Easy-Forex Explains Some of Today's Economic Indicators

Limassol, Cyprus. January 17, 2008 -- Today sees the release of the Consumer Price Index (CPI) in the UK for the December period as well as the Retail Price Index. And, in the US we will see the release of Retail Sales (ex autos) and the PPI core output for December.

What these Indices mean to OTC traders and how relevant they are is a question often asked of Easy-Forex. Understanding the potential impact of economic data at its release date is a fundamental approach most traders will examine.

The Consumer Price Index; Core-CPI is released by the Bureau of Labor and Statistics around the 20th of each month, 8:30am EST. It covers previous month's data, is considered the most widely used measure of inflation and is regarded as an indicator of the effectiveness of government policy. The CPI is a basket of consumer goods (and services) tracked from month to month (excluding taxes). The CPI is one of the most followed economic indicators and considered to be a very big market mover. A rising CPI indicates inflation. The Core-CPI (CPI, excluding food and energy, expense items which are subject to seasonal fluctuations) gives a more stringent measure of general prices.

Another eagerly anticipated release is the Retail Sales Data, less Automotives, by the Bureau of Census. This is released around the 12th of each month, 8:30am EST and covers the previous month’s data. Retail sales are a key driving force in US economy, this indicator tracks the merchandise sold by companies within the retail trade. This indicator measures the total consumer spending on retails sales (not including service costs). The retail revenues are a major part (two thirds) of the US economy. The Census Bureau surveys hundreds of various sized firms and business offering some type of retail trade. Every month the data is released showing the percent change from the previous month data. A negative number indicates that sales decreased from the previous months sales. This indicator is a very big market mover as it is used as a gauge of consumer activity and confidence as higher sales figures would indicate increased economic activity. The data is very timely because retail sales data is released within 2 weeks of the previous month.

Also due for release today in the US is the Producer Price Index; Core-PPI by the Bureau of Labor and Statistics. This is released in the second full week of each month, 8:30am EST and covers previous month’s data. The PPI is not as widely used as the CPI, but it is still considered to be a good indicator of inflation. This indicator reflects the change of manufacturers’ cost of input (raw materials; semi-finished goods; etc.). Formerly known as the "Wholesale Price Index", the PPI is a basket of various indexes covering a wide range of areas affecting domestic producers. Each month approximately 100,000 prices are collected from 30,000 production and manufacturing firms. It is not as strong as the CPI in detecting inflation, but because it includes goods being produced it is often a forecast of future CPI releases.