Forex

The IFO Business Climate Index is a widely early indicator for economic development in Germany. Every month the IFO Institute surveys more than 7,000 enterprises in west and east Germany on their appraisals of the business situation (good/satisfactory/poor) and their expectations for the next six months (better/same/worse). The replies are weighted according to the importance of the industry and aggregated. The percentage shares of the positive and negative responses to both questions are balanced and a geometric mean is formed from the balances divided according to east and west Germany. The series of balances thus derived are linked to a base year (currently 1991) and seasonally adjusted.

Import and export prices – The prices of goods that are brought in the United States but produced abroad and the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products. Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar. Inflation leads to higher interest rates and that’s bad news for stocks as well. By monitoring inflation gauges such as import prices, investors can keep an eye on this menace to their portfolio.

Industrial production and capacity utilization – The Index of Industrial Production is a chain-weight measure of the physical output of the nation’s factories, mines and utilities. The capacity utilization rate reflects the usage of available resources. Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. Industrial production show how much factories, mines and utilities are producing. Since the manufacturing sector accounts for one-quarter of the economy, this report has a big influence on market behaviour. The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate gets too high (above 85%) it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and sets interest rate policy on the basis of whether production constraints are threatening to cause inflationary pressures.

International Trade – Measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade. Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. Furthermore, the data can directly impact all the financial markets, but especially the foreign exchange value of the dollar. Imports indicate demand for foreign goods and services here and the US exports show the demand for US goods in overseas countries. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. This report gives a breakdown of US trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.