Economic Indicators every investor and Trader Should Know.

What are Economic Indicators?:
For any country, the key indicator to identify the overall performance is the Economic indicator. It is used to measure the health of the Macroeconomy. The survey is taken by the government and private organizations and then analyze to generate economic indicators. They provide details of business cycles, consumer buying power, and various key indicators with a time interval of Weekly, Monthly, Quarterly, Yearly.
Why Economic indicators are Important for Traders and Investors?:
Every trader and investor needs to watch Economic indicators because it is the source of Systematic risk that affects the growth or decline of industries and companies. It helps investors and analysts to analyze future trends and to create investment opportunities. The most fundamental analysis will include Economic indicators. Most of the economic indicators are produced by policymakers. Economic indicators are only useful when it is correctly interpreted.
For Example, an international investor, invested in Indian equities for the past several years and has generated good returns. If the investors tracking inflation data of India and come to know inflation is rising and expect RBI to increase interest rates and it will hurt his equities holdings. He may reduce his holdings in Indian Equity markets. With one economic indicator, we cannot analyze, so some most common indicators help investors and traders to analyze and to make better decisions.
Gross Domestic Product ( GDP):
To find macroeconomic performance GDP is the primary indicator widely accepted. It represents the market value of all goods and services produced within the country for a given period. It is released every three months and is a common way to gauge economic health. For example GDP of India is 4% in 2020, which would mean the economy had grown 4 % since the previous measurement of the year 2019. The expansion of GDP represents a growing economy and contraction represents an economy is slowing down.
Interest Rates:
Interest rates are set by the country's central bank ( RBI), and when inflation is high interest rates increased, and to promote growth interest rates decreased. Interest rate is an amount a lender charges from a borrower. When the interest rate changes it impacts the economy and the stock market. If interest rates increased by the central bank, financial institutions need to borrow more money from companies and individual customers and they often increase the rates and it will affect individual customer because he has to pay the loan, credit card bills, etc and those bills become more expensive and also affects companies that will result in stock market fluctuations.
Consumer Price Index( CPI):
CPI measures the change of price of a basket of goods for every year from the perspective of the consumer. It is nothing but comparing the cost of living from the present situation to the future situation. The central bank continuously monitors the CPI Figures to maintain price stability. For Example, a family's total expenses per month are Rs.30000 in August 2020, and in August 2021 for the same family total expense per month was Rs.31500, which means a 5 % increase in their budget. So 5% is the August CPI Of the family. Investors pay close attention to CPI data for a sign of inflation because central bank increase or decrease the interest rates according to inflation.
Producer Price Index ( PPI):
PPI Measures the average movement in selling prices that make products from various sectors like manufacturing, mining, agriculture, etc. PPI shows the price changes for the long term. Investors also look into this data closely. CPI Measures prices from the view of consumers and PPI Measures from the view of industries.
PMI Manufacturing and services:
Production and manufacturing are important for any country and it is essential for economic growth. An increase in manufacturing activity will increase GDP and it is a sign of positive growth. If manufacturing activity decreased company stops hiring employees and it leads to a high unemployment rate and if there is an increased manufacturing activity they will hire more people. The PMI Index shows the purchasing activity of goods and services by purchasing managers.PMI Manufacturing and PMI services are the two most surveys.
Employment Indicators:
It indicates the labor force, unemployment data, payroll and tells how many citizens are employed and whether they are making more money. A rise in employment means the consumer will spend more money and it is a positive sign for the Economy and fall in employment rates followed by a fall in consumer spending leads to negative growth of the country's economy. Also, the high employment rate and increasing wages show the economy is growing.
Balance of Trade:
It Measures the difference between the value of import and export for a certain period. If the export is increasing more money is coming into the country and if imports are more than export money is going out from the country and it is called a trade deficit. Deficit refers to domestic debt and it leads to a fall in national currency.