The Top 11 Economic Indicators Traders Need to Know

Traders are obsessed with economic indicators and data. Why? Because economic numbers move stock prices, commodities prices, options prices, interest rates, and just about everything else you can think of. So it’s a good thing the government is always giving us a fix! But which ones should you pay most attention to as a trader? Here’s a breakdown of the top 11 indicators that traders like you need to know about. 11. Homebuilder Sentiment From the National Association of Homebuilders Released at 8:30 a.m. ET in the third week of the month Measures builder confidence about current and future market conditions To judge Homebuilder Sentiment, The National Association of Homebuilders conducts a monthly survey of its members in partnership with Wells Fargo.  The survey asks NAHB members to rate market conditions based on their personal experience.  The questions are centered around the current state of the market, conditions 6 months from now, and the traffic of prospective buyers.  Builders are asked to rank current and future sales conditions as “good”, “fair”, or “poor”. Prospective buyers are rated as “high to very high”, “average”, or “low to very low”.  NAHB seasonally adjusted the number of responses in each category, “Good/High” or “Poor/Low” They then use this formula: (Good/High – Poor/Low + 100), to calculate the monthly index on a scale from 0 to 100. If every response was Good/High then the index will be 100. If all responses were Poor/Low it would be 0. Readings above 50 are considered positive. This index is a leading indicator for future home construction, since it is based on future expectations. The market uses this report to gauge how builders themselves are feeling about their future.  NAHB has conducted the monthly survey since January 1985.  10. New Home Sales, Starts & Building Permits From the U.S. Census Bureau Housing Starts and Building Permits report released on the 12th workday of the month at 8:30 a.m. ET New Residential Sales report released on the 17th workday of the month at 10:00 a.m. ET Measures pace of new home construction and sales of newly built homes Housing starts measure how many new homes builders broke ground on each month. It’s a lagging indicator because it measures past activity. Building permits measure how many new permits were approved to build homes in the months ahead, making it a leading indicator.  The numbers are reported together  by the Census Bureau to measure the health of new home construction.  Housing starts and permits include both single-family homes and multi-family buildings.  The Census Bureau also reports new residential sales each month.  This is a measure of how many newly constructed homes were sold the previous month and is a lagging indicator. The report includes sales data on both single-family homes and multi-family units.  The data is reported at a seasonally adjusted annualized rate in order to avoid large swings based on season.  The new residential sales report includes data on supply (how many units were for sale at the end of the month) as well as prices.  It also breaks down new homes by construction status: not started, under construction, or complete.  This group of reports gives the stock market a measure of the overall health of the new home market.  9. Existing & Pending Home Sales From the National Association of Realtors Existing Sales report released in the 3rd week of the month at 8:30 a.m. ET Pending Sales report printed in the 4th week of the month at 8:30 a.m. ET Measure of existing home sales closed in the previous month and number of contracts signed to purchase a home The National Association of Realtors reports existing home sales around the 20th of each month. This report measures the total number of closed sales in the previous month, making it a lagging indicator.  Sales are reported at a seasonally adjusted annualized rate, which means the numbers are smoothed out to eliminate the impact of seasonal changes. Home sales are typically faster in summer and slower in winter.  The existing sales report also includes data on supply levels and home prices.   NAR reports pending home sales in the week after existing sales.  This report is a measurement of the number of contracts signed to purchase a home in the previous month.  Pending Home Sales are a leading indicator for the housing market. This report typically impacts home building stocks directly.  8. Retail Sales From the U.S. Census Bureau Released mid-monthly at 8:30 a.m.  Measure of consumer spending in the U.S.  The retail sales report measures the total amount U.S. consumers spend on goods and services per month in 13 categories: Motor vehicle & parts dealers Furniture & home furnishing retailers Electronics and appliances Building materials and gardening Food and beverage stores Health & personal care Gasoline Clothing and accessories Sporting goods, hobby, musical instruments, book store General merchandise Miscellaneous retailers Nonstore retailers (online) Food services and drinking places (restaurants and bars) The monthly report includes a headline number, and retail sales excluding auto and gasoline sales.  Auto and gas numbers are considered volatile because prices rise and fall more often than other categories. Each monthly report also includes revisions for the two months prior.  Retail sales is a lagging indicator, reporting data from the previous month. The market will typically rise on a good retail sales report and fall with a bad one as it signals the strength of the consumer side of the economy. 7. GDP From the Bureau of Economic Analysis Released at 8:30 a.m. ET, typically on the last Thursday of the month Measures U.S. economic growth by quarter GDP stands for Gross Domestic Product.  The Bureau of Economic Analysis reports GDP on a quarterly basis.  The advanced estimate for each quarter is typically released on the last Thursday of the first month following the conclusion of the quarter. The first revision is then printed the following month and the final revision the month after that.  So for the first calendar quarter ending in March, you