employees of a country means progress to the economy and as a result strengthening of the currency. If the actual reading is lower than forecasted would weaken the currency and that happen inversely would lead to have a stronger currency.
As the employment indices has a bold rule in the U.S. economy, having it overvalued will lead to inflationary pressures, and instead having it undervalued and getting to negative figures is an obvious indication of deflation and recession. This index has a direct and close relativity with the dollar rate.

Impact: A
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Unemployment Rate
The principle and major indicator of current labor market conditions is the unemployment rate. However, in the short-term, effects of NFP (Non-Farm Payroll) index is more evident. But in the longer run, it is the unemployment rate that gives the clear picture of the employment status.
The reason unemployment rate is important than Core NFP index is that unemployment rate is a survey performed on the employment status of people, but the second Core index is surveyed on the businesses and manufacturers.
Unemployment rate is calculated by dividing jobless people to the total workforce willing and able to work in percent. Overall, low unemployment rate brings a pressure leading to inflation and high rate suggests deflation.
Target zone for unemployment rate is %4-%6. Unemployment rate above the target zone due to decline in spending, tax evasion, increase in criminal activities and lower investments leads to deflation and stops or slows the economy from growing. Unemployment rate below target zone is even worse for businesses as it prevents hiring expert workforce for economic growth. This index is directly proportional to the dollar value.

Impact: B+
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: Manufacturing Payrolls

This index determines how much the wages are in the overall manufacturing sector.
The higher the wages, the better the condition of the businesses are and therefore it is expected to have an improved business and higher inflation in long term. However, the lower the index is the more unfavorable business condition become and the inflation falls.
This index is not very important.

Impact: C
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Average Hourly Earnings

This index shows how much every American gets paid for one hour of work.
The higher the index is, the better the level of prosperity of the population would be. A sharp increase in the index leads to inflation though.

Impact: B
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Retail Sales

This index surveys the rate of retail sales to consumers and households.
In fact, it shows the percentage of total income changes in retail stores and it consists of:

1. Durable goods (including non-industrial goods like non consumptive home appliances and so on with over 1 year lifetime)
2. Usual/Ordinary goods (including industrial goods and consumptive ones and so on)

As this index reveals optimally the consumer confidence and its demand monthly accounts for the major news.
There are two reasons for its importance:

1. The final consumer spending is considerable in the U.S, because it reserves one third of the GDP.
2. Another reason that makes it important is that its monthly release is earlier than GDP, which somehow shows the view and the expectation for the GDP data to be released.

Key Tip: In this report, the service sector and inflation condition is not considered while it could be intended to change.
Key Tip: If the GDP results are awaited, this news will be under more focus.
Key Tip: It should be noted that gathering data for this report is very hard in countries having improper hardware and software infrastructure. In addition, this report usually is produced based on normal and unreal figures, because the retail store owners may not provide real and true figures of their income for tax evasion.

Impact: B+
Release Time: Between 10^th-13^th of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: New building permits

This data is important as getting a new building permit is the very first step in the construction process.Because of the higher costs associated with home building, an increase in new building permits is an obvious sign for higher investment.
This index gives an overall view on economic conditions and is related to many other economic reports including durable goods, retail sales and more important the GDP.

Key Tip: This news is among the leading economic reports related to deflation and prosperity. During deflationit is more important because it shows how to get out of deflation earlier than other data.

Impact: C+
Release Time: Between 15^th-17^th of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: FOMC Rate Decision

The interest rate report is an index that the Federal Reserve publishes eight times a year.
This news index reveals what level the central bank defines as the benchmark interest rate.
Changing the rate has huge impact on mortgages, bonds and FX markets. The interest rate policies are based on all economic conditions.

Key Tip:Besides announcing interest rate, the Federal report is much important as it is about Fed’s outlook on overall current economic conditions and future plans.
Key Tip: Monetary policies are defined based on interest rate decisions. These policies either dampen inflation or fight deflation with target to improve labour market.

Impact: A+
Release Time: 8 times a year on Tuesday or Wednesday at 14:00 (EST)
Period: one and half month once

[PCMNewsdesk]

U.S News Indices: (ITC) Net Foreign Security Purchases

This news shows the net capital inflow to the U.S.
The most part of the net inflow and outflow is for bonds and government guaranteed bonds and has a high reliability.

Impact: B+
Release Time: the second or the third week of the month at 09:00 (EST)
Period: Monthly

[PCMNewsdesk]

U.S News Indices:Trade Balance
Trade Balance shows the difference between total value of imports and total value of exports of a nation.
Trade balance is one the most important part of “Balance of Payments” and it directly effects U.S. dollar. The more positive figures the higher U.S dollar dominated value on exported goods against the imported. The negative trade balance shows the lower value of export against import.
Negative trade balance is known as trade deficit which shows that the amount of U.S dollar going out is greater than the amount coming in. Except, it is covered by the country’s net inflow.
Although this data is connected to many conditions, it is hard to predict where it is going to step next. Along with the net inflow, this data is considered as the important U.S news index which impacts the market.
Key Tip: The export data is important as it reveals how hard the domestic competition is and import data suggests the domestic demand.

Keep in mind that:
The index also surveys the trade balance or the biggest trade partner of a nation and it is published separately as a report. For example United States has announced its trade balance minus 1 (-1) trillion dollar which prompted the U.S financial officials and experts to bring the China under pressure to get the Yuan rate higher. Though, during the last 3-4 years its value rose %15, but it couldn’t satisfy those officials yet. The problem between the U.S and China is the low exchange rate of Yuan and therefore all the goods coming from china is so cheaper than U.S manufactured goods the time it is for the consumers and the merchants and the consumers tend to use cheaper goods (even if the quality is lower).
Now, the U.S has two ways to tackle this situation:

1. They have to charge high tax on import (which doesn’t match its free trade policy and it will be criticized definitely and China will loudly talk about it globally.)
   
2. Or to lower the exchange rate to encourage the people around the world buying U.S made goods and take the trade balance out of this terrible area. Obama’s financial advisors team have been concentrating on the way since then.

Impact: B+
Release Time: the second or the third week of the month at 08:30 (EST)
Period: monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets while inversely with the bond market.