Week Ahead: Economic Indicators (US)
Hey, Traders!
For the March 4th week, here is a list of all of the major economic indicators being released during the US Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.
Tuesday 5th March
09:45 ET
US S&P Services PMI February Prelim
The US S&P Services Purchasing Managers’ Index evaluates the health of the services sector in the United States.
Through surveys conducted among purchasing managers in diverse industries, such as finance, healthcare, and retail, the PMI assesses key factors like employment, new orders, and business activity.
As a diffusion index, a PMI score above 50 indicates expansion in the sector, reflecting positive economic activity, while a score below 50 suggests contraction.
What to Expect
Markets have been reacting positively to lower Services PMI data, as seen in the last release.
This is most likely due to the services sector getting closer to contraction, which may aid in taming inflation.
The service sector is also an area where the Fed has said they need to see some more cooling.
Unicredit notes that the services sector in the US continues to prove to be rather resilient, but there are growing signals of cooling demand, in line with the erosion of consumer purchasing power, the exhaustion of extra savings accumulated during the pandemic and tighter monetary policy.
10:00 ET
US ISM Service PMI for February
The US Institute for Supply Management Services Purchasing Managers’ Index, like the S&P Services PMI, measures the health of the services sector.
Similar to other PMI indicators, a reading above 50 indicates expansion in the services sector, while a reading below 50 suggests contraction.
What to Expect
Markets have been reacting positively to lower Services PMI data, as seen in the last release. This is most likely due to the services sector getting closer to contraction, which may aid in taming inflation.
The service sector is also an area where the Fed has said they need to see some more cooling.
Therefore a lower-than-expected reading may result in US stock strength and Dollar weakness.
US Durable Goods January Final
Durable goods refers to goods that have a lifespan extending over three years. In the United States, the Census Bureau publishes a monthly report called the “Durable Goods Orders” report.
This report tracks the new orders placed with domestic manufacturers for delivery of factory hard goods, such as refrigerators, cars, and industrial machinery, which are expected to last three years or more.
The data in this report is a key economic indicator as it provides insight into the health of the manufacturing sector and overall economic activity.
What to Expect
US Durable Goods is currently nearing a good place, this could mean any shock deviations from forecast could be negative for stocks and the dollar, as any extreme weakness could foreshadow the manufacturing sector going into free fall.
A much higher reading may show overheating in the sector.
Wednesday 6th March
08:15 ET
US ADP Employment Change for February
The ADP Employment Change compiled by the ADP Research Institute utilizes actual payroll data from a diverse array of private-sector employers to gauge changes in employment levels.
Excluding government and farm employment, the ADP figures provide insights into the dynamics of the private labor market, covering small, medium, and large businesses.
What to Expect
While the Fed does wish to uphold its dual mandate of 2% inflation with maximum job growth, an overly hot reading may have negative implications for the future of inflation. This could send the dollar up and stocks down.
09:45 ET
BoC Rate Decision
The Bank of Canada Interest Rate Decision is the main monetary policy tool where the Bank of Canada’s Governing Council determines the official interest rate for the Canadian economy.
This rate, known as the overnight rate, influences short-term interest rates and serves as a key benchmark for borrowing costs in the country.
What to Expect
The Bank of Canada uses this rate to achieve its inflation target and support overall economic goals. Changes in the interest rate can impact consumer spending, business investments, and inflation.
It is widely expected that the BoC will leave rates unchanged at 5%.
If realized, attention will turn to the subsequent BoC rate statement for any clues on the future path of BoC interest rates.
Any mention of more rate cuts this year than are already priced in by the markets could prompt strength in Canadian stocks and weakness in the Canadian dollar.
However, hawkish remarks implying fewer interest rate cuts than are currently priced this year could result in the opposite.
10:00 ET
US JOLTS Job Openings for January
The US Job Openings and Labor Turnover Survey (JOLTS) provides monthly data on job openings, hires, separations, and other labor market dynamics in the United States.
It offers insights into the demand for labor and the overall health of the job market.
Job openings represent unfilled positions that are actively being recruited for by employers.
Analyzing JOLTS data helps assess trends in job creation, labor market tightness, and worker mobility, providing valuable information for understanding the dynamics of the US labor market.
The JOLTS data is the oldest bit of employment data this week, representing the month of January, while ADP and Nonfarm Payrolls reports represent the month of February.
Having said that, with employment a key piece of the Fed’s monetary policy puzzle, markets will still monitor this.
What to Expect
If JOLTS comes in higher than expected, that indicates there are a larger number of job openings, which means that there is demand on the corporate side to hire more staff.
This can be seen as an upside inflation risk, and a threat to the Fed’s 2% inflation target, as higher demand for staff indicates corporations are not being affected as the Fed would like by tight monetary policy.
This could cause strength in the dollar and weakness in US stocks.
“The series has been very volatile, perhaps reflecting low survey response rates,” Unicredit notes.
10:30 ET
Weekly EIA Crude Oil Inventories
The US Weekly Energy Information Administration Crude Oil Inventories report provides information on the total stockpile of crude oil in the United States.
It includes data on the changes in crude oil inventories, indicating whether there has been an increase or decrease in the amount of oil held in storage.
This report assesses supply and demand dynamics in the oil market and can influence oil prices.
What to Expect
A significant buildup in inventories may indicate oversupply, putting downward pressure on prices, while a decline may suggest increased demand, potentially impacting prices in the opposite direction.
14:00 ET
Fed’s Beige Book
The Federal Reserve’s Beige Book, formally known as the Summary of Commentary on Current Economic Conditions, is a report published eight times a year.
It provides anecdotal information on current economic conditions in each of the 12 Federal Reserve districts, based on interviews with business contacts, economists, market experts, and other sources.
The Beige Book serves as a qualitative assessment of the economy, offering insights into trends in various sectors such as manufacturing, retail, real estate, and agriculture.
What to Expect
The Beige Book is extremely unlikely to move the markets, as the data is anecdotal; however, it can still provide some important context to the affects of the Fed’s monetary policy on real people’s businesses in a more tangible way.
Thursday 7th March
08:30 ET
US Trade Balance for January
The US Trade Balance for January is an economic indicator that measures the difference between the value of the goods and services exported by the United States and the value of goods and services imported into the country during that month.
A positive trade balance indicates that exports exceed imports, which can contribute positively to economic growth and employment.
Conversely, a negative trade balance, or trade deficit, means that imports exceed exports, which can put downward pressure on economic growth and employment.
The US Trade Balance provides insights into the country’s international trade dynamics and its impact on the overall economy.
What to Expect
As a major importer of goods, the US has been in a trade deficit since 1975.
While unlikely to move the markets, a smaller than expected trade deficit would indicate higher growth in the US, which could be seen as an upside inflation risk if it is considerably smaller than expected, or, if it is only marginally smaller, could ease recession fears.
US Weekly Initial & Continued Jobless Claims
The US Initial Jobless Claims report provides data on the number of individuals who filed for unemployment benefits for the first time during the previous week.
It serves as an indicator of the labor market’s health, with higher numbers indicating increased layoffs and economic instability, while lower numbers suggest a stronger job market.
Continued Jobless Claims, on the other hand, represent the number of individuals who remain on unemployment benefits after their initial claim.
What to Expect
Employment is one of the Fed’s mandates, however, FOMC officials have mentioned that they do see a higher unemployment rate being in line with their goal back to 2% inflation.
This means that Jobless Claims coming in higher than expected, suggesting higher unemployment, would be likely to be read by the Fed as good news for inflation’s return to target.
This scenario could cause US stocks to strengthen and the dollar to weaken.
Friday 8th March
08:30 ET
US Employment Situation for February
US Nonfarm Payrolls
US Nonfarm Payrolls, commonly referred to as NFP, is a key economic indicator published by the Bureau of Labor Statistics on a monthly basis.
It represents the total number of paid workers in the US, excluding farm employees, government workers, and non-profit organization employees.
The NFP report provides insights into the overall health of the labor market, reflecting changes in employment levels.
The data is closely watched by policymakers, economists, and investors for its impact on financial markets and economic policy decisions.
US Unemployment Rate
The US Unemployment Rate is a widely tracked economic indicator that measures the percentage of the labor force that is unemployed and actively seeking employment.
It is calculated by dividing the number of unemployed individuals by the total labor force.
The Unemployment Rate can differ from the Nonfarm Payrolls data due to differences in their definitions and methods of measurement.
While NFP represents the total number of paid workers in the US, excluding certain categories like farm and government employees, the Unemployment Rate considers the percentage of the labor force that is actively seeking but unable to find employment.
US Average Earnings YoY
US Average Earnings Year-over-Year is an economic indicator that measures the annual percentage change in the average earnings of all non-farm employees in the United States.
This data is typically derived from the monthly employment reports released by the US Bureau of Labor Statistics.
Average earnings include wages and salaries, and the YoY comparison helps assess the rate of change in workers’ compensation over a one-year period.
Positive growth in Average Earnings YoY is indicative of increasing income levels, while negative growth suggests a decline in average earnings. Policymakers, economists, and investors monitor this indicator for insights into wage trends and their implications for consumer spending and inflation.
What to Expect
US NFP is the most closely watched employment indicator by traders and policymakers alike.
A higher-than-expected read indicates that employment is not slowing down, which poses an upside risk to inflation. This could cause policymakers to keep interest rates higher for longer.
This repricing of the future of US monetary policy could be likely to cause weakness in US stocks, and strength in the dollar. The inverse could also be the case.
Having said this, participants will also be looking at the average earnings data to see if increased wages are also causing potential upside inflation risks.
In comments from Powell and other FOMC officials, they have also noted a refocus back onto the ‘dual mandate’, (which includes employment), so while a slight cooling in the employment situation may be seen as reinforcing dovish Fed bets, too much could go against the other element of the Fed’s dual mandate, and increase recession fears.
Unicredit notes that the labor market remains tight, and the unemployment rate is unlikely to rise in a sustained way until monthly payroll gains fall below the around 100k needed to absorb population growth. Consistent with this, initial jobless claims remain low.
