Bloomberg 1: GDP

Personal Consumption

2/3 the world's GDP

Housing

3% of the US Economy but is a good indicator because buying a house leads to a lot more consumer spending

Business Confidence

A measure of the degree of optimism among firms in an economy about the future performance of firms and the economy; it is measured on the basis of surveys of business managers. Is an important determinant of the investment component of aggregate demand. (PMI-ISM Manufacturing)

Imports Effect on GDP

Act as a drag on GDP; the larger growth in imports offsets the growth in consumption, thereby causing GDP to decline

GDP formula

C + I + G + (X-M)

Which economic indicator is most directly linked to the average person's cost of living?

CPI

Essential Economic Indicators

Economic Growth Inflation Unemployment Business Confidence Housing

GDP Release Date

Every quarter a month after the end of the quarter

X

Exports

Nonfarm Payrolls Release Date

First Friday of the following month

PMI Release Date

First business day of the following month

G

Government Consumption

Nominal GDP Growth

Growth of GDP before inflation has been accounted for (usually higher)

M

Imports

What does Inflation to do Bonds?

It erodes their value

CPI Release Date

Middle of the following month

Housing Starts Release Date

Middle of the following month

X-M

Net exports

Real GDP Growth

Nominal GDP Growth - Inflation (main gauge of economic health)

C

Personal Consumption

GP (terminal function)

Price chart used to identify trends and market patterns

I

Private Investment

ECST S (terminal function)

Provides economic data with context and customizable graphs

GDP Report

Publisher: Bureau of Economic Analysis Data Input: Whole Economy Frequency: Quarterly Inflation Source: GDP Price Deflator

Consumer Price Index

Publisher: Bureau of Labor Statistics Data Input: Basket of Goods and Services Frequency: Monthly Inflation Source: Labor Departments Inflation Report

Which GDP Growth do investors look at?

Real GDP growth,

NH (terminal function)

Shows real-time scroll of news headlines

Biggest pitfall of economic indicators

They are not sufficiently timely to make informed investment decisions. When economic indicators fail to predict a turning point, which they frequently do, investors can miss out on opportunities and/or lose money

Investors Value

Timeliness of release; the more timely the data, the more valuable it is to investors and policy makers

Main reason that investment banks create estimates of economic indicators

To know when specific economic date points are a positive or negative surprise

Inflation

a general increase in prices of goods and services which diminishes the purchasing power of money

Unemployment

causes Economy to shrink and depresses GDP growth (nonfarm payrolls)

Changes in estimates illustrate

economic optimism and pessimism. Significant changes in estimates may herald an economic turning point

Long-term economic estimates are

foundational to financial models

Actually GDP Growth

has lost its capacity to surprise

GDP per capita

is a measure of prosperity because it divides the total GDP of a country by its population

CPI (Consumer Price Index)

measures price increases for a standard basket of goods

ECOW (terminal function)

provide comprehensive data on economic indicators by country

Leading Indicators

the goal of a leading indicator is to be alerted to forthcoming turning points in real GDP growth. (In the great recession starting in late 2008, PMI fell to its low point and started to recover well in advance of GDP falling to its low point and then rebounding)

GDP

the market value of all final goods and services produced within a country (broadest measure)

GDP can change when

the measurement of economic activity evolves

PMI and Nonfarm payrolls attract the most attention because

they release first

Surprises

what moves markets (PMI)