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Economic indicators - B

List of indicators - B:

  • Balance of trade
  • Beige Book
  • Bridge/Commodity Research Bureau (CRB) Indices
  • BTM-UBSW Chain-Store Sales Index
  • Building permits
  • Business inventories

Balance of Trade or Merchandise Trade Balance

The indicator that shows the difference between imports of goods and a nation's exports is the trade balance. On the other side, it may also be considered as the difference between national investment and national savings. When export exceeds import, a positive Trade Balance, or a surplus, occurs. A deficit, or a negative trade balance, occurs when import exceeds export. The Trade Balance is a major indicator of foreign exchange trends, therefore the foreign exchange markets closely follow and any changes in exports and imports.

Rates of imports and exports are significant indicators of the overall activity in the economy. Changes in export activities represent the competitive position of the country in question, as well as the intensity of economic activity abroad. Strength of domestic economic activity is reflected by developments in the import activity. When a country has weak currency, it is the result of large Trade Balance deficit, as there is a continually commercial selling of the currency of this country. However, substantial financial long-term investment flows can solve the problem. A surplus occurs when the exports exceed the imports, otherwise a deficit, appears, as the current situation for the US. Different factors can be useful in reaching the balance, such as exchange rates, prices of domestic goods, tariffs, trade agreements, or barriers.

Trade surpluses may lead to harmful protectionist policies, although they are generally good for the economy. Deficits can cause problems with debt servicing and unemployment. The US has had a trade deficit is continuously growing (from $101.7 billion in 1990 to $716.7 billion in 2005). Among the reasons we can name are the growth of the US economy, high-rising oil prices, globalization, demand for American investment assets, and the dollar's use as a reserve currency and its overall strength. One of the possible results of this imbalance is depreciating the dollar.

Ideally, it can cause imports to decrease because of level reduction of consumers' purchasing power. A deficit may lead traders to short the dollar and it is believed to be a sign of US economic weakness. Trade balance is followed by an average move of 64 pips in the price of the EUR/USDand is usually published near the middle of the second month after the reporting period.

Each Federal Reserve Bank collects remarkable information on current economic condition in its District through different sources, such as reports from Bank and Branch directors and interviews with key business people, market experts, and economists. This information is a summary by District and sector in the Beige Book.

Fed uses this report, along with other indicators, to define interest rate policy at FOMC meetings. These are held two weeks after the Beige Book's publishing. Interest rates may have changed depending on trends portrayed in the Beige Book. Federal Reserve Board releases the Book eight times a year, every six to eight weeks at 2:00 p.m., second Wednesday before Federal Open Market Committee Meetings.

Bridge/Commodity Research Bureau (CRB) is everyday indices for 23 different commodity price measures. It is a valuable indicator of increase in consumer prices and inflation.

The BTM-UBSW Chain-Store Sales Index is based on private review information covering the week ending the previous Saturday and seasonally adjusted. This index is necessary because its month-to-month changes are a coincidental indicator of nominal retail department store sales.

Building permits are an application that updates every month. It represents construction statistics on new privately owned residential housing units authorized by building permits by place and by county. Data items contain number of buildings, units, and construction cost for monthly new privately owned residential Building Permits.

Business Inventories is a report released monthly by the Commerce Department containing inventory statistics and sales from all three stages of the manufacturing process, which include manufacturing, wholesale, and retail. However, two of its inventory components along with all three of its sales components are already reported by the time of its released. As a rule, the market pays no attention to the business inventories report because retail inventory is the only new piece of information in it.