Analytics

Factory Orders is an important part of any trader's analysis for predicting the trend direction. Just like many other indicators, Factory orders are calculated and published by the American Bureau of labor statistics. The time of release is traditional — 11 a.m (Eastern Standard Time) on the 35th day after the end of the fiscal month. One week prior, there's a preliminary report which includes the most important numbers of Factory Orders.

What exactly does the Factory Order dynamics say?

The change of this indicator means a new result of recalculation of the total amount of new orders done by the customer. Thus, if Factory Orders increase, it clearly means an increase in demand, costs of costumers and income of companies and their stability. All the mentioned strengthens the American dollar. And just the opposite, if Factory Orders lowers, it affects the stability of the currency in a negatively.

How should one use Factory Orders in practice?

In general, the numbers allow us to consider the intensity of economic conditions changes subject to American Industrial Sector. This significantly facilitates the work with this or that tendency and time frame and thus allows for a more detailed evaluation of industrial prospects. 

But one shouldn't interpret the factory orders data literally. Experienced traders do not use it as a key criterion for strategy selection. The news about this indicator are used to prove the choice of this or that strategy concerning the market behavior. 

Among all the indicators published by the American bureau of labor statistics that are used by traders in their working routine, this indicator is a most clear one, that’s why it seriously influences the market situation. Non-Farm Payrolls shows the amount of new vacancies not including agricultural companies. It is published the first Friday proceeding the financial month.

A detailed review on free vacancies in all the industrial sectors excluding the agricultural one allows us to see a rise or a fall in their quantity in comparison with the previous month and calculate the unemployed headcount among the employable population. Thus, any change in the chart shall reflect some serious changes in labor market, which always influences the state of American economy.

How to read the NFP?

A trader’s got to keep in mind that the States are a biggest import country that deals with China and Europe. As a result, the employment rate within the US influences the world’s economy as a whole and touches such sensitive factors as GDP, overall production, consumer spending, trading balance etc.

The main factors in the Non-Farm Payrolls indicator are employment and unemployment, and traders, first of all, study the difference between them and prognoses. For instance, if unemployment is higher than it was predicted, and employment is lower (the amount of new vacancies is reducing), the USD starts to fade. Otherwise, when new vacancies appear in an amount exceeding the one predicted and unemployment lowers down, then the national currency strengthens.

Trading on NFP news

Upcoming news on this indicator shall be considered by any trader, who deals with the USD. Even for those who prefer USD/JPY, the Non-Farm Payrolls indicator is a main one, since the US is the biggest importer for Japan. In general, changes in NFP lead to a movement of price in different markets: product, stock but most importantly, currency exchange market.

Professional analysts define the index of leading indicator as a set of economic indicators. The data are published in Conference board report monthly. Specialists tend to relate this kind of date with prognosis, since the indicator is vitally important for it.

What does Leading Indicators Index tell?

An accurate analysis of Conference Board report allows us to draw certain conclusions concerning the prospects for the economic development. The index includes 10 elements which reflect the current market situation within the US. The government shall be considered some kind of a flagman, thus financial state of the country immediately finds its mark on exchange rates and securities.

Among the elements of Leading Indicators Index there are:

• 1) Average duration of the working week in industrial field. The index calculates the total of hours and is applicable to all the fields separately.
• 2) An average number of requests for unemployment insurance compensation. The data are collected from all the states.
• 3) The volume of orders for consumer goods. While calculating, contracts with foreign partners are also considered, including purchase of materials from local production providers.
• 4) Time cost on goods transfer from plant to distribution. What is elevated is the speed of transfer from factories to the shops.
• 5) The amount of repeated orders to manufacture capital goods. These are equipment and planes mostly. The volume of orders among military field is not considered.
• 6) The amount of permits for building houses for the previous period.
• 7) The price of 500 stocks in use of financial market with S&P 500 index.
• 8) The elevation of consumers’ mood.
• 9) Monetary stock (M2) including inflation processes.
• 10) Difference between percentage rates on short-range and long-range financial products.

The described above indicators characterize the economic state of the USA quite accurately. The data extracted from monthly report is used by professional traders, investors, economists. The Leading Indicators Index analysis allows us to correctly elevate the situation and choose prospective ways for investment. The 10 indicators, combined in one, are one of the most effective instruments for short-range prognosis.

How to receive the data and interpret it on time?

The official data provider for this index is Conference Board. It is published as a detailed report, are accurate and real. The experts expect this report every 20th day of the month, an exact date of publishing isn’t stipulated. The data may be published earlier or later.

In formally several hours, the data appear on pages of central financial magazines. The central are Thomas Reuters and Bloomberg. E-magazines are published in English only.

Elevating the Leading indicators is a complex process. These are the key characteristics of governmental economics of the USA. The changes shall reflect in a fall or rise. This is some kind of basis for drawing up a conclusion concerning business cycles.

The changes in indicators demonstrate the turning tendencies. Indicators are extremely accurate, which distinguishes it from other individual indicators. Once studied the report, a trader makes a definite conclusion concerning a fall or rise in this or that sector. Investors are allowed to make an optimum decision for investment direction.

The American employment system is well developed, thus the government provides the unemployed population with relatively high claims. Any fired employee due to optimization or any other reason is eager to receive aid from the government and the statistics data about such people is public. Due to the late employment crisis in the US, there’s extra attention payed to such field of governmental mechanism, so a trader shall also consider it and analyze the data extracted from it.

Jobless claims Indicator shows the amount of claim request received per week. Following the dynamics of this indicator allows a trader to easily predict the consumer costs level and the economy’s state in general.

When is it published?

The weekly statistics on Jobless Claims indicator are published every Thursday at 8:30 a.m. EST. The data are published on the official pages of American Labor Department, Bureau of Statistics. The weekly review includes a detailed report on the requests received from the citizens who were formerly employed in the following fields of labor:

• storage facilities and logistics;
• housebuilding;
• transport;
• education;
• foodservice;
• wholesale;
• sales;
• manufacture;
• farming.

How do traders use jobless Claims index in practice?

If the number of request to receive aid from the government is increasing, it means more and more people are fires. Knowing the indicator’s level formed the current week and having built its dynamics, one may conclude a growth or fall in unemployment which directly affects the county’s economy.

Once obtained a certain prognosis from a specialist and formed a preliminary strategy, traders wait for real indicators of the currency change. Once fixed a result that is lower than the one predicted, we shall conclude, the dollar is strengthening, but if the result is lower than the real numbers are, a negative scenario shall be expected.

In the US it is customary to calculate the wages in money per hour. The average of it is extremely important, published every month by the American Bureau of labor statistics. The Hourly Earnings Indicator is a main indicator for predicting escalation.

What does the Hourly Earnings indicator tell?

The Indicator allows us to trace the dynamics of the average wage per hour at American companies (excluding agricultural companies). Based on the data, analysists predict consumer and industrial escalation additionally comparing it with process costs. The higher the wages, the more expensive the product shall be.

But industrial escalation unavoidably touches the volume of consumer costs leading to consumer escalation. Having this in mind, the main financial regulators of the country have an only way out — fight the escalation increasing the rates, thus strengthening the national currency, in other words, the Average Hourly Earnings for American dollar always is considered positive. And vice versa, if the index is falling, such a factor shall be considered negative.

Time of publication

Every first Friday of the month 9 a.m. EST, you may find an up-to-date report on Hourly Earnings Indicator on the American Bureau of labor statistics’ web-site or other major news agencies (Bloomberg, Thomas Reuters etc.)

How does the Indicator influence the trade?

It is well known that the banks’ rates always tend to be descending, but if financial experts register an increase in the wage per hour, they lift it manually in order to reduce the escalation impact. In practice this doesn’t reflect in an immediate effect, thus making the Average Hourly Earnings Indicator a weak point for actions.

The indicator often is left behind the scene, since it’s effect is only traced at long term. But the indicator is used in order to make sure the chosen strategy is appropriate and correct it if necessary. Thus, the Indicator is not considered independently, only accompanied by those that are published later.

One of the easiest, but extremely effective ways to evaluate the current state of retail economy in a country is based upon the volume of items sold by retail organizations. The information collected from 9 000 shops of the network Redbook allows to achieve the clear picture of consumer demand in a country and evaluate the dynamics of consumer´s preferences regarding the time of the year, days of the week, holidays and other events.

About the index.

Redbook index is calculated by a branch of the network called Redbook Research Inc and is published every week, on Thursday. In other words, the index is some kind of review o retail sales done by the network’s branches allowing to find out the tendencies of retail sales. For own convenience, it is divided into the following categories:

• Clothes

• Furniture

• Drugs (pharmacy)

• Sections

• Goods on sale

• Etc

The results of the research powered by Redbook Research Inc. are published since 1964 which grants an enormous analytical base regarding the consumer demand of the whole country.

How to interpret the data extracted from Redbook?

Knowing how do the data on consumer demand change at a certain timeframe, one may draw certain conclusions about private income of the population. This references to employment rate allowing to evaluate the volume of production being stored etc.

It is not exactly that Redbook index makes a significant influence on financial market and its participants, but it often accompanies some serious market changes. One should keep in mind the traditional days of sales, pre-holiday discounts, and an increased demand during natural disasters etc. At “Black Friday”, famous for its discounts, customers buy almost everything they see. At such occasions, the indicator Redbook is studied extremely thoroughly by the experts all over the world.

Not only the biggest players of forex market pay extra attention to it, but American financial experts also. The consumers’ customs change in accordance with the index influence the business cycle, escalation and thus the establishment of optimum interest rates by the main financial regulators of the country.

The volume of one´s personal income is different from salary in the way that the first one includes all the possible sources of money. In some cases the sum differs a lot, thus making their purchasing power analysis way more difficult. Real Earnings indicator is a narrow case, the data collected from the registered entities, while Personal Income is a general case, which includes not only salary and official income, but government aid and other sources.

What are the data sources?

Traders get information about Personal Income from Economical Analysis Bureau’s specialists the month proceeding after the fiscal month. Since this indicator is extremely important for strategy build-up, one’s got to clearly know at what exact time it is published — 9:30 EET (Eastern Standard Time) is the time when official reports appear on the Bureau’s web-site, and at Bloomberg’s, Thomas Reuters and others several minutes later.

How to interpret the Personal Income data?

Following the dynamics of personal income volume allows drawing certain conclusions. A growth of the indicator tells us about an increase in consumers’ customs leading to an increase in the amount of goods obtained. All of the mentioned above positively affects the county’s currency, but if the data revealed in the report shows no growth, but a decrease, one shall expect nothing but a negative scenario.

Personal Income Indicator is an important variable in every prognosis’ formula, though traders notice insignificant influence on the market. But either way, Personal Income is the best preceding indicator which reflects consumer costs and accordingly retail sales and escalation expectations.

American existing home sales is a field of domestic economics which is paid extra attention to by financial experts, bankers and, of course, traders. This is understandable, since the last global economical crises started particularly with severe problems with realty market.

The main trait of American realty consists in comparatively small share of new houses being built (and sold). Citizens normally buy and sell houses on secondary market, but each house is obligatory renewed before the sale.

Secondary Market Indicator

The number of sell-buy deals on secondary realty market — one of the clearest indicators reflecting the state of the mentioned field. That’s why it is paid extra attention to, since it shows the amount of re-sold houses per month. This indicator is more important than new home sales.

When is it published?

A specific trait of this indicator is it’s period of publication — per year. Each numeral collected by the census bureau is multiplied by 12. You may find the current report on the Bureau’s web-site (or some other news agency) on the 20th of each month following the financial month. The data regarding sold houses is published at 11 O’clock EST.

How does the indicator affect financial market?

The field of American realty is attractive, since it opens some new employment opportunities. These are representatives of building field, who repair the old houses, bank accountants who permit or reject loans and the whole army of brokers who are in charge for execution of corresponding transactions. It is obvious that if Existing Home Sales turns out to higher than expected, it shall have positive effect on the market, an increase in sales also increases labor demand.

Along with the mentioned, this indicator sometimes isn’t correctly analyzed by traders while studying its dynamics. The “problem” is in different price levels for secondary buildings. In other words, if the general volume for financial month has fallen it shall be extremely important to study the dynamics in “cheap”, “middle” and “expensive” price level segments. Thus there was a situation in 2013 when Existing Home Sales hadn’t made it to the prognosis level, but the amount of deals in “expensive” segment skyrocketed. This factor almost neutralized the effect that general sales volume produced when it has fallen.

This index is characterized by an extreme influence on the market and neither traders, nor market analysists and financial experts leave it out in the cold. The index of business activity in the field of services is also that important, since its indicator is the result of public surveys conducted among specialists who find themselves in the amidst of the market and who see it from the inside and participate in it.

The monthly survey in Supply Services is conducted by the Institute for Supply Management (ISM). 400 surveyed are the representatives of different fields of business (finance, life and property insurance, sales, education, real estate, etc). They are asked about the current business conditions, volumes of orders, price levels, product stock levels, etc. The result of the survey is reflected in percentage and subdivided accordingly.

When is it published?

The report on ISM is published every 3rd day of the month proceeding the financial month. The exact time is 10.00 EET (Eastern European Time). Traders may find the report on the ISM web-site — www.instituteforsupplymanagement.org or in feeds of such news agencies as Bloomberg, Thomas Reuters and others.

Influence of ISM on the market

Much does the business sector know about all the changes that happen inside the market. Specialists in Forex all as one call Supply Managers the connoisseurs of the country’s economy, prospects and expectations. As a result ISM Services Index is considered to be a most accurate leading index of country’s economic health.

The beginning of this week is full of events. US stock indexes will remember November 21 for a long time: the Dow Jones Industrial Average index has reached its historic highs. The flagship index S&P500 and Technology Sector Index NASDAQ  have the same dynamics . After the end of trading session in US Donald Trump published a release in which he informed about an intention to quit TTP as a part of the plan for the first 100 days of his presidentship. Prime  Minister of Japan Shinzō Abe said that the TPP would be "meaningless" without the involvement of the US.

If US quits the deal we will witness  fundamental changes in the world infrastructure as more than a third of the world countries are the part of it.

The market responded to this intention already. Investors buy up shares of the companies that benefit from Donald Trump being a president.

On Monday November 21 the following companies increased their  shares price: Range Resources Corporation (+6,97%); Chesapeake Energy (+6,36%); Marathon Petroleum (+8,94%). All these companies  are attractive for investment looking out for the structural changes that will be done by Donald Trump (increasing of investment in hydrocarbon sector and infrastructure project and leaving Trans-Pacific Partnership trade deal).

The review is done by FIBO Group analyst Mikhail Khlestunov.