Forex Education

Trading industry knowledge. Learn forex trading, investing in stocks, commodities.

You are here: Home / Archives for Fundamental Analysis

Institutional Structure of International Financial Markets

by

If you are new to the finance field, you are likely to have questions like what is the architecture of this field, what is the institutional structure of international financial markets, how this function works, what are the market players, etc. Every novice trader needs to learn the basics first, and the basic here is the institutional structure of international financial markets. It states how the market is arranged and how each player works together to gain benefits and find investment opportunities.

When a person enters the financial markets, various parties are involved with which the person, aka trader, deals. This includes banks, pension funds, insurance companies, institutional investors, and more. You can expect to learn the following things by reading this article.

  • Types of Financial Markets
  • Participants of the Financial Market and how they are connected
  • Financial Instruments
  • Functions of Financial Markets

For a trader gaining the basic information for the market, he or she is trading in is essential. For example, if you plan to enter the forex market, you need to learn the alphabet from scratch. You need to learn from your mistakes and experiences while applying your knowledge. You can also attend webinars, trading courses, or watch articles on forex to gain more understanding.

If you are starting in this market, you need to have your hands on two forms of information: fundamental analysis and technical analysis. These would help him, in the long run, to sustain in the market. So, you might not need to learn about all the financial markets, but you need to learn about the financial market you are dealing with for sure!

The Institutional Structure of International Financial Markets

What is the financial market?

Financial markets represent a marketplace where traders trade assets such as stocks, bonds, derivatives, foreign exchange, and commodities. All the markets at national and international levels build the financial market.

But, what is the structure of financial markets?
The financial market structure comprises five key components: foreign Exchange Market, credit market, insurance market, investment market, stock market.

structure of financial market diagram

Structure of financial market diagram

There are three main parts of the world financial market, namely

  • International Exchange Market
  • International Debt Market
  • International Securities Market

It is further divided into five segments, as below.

1. Foreign Exchange Market (Forex)

In this market, the asset being traded is currency and its relevant equivalent. Many derivative instruments like CFDs also get considered in this market. In the forex market, the settlement of trades can be in cash or non-cash, depending on the form, term of transactions, and market type. There are two types of markets here – Spot Market and Derivatives Currency Markets. For a derivatives market, a contract is

  • Forward Contract:  It is customized as per the needs of two parties, and the two parties agree to a specific rate. There is no guarantee here, and commercial banks are the intermediaries.
  • Futures Contract: It is based on the current forex exchange rates. There is a guarantee available, and the intermediary is always an exchange body.
  • Options and Currency Swaps: All the currency transactions can be done on the exchange or the over-the-counter market, depending on the trader.

2. Credit market

In simple words, the credit market redistributes extra funds from those who have them to those who don’t have them. It is complex compared to the investment market as it has a three-tier structure and needs higher requirements to fulfill the obligations.

Levels of Credit Market

  • Central and Commercial Banks: In this prospect, the bank acts as a regulator. Through loans, the bank circulates the supply and demand of money, aids banks in troubles, and keeps them liquid to eliminate the cash gaps.
  • Commercial Bank and Its Clients
  • Legal Entities and their Credit Relations

3. Insurance Market

At the global stance, insurance companies have a firm hold on the market, being the largest investors, and thus they have a separate market. They give different kinds of services for which they get funds, and they park these funds in the financial markets, metals, etc., too averse the inflation cost and maintain profitability.

4. Investment Market

The investment market is free competition and a partnership-based concept between various agents in the investment market. It is similar to the stock market as it involves dealing with funds parked insecurities, but unlike the stock market, it also deals with fixed assets, capital investments, and more. In short, the investment market involves dealing with all kinds of financial assets to take advantage of price hikes and dividend payouts.

5. Stock Market

The stock market is a relationship between the market participants and the securities. Securities here can be traded on exchanges as well as over the counter. Though to trade securities on an exchange, it has to be listed. There are various types of securities in the stock market, which includes,

  • Stocks: These are common stocks or preferred stocks. The difference between the both is that the common stockholders have the right to vote, whereas the preference shareholders may not have it. Though preference shareholders enjoy a fixed dividend, it is conditional on profitability and company decisions.
  • Bonds: There are various types of bonds, as stated below.

Company Bonds – Issued by Company

Municipal Bonds – Issued by the Local Authorities

State / International Bonds – For example, Eurobonds

Bonds also come with preferences for people to have an average of getting the money back in case a company defaults or decided to liquidate. For bondholders, two things are significant – Coupon Rate and Yield to Maturity.

  • Indices: Indices are a basket of various securities that shows the average rate stats for a specific sector or industry. For example, Auto Indices may have all the major stocks of auto sector firms and shows the average share rate.
  • Derivatives: It is a derived instrument, and very complex in nature, mostly used for hedging.
  • ETF Securities: ETF or Exchange Traded Funds are index funds whose units are traded on an exchange. The funds can be anything from a company’s stock to a portfolio having gold and metals. It definitely gives more options to trades.

The currency market accounts for 1/5 share of the financial market. Apart from the classification stated above, one can also classify the financial market in border sense in three categories – the Currency Market, the Stock Market, and the Commodity Market.

The currency market has all the world currency, including the new age cryptocurrency. The stock market has all the items related to securities, and the last commodity market includes oil, metals, goods, services, and rare investments like art, antiques, etc. These markets are interconnected.

What are the functions of the financial market?

The financial market’s motive is to mobilize the capital, distribute it, control and maintain its reproduction, and increase an economic cycle and system’s overall efficiency. Here is the list of functions that market participants play in the financial market.

But why financial markets matter?

Functions of international financial markets are:

  • Monitor and regulate the financial system process like overlooking compliance control, maintaining the supply of money, legal supervision, etc.
  • Maintains and provides different relationships between the market players, including individual investors, institutional investors, private investors, etc.
  • Allocating the capital in a way that can increase efficiency and creates more value.
  • Reduces the risk, prevents fraud, including money laundering, maintains transparency, and tries to erode rate manipulation in the market.
  • Creates and maintains liquidity in the market.
  • Keeps transactions secured and transparent.
  • Provides important information and data.

In simple words, the 7 main functions of financial markets are:

  • Price Determination.
  • Funds Mobilization.
  • Liquidity.
  • Risk sharing.
  • Easy Access.
  • Reduction in Transaction Costs and Provision of the Information.
  • Capital Formation

Financial markets are lean on central banks to control the currency rates as they decide interest rates. Simultaneously, the stock and the currency market directly correlate with the progress and changes of the financial asset being traded. The most interesting market for traders remains the security market as it requires fewer funds and has great volatility.

Participants of the Financial Market

The answer to this is simple; all of us are market participants. We work at a place or do a job, contributing to GDP (Gross Domestic Product). We buy or sell things associated with the Consumer Price Index (CPI), aka inflation rate. Many people also invest money or trade-in forex, park their money in the banks, take loans, or land money. All of these things are financial activities.

Though in a precise way, financial market participants are classified based on the segment. In layman language, financial markets are nothing but relationships between the buyers and the sellers. It also has one more category known as intermediaries that look after transactions, assists, and necessary facilitation. Through this, the intermediary can act as a buyer, a seller, and an intermediary all at the same time.

We have classified the players of financial markets for each market. So, let’s dive into it.

1. Forex Market

  • Buyers: All sellers, agents, etc., may also perform the role of buyers.
  • Sellers: Mostly, all the significant sellers and banks or state bodies. If a state sells currencies through an authorized body, it must perform a regulatory function. A lot of sellers are also large companies here.
  • Intermediaries: Here, mostly commercial players are involved.  

2. Credit Market

  • Borrowers: Borrowers in this market on two segments – international level and national level. For the international level, the borrowers are known as states, and here the debt to GDP ratio is considered the main indicator. At the national level, companies, individuals, and local governments are the borrowers. One such example is the U.S mortgage system, in which banks issue various securities for lending more and secure new capital.
  • Lenders: In here, market players have extra capital, aiming to create more of it. These individuals are people or companies that would park their capital in investment funds, pension funds, instances, etc. They give money and thus are called lenders; they benefit from interest income or dividends. States are also said to be lenders as they try to enhance liquidity and distribute it using the central bank.
  • Intermediaries: The intermediaries are the organizations that look after capital distribution like banks, dealers, brokers, and investment management companies. We can also add insurance and pension companies here as they also gather and distribute money. The credit market can be like investment or the stock markets; for example, it is useful for raising capital and security when we talk about corporate bonds. Generally, government bonds are a popular option compared to investment funds as they have low risk.

3. Insurance Market

  • Insurers: Insurers are the companies that provided the insurance service. There are three types of insurance providers – Open type, which provides insurance to all the market participants, Captive Insurers (their insureds control them, and lastly comes reinsurance risk management companies.
  • Insureds: These are Individuals, institutions, or companies that buy insurance products to reduce the overall risks.  
  • Intermediaries: The good thing about this market is that there are no intermediaries as all the transactions occur between the insurer and the insured.

As markets are interconnected, in this case, insurance companies are involved in the investment market too. There are insurance instruments like swaps, futures, etc., which are traded on the stock market.

4. Investment Market

The investment market includes all the people who invest their money in a financial asset as an investor. In this market, banks, exchanges, etc. act as intermediaries.

5. Stock Market

The following are the market participants in the stock market.

  • Security Issuers: This category includes firms, companies, etc., who issue securities like bonds, stock, and more. They have to abide by the rules to issue securities at the time of issuing it.
  • Investors: These are the people that purchase securities for increasing or creating income. There are two types of investors – Strategic ones who buy a majority in a company’s stock, and minorities who buy securities to create revenues and build a portfolio.
  • Intermediaries: Here, stock exchanges, underwriters, banks, auditors, rating agencies, etc., act as intermediaries. They help in issuing and placing the securities in the market.

We can also classify all these categories in a group, as stated below.

  1. The Central and State Banks: This includes regulatory organizations as well. They manage the capital and overlook the performance and regulatory requirements.
  2. Regulators: These are the participants who do not perform any transactions but have a controlling duty over them. A state or central bank can also plate the same part, government, or a separate organization for that, i.e., Self-regulatory Organization (SRO).
  3. Financial Service Companies: These are companies that give financial services and also act as an intermediary. They look after various aspects and include stocks, forex, commodity exchanges, brokers, auditors, underwriters, registrars, clearinghouses, consulting firms, etc.
  4. Banks: They act as financial intermediaries. They look after the distribution of cash and regulate and supervise the market to abide by the regulatory authorities’ compliance.
  5. Legal Entities: These include borrowers, investors, lenders, etc. Also, companies involved in parking or investing clients’ funds in various funds like pension schemes, insurance, hedge funds, trust management firms, brokers, individual organizations, dealers, etc., are called legal entities.  
  6. Individuals: Individuals also include borrowers, investors, and lenders. In a broader perspective, these people are traders, speculators, long term investors, asset managers, or common people.  

Market Indicators

Just having the basic information is definitely not enough for a trader; there is a lot more to it, and one of such things is market indicators. The indicators here include micro and macroeconomic data, forecasts, analysis, and much more, which get released from time to time. The unemployment rate, GDP, inflation rate, securities growth, currency rates, etc., act as indicators.

Read more in our article, Key economic indicators.

That’s the reason that most of the traders consider economic indicators an essential part of their trading. If you are still not clear about the indicators and their impacts, worry not, as we have got you covered.

1. Interest Rate

The interest rate can be said to be the most significant economic indicator as it helps in managing the money supply and helps in adjusting the inflation rate. At this rate, the loans are given to commercial banks by the central bank. A high rate increases the rates of deposits and credits and motivates customers to invest more. This also reduces the rate of inflation. 

There are broader benefits of this rate increase as well. For example, in an advanced economy like the U.S, if the Federal Reserve hikes the rates, it also boosts the dollar’s value. This move also helps in reducing the stagnation and interest of more investors.

2. Non-farm Payrolls

Non-farm Payrolls suggest the change in the total number of employees in the non-farm sectors of the U.S. It is critical data and impacts the dollar rate highly. It gets released on the first Friday every month around 1:30 pm GMT. 

If the actual data deviates more than 40,000 compared to the expectations, it affects the U.S dollar exchange price. Though, in reality, it depends on the data and how investors react.

3. Consumer Price Index (CPI)

CPI is a stat that shows a change in the price of consumer goods and services being bought by a nation’s households. It shows the change in the cost of living due to changes in the price of goods and services. It is compared to the benchmark indicator for knowing the performance. 

Generally, this base is referred to by EBRD, IMF, UN, etc. There are various calculation methods as well, like Paasche, Lowe Index, or Laspeyres Price Index. The decline in this index suggests lower consumer purchasing power along with higher inflation growth.

If the indicators are positive, investors will react strongly to that, eventually impacting the financial markets. Though remember that along with all these, you should also keep yourself aware of the economic calendar. 

It keeps a list of all the main economic events around the world, and you should form your strategies around it to avoid any repercussions. When the news gets released, it increases the volatility, and thus knowing it in advance can help you enter and exit the market on time.

Tips for Trading on Economic Indicators

Here are a few tips that would help you out if you want to trade around economic events.

You should compare the released data with the forecasted data. For example, if the U.S GDP is forecasted to be 3%, but it came out only 2.4%, it is negative news. But be aware of the fact that the data can also be revised.

Evaluate your expectations and reality. Often, the news is already traded, and thus no major impact is seen when releasing the news. I.e., when the Fed is likely to increase the interest rate in the forthcoming meetings, investors would already be suspecting and trading accordingly. So, when the Fed finally raises the rates, there would not be as high volatility as you may have expected.

Be observant and keep yourself updated with other factors as well. Sometimes a lot of big events overshadow important data releases and have no impact on the market. For example, at the time of the U.S- China trade war, the U.S crude oil stockpile data was released, which generally affects the exchange rates and other financial assets. But due to the trade tensions, it went unnoticed.

Conclusion

We hope that we have helped you understand the institutional structure of international financial markets. There are many layers that you have to pill to get to the depth of this realm.

With consistency and hard work, you can do wonders in this field while enjoying it. So, brace yourself, keep yourself updated, and learn from your mistakes. Hasta La Vista, until the next time!

Key Economic Indicators

by

What are the key economic indicators of a country? How do you determine if the country is doing well or not? Certain factors cumulatively establish the country’s worth, like its mortality rate, life expectancy, and education, but the most common remains its economic indicators. Economic indicators of a country, on numerous occasions, become the countenance of how well a country is doing.

What are Economy Indicators?

Economic indicators are the reports released by government agencies, NPOs, and private organizations. These reports provide a statistical evaluation of a country’s economic health. These indicators account for a number of factors like the total production of goods and services in a financial year, current business cycles, consumers and producers’ behavior, and more. Basic economic indicators may be released daily, weekly, or monthly, but the major ones have fixed quarterly or annual cycles.

Before we discuss the major economic reports, one must keep in mind that we are not solely talking about money when we are dis economic indicators. These indicators are massive and play a key role in various independent studies and analyses as well.

The Top 10 Leading Economic Indicators

What are the best indicators of a thriving economy? GDP growth is the most important economic indicator of a thriving economy. Of course, Industrial production, retail, etc., everything is connected, and the growth of GDP usually means the growth of several important economic indicators. Real GDP is adjusted for inflation, while nominal GDP is not adjusted for inflation. The 3 most important economic indicators are CPI, GDP, and Unemployment.

Key Economic Indicators are Real Gross Domestic Product (GDP), Consumer Price Index (CPI), U.S. Nonfarm Payrolls (NFP) Data – Current Employment Statistics (CES), Retail Sales, Producer Price Index (PPI), Consumer Confidence Survey, Money Supply (M2), Housing Starts, Manufacturing and Trade Inventories and Sales.

As we have mentioned earlier, there are numerous economic reports that are published every year. Some of these reports are easy to understand, but if you are studying them with the outlook of trade or investment, we advise you to take an expert opinion. The data in these reports are highly sensitive, and even the slightest change can have a ricocheting effect. The current economic indicators are very precise, but you should still not isolate one economic report and judge the country on its basis. However, you are not required to read all of them. So what are the 10 most important economic indicators, and how can you use them?
It is essential to identify economic indicators by the importance, so the recommendation is always to look: CPI, GDP, and Unemployment and then all other indicators.

Real Gross Domestic Product (GDP)

What is Real GDP?

Gross Domestic Product or GDP is the total value of all the final goods and services produced in a country in one financial year. Economists consider two types of GDPs: real GDP, and the other is called Nominal GDP. The major difference is that inflation is adjusted when we are talking about Real GDP. It takes into account the change in year-to-year prices. 

Here, the wealthy society’s social depending on how fast the profits might grow and the expected return on capital. The HDI considers it a narrower approach as it calculates the health of the economy against the monetary increase or decreases only.

Its importance?

The Real GDP provides some data that helps the central or federal banks in adjusting their monetary policies.

From where can you get the data?

You can read the data on various government sites. For example, in the U.S.A, the report is issued by the Department of Commerce’s Bureau of Economic Analysis. You can view it at www.bea.gov. It is released quarterly after revisions are made. The data has ‘advance estimates,’ ‘preliminary estimates,’ and the ‘final numbers.’ Along with the data, the reasons for the increase or the decrease in GDP are also explained.

Consumer Price Index (CPI)

What is the Consumer price index (CPI)

The consumer price index is based on the relationship between consumers and their purchasing power. It notes the average price level fluctuation in the goods and services purchased by urban households in a month. It focuses on the cost of living. The fluctuation in the level of money spent on products and services helps in determining the inflation rate.

CPI is based on averages; that is, it will not consider every item that an individual will buy but will collect information about several goods and services spread in over 200 item categories. This data can be collected virtually or by visiting urban areas. As the data is more focused on the expenditure on consumable products and services, it excludes income, investments in bonds, life insurance or stocks, and Social Security taxes. However, the sales tax is included in the data as it is paid directly by the consumer when they make a purchase.

Its importance?

CPI is one of the best economic indicators that is used to understand the level of inflation prevailing in a country. It is closely read by financial economists who make assumptions about the directions in which the economy may move by utilizing this data. Changes in the inflation level alert the Federal Bank that it is time to change the monetary policy.

From where can you get the data?

In the U.S., BLS is responsible for this task. They sample all the urban areas on an average and release the CPI on a monthly basis. CPIs for three metropolitans are released every month while it is done on a bi-monthly basis for other metropolitans. The report is highly specific, and you can find it on www.bls.gov/cpi/home.htm.

 

U.S. Nonfarm Payrolls (NFP) Data – Current Employment Statistics (CES)

Non-Farm Payroll or NFP represents the change in the number of people employed outside the agricultural sector (industry, public sector, services, etc.). An increase in employees could potentially strengthen the currency, while a decline could weaken it. Why is the agricultural industry not included in the report? We will answer immediately! Weather conditions and seasonal changes (mostly) affect the farm sector, while other sectors are more strongly related to their economic needs. That is why the report is called Non-Farms Payrolls. Non-farm payroll report dates you can analyze on our website.

What is Current Employment Statistics?

As the name suggests, CES is related to employment and earnings across non-agricultural industries like civil government workers. It talks about the current situation rather than in the past. It is a survey that is conducted every month by the Bureau of Labor Statistics to know about employment, wages, unemployment, working hours, and earnings based on the company payroll. It has a broader approach as the research is disseminated in many ways, including employment/unemployment rate among different genders and ethnic groups.

The survey is based on the information gathered from 300,000 establishments across 600 industries. This is approximately one-third of the total employees who belong to the formal sector. The survey relies on hours of working. Therefore, when we talk about employed personnel, we consider both full-time and part-time employees who receive a certain income for the hours they have worked for. Even the employees on paid vacations and sick leaves are included in this survey. However, it does not include unpaid family members, volunteers, self-employed people. In other words, a person will be covered in this survey if they are on the payroll of a company.

Its importance?

When we are talking about a strong economy indicators, CES is deemed prominent as it is the earliest report that is released every month. Economists pay special attention to CES as it tells about the employment and wage trend in the non-agriculture sector. It talks about how many jobs have been lost or gained in that month and how many people have earned above the minimum wage.

The trends derived from the payroll data are also interesting. You can get to know how many hours have people worked on average and how they were compensated on an hour. Important to understand these trends as they tell the authorities about wage inflation.

From where can you get the data?

You can get the data from www.bls.gov/ces/home.htm. It is shared by the Department of Labor’s Bureau of Labor Statistics in the U.S.

 

Retail Sales

Retail sales in the USA is a report that shows changes in the volume of sales in retail stores every month. It is published two weeks after the reference month (data are for the last month). The U.S. Department of Commerce issues it. Retail volume is one of the indicators of consumer consumption, so as an indicator of consumer demand and consumer confidence, it can serve as a guide for currency markets. This indicator is divided into: “car sales” and “sales of everything else.” Since the number of vehicles is a very volatile value, more accurate information is provided by the part of the indicator that does not include “car sales,” i.e., U.S.Core retail sales.

The growth of retail volume is a positive factor for the development of the national economy and leads to an increase in the national currency value. The indicator marks the strength of consumer demand. Its growth indicates an increase in the production of goods, strengthening the economy and currencies.

What is Retail Trade Sales And Food Services Sales?

As one of the top 8 economic indicators, this one identifies the increase or decrease in different food-oriented sectors’ sales. The retail and foodservice sales changes are measured every month, and the reports are released.

5000 random samples from retail and foodservice firms are taken for consideration. The sales have corresponded to the present three million firms of the country that fall into this category.

Its importance?

Two-thirds of U.S. annual GDP comprises of spending on the consumption of foo-related items or services. An acceleration or declaration in the spending trends can help the analysts to identify future spending habits.

From where can you get the data?

The responsible department releases this data monthly. You can get the details at  https://www.census.gov/.

 

Producer Price Index (PPI)

What is the Producer Price Index (PPI)?

Like the CPI is measured from the consumers’ perspective, the PPI is measured from the producers’ perspective. It is more like a business equivalent to the CPI. The PPI calculates the average change in the selling price of goods and services produced over a specific time period. It takes into consideration the price movements that happen at the wholesale level rather than the price changes that take place at the retail levels.

When we are calculating the GDP, we consider the final price of all the goods and services to avoid double counting, but in PPI, we measure the prices throughout the stages of production – crude goods, intermediate goods, and the final goods to check the price movement.

Its importance?

The PPI provides the first step of inflation as it can be detected by analyzing the price movements of crude goods. If detected on time, the inflation can be controlled by intervening at its primary stage. This way, there will not be inflation in the CPI, and the economy will function smoothly. To identify economic indicators is crucial.

From where can you get the data?

The Department of Labor’s Bureau of Labor Statistics takes care of both PPI and CPI. They release the data monthly. You can get the report during the second full week of the month. You can access the report at www.bls.gov/ppi/home.htm.

 

Consumer Confidence Survey

What is the Consumer Confidence Survey?

The Consumer Confidence Survey provides good economic data about the nation’s trust in the economy. It reflects the degree of optimism that people have towards the U.S. economy. Their savings and spending activities depict it.

To know whether the public is optimistic or pessimistic towards the economy, around some random 5000 people are asked to participate in a survey. It is not mandatory for everyone. These participants are asked questions about the labor market, their spending behavior, business conditions, financial and professional growth expectations for the next six months or more. The survey is not point-based. The individuals are asked to choose among the three options: positive, neutral, and negative.

Its importance?

As a rule of thumb, a person is reluctant to spend money when there is no job security. They will be more encouraged to save and may even reduce their monthly expenditure on the basic necessities. This is not a sign of a positive economy. On the contrary, a person spends more when they are confident that their income will not stop. They are confident about their growth with respect to that of the economy. Such behavior helps policymakers about the health of the economy.

From where can you get the data?

The data is released on the last Tuesday of each month by the Conference Board’s Consumer Research Center. You can get the full report at http://www.conference-board.org/data/consumerconfidence.cfm.

 

Money Supply (M2)

What is Money Supply (M2)?

In macroeconomics, Money Supply refers to the total value of money available for circulation in a country at a given point in time. As one of the five major economic indicators used by the Forex traders, the data of M2 is strictly based on the physical currency available like coins, bills, demand deposits, fixed deposits, traveler’s checks, assets in retail money market accounts, mutual funds that are less than $100,000, or other term deposits.

The data is exclusive of institutional money fund assets or time deposits that are more than $100,000.

Its importance?

The key economic figures supplied by this data allow the banks to review the country’s current financial and economic conditions. After considering the stats, they alter their monetary policies by lowering or increasing interest rates. This is done to control the circulation of money in the economy.

M2 is helpful for economists and uses the data to make predictions about cyclical economic recessions. The same data is used to determine the possible recovery time and changes in stock prices. You can use M2 to speculate about changes in monetary policies.

While M2 has been around for a while, with the introduction of new indicators, its importance has declined over the last two decades. This is because the new economic indicators are more adept in keeping up with the movement of money, like the transfer of funds from savings accounts to investment accounts, the internationalization of the economy, and the new depository products. These things can render M2 redundant as it can easily go out of sync when tracking these movements.

However, let’s not neglect that M2 does have great use when we are talking about long-term analysis. Banks and economists do deploy this data to assess the long-term growth or reduction in currency circulation. The interest rate is decreased to give a jolt to the sluggish economy and to increase the money supply while the opposite is done to control the flow of money when the economy is overheated.

From where can you get the data?

In the U.S., the Federal Reserve System’s Board of Governors is responsible for releasing the data. It is done weekly (on Thursdays) and monthly. This data has become a staple for the researchers as well and has been getting published since January 1959. You can find the details at www.federalreserve.gov/releases/h6.

 

Housing Starts (Earlier called “New Residential Construction”)

What is Housing Starts?

Housing Starts includes the new residential constructions that start during a particular month. It is an essential economic factor to consider. When construction begins on the footings or foundations of a residence owned by a single-family or under multiple-unit buildings, it becomes a part of that month’s Housing Starts. The data depicts the monthly permits that were issued for residential construction and the number of projects that have been finished.

Its importance?

It is one of the best indicators of a strong economy because you would pay for the construction of a house when you are doing well in other areas of your life. From the analysts’ point of view, they get to see how the change in mortgage rate affects Housing Starts. This is a highly volatile indicator. A change in Housing Starts can affect the financial conditions of the nation. Economists can figure out long-term trends by reading the housing starts.

From where can you get the data?

The U.S. Department of Commerce’s U.S. Census Bureau is responsible for collecting and publishing the monthly Housing Start data. You can find it online at https://www.census.gov/topics/business-economy.html.

 

Manufacturing and Trade Inventories and Sales

What is Manufacturing and Trade Inventories and Sales?

The collective data of shipments by manufacturers and the value of trade sales, along with the value of wholesale and retail inventories of a particular month, provide the data for manufacturing and Trade Inventories and Sales. The data shows the approximate ratio between inventories and sales. That is, how long will the inventories last if the sales continue at the same rate.

Its importance?

This data is the primary source that shows business inventories: business sales. Analysts use this data to identify whether the economy is growing or contracting. If the inventories are growing faster than sales, the economy is slow as people are purchasing less. The economy is flourishing if the sales surpass inventories.

From where can you get the data?

The data is released by the Department of Commerce’s U.S. Census Bureau. You can find more details at  https://www.census.gov/topics/business-economy.html.

 

In the end, this is not a report, but it is an excellent fundamental indicator of the US economy:

S&P 500 Stock Index (the S&P 500)

What is the S&P 500?

The S&P 500 stands for Standard and Poor 500. It is an index that shows the market value of 500 stocks publicly owned and placed in one equity basket. This basket has now become the industry benchmark for the performance of the U.S. equity markets.

Its importance?

The index shows the changes in the stock prices of the 500 companies. Economists use it to measure the nation’s stock of capital and estimate the consumers’ confidence in the economy. It can signal long-term trends in stocks and futures markets.

From where can you get the data?

Standard & Poor’s gathers the data and releases this index. It shows real-time information, as well. You can track it at https://www.standardandpoors.com.

Spanish language – Hindi Language

Spanish language website Hindi language website