| GDP |
Quarterly |
Final week of quarter end |
Department of Commerce |
- GDP = C + I + G + (X – M)
- Investors may look at increasing consumption of durable goods as a sign of consumer confidence, which is beneficial to cyclical industries
- Others may treat increasing business investment as a sign of business confidence.
- On the other hand, consecutive quarters of business inventory buildup without corresponding personal consumption (final sales) increases suggest that business may have to cut spending in the future
|
| Retail Sales |
Monthly |
Two weeks after a month ends |
MRTS by US Census Bureau |
- The real growth rate can be estimated by taking the Consumer Price Index into consideration.
- The headline numbers that many investors watch are month-over-month changes of sales, with or without auto sales.
- In general, robust month-over-month retail sales growth indicates a healthy economy and higher corporate revenues/profits, which are good for the stock market.
- The drawback is that the data are aggregated at the industry level instead of the company level and is often restricted to a small subset of industries.
|
| House starts |
Monthly |
Middle of the month for the prior month’s data |
Census Bureau |
- The number of building permits is a leading economic indicator
|
|
| New building permits |
Monthly |
Middle of the month for the prior month’s data |
Census Bureau |
|
| New home sales |
Monthly |
End of the month for the prior month’s etimation |
Census Bureau |
|
| Existing home sales |
Monthly |
25th of each month for the prior month’s estimation |
National Association of Realtors |
- Existing home sales are a lagging indicator as sales are included only after closing
|
| Pending home sales index |
Monthly |
25th of each month for the prior month’s estimation |
National Association of Realtors |
- The limitation of the pending home
sales index is that some sales contracts fail with the percentage of failure
rates varying over time
|
|
| Nonfarm payroll |
Monthly |
8:30 am on the first Friday of the following month |
Department of Labor |
- From both a household survey of
60,000 households to collect employee information and an establishment survey
of more than 400,000 businesses and government agencies to collect employer
information
|
|
| Unemployment rate |
Monthly |
8:30 am on the first Friday of the following month |
Department of Labor |
- When the nonfarm payroll number
grows at a dismal rate or shrinks, consumer spending is unlikely to have
healthy growth
- A steady increase in nonfarm
payroll and a decrease in unemployment rate are signs of an expanding
economy, which are often associated with a bull market
- When the economy is close to full
employment, average hourly earnings become a gauge of labor costs and reflect
potential inflation rates. Therefore, large increases in average hourly
earnings are detrimental to corporate earnings and stock prices.
|
| ADP national employment report |
Monthly |
8:15 am on the first Wednesday of the following month |
Automatic Data Processing |
- It collects payroll information on
~340,000 private companies that cover more than 20 million workers in all
private nonfarm sectors.
|
|
| Initial claims |
Weekly |
every Thursday at 8:30 AM |
Department of Labor |
- High initial claim numbers indicate
that many people have recently lost their jobs and that businesses are
reducing investment, which in turn reduces future spending and lowers
consumer confidence.
- Nevertheless, weekly numbers can be
easily distorted by holidays, quarter ends, or weather conditions; economists
often use four-week moving averages to reduce the noise in trend analysis.
|
| Purchasing Managers Index |
Monthly |
10 AM on the first business day of the following month |
Institute for Supply Management |
- The composite index is calculated
as the average of seasonally adjusted diffusion indexes of five indicators:
new orders, production, employment, supplier deliveries, and inventories
- The PMI index is a particularly
important index to watch during a recession or in the early stage of a
recovery. In those periods, the stock market usually reacts positively to a
positive surprise in PMI.
|
|
| Consumer Confidence Index |
Monthly |
last Tuesday of each month |
Conference Board |
- Compared with retail sales, the
Consumer Confidence Index is a less important economic indicator even though
it is a forward-looking measure
|
|
| Consumer Price Index (CPI) |
|
Bureau of Labor Statistics |
- The top-level price index is
derived from dozens of sub-indices, each of which estimates the price level
change of one type of goods or services.
|
|
| Producer Price Index (PPI) |
|
Bureau of Labor Statistics |
- Seasonal adjustments are made to
correct the effect of price variations caused by calendar effects, such as
climatic conditions and holidays
- Although high inflation may
increase the nominal values of revenues, it leads to tightening monetary
policy and higher interest rate, which increases business borrowing costs as
well as cost of capital.
- Some investors focus more on
year over-year price index changes to avoid potentially inaccurate
seasonal adjustments.
- price changes have larger impact on
the revenues of defensive sectors than of cyclical sectors. Since the
quantity is less elastic to the price changes for defensive sectors, revenues
grow faster as prices go up.
|
| FOMC |
eight times a year |
12:30 pm |
Federal Open Market Committee |
- David Lucca and Emanuel Moench
(2013), two economists at the Federal Reserve Bank of New York, found that
the 24-hour return (8 out of 252 trading days) before the FOMC announcement
accounted for more than 80% of the equity premium—the difference between
equity return and T-bill return—during that period.
|
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