Course 7 Economic indicators · Lesson 10 of 14

GDP, PMIs and Retail Sales

Gross domestic product measures the total output of an economy, published quarterly and revised for months afterwards. Purchasing managers' indices survey businesses monthly and give the earliest read on whether activity is expanding or contracting. Retail sales measure consumer spending, the largest component of most developed economies. GDP confirms, PMIs anticipate and retail sales explain, and the market reacts most to the ones that arrive first.

What you'll learn

  • Read GDP, PMI and retail sales releases
  • Understand why timely data move markets more than definitive data
  • Know the thresholds and conventions for each

GDP

Published quarterly, as an annualised rate in the US and a quarter-on-quarter rate in most other economies, with a preliminary estimate followed by revisions. By the time it arrives the market has seen three months of monthly data, so a GDP release moves prices only when it differs from what those data implied. Two consecutive quarters of contraction is the common definition of a recession.

PMIs

Surveys of purchasing managers in manufacturing and services, scored so that 50 is the dividing line: above it, activity is expanding; below it, contracting. Flash estimates are released mid-month for the current month, which makes them the most timely broad indicator there is, and the eurozone and UK flash PMIs are among the most market-moving European releases. The US has two competing series, ISM and S&P Global, and the ISM is the one the market watches.

Retail sales

Monthly, with a headline figure and a core figure excluding cars and fuel. In the US the control group, which feeds directly into GDP, is the number economists watch. Strong retail sales mean a confident consumer, which supports growth and, if sustained, inflation. The figure is volatile month to month and the trend over three months is more informative than any one print.

Which to watch

ReleaseFrequencyTimelinessMarket impact
GDPQuarterly, with revisionsLaggingModerate; high when it surprises
PMI flashMonthly, mid-monthLeadingHigh in Europe and UK; ISM high in US
Retail salesMonthlyCoincidentModerate to high in US

Key takeaways

  • GDP confirms with a lag and moves markets only on surprise.
  • PMIs above 50 mean expansion; flash PMIs are the most timely broad indicator.
  • Retail sales show the consumer; the trend matters more than one month.
  • Timely data move markets more than definitive data.

Knowledge check

  1. A services PMI prints 48.5. What does this indicate?

Glossary

Guides

Trading forex, CFDs and other leveraged products carries a high risk of losing money. This lesson is general education, not advice. Risk disclosure.

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