Page 16 - Module 4 - Trading_Ways_and_Means

Module 4 - Lesson 3 Indicators for fundamental analysis

Traders watch retail sales closely to gauge the overall strength of the economy and, consequently,
the strength of the currency. This indicator is released on a monthly basis.

8. Consumer sentiment
It’s a survey of households that is designed to gauge direct the individual propensity for spending
money to increase or to maintain on the same level their expenditures connected with the
satisfaction of the household current needs and, by implication, - the situation on the labour market.

9. Auto sales
Despite the importance of the auto industry in terms of production and sales, the level of auto sales
is not an economic indicator widely followed by foreign exchange traders. The American automakers
experienced a long, steady market share loss, only to start rebounding in the early 1990s. But car
manufacturing has become increasingly internationalized, with American cars being assembled
outside the United States and Japanese and German cars assembled within the United States.

Because of their confusing nature, auto sales figures cannot easily be used in foreign exchange
analysis.

10. Leading indicators
The leading indicators consist of the following economic indicators:
▪ Average workweek of production workers in manufacturing
▪ Average weekly claims for state unemployment
▪ New orders for consumer goods and materials (adjusted for inflation)
▪ Vendor performance (companies receiving slower deliveries from suppliers)
▪ Contracts and orders for plant and equipment (adjusted for inflation)
▪ New building permits issued
▪ Change in manufacturers' unfilled orders, durable goods
▪ Change in sensitive materials prices

11. Personal income
It’s the income received by individuals, non-profit institutions, and private trust funds. Components
of this indicator include wages and salaries, rental income, dividends, interest earnings, and transfer
payments (Social Security, state unemployment insurance, and veterans' benefits).

The wages and salaries reflect the underlying economic conditions. This indicator is vital for the sales
sector. Without an adequate personal income and a propensity to purchase, consumer purchases
of durable and nondurable goods are limited. For FX traders, personal income is not significant.

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