Withdrawal of American statistics index PPI is often caused by the emergence of intermediate trends in the international currency market. This market FOREX traders to take into account the capacity of their profitable positions.
This pattern is used the last months - U.S. dollar abnormally responding positively to the growth of inflationary expectations in the country
What is the price index?
The index of producer prices (Producer Price Index, PPI) evaluates the average change in prices as determined by the producers at all stages of manufacture. The index consists of two indicators: falling prices (semi-finished components, etc.) and prices at the output of production (finished goods). The price at the outlet includes labor costs and provides an indication of the inflation associated with the change. PPI does not include imported goods, services and taxes. Tracked not an index value and its change over time. In England, the index is published as an index of wholesale prices (Wholesale Price Index).
To date, the U.S. Bureau of Labor Statistics tracks changes in retail prices of about 3450 kinds of products in various stages of production from the producers of these goods. Prices are collected monthly, and, for the most part, are recorded as of Tuesday of the week, which includes the thirteenth day of the reporting month.
The components are weighted according to their contribution to the GDP. Thus, PPI includes data on prices, since all raw materials and intermediate goods to the retail trade Lei. Analysts measuring the movement of digital series of producer price indices, can estimate the rate of inflation throughout the production cycle. This will eventually help to assess the level of inflation at the consumer sector or retail trade [1-3]. The behavior of the index helps to understand what is behind the rising overhead costs in manufacturing - demand or supply. Because of these properties of PPI, as well as in the earlier period of his release on another inflationary indicator - index of consumer prices (Consumer Price Index, CPI - we'll talk about it in subsequent publications) - this economic indicator is often used to predict consumer price index.
It should be understood that the algorithms for calculating the PPI and CPI are so different (as a way to build on, and on the types of products) that such forecasting can lead to erroneous conclusions at short intervals. At the same time, their high correlation to the depth of investment horizons. For example, as already mentioned, the PPI does not include price changes in the services sector - the largest part of the U.S. economy. At the same time, information on prices for raw materials strongly linked to weather conditions.
Bureau of Labor Statistics publishes a monthly basis over five hundred industrial subindeksov 3200 prices and price indices for goods.
Therefore, PPI is published monthly only contains key aggregate indexes approximately two indices, as "purified" by a factor of seasonality, and without this treatment [1, 2].
In the face of expectations that the main U.S. interest rates rise, the growth index PPI leads to an increase in the dollar. Particular attention should be paid at the core of the index (core), ie on the so-called "pure PPI". Typically, the producer price index is published at 16:30 Moscow time, 11-th numbers (for the previous month). This economic indicator has a significant impact on the trends of the stock market and FOREX.
U.S. Stock market does not know the rest
Figure 1 provides a 10-minute schedule of course the Dow Jones (DJIA). We see that 15.10.04 was the stock market the U.S. is responding to economic news than to corporate records. Anyway, in this day bulls managed to fall in the market, and even take a small revenge: at the very beginning of the trading rate DJIA pushed the crucial support of 9900 and the first minute bidding "took off" with 50 points, and then tried to test and a more aggressive goal --
9975. And this is despite the generally negative on the day corporate news.
In this regard, a reference message from 15.10.04 of the pharmaceutical component of the Dow - the company Pfizer. She added the new head of a heavy history, which began with the withdrawal of medication Vioxx. On that day, it was stated that the Corporation will hold a lengthy clinical trials published by the arthritis drugs Bextra, because there is some reason to suspect that this drug may be associated risk of cardiovascular and skin complications. Bextra is one of the two drugs that Pfizer produces for patients with arthritis.
When Merck announced the withdrawal of Vioxx, analysts initially assumed that Pfizer could benefit greatly from this. But the doctors questioned the safety of all drugs for arthritis, a class of COX-2 inhibitors, which include Vioxx. The same class will include both of the arthritis drug manufactured by Pfizer. October 15, its shares fell by 1.99%.
It should be noted that the statistics
Fig. 1. 10-minute schedule of course the Dow Jones (DJIA).
that day came a great multitude. An hour before the opening of U.S. stock exchanges have three sets of economic data. U.S. Labor Department reported that producer price index PPI rose in September by 0.1% compared with August. The basic component of PPI index rose in September by 0.3%. According to the poll Reuters, on average, economists predicted that the index and the PPI, and its basic component will rise by 0.1%. Wholesale energy prices fell in September by 0.9%, not enough for the rising oil prices, renewed in the middle of the month, after the impact of Hurricane "Ivan" in the oil and refining industry in the U.S. Gulf of Mexico. Wholesale prices for liquefied petroleum gas fell in September to 7.4% for natural gas - by 2.3% and fuel oil - 2.7%. Wholesale gasoline prices rose in September by 0.7%, after falling by 5% in August. A marked increase in the core PPI index in September helped to increase the wholesale prices of cars by 1.1% after declining by 1.2% in August. According to Lehman Brothers economist Drew Meytusa (Drew Matus), it is not too concerned about higher-than-expected increase in the base of the index of PPI, as at this time of year it affect se-gap fluctuations in the price of cars (k2kapital.com).
Effect of PPI index for U.S. stock market was weakened by the Federal Reserve Bank reported that they calculated the index of business conditions in the manufacturing sector of New York and north-eastern region of the United States, Empire State Manufacturing Survey, was 17.4 in October, falling as compared with September at 9.9.
Empire State Manufacturing index is very volatile and plays the role of the third plan in the picture that shows the state of the U.S. manufacturing sector. Recently, the index fell sharply in August, then rose strongly in September and dropped again in October.
In a team with a retail
The third block of news (and on the day the most important) for the U.S. stock market and the market for U.S. Treasury bonds have become data Mintorg for the September retail sales in America. It was stated that the volume of retail sales rose in September by 1.5% compared with August, when sales declined by 0.2%.
At the September figure was influenced by strong growth in sales of cars, amounting to 4.2%. In August, sales of cars fell by 1.3%. But without a car and retail sales grew in September at a solid 0.6%, after declining by 0.2% in August. These figures exceeded the forecasts of economists, that in September retail sales as a whole increased by 0.7%, but excluding motor vehicles - by 0.3%.
In doing so, retail sales of building materials and garden supplies rose in September to 1.4% after the increase of 0.7% in August. Sales of electronics and household appliances rose by 0.5% after falling 0.8% in August. Sales of clothing rose by 0.8% (-0.7% in August). Sales at bars and restaurants increased by 0.7% (-0.5% in August). Sales at department stores rose by 0.9% (-0.7% in August (k2kapital.com).
Growth of retail sales in September on a wide range of products showed that the drop in U.S. consumer activity, recorded in August, did not spread to the next month. As you know, consumer spending in the U.S. provide a two-thirds of GDP, and growth of activity in the retail sector of the economy, despite the burden high prices for gasoline, led to the positive sentiment on the stock market. In the market of Treasury bonds, on the contrary, it is disheartening. The strong increase in retail sales, stimulating economic growth, was seen as a signal that the Fed will continue its policy of raising interest rates. The cost of a 10-year Treasury bonds fell on 15 October to 9 / 32, and their yield, which is the main point of reference for the U.S. market for long-term loan increased to 4.06%, 4.02% against the previous day. Cost of 2-year Treasury bond fell 3 / 32, and their yield increased to 2.53% against 2.51% on the previous day. The morning decline bidding quotations treasury bonds were higher, but the rise in oil prices in the late session on the NYMEX exchange up to $ 55 let the market gosbumag to reduce losses. All these events have not slowed down and the impact on the market FOREX, where the output of statistical data on the U.S. dollar remained under strong pressure from the entire spectrum of major currencies.
FOREX and the index of producer prices
Graph rate EUR / USD (Fig. 2) shows that the yield on U.S. inflation data was allowed on 15.10.04 time to lift pressure on the dollar by the euro. The market slipped to 1.2383 support, which amounted to more than 40 points. However, it should be noted that on the day the market is fully in control of the bulls in a single currency, however, had markedly USD yielded their positions. And this despite the fact that, as we have seen above, the stock market has tried to fully support the U.S. dollar. The significant increase in the base of the PPI index gives hope that the core CPI inflation index will also be significantly higher than projections. This would allow the Fed to move away from U.S. policy of moderate monetary management and to begin more aggressively to raise the basic discount rate in the country. Now it is 1.75%, and the neutral value is estimated to average at 3.5%, ie in fact, a negative interest differential on the discount rate in the U.S. negatively acts on its national currency. In Figure 3 you can see the impact of statistics on an index of producer prices in the U.S., released 10.09.04 and 13.08.04 of the city, on the world currency market.
Fig. 2. 30-minute schedule rate EUR / USD.
As the U.S. Labor Department announced Friday 10.09.04 city, the producer price index PPI, an indicator of inflation in wholesale sphere, in August dropped by 0.1%. To a large degree of decline was due to some easing of price pressure from the oil market. Energy costs, jumped in July to 2.3% in August, rose by only 0.2%. Food prices fell in August by 0.2%, their decline after a sharp jump in the spring was recorded the third month in succession.
The core index of producer prices, excluding volatile energy prices and food, fell by 0.1%, showing the first decrease over the last six months. A coherent projection of economists suggested raising the overall index by 0.2% and the core - at 0.1%.
As a result, FOREX market took this news as negative for the euro, and for two subsequent days, the market EUR / USD adjusted downward by more than 80 points (Fig. 3).
A month earlier - 13.08.04 d. - U.S. Labor Ministry announced that the producer price index PPI rose in July to 0.1% as compared to June, when the rate fell to 0.3% due to falling energy prices. Wholesale energy prices fell in June to 1.6%, and in July increased by 2.3%. Including wholesale gasoline prices rose in July at 5.4%. In June, the wholesale price of gasoline fell by 5.2%. The growth of wholesale energy prices in July were largely offset by lower prices for food products (-1.6%).
The basic component of the index PPI, does not include the volatile prices of food and energy, in July rose by 0.1%, after +0.2% in June. According to the poll Reuters, economists believed that the July index PPI increased by 0.2%, and its basic component - at 0.1%.
It was also stated that in the last 12 months ended in July, wholesale prices in the U.S. grew by 4%. Core PPI index over the same period grew by 1.7%. This figure was lower than the June figure (+1.8%).
As a result, FOREX market reacted poorly to these conflicting data (Fig. 3), as does waiting for a serious increase in inflationary pressures in the country and, consequently, more decisive steps taken by the U.S. Federal Reserve in monetary policy through the increase of aggressive accounting rates. Nevertheless, one can conclude that the current economic conditions, the producer price index PPI in the U.S. is one of the key economic indicators that are able to create intermediate trends for different segments of global financial market, including market FOREX.
Fig. 3. Four-course schedule for EUR / USD.
This pattern is used the last months - U.S. dollar abnormally responding positively to the growth of inflationary expectations in the country
What is the price index?
The index of producer prices (Producer Price Index, PPI) evaluates the average change in prices as determined by the producers at all stages of manufacture. The index consists of two indicators: falling prices (semi-finished components, etc.) and prices at the output of production (finished goods). The price at the outlet includes labor costs and provides an indication of the inflation associated with the change. PPI does not include imported goods, services and taxes. Tracked not an index value and its change over time. In England, the index is published as an index of wholesale prices (Wholesale Price Index).
To date, the U.S. Bureau of Labor Statistics tracks changes in retail prices of about 3450 kinds of products in various stages of production from the producers of these goods. Prices are collected monthly, and, for the most part, are recorded as of Tuesday of the week, which includes the thirteenth day of the reporting month.
The components are weighted according to their contribution to the GDP. Thus, PPI includes data on prices, since all raw materials and intermediate goods to the retail trade Lei. Analysts measuring the movement of digital series of producer price indices, can estimate the rate of inflation throughout the production cycle. This will eventually help to assess the level of inflation at the consumer sector or retail trade [1-3]. The behavior of the index helps to understand what is behind the rising overhead costs in manufacturing - demand or supply. Because of these properties of PPI, as well as in the earlier period of his release on another inflationary indicator - index of consumer prices (Consumer Price Index, CPI - we'll talk about it in subsequent publications) - this economic indicator is often used to predict consumer price index.
It should be understood that the algorithms for calculating the PPI and CPI are so different (as a way to build on, and on the types of products) that such forecasting can lead to erroneous conclusions at short intervals. At the same time, their high correlation to the depth of investment horizons. For example, as already mentioned, the PPI does not include price changes in the services sector - the largest part of the U.S. economy. At the same time, information on prices for raw materials strongly linked to weather conditions.
Bureau of Labor Statistics publishes a monthly basis over five hundred industrial subindeksov 3200 prices and price indices for goods.
Therefore, PPI is published monthly only contains key aggregate indexes approximately two indices, as "purified" by a factor of seasonality, and without this treatment [1, 2].
In the face of expectations that the main U.S. interest rates rise, the growth index PPI leads to an increase in the dollar. Particular attention should be paid at the core of the index (core), ie on the so-called "pure PPI". Typically, the producer price index is published at 16:30 Moscow time, 11-th numbers (for the previous month). This economic indicator has a significant impact on the trends of the stock market and FOREX.
U.S. Stock market does not know the rest
Figure 1 provides a 10-minute schedule of course the Dow Jones (DJIA). We see that 15.10.04 was the stock market the U.S. is responding to economic news than to corporate records. Anyway, in this day bulls managed to fall in the market, and even take a small revenge: at the very beginning of the trading rate DJIA pushed the crucial support of 9900 and the first minute bidding "took off" with 50 points, and then tried to test and a more aggressive goal --
9975. And this is despite the generally negative on the day corporate news.
In this regard, a reference message from 15.10.04 of the pharmaceutical component of the Dow - the company Pfizer. She added the new head of a heavy history, which began with the withdrawal of medication Vioxx. On that day, it was stated that the Corporation will hold a lengthy clinical trials published by the arthritis drugs Bextra, because there is some reason to suspect that this drug may be associated risk of cardiovascular and skin complications. Bextra is one of the two drugs that Pfizer produces for patients with arthritis.
When Merck announced the withdrawal of Vioxx, analysts initially assumed that Pfizer could benefit greatly from this. But the doctors questioned the safety of all drugs for arthritis, a class of COX-2 inhibitors, which include Vioxx. The same class will include both of the arthritis drug manufactured by Pfizer. October 15, its shares fell by 1.99%.
It should be noted that the statistics
Fig. 1. 10-minute schedule of course the Dow Jones (DJIA).that day came a great multitude. An hour before the opening of U.S. stock exchanges have three sets of economic data. U.S. Labor Department reported that producer price index PPI rose in September by 0.1% compared with August. The basic component of PPI index rose in September by 0.3%. According to the poll Reuters, on average, economists predicted that the index and the PPI, and its basic component will rise by 0.1%. Wholesale energy prices fell in September by 0.9%, not enough for the rising oil prices, renewed in the middle of the month, after the impact of Hurricane "Ivan" in the oil and refining industry in the U.S. Gulf of Mexico. Wholesale prices for liquefied petroleum gas fell in September to 7.4% for natural gas - by 2.3% and fuel oil - 2.7%. Wholesale gasoline prices rose in September by 0.7%, after falling by 5% in August. A marked increase in the core PPI index in September helped to increase the wholesale prices of cars by 1.1% after declining by 1.2% in August. According to Lehman Brothers economist Drew Meytusa (Drew Matus), it is not too concerned about higher-than-expected increase in the base of the index of PPI, as at this time of year it affect se-gap fluctuations in the price of cars (k2kapital.com).
Effect of PPI index for U.S. stock market was weakened by the Federal Reserve Bank reported that they calculated the index of business conditions in the manufacturing sector of New York and north-eastern region of the United States, Empire State Manufacturing Survey, was 17.4 in October, falling as compared with September at 9.9.
Empire State Manufacturing index is very volatile and plays the role of the third plan in the picture that shows the state of the U.S. manufacturing sector. Recently, the index fell sharply in August, then rose strongly in September and dropped again in October.
In a team with a retail
The third block of news (and on the day the most important) for the U.S. stock market and the market for U.S. Treasury bonds have become data Mintorg for the September retail sales in America. It was stated that the volume of retail sales rose in September by 1.5% compared with August, when sales declined by 0.2%.
At the September figure was influenced by strong growth in sales of cars, amounting to 4.2%. In August, sales of cars fell by 1.3%. But without a car and retail sales grew in September at a solid 0.6%, after declining by 0.2% in August. These figures exceeded the forecasts of economists, that in September retail sales as a whole increased by 0.7%, but excluding motor vehicles - by 0.3%.
In doing so, retail sales of building materials and garden supplies rose in September to 1.4% after the increase of 0.7% in August. Sales of electronics and household appliances rose by 0.5% after falling 0.8% in August. Sales of clothing rose by 0.8% (-0.7% in August). Sales at bars and restaurants increased by 0.7% (-0.5% in August). Sales at department stores rose by 0.9% (-0.7% in August (k2kapital.com).
Growth of retail sales in September on a wide range of products showed that the drop in U.S. consumer activity, recorded in August, did not spread to the next month. As you know, consumer spending in the U.S. provide a two-thirds of GDP, and growth of activity in the retail sector of the economy, despite the burden high prices for gasoline, led to the positive sentiment on the stock market. In the market of Treasury bonds, on the contrary, it is disheartening. The strong increase in retail sales, stimulating economic growth, was seen as a signal that the Fed will continue its policy of raising interest rates. The cost of a 10-year Treasury bonds fell on 15 October to 9 / 32, and their yield, which is the main point of reference for the U.S. market for long-term loan increased to 4.06%, 4.02% against the previous day. Cost of 2-year Treasury bond fell 3 / 32, and their yield increased to 2.53% against 2.51% on the previous day. The morning decline bidding quotations treasury bonds were higher, but the rise in oil prices in the late session on the NYMEX exchange up to $ 55 let the market gosbumag to reduce losses. All these events have not slowed down and the impact on the market FOREX, where the output of statistical data on the U.S. dollar remained under strong pressure from the entire spectrum of major currencies.
FOREX and the index of producer prices
Graph rate EUR / USD (Fig. 2) shows that the yield on U.S. inflation data was allowed on 15.10.04 time to lift pressure on the dollar by the euro. The market slipped to 1.2383 support, which amounted to more than 40 points. However, it should be noted that on the day the market is fully in control of the bulls in a single currency, however, had markedly USD yielded their positions. And this despite the fact that, as we have seen above, the stock market has tried to fully support the U.S. dollar. The significant increase in the base of the PPI index gives hope that the core CPI inflation index will also be significantly higher than projections. This would allow the Fed to move away from U.S. policy of moderate monetary management and to begin more aggressively to raise the basic discount rate in the country. Now it is 1.75%, and the neutral value is estimated to average at 3.5%, ie in fact, a negative interest differential on the discount rate in the U.S. negatively acts on its national currency. In Figure 3 you can see the impact of statistics on an index of producer prices in the U.S., released 10.09.04 and 13.08.04 of the city, on the world currency market.
Fig. 2. 30-minute schedule rate EUR / USD.As the U.S. Labor Department announced Friday 10.09.04 city, the producer price index PPI, an indicator of inflation in wholesale sphere, in August dropped by 0.1%. To a large degree of decline was due to some easing of price pressure from the oil market. Energy costs, jumped in July to 2.3% in August, rose by only 0.2%. Food prices fell in August by 0.2%, their decline after a sharp jump in the spring was recorded the third month in succession.
The core index of producer prices, excluding volatile energy prices and food, fell by 0.1%, showing the first decrease over the last six months. A coherent projection of economists suggested raising the overall index by 0.2% and the core - at 0.1%.
As a result, FOREX market took this news as negative for the euro, and for two subsequent days, the market EUR / USD adjusted downward by more than 80 points (Fig. 3).
A month earlier - 13.08.04 d. - U.S. Labor Ministry announced that the producer price index PPI rose in July to 0.1% as compared to June, when the rate fell to 0.3% due to falling energy prices. Wholesale energy prices fell in June to 1.6%, and in July increased by 2.3%. Including wholesale gasoline prices rose in July at 5.4%. In June, the wholesale price of gasoline fell by 5.2%. The growth of wholesale energy prices in July were largely offset by lower prices for food products (-1.6%).
The basic component of the index PPI, does not include the volatile prices of food and energy, in July rose by 0.1%, after +0.2% in June. According to the poll Reuters, economists believed that the July index PPI increased by 0.2%, and its basic component - at 0.1%.
It was also stated that in the last 12 months ended in July, wholesale prices in the U.S. grew by 4%. Core PPI index over the same period grew by 1.7%. This figure was lower than the June figure (+1.8%).
As a result, FOREX market reacted poorly to these conflicting data (Fig. 3), as does waiting for a serious increase in inflationary pressures in the country and, consequently, more decisive steps taken by the U.S. Federal Reserve in monetary policy through the increase of aggressive accounting rates. Nevertheless, one can conclude that the current economic conditions, the producer price index PPI in the U.S. is one of the key economic indicators that are able to create intermediate trends for different segments of global financial market, including market FOREX.
Fig. 3. Four-course schedule for EUR / USD.Vasily Yakimkin
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