Forex Analysis

The Pocketbook of Economic Indicators

Economic Indicators

                         The Pocketbook of Economic Indicators

If you have no idea what CPI, PMI, or ECI mean, then you are like most beginning investors. Let me explain these and a few others terms to enhance your knowledge of economic indicators that affect your investments.

Economic indicators are used by the Federal Reserve to monitor inflation. When they reflect inflationary pressure, the Fed will increase interest rates. Conversely, when they show signs of deflation, a decrease of interest rates becomes imminent.

Interest rates are important for the economy because they influence the willingness of individuals and businesses to borrow money and make investments. An increase of interest rates will cause a downturn in the economy, while a decrease will fuel an expansion.

The purpose of this guide is to explain in simple terms, the twenty economic indicators followed by most investors and analysts.  The next time you hear these terms in the media and or financial press, you can use the information in this guide to evaluate their potential effect on the economy and ultimately your portfolio.

Invest Smart!

Beige Book

Definition: Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key businessmen, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector.

Importance: The Fed uses this report, along with other indicators, to determine interest rate policy at FOMC meetings. These meetings are held two weeks after the Beige Book’s release.

If the Beige Book portrays inflationary pressure, the Fed may raise interest rates. Conversely, if the Beige Book portrays recessionary conditions, the Fed may lower interest rates.

Source: Federal Reserve Board.

Availability: It is released at 2:00pm ET on the Wednesday less than two weeks prior to an FOMC meeting.

Frequency: Eight times a year.

Revisions: The data are not revised.

In The News:

BusinessWeek                                             CNNmoney                           Fortune

Smart Money                                                Yahoo! News

Read the complete Article from here: Economic Indicator

About the author

David Richard

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