Week Ahead: Economic Indicators (EU)
Hey, Traders!
For the April 29th week, here is a list of all of the major economic indicators being released during the EU Session, with a brief synopsis of what they represent and what to possibly expect from the markets in reaction.
Tuesday 30th April
01:30 ET
French GDP
Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The flash estimate, released a relatively short 4-5 weeks after the end of the reference quarter, is an effort to speed up delivery of key economic data. In contrast to most European flash releases, the French version provides an early look at the GDP expenditure components.
What to expect:
Each financial market reacts differently to GDP data because of their focus. For example, equity market participants cheer healthy economic growth because it improves the corporate profit outlook while weak growth generally means anemic earnings. Equities generally drop on disappointing growth and climb on good growth prospects.
03:55 ET
German Unemployment Rate
The unemployment rate is calculated by the Federal Employment Agency based on the number of unemployed persons as a percentage of the number of all civilian members of the labour force (dependant civilian employed persons, the self-employed family workers and unemployed). Unemployed is defined as persons between the ages of 15 and 65 and who are without employment or only with short-time employment (currently less than 15 hours per week) and seeking employment of at least 15 hours per week subject to compulsory insurance.
What to expect:
Unlike in the U.S. no wage data are included in this report. But by tracking the jobs data, investors can sense the degree of tightness in the job market. If labor markets are tight, investors will be alert to possible inflationary pressures that could exist. If wage inflation threatens, it’s a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline – boosting up bond and stock prices in the process.
German Unemployment Change
The Unemployment Change released by the Bundesagentur für Arbeit and published by the German Statistics Office is a measure of the absolute change in the number of unemployed people in Germany using seasonally adjusted data.
What to expect:
A rise in this indicator has negative implications for consumer spending, as there’s less people working and therefore diminishes economic growth in the country. Generally, a reading above expected is seen as negative (or bearish) for the EUR, while a low reading is seen as positive (or bullish).
04:00 ET
German GDP
Gross Domestic Product (GDP) is the broadest measure of economic activity and is a key indicator of economic health. The quarterly percent changes in GDP show the growth rate of the economy as a whole.
What to expect:
A higher real GDP improves the standard of living for Germans, however, a GDP growth due to inflation erodes living standards because people pay more for the same. The GDP can be used as a report card for the Govt. and Bundesbank to view how well or poorly their policies are working. The GDP reflects the final value of all output in the German economy, regardless of whether a product was sold or placed in inventory.
04:00 ET
Eurozone CPI
The consumer price index (CPI) is an average measure of the level of the prices of goods and services bought for the purpose of consumption by the vast majority of households in the Eurozone. It is calculated using the methodology developed by Eurostat, the European Union’s statistical agency.
What to expect:
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the HICP are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
Wednesday 1st May
04:00 ET
UK Mfg PMI
The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
What to expect:
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.
Thursday 2nd May
02:30 ET
Swiss CPI
CPI an average measure of the level of the prices of goods and services bought for the purpose of consumption by Swiss households. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Swiss National Bank (SNB), the annual CPI rate can be distorted by swings in prices amongst the more volatile subsectors and the CPI excluding fresh food and energy is used as a better guide to underlying short-term trends. Although not a member of the Eurozone, a harmonized index of consumer prices (HICP), measured according to Eurostat’s procedures, is also published alongside the CPI.
What to expect:
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
03:50 – 04:00 ET
Euro-Area Mfg PMI (France, Germany, Eurozone)
The Manufacturing Purchasing Managers’ Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.
What to expect:
A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).
Friday 3rd May
04:30 ET
UK PMI
Services:
The Services Purchasing Managers’ Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and Markit.
Composite:
The Composite PMI Index measures the activity level of purchasing managers in both sectors (manufacturing and services). A reading above 50 indicates expansion in the sector; a reading below 50 indicates contraction.
What to expect:
A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.
05:00 ET
Eurozone Unemployment Rate
The unemployment rate measures the number of unemployed as a percentage of the labor force.
What to expect:
Unemployment data is closely monitored by the financial markets. These data give a comprehensive report on the state of the economy and its future direction. A rising unemployment rate can be a warning sign of hard times, while a low rate can be a warning of inflation as wages are bid up to attract labor.
