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)
