Batch XIII-BNAME ROLL NO

PARAG BHADEKAR KH08JUN84MBA

SACHIN R KH08JUN89MBA

PRADEEP KATKADE KH08JUN86MBA

SATISH NAIR KH08JUN98MBA

SUSHANT BHIRUD KH08JUN105MBA

MOST INFLUENTIAL

U.S. ECONOMIC INDICATOR

Statistical data showing general trends in the economy. That is whether the economy is in recession, depression or in boom.

Leading – before economy changes eg: inventory changes, stock prices, Money supply

Coincident- varies directly at the same time with changes in economy eg: Personal Income. Employment & industrial production

Lagging- Changes after overall economy has$ changed eg: labor cost, Business spending, unemployment rate

Employment Situation Report(Stock, Bond ,U.S.Dollar value)Personal Income and Spending(Stock, Bond)Retail Sales(Stock, Bond ,U.S.Dollar value)Consumer Confidence and Sentiment Surveys(Stock, U.S.Dollar value)Advance ReportWeekly Claims for Unemployment Insurance Report(Stock, Bond)ISM Manufacturing Report(Stock, Bond ,U.S.Dollar value)Consumer Prices(Stock, U.S.Dollar value)Producer Prices(Stock, Bond )on Durable Goods(Stock)GDP(Stock, Bond)ADP National Employment Report(Bond )Housing Starts(Bond)Current Account (U.S.Dollar value)Productivity and Cost (U.S.Dollar value)

Market Sensitivity: HighFrequency: MonthlySource: US Census Bureau, Department of Commerce

Why is it important?

Consumer spending makes up 70% of all economic activity & retail sales account for one-third of that

If consumer can keep cash registers ringing , it is a sign of overall economic growth.

Therefore, economist & investors see retail sales as one of the best indicator of the change in consumer spending pattern.

DrawbacksIt represents spending only on goods found at

dept. store, auto dealer, gas stations & food service providers such as restaurants

Nothing about what’s being spent on services such as air travel, hair cuts, insurance

It is measured only in nominal $, which means no adjustment for inflation.

Collected from 13,000 small & large retailers, Only 70-75% respond, so small sample size

Market Impact

--Jump in retail sales shows consumers are in buying mood, this could accelerate economic growth, which will lower bond prices.

--Healthy retail sales will increase corporate revenue and profits which are positive for stock prices.

--Increase in retail sales can hurt $ because many of these goods are imported.

PERSONAL INCOME AND SPENDINGMarket Sensitivity: HighFrequency: MonthlySource: Bureau of Economic Analysis (BEA), Department of

Commerce.Why is it important?

Consumers rule the economy, plain and simple. Consumer expenditure are the main driving force of sales, imports, factory output, business investments, and job growth in the US. But to be able to spend, people need a reliable stream of income.

As long as personal income rises at a healthy clip, so will spending. If income growth turns sluggish, consumer will curb their shopping.

Though other factors such as inflation & the change in household wealth due to stock & real estate values, can influence when & how much consumers spend, the most important determinant over time is personal income.

The Govt. breaks down the personal income & spending report into 3 major categories: Personal income, expenditures, & savings.

Personal Income:- Personal income represents the money households receive before taking out taxes

Expenditure:- Personal spending, Formally known as “Personal Consumption Expenditures” There are Just 2 things you can do with your income-either spend it or save it.

Savings:- Savings is what’s left after spending on goods, services, & interest payments on credit cards & loans.

In 1960’s & 70’s households were relatively careful & maintained a saving of 8%

IN 1996 the rate slipped to 4%. By 2005 & 2006 personal savings fell into negative territory as households routinely spent more than their income.

Types of Expenditure Percentage

Durable goods 12-14%

Non Durable goods 30%

Services Jumped from 40% to 60% in 1960

Personal Income

Market Impact

A larger than-expected jump in household spending can induce a sell-off in the bond market, with the price of fixed incomes dropping and yields climbing.

Higher personal income & spending are viewed favorably in the stock market because they fuel more economic activity & fatten corporate profits.

Foreign exchange investors are likely to respond to the proposal to the personal income & spending numbers. A healthy increase in both bodes well for the US$. High consumer demand encourages more growth & puts upward pressure on interest rates.

CONSUMER CONFIDENCE INDEX

Market Sensitivity: Medium, can be high Frequency: MonthlySource: The Conference Board.Basically consumer confidence index is used to

examines how consumer feel about jobs, the economy and spending in future.

The main elements of the consumer confidence index are:

Personal FinancesBusiness FutureBuying Plans

Why is it important? The consumer confidence index is important because

it help to release consumer confidence, consumer expectation and the current situation of the consumer. This indicator shows the most important question to respondent each month whether they think jobs are easier or harder to find or job is painful or not in statistical data.

Happy customer are good for business. They are more likely to shop, travel, invest and keep the economy on the roll, but an unhappy and insecure consumer reduces the business, and if the number of this consumer is large then the economic activity going slowly.Thus, three organization mainly working to check the consumer mood regularly. 1.COFERENCE BOARD AND ITS MONTHY CONSUMER COFIDENCE INDEX.2.UNIVERSITY OF MICHIGAN’S CONSUMER SURVEY3. ABC NEWS/WASHINGTON POST’S WEEKLY CONSUMER COMFORT INDEX.

Mostly this institutions doing survey by using the way of mails, calling stations, etc. This institutions showing similar performances month to month, but they often don’t that means when one index showing pickup the confidence among consumers, while the other may show a decline.

Why such conflicting signals happens?Because the responses are different that means

when consumer confidence index which claims based on the response from 5000 households and there expenditure. The same time the university of Michigan’s consumer survey polls a much smaller population, it queries 500 adults. ABC News talks to 250 new people every week but asks only about current economic condition.

And the another reason is conference board questionnaires are more emphasis on household reaction to labor market condition, while the university of Michigan surveying on consumer attitude on financial and economic situation.

Market ImpactIf consumer confidence increases the bond

market is also increase. But if consumers confidence about market is low then bonds market will automatically decreases.

In stock market shareholder hope consumer confidence stays high to encourage more spending due to this stock will increases more.

EMPLOYMENT SITUATION Market Sensitivity: Very High Frequency: Monthly Source: Bureau of Labor Statistics, Department of Labor.

Why is it important? As Wages and Salaries from employment make up the main

source household income. The more workers earn, the more they buy and propel the economy.

If fewer people are working, spending drops off and business suffers. household spending accounts for more than two third of the economy’s total output. That’s why Federal Reserve & Investment community pay such close attention to the Employment Report.

The highlight of the employment report is the unemployment rate, which is the percentage of Civilian work –force that is unemployed. This is computed by two different surveys, one is based on household survey and the other one is establishment survey.

DrawbacksData accuracy in Household Survey.

Graph

Nonfarm Payroll employment

Market ImpactA strong job report signifies accelerating

inflation as now more people will have money to spend, as a result expectations rise that business sales and profit will pick up in the future. This can set the stage for rally in the equity market.

The only exception may be when economy is climb out of recession when a jump in employment will have only a modest effect on Commodity Market.

Thank You