c07 JWBT016-Busby October 1, 2008 21:9 Printer: TBD
88 STRATEGIES TO WIN
furniture, appliances, and other household items. This data reflects the
optimism or pessimism of consumers. If times are good and consumers
are confident in the future, they will be more likely to purchase a home.
The flip side is that if they fear that the economy is slowing down or that
bad times are ahead, they will postpone such a large purchase as a home.
Therefore, this report tells us a great deal about the confidence level of
consumers. When news on the housing front is especially good or espe-
cially bad, the financial markets will likely react. That makes housing news
a potential market mover to watch.
TheProducer Price Index (PPI)is released monthly by the U.S. De-
partment of Labor. This report measures price changes for products that
are produced. It measures the average changes of selling prices over time.
Because the U.S. economy is large and diversified, there are many PPIs gen-
erated each month. In fact, the Department of Labor compiles over 10,000
of them. The data gathered is then analyzed and merged into one report.
Like the CPI, the PPI tracks the same data each month. Because this
report reflects cost and price data from producers, it foreshadows prices
for consumers and the general economy. Inflationary signals may be re-
vealed before they hit the retail level. For this reason, the PPI is important
to governmental and business decision makers.
Since the PPI measures prices of consumer goods and capital equip-
ment, a portion of the inflation at the producer level will also be reflected
in the CPI. By tracking price pressures in the pipeline, investors can an-
ticipate inflationary consequences in coming months. The PPI is consid-
ered a precursor of both consumer price inflation and producer profits. If
the prices paid to manufacturers increase, businesses are faced with either
charging higher prices or cutting profits. Both the CPI and the PPI are im-
portant inflation gauges and are deemed to be significant to traders and
investors. Again, this report is released at 7:30AM.
Retail salesmeasure the total receipts at stores that sell durable and
nondurable goods. Consumer spending accounts for two-thirds of the GDP
and is therefore a key element in economic growth. This data has a great in-
fluence on the financial markets, especially during key times like the Christ-
mas holiday season. Retail sales are very telling in that the data says a great
deal about the confidence of consumers and the numbers may also be a
good predictor about future economic activity. If sales are low, production
will slow down and both retail and manufacturing layoffs may result. This
data has the power to be a big market mover.
Barron’sis a great source for economic and market information. I
regularly check theBarron’seconomic calendar and make notes of im-
portant events to watch. In addition, some of the information about the
preceding financial and economic reports was derived fromBarron’s
and their online site. For more information about regularly scheduled