Macroeconomics: Key US Economic Indicators

United States Fed Funds Rate

https://tradingeconomics.com/united-states/interest-rate

Changes in the federal funds rate may affect the US dollar. When the Federal Reserve raises the federal funds rate, it usually raises interest rates throughout the economy. Higher yields attract investment capital from foreign investors seeking higher yields on bonds and interest rate products. However, the federal funds rate has a much broader effect on the economy as a whole. The federal funds rate is used to set the rate that banks charge their customers for loans. Any changes in the federal funds rate affect mortgage and loan rates, as well as savings deposit rates. With the help of the federal funds rate, the Fed influences the economy to achieve two main goals: keeping inflation at the target level of 2%; lowering the unemployment rate.

Real Broad Dollar Index

https://fred.stlouisfed.org/series/RTWEXBGS

As the federal funds rate increases, overall rates in the economy rise. If global capital flows into dollar-denominated assets in pursuit of higher rates of return, the dollar strengthens. That is, in other words, big capital prefers to park money or assets in the economy where it is possible to earn more, that is, to buy financial instruments denominated in USD. And for this they need to first buy the dollar at the same time selling another currency. Thus, the Fed rate leads to an increase in demand for the dollar around the world.

The Real Interest Rate

https://www.longtermtrends.net/real-interest-rate/

The real interest rate is calculated as the difference between the nominal interest rate and the inflation rate. The page shows a graph of the nominal interest rate of a one-year US Treasury bond, the US inflation rate, and the resulting annual real interest rate. Inflation is defined as the annual percentage change in the consumer price index (CPI). When inflation is high, the prices of goods and services rise, which lowers the purchasing power per unit of currency. The chart shows the US Treasury yield (blue line) adjusted for inflation.

United States Money Supply M2

https://fred.stlouisfed.org/series/WM2NS

Money supply - M2 aggregator is a critical factor in inflation forecasting. Inflation and current interest rates have serious implications for the economy as a whole, as they strongly affect business activity and consumption, job availability, consumer spending, business investment, currency strength, and the balance of trade. In the United States, the Fed releases M1 and M2 money supply data every Thursday. The dual mandate of the Federal Reserve is to balance unemployment and inflation. One way to do this is to manipulate the money supply. The money supply is an important factor for economic growth and a way to manage or manipulate liquidity. The M2 aggregator must be considered together with the velocity of the money stock.

Velocity of M2 Money Stock

https://fred.stlouisfed.org/series/M2V

The velocity of money is very important in determining the speed at which money circulates in the economy, that is, it is used to buy goods or services. The velocity of money is used to help investors assess the health and viability of an economy. A high velocity of money usually confirms the health of the economy and its expansion. Slow velocity of money is usually associated with recessions and contractions. While not necessarily a key economic indicator, it can be tracked along with other key indicators that help determine economic health, such as GDP, unemployment, and inflation.

United States Inflation Rate

https://tradingeconomics.com/united-states/inflation-cpi

The US annual inflation rate is the nationwide inflation (US consumer price index). The indicator by which the purchasing power of the US currency decreases annually, that is, how quickly the real purchasing power of investors' and consumers' money in the US economy decreases. If an investor holds assets in USD, then over the past year the real amount (in real, not in nominal terms) has decreased by the inflation rate, all other things being equal.

United States Consumer Inflation Expectations

https://tradingeconomics.com/united-states/inflation-expectations

US consumer inflation expectations for the year ahead. Inflation expectations refer to the median expected inflation rate for the year ahead and are part of the Consumer Expectations Review. Expectations are based on a nationwide representative internet survey of a rotating group of approximately 1,300 heads of households.

United States Michigan 5-Year Inflation Expectations

https://tradingeconomics.com/united-states/michigan-5-year-inflation-expectations

US consumer inflation expectations for the next 5 years. This index focuses on three areas: how consumers view their financial outlook, how they view the economy as a whole in the short term, and how they view the economy as a whole in the long term.

Yield Curve

https://www.longtermtrends.net/us-treasury-yield-curve/

US Treasury yield spreads reflect the sentiment (current and future expectations) of US Treasury bondholders. If the yields on bonds with different maturity periods begin to converge, this means that there is instability and uncertainty in the financial market and in the economy. That is, it is such an indicator of the collective wisdom of investors, usually large creditors of the American economy, who, for various reasons, are not sure about the reliability and/or profitability of the bonds that they have in their portfolio.

Yield Spread between Corporate and US Treasury Bonds

https://www.longtermtrends.net/bond-yield-spreads/

Yield spreads between corporate bonds and US Treasuries. These spreads reflect the sentiment of holders of fixed income securities by analogy with the Yield Curve indicator. But in this case, we're comparing yields on corporate bonds, treasury bonds, and mortgages with each other.

U.S. 3 Month Treasury

https://www.cnbc.com/quotes/US3M

U.S. 6 Month Treasury

https://www.cnbc.com/quotes/US6M

U.S. 2Yr/10Yr Spread

https://www.cnbc.com/quotes/10Y2YS

10Y Treasury Constant Maturity Minus 2Y Treasury Constant Maturity

https://fred.stlouisfed.org/series/T10Y2Y

10Y Treasury Constant Maturity Minus 3M Treasury Constant Maturity

https://fred.stlouisfed.org/series/T10Y3M

The above indicators are also related to the theme of the Yield Curve and reflect the collective wisdom of the market. Large players, holders of long and short Treasuries, are usually “in the know” and feel in advance that shocks and negative events are coming to the market. Short Treasury yields need to be considered in comparison to long Treasury yields. The longer the maturity period of a Treasury, the more uncertainty and risk its holder (buyer) takes on, since it is not known exactly what events await the US economy and the world economy in the future. And for this reason, long Treasury holders strive to get a higher yield than short Treasury holders. In other words, the greater the risk, the greater the required yield. The difference between these yields (or the ratio between them - Spread) is a signal to the financial world, and reflects the mood of the collective mind of Treasury holders and other players in the fixed income securities market.

Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft https://fred.stlouisfed.org/series/NEWORDER

New orders for durable goods reflect the dynamics of orders for goods that consumers do not buy every day (these can be refrigerators, TVs, washing machines, built-in appliances, etc.). If the consumer is confident in the future, then he is more willing to spend money on expensive equipment and goods, without which, in principle, he can do. This indicator is cleared of the influence of defense and aviation products, which can greatly distort the real situation with durable consumer goods orders.

Unemployment Rate by Educational Level

https://www.macrotrends.net/2509/unemployment-rate-by-education

The indicator displays the unemployment rate by level of education. The unemployment rate starts to rise if employers (companies, businesses) start laying off more than hiring staff. Since the payroll accounts for a fairly significant proportion of the company's current operating costs, the company, anticipating a decrease in sales and business profitability, begins to optimize costs and cuts the largest costly parts of the company's budget. Naturally, at first they begin to dismiss personnel less valuable to the company (with a low level of education and unskilled employees).

Continued Jobless Claims (Insured Unemployment)

https://fred.stlouisfed.org/series/CCSA

Extended Jobless Claims Rate - displays the trend in claims for workers who are already working in the economy. In fact, this is an unemployment indicator based on data for all already insured persons who work officially in the United States. The indicator has a valuable predictive value for the economy and financial markets.

University of Michigan: Consumer Sentiment Index

https://fred.stlouisfed.org/series/UMCSENT#0

The University of Michigan Consumer Sentiment Index is an important predictive indicator of the US economy. This indicator may indicate a decrease or increase in business activity and consumption plans of the population with a high probability. If consumers are not confident about the future, then they naturally reduce their consumption and tighten their belts. And this, in turn, is reflected in the growth in sales and profits of companies that are sensitive to the business cycle.

All Employees, Residential Building

https://fred.stlouisfed.org/series/CES2023610001

Valuable leading indicator - reflects the dynamics of employment in the residential construction sector. Usually, this indicator is highly likely to predict an upcoming recession in the US economy. It has a high predictive value and sensitivity to the business cycle. Pre-recession passes down past zero - when displayed as a percentage of the previous year.

New Private Housing Units Authorized by Building Permits

https://fred.stlouisfed.org/series/PERMIT

This indicator has high sensitivity and predictive value - it reacts 3-4 quarters before the upcoming recession in the US economy. Displays the financial health of the US economy. Most homes in the US are purchased with a mortgage. If consumers are not confident in their ability to repay a loan, or if real estate prices, including lending, are at a disadvantage, then private home sales will naturally fall. As a result, construction companies react early (understanding the market situation better than anyone else) and will not seek a building permit.

Privately Owned Housing Starts: 1-Unit Structures

https://fred.stlouisfed.org/series/HOUST1F

This indicator reflects the dynamics of the start of construction of private residential houses for one family (for one household). This indicator can predict in advance for 2-3 quarters the upcoming recession in the US economy. The start of construction indicates the degree of demand for the construction of private houses and the actual construction contracts. In addition, this also indicates the readiness of banks to lend to consumers for construction. As you know, business activity in related sectors of the economy depends on the well-being of the construction sector.

Industrial Production: Construction Supplies

https://fred.stlouisfed.org/series/IPB54100S

The indicator shows high sensitivity to the business cycle and has a high predictive value. The production of building materials is very sensitive to fluctuations in demand and construction volumes. Reacts 1-2 years before the upcoming recession in the US economy.

S&P Global PMI (Purchasing Managers’ Index – Manufacturing, Services)

https://www.pmi.spglobal.com/

Pretty good leading economic indicator for the US and other countries from S&P Global. The Purchasing Managers' Index (PMI) gives early warning of an upcoming downturn or upturn in the economy. The data on the economies of different countries and regions are presented.

ISM Report On Business (PMI, NMI - Purchasing Managers’ Index from ISM)

https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/

The well-known ISM institute makes publicly available the results of surveys of purchasing managers in the manufacturing and non-manufacturing sectors of the US economy. These diffuse indices have good predictive value and give early warning of upcoming economic trends in the US economy.