Market Overview

11 Key Economic Events In Q2 Investors Should Pay Attention To

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11 Key Economic Events In Q2 Investors Should Pay Attention To

The U.S. economy, which was stuttering with a "fits-and-starts" recovery following the Great Recession of 2007–2008, has now reached a state of steady, stable growth, with the pace of growth centering around a new normal rate that is lower than its historical norm.

Economic Health: Far From Concerning

Most economic indicators are suggesting a definitive inflection point, as the extremely accommodative monetary policy pursued by the Federal Reserve since the Recession and the government's stimulatory policies have proved salubrious for growth.

The confidence investors vested in economic growth is reflected in the way the stock market has fared. Economic optimism is listed among the reasons for the major averages trading closer to all-time highs. Moreover, the Federal Reserve's monetary policy moves are predicated on the incoming economic evidence.

FOMC's Data-Obsession

The FOMC statement carries a statutory sentence that says, "However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data." This more than adequately emphasizes the need for data watching in order to capitalize on the data-induced moves in the market.

After sifting through the economic calendar of May and June, Benzinga has culled out 11 major economic events/data that are of significance to the market due to their market moving capabilities.

Since some of the data discussed have a monthly periodicity, the date for the two releases (for May and June) are mentioned along with the data point.

1. ISM-Non-Manufacturing Index

    Date(s): May 3, June 5
    Agency: The Institute for Supply Management

With the services activity accounting for the bulk of the economic activity, this survey of purchasing managers' in the services sector would serve as a leading indicator of activity in the sector.

2. Jobs Watch Through Non-Farm Payrolls Reports

    Date(s): May 5, June 2
    Agency: Labor Department

The dual mandate of the Federal Reserve is to achieve stable prices and maximum sustainable employment. The job market in the United States has been faring fairly well, with the economy adding jobs at a robust pace of 178,000 in the first three months of 2017. The unemployment rate has also trickled down and is now near the cycle lows.

Continued strength in the job market would at least trigger fears of additional tightening, although in reality, upward adjustment to rates may also hinge on several other factors.

3. Reading The Consumer Pulse Through Retail Sales Reports

    Date(s): May 12, June 14
    Agency: Commerce Department

The consumer is a vital cog in the wheel of the economy, with about two-thirds of the economic activity fueled by consumer spending. Need one say more of the importance of the readings that relay the health of consumer spending?

4. Inflation Readings On The Docket

    Dates: May 12, June 14
    Agency: Labor Department

Along with jobs, the Fed is also concerned about pricing pressure when it deliberates on monetary policy. Although the Fed's preferred inflation gauge is the core price consumption expenditure index of the personal income and spending report, the market also focuses on the consumer price inflation report to see the extent to which pricing pressure has seeped down to the retail level.

The Fed targets 2-percent inflation over time.

5. Empire State Manufacturing Survey

    Date(s): May 15, June 15
    Agency: New York Federal Reserve

The results of the manufacturing survey by the New York Federal Reserve give the first glimpse into the state of the manufacturing sector for a month. This is a regional survey.

The survey throws in several data points, including new orders, backlogs, employment, costs, etc.

Several other regional surveys and the Institute for Supply Management's national manufacturing survey will be released following the release of the empire state manufacturing survey.

6. Factory Activity In Focus

    Date(s): May 15, June 15
    Agency: Federal Reserve

Industrial production data gives an indication of how factories cranked up production, which goes on to add notably to the GDP growth. As per estimates by World Bank, Industrial production accounted for 20 percent of the U.S. GDP in 2014.

7. Stats On Housing Starts

    Date(s): May 16, June 16
    Agency: Commerce Department

The housing starts report gives two main readings, namely housing starts, which are the number of new residential construction projects that have begun in a particular month. Another metric is the building permits, which are the number of new housing units authorized by building permits. Building permits are considered a leading indicator of housing activity.

8. FOMC Minutes: A Dissection Of The Fed Decision

    Date(s): May 24
    Agency: Federal Reserve

The FOMC minutes, which is released roughly three weeks after a monetary policy meeting, gives a more elaborate view of what went on in the minds of policymakers while arriving at a particular decision.

Investors sift through the minutes not only to understand the logic of the Fed decision but also as a means to predict the future course of the monetary policy.

9. Durable Goods Orders

    Date(s): May 26, June 26
    Agency: Commerce Department

Durable goods orders give an indication of how busy factory activity will be in the near term. Investors usually focus on a metric called core capital goods orders, excluding aircraft, which is considered as a proxy for capital spending by businesses.

10. Personal Income And Spending Data

    Date(s): May 30, June 30
    Agency: Commerce Department

This report gives an understanding how personal income and personal spending fared in a month. While the retail sales data measures spending from the standpoint of retailers, consumer spending data is based on survey done with consumers.

The annual rate of growth of the core price consumption expenditure index is the inflation gauge considered by the Fed for its reference.

11. FOMC Meeting As The Fed Walks Down The Normalization Path

Date(s): June 13–14
Agency: Federal Reserve

The FOMC is set to meet for a two-day meeting beginning on June 13, with the post-meeting policy statement, the updated FOMC forecasts and Chair Janet Yellen's press briefing all being events to watch out for.

The May meeting scheduled for May 2–3 may not be of much significance, as it is widely expected that the Fed usually acts when a press briefing is scheduled to explain any change in the monetary policy.

After holding the Fed funds target rate at 0–0.25 percent for about seven years, the central bank effected its first quarter point increment in December 2015, the next in December 2016 and the third in March 2017.

Related Links:

The US economy Appears To Be Getting More Sluggish Than Expected

Is There A Disconnect Between Earnings Growth And GDP Growth?
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Image Credit: By Dan Smith - Own work, CC BY-SA 2.5, via Wikimedia Commons

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