Merchandize Trade Balance

Economy is possible influence by export and import trade. When products trade between countries, currency exchange should be taken consideration in order to gain more from the profit margin. Among all of the trade, the products are divided by six categories:

1. Food & beverages
2. raw material
3. consumer goods
4. autos
5. capital goods
6. other merchandise

Industrial sector indicators

Industrial Production indicator is the total output of a nation's plants, utilities, and mines. For the fundamentalists, this is the important indicator that reflects the strength of the economy, and also the strength of a specific currency. Therefore, forex traders use this economic indicator as a useful trading signal.

Capacity utilization indicator equal to the total output of industry divided by total production capability. It refers to the maximum output of production plant in a normal business conditions. Capacity utilization is not a major economic indicator for forex market. However, this is the substance that is useful for fundamental analysis. A "normal" figure for a steady economy is 81.5 percent. If the figure reads 85 percent or more, it means that the industrial production is overheating, which close to full capacity. High capacity utilization rates induce inflation, and forex market may expect bank to increase the interest rates in order to avoid or against inflation.

Factory orders refer to the total of durable and nondurable goods orders. The factory orders indicator has limited significance for forex traders.

Nondurable goods are those products with life span not more than three years. For instance, food, clothing, light industrial products.

Durable goods orders are those products with a life span of more than three years. For example appliances, furniture, jewelry, and electronic products. They are divided into four major categories: primary metals, machinery, electrical machinery, and transportation. In order to eliminate the volatility pertinent to large military orders, the indicator includes a breakdown of the orders between defense and non-defense.

How can forex traders analyze from the data?
This data is fairly important to forex markets due to a good indication of consumer confidence. If durable goods cost more than nondurable, a high number in this indicator shows consumers' propensity to spend. Therefore, a good figure shows the bullish of the domestic currency.

Business inventories are the items produced and stored for future sale. The compilation of this information determines the situation of business of the market. Moreover, financial management and computerization help control business inventories in exceptional ways. Therefore, this indicator is not much important for the forex traders.

Inflation indicators

When inflation arises, bank interest rate tend to increase to fight against it. In additional, high interest rate may alternately support the local currency rate . Normally we use the indicators below to measure the inflation trade.

Producer price index (PPI). The compilation of most sectors of the economy, such as manufacturing, mining, and agriculture. PPI does not include imported goods, services, or taxes. It measures the average change over time in the selling prices received by local producers for their output. For PPI calculator, refer to http://www1.jsc.nasa.gov/bu2/inflation/ppi/inflatePPI.html

Consumer price index (CPI). Reflects the average change in retail prices paid by most consumer for a fixed market basket of goods and services. The CPI data is obtained from a sample of prices for food, shelter, clothing, fuel, transportation, and medical services that people purchase in daily basis.

For example, in 2000, you buy a book cost $10 and then in 2006 the same book will cost $11.76.

Formula:
CPI in 2000 = 110.88
CPI in 2006 = 130.4
Price in 2000= Price in 2006( 2000 CPI /2006 CPI)
$10=$11.76 (110.88/130.4)

Gross national product implicit deflator. It’s calculated by dividing the current dollar GNP figure by the constant dollar GNP figure.

Gross domestic product implicit deflator. It’s calculated by dividing the current dollar GDP figure by the constant dollar GDP figure.

Commodity research bureau's (CRB) futures index . An equally weighted index of 21 commodities, commonly used to gauge the effects of inflation.

The “Journal of Commerce” industrial price index (JoC). Consists of the prices of 18 industrial materials and supplies processed in the initial stages of manufacturing, building, and energy production.

Construction Data

These indicators are classified into three major categories:

1. real estate development and approval
2. new housing sales and second hand housing offered;
3. construction expenditures

Construction indicators are recurring and very sensitive to the level of interest rates and the level of disposable income. Sometimes, the bank issue low interest rates also won’t help to generate a high demand for housing. As happened in U.S. 1990, low mortgage rates only cause housing increased marginally, due to the low employment rate in a weak economy period. Housing level about between one and a half and two million units indicates a strong economy, whereas around one million units imply that the economy is in downturn.

Economic Indicators

The Gross National Product (GNP). The Gross National Product measures the economic performance. This indicator is the macro scale, of the total of consumption spending, investment spending, government spending, and net trade. The gross national product refers to the overall goods and services produced by United States residents, or residents abroad.

The Gross Domestic Product (GDP). The Gross Domestic Product is the total of all goods and services produced in the United States , either by local or foreign companies.

Consumption Spending. Consumption is made probably by own basic income and discretionary income. The decision to spend or to save is depends on customers. Consumer confidence level is also measured as an important indicator to switch the tendency of customer from saving to buying.

Investment Spending. Investment — or gross private domestic spending — is the fixed investment and inventories.

Government Spending. Government spending is very influential and its impact on other economic indicators because of other expenses.

Net Trade. Worldwide internationalization and the economic and political developments when the United States able to compete overseas. Net trade can be approached in two ways: flow of product and flow of cost.