Understanding Economic Statistics

The condition and direction of the U.S. economy is a major driver of interest rates and bond prices. Even though no one knows for certain what the future holds, bond traders profit when their expectations for the economy are correct. Bond market participants follow economic indicators closely, looking for signs of change that might affect future supply and demand so they can position themselves accordingly. When economic indicators exceed or fall short of market expectations, bond prices can move quickly and sharply in response.

Monetary policy makers at the Federal Reserve also closely follow and interpret economic data releases, looking at the indicators relative to expectations as an indication of the outlook and direction of the economy and inflation, which can affect Federal Reserve policy. Federal Reserve policy has a significant impact directly on short-term interest rates and indirectly on longer term interest rates, which in turn affect bond prices.

Which Indicators Matter Most?
The markets’ reaction to the release of economic indicators depends on the indicator itself, where we are currently in the business expansion/contraction cycle, and policymakers’ reaction to structural changes in the economy.

Leading indicators, which have historically predicted the future direction of the economy, are more important than lagging indicators of economic turns that have already occurred.

Relevance, Timeliness and Reliability
The most relevant, timely and reliable indicators have the biggest effect on the market. Retail sales figures are considered relevant, for example, because consumption spending represents two-thirds of total U.S. economic activity.

Markets always want the latest news, so indicators that reflect the most current data, such as the Institute for Supply Management (ISM) Survey released on the first day of the month and reflecting the month just past, could have a greater impact than the final quarterly report on economic growth (change in Gross Domestic Product, or GDP) which is released three months after the end of the quarter it reflects.

As for reliability, some figures, such as new, single-family home sales, are subject to large subsequent revisions or too changeable for valid comparisons. Other indicators also show wide swings from report to report, compelling analysts to “smooth” the data using moving averages to discern trends.

Business Cycle Phase
When the economy is in recession or just starting to expand, the markets are less concerned with inflation and more sensitive to signals about demand and production. When the economy has been growing for some time, the fear of inflation rises and the markets focus on signs of increasing wages and prices.

Structural Change and Policy Reaction
Structural changes in the economy also make certain indicators more or less reliable as signals of broad business conditions or prospects. In the early 1980s, for example, the money supply numbers determined short-term interest rates because of Fed policy at that time. A Fed policy change in 1982 broke the link between monetary growth and interest rate changes. In addition, the relationship between changes in money and economic growth broke down, making the money supply numbers less useful for predicting future spending and production. The Federal Reserve now may look at a number of indicators, including relative interest rate levels, commodity prices, inflation and economic growth along with the money supply.

A Note on Seasonal Adjustment
“Seasonal adjustment” of economic data applies factors based on recent seasonal patterns so that indicators can be compared week-to-week and month-to-month for evidence of emerging trends. Although the seasonal adjustment process is not perfect, without it analysts would only be limited to year-to-year comparisons and unable to assess the current condition of the economy.

Economic indicators are listed by category, with a description of what the economic indicator is and why a change in that indicator might be meaningful to an investor.

The Employment Situation
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Monthly
Released: 8:30 a.m., first Friday of the month (usually)

What it is: A report including the civilian unemployment rate; the change in total nonfarm payroll (number of payroll jobs added or lost); the change in manufacturing payroll employment; the average nonfarm workweek (number of hours worked); average workweek in manufacturing; average hourly earnings; index of aggregate weekly hours (total hours worked per week by non-supervisory employees in the private nonfarm economy); and payroll employment diffusion, the percentage of industries reporting an increase in payroll employment.

Why we care: Rising employment can be a sign of economic recovery or, in the extreme, an inflationary pressure. Rising unemployment is consistent with economic slowdown or recession. The change nonfarm payroll is considered shorthand for the overall tone of the report and affects the outlook for personal income. The average workweek in manufacturing often leads changes in manufacturing employment, as employers will adjust workers’ hours before adding or cutting jobs. Average hourly earnings is an indicator of wage inflation and is helpful in estimating changes in personal income and the Employment Cost Index. Payroll employment diffusion indicates the breadth of payroll employment changes and can foreshadow shifts in overall employment.

Unemployment Insurance Claims
Source: Department of Labor
Frequency: Weekly
Release: 8:30 a.m., Thursday of the following week

What it is: Number of initial filings for state unemployment insurance benefits for the previous week and the total number of persons receiving payments for the week before that.

Why we care: Indicates whether unemployment is up or down. Initial claims suggest the layoff pace, which can be useful early signal of conditions in the labor market.

Gross Domestic Product (GDP)
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Quarterly, revised monthly.
Timing: 8:30 a.m., about four weeks after month end. Advance GDP estimates are released late in the first month after the quarter ends; preliminary GDP is released a month later; revised GDP is reported late in the third month after the end of the quarter it refers to.

What it is: A measure of the total value of goods and services produced by people, businesses governments and property located in the United States. Nominal GDP shows current dollar value; real GDP is adjusted for inflation by reference to a 1996 base year. The indicator is typically reported as an annualized quarter-to-quarter percentage change.

Why we care: GDP is the broadest available measure of U.S. economic activity. Rising GDP indicates economic growth. Falling GDP indicates retrenchment. Negative GDP growth for two or more consecutive quarters defines a recession.

Personal Income
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Monthly
Timing: 8:30 a.m., four weeks after month end, next business day following GDP report

What it is: Total pretax income earned by individuals, non-profit organizations and private trust funds, expressed at an annual rate. Disposable personal income (DPI) measures personal income minus tax and non-tax payments. Personal saving subtracts personal consumption expenditures plus interest payments and net transfers to foreigners from personal income. The personal saving rate is personal saving stated as a percentage of personal income.

Why we care: Changes in real (inflation-adjusted) DPI often foreshadow changes in consumer spending patterns; i.e., a rise in income can lead to a rise in spending and vice versa. Consumer spending has an effect on economic growth because two-thirds of GDP is personal consumption.

Corporate Profits
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Quarterly, revised monthly along with GDP
Timing: 8:30 a.m., eight to nine weeks following quarter end.

What it is: Tax-based profits are derived from corporate tax returns. Adjusted profits are designed to reflect earnings from current production. Tax-based numbers get the most press, but the adjusted figures are more economically meaningful.

Why we care: Strength or weakness in corporate profits often foreshadows increases or decreases in the contribution of capital spending to GDP growth.

Institute for Supply Management Survey
Source: Institute for Supply Management
Frequency: Monthly
Timing: 10:00 a.m., first business day of the following month

What it is: Results of a survey of 350 purchasing managers on recent trends in orders, production, employment, delivery speeds (vendor performance), and inventories as well as prices for the products they buy. Respondents indicate whether activity in each category has been higher, lower or unchanged from the previous month.

Why we care: An overall index reading above 50% implies expansion of the manufacturing sector; below 43% implies recession. Growth in other sectors—service and construction—can sustain gains for the whole economy when manufacturing weakness is only moderate. This survey is also considered an indicator of corporate purchasing managers’ plans.

ISM Nonmanufacturing Survey
Source: Institute for Supply Management
Frequency: Monthly
Timing: 10:00 a.m., third business day of the month

What it is: Results of a survey covering 370 purchasing and supply management professionals from more than 26 sectors of the economy.

Why we care: Although it dates back only to 1997, the survey is expected to become a valuable guide to large parts of the economy for which not much economic data exist.

Chicago Purchasing Managers’ Survey
Source: Purchasing Management Association of Chicago
Frequency: Monthly
Timing: 8:45 a.m. CT, last business day of month

What it is: Survey of purchasing managers in Illinois, Indiana and Michigan.
Why we care: This survey moves in the same direction as the Institute for Supply Management survey about half the time and is followed as a secondary source of corporate purchasing managers plans.

Philadelphia Federal Reserve Bank Business Outlook Survey
Source: Federal Reserve Bank of Philadelphia
Frequency: Monthly
Timing: 8:30 a.m., third Thursday of each month

What it is: A poll of manufacturing firms in eastern Pennsylvania, New Jersey and Delaware, the bank’s district, on recent developments and expectations with respect to “general conditions” and specific sectoral activities.
Why we care: Indicates changes in regional economic activity.

Kansas City Federal Reserve Bank Manufacturing Survey
Source: Federal Reserve Bank of Kansas City
Frequency: Monthly
Timing: 11:00 a.m., two weeks after month-end

What it is: Reports about their businesses from manufacturers in the Kansas City Federal Reserve Bank district.

Why we care: Indicates changes in regional economic activity.

Richmond Federal Reserve Bank Survey
Source: Federal Reserve Bank of Richmond
Frequency: Monthly
Timing: 10:00 a.m., fourth Tuesday of the month

What it is: Poll of district businesses on conditions in manufacturing, service and retail sectors.

Why we care: Indicates changes in regional economic activity.

Current Economic Conditions (“Beige Book”)
Source: Federal Reserve Board
Frequency: Eight times per year, every six to eight weeks
Timing: 2:00 p.m., second Wednesday before Federal Open Market Committee Meetings.

What it is: A report on regional and economic conditions from each of the 12 Federal Reserve district banks

Why we care: Based mostly on anecdotal reports, the Beige Book (so-called because of the color of its cover) can convey a different impression about the economy than what can be gleaned by the numbers alone. Although the Fed does not seem to assign much importance to the backward-looking report, the markets can move substantially in response to a change in its tone about regional and economic conditions.

Durable Good Orders (Advance Report)
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 8:30 a.m., three to four weeks after month end

What it is: A report measuring the value of orders placed with U.S. manufacturers for goods with a life expectancy of at least three years.

Why we care: Within the nondefense orders group, bookings for capital goods are watched particularly closely as a leading indicator of business spending on durable equipment. The Conference Board’s index of leading economic indicators includes this number as well as manufacturers’ new orders for consumer goods and materials.

Manufacturers’ Shipments, Inventories and Orders
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 10:00 a.m., four to five weeks after month end

What it is: Data on new orders, unfilled order backlogs, shipments and inventories for both durable and nondurable goods at U.S. factories.

Why we care: The ratio of factories’ inventories to shipments, when averaged over two or three months, can suggest whether inventory imbalances are present or developing at the factory level.

Industrial Production
Source: Federal Reserve Board
Frequency: Monthly
Timing: 9:15 am, two weeks after month end

What it is: A measure of domestic production by manufacturing, mining and utility companies.

Why we care: Industrial output accounts for roughly 25-30% of GDP (as of 2000).

Capacity Utilization
Source: Federal Reserve Board
Frequency: Monthly
Timing: 9:15 a.m., two weeks after month end, coincident with Industrial Production

What it is: The percentage of estimated productive capacity in manufacturing, mining and utilities in operation each month.

Why we care: Historically, utilization rates approaching or exceeding 85% can heighten inflation risks by creating production bottlenecks and limiting the supply of products.

Manufacturing and Trade Inventories and Sales
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 8:30 a.m., six weeks after month end

What it is: A report indicating the level of business stocks at the retail, wholesale and manufacturing levels.

Why we care: The inventory-to-sales ratio included in the report can be helpful in attempting to infer whether recent changes in the speed of stock building are sustainable or appropriate in the context of demand trends and is often viewed in conjunction with manufacturers’ shipments, inventory and order trends. Inventory data are revised frequently and considered less reliable than other statistics.

Composite Index of Leading Economic Indicators
Source: The Conference Board
Frequency: Monthly
Timing: 10:00 a.m. approximately three weeks after month-end

What it is: A composite of ten financial and non financial indicators.

Why we care: These indicators have historically tended to anticipate business cycle peaks and troughs.

Retail Sales
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 8:30 a.m., two weeks after month-end

What it is: A measurement of sales of retail establishments, including e-commerce sales adjusted for normal seasonal variation, holidays and trading-day differences. Advance estimates are unreliable and revised a month later and made final a month after that. Large adjustments are the norm, so advance figures are unreliable.

Why we care: Retail sales are 40% of Personal Consumption Expenditures, which in turn make up two-thirds of the Gross Domestic Product (GDP). Retail sales is an indication of consumer spending and confidence.

Personal Consumption Expenditures
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Monthly
Timing: 8:30 a.m., four weeks after month end

What it is: A measure of consumer spending for all goods and services, quoted in both nominal (current-dollar) and real (inflation adjusted) terms and broken down into broad categories of durable goods, nondurable goods and services.
Why we care: Personal Consumer Expenditures contribute two-thirds of the Gross Domestic Product (GDP).

Unit Auto and Truck Sales
Source: Individual company reports, adjusted using seasonal factors provided by the Department of Commerce, Bureau of Economic Analysis
Frequency: Monthly
Timing: Time varies; one or two business days after month end.

What it is: Monthly figures supplied by the major vehicle manufacturers, in conjunction with official seasonal adjustment factors.

Why we care: Provides useful information about demand trends in this sector, and, by inference, for other big-ticket items.

BTM-UBSW Chain-Store Sales Index
Source: Bank of Tokyo-Mitsubishi, UBS Warburg
Frequency: Weekly, for week ending Saturday
Timing: 9:00 a.m., Tuesday

What it is: a seasonally adjusted sales index based on private survey information and covering the week ending the previous Saturday

Why we care: Month-to-month changes in this index have been a coincidental indicator of nominal retail department store sales.

LJR Redbook Report
Source: Lynch, Jones and Ryan
Frequency: Weekly, for week ending Saturday
Timing: 10:30 a.m., Tuesday

What it is: A report designed to measure department store trends, compiled from information from 21 large department store firms.

Why we care: The report has a modest correlation to monthly changes in non auto retail sales.

Goldman Sachs Retail Index for Same-Store Sales
Source: Goldman, Sachs & Co.
Frequency: Monthly
Timing: 11:00 a.m. on the first or second Thursday of the following month

What it is: A sales index value and year-to-year percentage change computed by Goldman, Sachs retail industry analysts based on monthly same-store sales reports from large merchandiser retailer firms

Why we care: Helps discern shifts in tone of broad consumer demand for goods.

Consumer Confidence
Source: The Conference Board
Frequency: Monthly
Timing: 10:00 a.m., last Tuesday of the month to which data apply

What it is: Results of a poll of 5,000 households on questions relating to their perception of the economy as well as personal circumstances such as plans to purchase homes or durable goods

Why we care: Compiled since 1969, the Consumer Confidence Index seems to have a strong negative correlation to unemployment, though its relationship to consumer spending is loose.

Consumer Sentiment
Source: University of Michigan Survey Research Center
Frequency: Semimonthly
Timing: 10:00 a.m. Preliminary data released on Friday following the second full weekend of the month to which the data apply; final data published on Friday following the last full weekend of the month.

What it is: A nationwide poll of 500 consumers per month on issues relating to views of personal finance and economic conditions.

Why we care: Conducted since 1950, the poll has over its long history been a valuable guide to changes in consumer attitudes that might influence spending behavior.

Consumer Installment Credit
Source: Federal Reserve Board
Frequency: Monthly
Timing: 3:00 p.m., five weeks after month-end

What it is: A measure of the change in the dollar amount of consumer installment credit outstanding during the month, including loans to individuals by banks and finance companies.

Why we care: An indication of consumer spending that has become less useful since non mortgage interest lost its tax-deductible status in 1986.

Housing Starts and Building Permits
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 8:30 a.m., two to three weeks after month end

What it is: The total number of private housing units on which construction has started and permits issued by 19,000 localities during the month, expressed at an annual rate.

Why we care: The housing sector tends to lead the rest of the economy, so its strength is a sign of economic recovery or continuing strength, and its weakness can signal economic contraction.

New Single-Family Home Sales
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 10: a.m., four to five weeks after month end

What it is: The annualized unit sales level and monthly percentage change for new single-family homes, seasonally adjusted, as well as the number of new homes offered for sale.

Why we care: The housing sector tends to lead the rest of the economy. Changes in the inventory of unsold new homes relative to home sales often presage the opposite direction for housing starts.

Existing Home Sales
Source: National Association of Realtors
Frequency: Monthly
Timing: 10:00 a.m., the 25th day of the following month or next business day

What it is: Seasonally adjusted data on sales of existing dwellings.

Why we care: Turnover in housing stock can be a valuable leading indicator of demand for household durables. Home purchases typically stimulate spending on furnishings, and the transactions frequently pump more cash into the economy by liquefying capital gains on real estate investments.

Residential Construction Spending
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 10:00 a.m., four to five weeks after month end

What it is: Total new public and private construction outlays, seasonally adjusted and reported in both nominal and real (inflation-adjusted) terms.

Why we care: Construction spending data figure directly into the computation of several components of the quarterly GDP report. However, because these figures are frequently revised, the financial markets are more likely to move in response to housing starts and new home sales.

National Association of Home Builders Survey
Source: National Association of Home Builders (NAHB)
Frequency: Monthly
Timing: 1:00 p.m., mid-month

What it is: A survey of NAHB members regarding current sales conditions, buyer traffic and sales expectations for the next six months.

Why we care: Buyer traffic and sales expectations usually coincide with or slightly lead housing starts, while current sales have a modest positive correlation with new homes sales as reported by the Department of Commerce.

Mortgage Bankers Association Weekly Survey
Source: Mortgage Bankers Association (MBA)
Frequency: Weekly
Timing: early Wednesday morning

What it is: Index value or measure of overall volume of mortgage applications received by MBA members. There are also two sub-indices for purchase mortgage and mortgage refinancing.

Why we care: Provides an early signal of changes in housing transactions and mortgage refinancing activities, which can be leading indicators of total consumer expenditures. Home purchases typically trigger other outlays while loan refinancing lowers monthly expenses and leaves consumers with more cash to spend.

International Trade Balance
Source: Department of Commerce, Bureau of the Census
Frequency: Monthly
Timing: 8:30 a.m., six weeks after month end

What it is: Difference between U.S. exported and imported goods and services, expressed in billions of dollars.

Why we care: Differences in trade figures from expectations or official assumptions can significantly change GDP growth estimates, especially for the current quarter.

Current Account Balance
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Quarterly
Timing: 10:00 a.m., ten to eleven weeks after quarter-end

What it is: A measurement of net U.S. trade in merchandise, services, and certain financial transactions.

Why we care: Changes in the current account balance imply a corresponding shift in the flows of capital between the United States and the rest of the world. If the current account deficit goes up, then capital inflows into the United States also go up. This indicator is widely followed and referred to as the “trade deficit” measure.

Financial Account Balance
Source: Department of Commerce, Treasury Department
Frequency: Monthly or quarterly, depending on series
Timing: n/a

What it is: A measure of U.S. assets abroad and foreign assets in the United States.

Why we care: Shows the percentage of U.S. Treasury securities held by foreign investors, which can affect market demand.

GDP-Based Price Indices
Source: Department of Commerce, Bureau of Economic Analysis
Frequency: Quarterly data, revised monthly
Timing: 8:30 a.m., four weeks after month-end

What it is: Part of the quarterly Gross Domestic Product (GDP) report showing quarter-to-quarter percent change in weighted price indices for the various components of GDP, for gross domestic purchases (excludes exports) and for the ratio of nominal (current-dollar) GDP to real (inflation-adjusted) GDP

Why we care: The broadest measure of inflation in the economy.

Producer Price Index (PPI)
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Monthly
Timing: 8:30 a.m., two weeks after month end.

What it is: An index of prices received by U.S. producers of goods and commodities covering 3200 commodity groups and prices for 100,000 items. Indices in the report include: PPI for finished goods, or products ready to be shipped to wholesalers and retailers; PPI for intermediate goods that are not quite finished; and PPI for crude goods and materials, or raw commodities.

Why we care: An indicator of inflation at the producer level. A higher cost of producing goods can get passed along to consumers in the form of higher prices. The PPI for finished goods gets the most attention from the markets as an indicator of inflation prospects. Changes in the PPI for intermediate goods can be a leading indicator for finished goods prices.

Consumer Price Index
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Monthly
Timing: 8:30 a.m., two or three weeks after month ends

What it is: A measurement of prices for a fixed basket of goods and services bought regularly by U.S. consumers, reported for Urban Wage Earners and Clerical Workers (CPI-W) and for All-Urban Consumers (CPI-U), which includes professional and self-employed people.

Why we care: An indicator of inflation at the retail level. The CPI-W Index is used to make annual cost-of-living adjustments to social security benefits and wages covered by collective bargaining agreements. It is also used as the measure to adjust Treasury Inflation-Protected Securities (TIPS) on a semiannual basis.

Employment Cost Index (ECI)
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Quarterly
Timing: 8:30 a.m., four weeks after quarter end

What it is: A measure of changes in wage and benefit payments for specific types of work.

Why we care: By including benefits and management categories, the ECI becomes a more comprehensive labor-cost inflation indicator.

Goldman Sachs Commodity Index
Source: Goldman, Sachs & Co.
Frequency: Daily
Timing: n/a

What it is: Performance benchmark for commodity investments providing information about commodity price behavior on a production-weighted basis and a measure of total return achievable through an unleveraged investment in commodities over time.

Why we care: Sustained increases in commodity prices over time can be a precursor to an increase in consumer prices and an inflation indicator. Conversely, declines can be a precursor of dis-inflation and at the extreme, deflation.

Bridge/Commodity Research Bureau (CRB) Indices
Source: Bridge/CRB
Frequency: Daily
Timing: n/a

What it is: Daily indices for 23 different commodity price measures.

Why we care: Sustained increases in commodity prices over time can be a precursor to an increase in consumer prices and an inflation indicator.

Productivity and Costs
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Quarterly data, revised monthly
Timing: 10:00 a.m., five to six weeks after quarter end

What it is: Productivity measures the change in output per hour of work, seasonally adjusted. The report also provides quarterly statistics on total labor compensation.

Why we care: Productivity gains suggest the possibility of economic growth without a corresponding increase in inflation. It is also an indicator as efficiency of the labor market and has an significant effect on the outlook for employment.

Import and Export Prices
Source: Department of Labor, Bureau of Labor Statistics
Frequency: Monthly
Timing: 10:00 a.m., 10 days after month end

What it is: Detailed monthly international price indices used to deflate the monthly merchandise trade balance figures for conversion into real (volume) terms.

Why we care: Movements in the price index for imports excluding the petroleum component provide a good indication of the underlying pricing for foreign-produced goods is influencing overall U.S. inflation among goods.

Federal Budget Balance
Source: Department of the Treasury, Financial Management Service
Frequency: Monthly
Timing: 2:00 p.m., 15th business day of the month

What it is: Monthly deficit or surplus in the federal budget, not seasonally adjusted.

Why we care: Over time, budget deficits can put upward pressure on interest rates because they increase the supply of U.S. treasury securities issued to finance the debt. However, such factors as inflation, Federal Reserve policy and the value of the dollar can have an even greater effect on rates. Higher interest rates in turn can slow economic growth.

U.S. Treasury Borrowing Schedule
Source: Department of Treasury, via Federal Reserve Bank of New York acting as fiscal agent.
Frequency: Weekly for Treasury bills; monthly for 2-year Treasury notes; quarterly for 5- and 10-year Treasury notes and, for 5-, 10- and 20-year Treasury Inflation Protection Securities, according to the schedule established by the Treasury Department.
Timing: Announcements made at 2:30 p.m.; auctions held at 1:p.m.; day varies.

What it is: A picture of the amount of U.S. Treasury securities coming to market

Why we care: Indication of supply, which, when compared to demand, affects bond prices and therefore yields.

Monetary Aggregates
Source: Federal Reserve Board
Frequency: Weekly, for week ending Monday
Timing: 4:30 p.m., every Thursday, ten days after reporting period

What it is: M1, M2, M3 and L are measures of money circulating in the economy, each more inclusive of various cash equivalents than the previous. The Debt figure includes outstanding credit market debt of federal, state and local governments and the private non financial sector.

Why we care: In monetarist economic theory, changes in the money supply over time should yield fairly predictable changes in nominal economic output. Accelerations or decelerations would be expected to influence real economic activity in the short term, but for the long term it is argued that money growth affects only the inflation rate. However, deregulation and globalization have caused these relationships to break down since the 1980s.

Monetary Base
Source: Federal Reserve Bank of St. Louis, Federal Reserve Board
Frequency: Weekly
Timing: n/a

What it is: A measure of the supply of “high-powered” money in the economy that can be leveraged by the banking system for future lending activities.

Why we care: Monetarists believe that changes in the growth of the money base predict similar changes in monetary aggregate growth rates.

FOMC Policy Announcements
Source: Federal Reserve Board/Federal Open Market Committee (FOMC)
Frequency: varies with meeting schedule
Timing: around 2:15 on FOMC meeting dates

What it is: An announcement of any monetary policy changes undertaken by the Federal Reserve Board, most often relating to changes in the federal funds rate, or the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. A statement that explains the reason for the target Fed funds rate and FOMC views on relative inflation and economic growth risks accompanies the announcement.

Why we care: The Federal Reserve lowers the federal funds rate when it wants to bring overall interest rates down and stimulate the economy, and increases it when it perceives the economy to be growing too fast and becoming inflationary. Federal Reserve “watchers” and analysts of monetary policy consider the accompanying statement an important indication of the direction of monetary policy and the interpretation of that statement is reflected in movements of Treasury yields immediately after the announcement is made public. At times, the statement is considered at least as important as the decision on the Fed funds rate.

FOMC Minutes and Transcripts
Source: Federal Open Market Committee (FOMC)
Frequency: varies with meeting schedule
Timing: 2:00 p.m. on the Thursday following the next FOMC meeting date

What it is: Official minutes from the previous FOMC meeting, summarizing the panel discussions and vote and describing the economic conditions that were present at the time.

Why we care: Provides insight into FOMC thinking and its rationale for policy decisions. It is a more detailed and complete description of FOMC thinking than found in the announcement immediately following the FOMC meeting when any change in the target Fed funds rate is announced. (See FOMC Policy Announcements description above.)