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Economic indicators - N

List of indicators - N:

  • NAPM index (National Association of Purchasing Managers' index)
  • National Association of Home Builders Survey
  • New home sales
  • Nonfarm payrolls
  • NY Empire State Index

NAPM: National Association of Purchasing Managers

The NAPM report measures the condition of the manufacturing sector, and more generally the entire economy, by calculating for data about new orders, production, employment, deliveries, and inventory, in descending order of importance. It totalizes the surveys of over 250 companies within twenty-one industries covering all 50 states. Additionally, it is published on the first business day of the month at 10 a.m. Eastern Standard Time and contains the previous month's data. A rate over 50% indicates that manufacturing growth, while a rate below 50% means its recession. The NAPM index is also considered an early symptom of inflationary pressures. Diffusion indices are calculated for each of report's categories (which are new orders, production, employment, inventories, delivery times, prices, export orders, and import orders), with a reading over 50% indicating expansion relative to the prior month, and a sub-50% reading indicating contraction. The NAPM precedes all other economic releases of the month, even the employment report, and the tone of subsequent releases could be guessed basing on the NAPM survey. The bond market's reaction to the report is often determined by the prices paid and vendor deliveries indices, especially during periods of inflation concerns. National Association of Purchasing Management (NAPM) monthly releases one of the most popular data series on the U.S. economy, called the Report on Business. Purchasing Managers Index (PMI), which is most cited single feature of the report, presents summary statistics, which indicates whether the manufacturing sector is expanding or contracting. NAPM recently extends its coverage of the U.S. economy in order to represent the condition of U.S. non-manufacturing activity.

A local report, produced by the Houston affiliate of NAPM since January 1995, provided similar insights into the workings of the Houston economy. It is one of 16 regional reports from around the nation. This monthly review, of 80 or more local companies, presents helpful and well-timed data about a number of economic indicators. As a result, this survey yields an overall measure of local expansion or contraction. The use of this new tool to analyze the local economy compared to its national counterpart is the subject of this issue. The NAPM has compiled informal and formal reports on U.S. economic conditions since it was established in 1915. Information mostly on price and supply conditions for various commodities had been the main interest of the association for the first 15 years, but in 1930, a committee was formed to expand the reporting basis. Formal structure slowly emerged through the years, and today the panel of 300 members statistically reflects the composition of U.S. manufacturing; they selected by Standard Industrial Classification code and geographical region. Since this year, a separate panel regularly reports on U.S. non-manufacturing industries. Data are collected from member companies on a number of manufacturing-related series regarding production, employment, new orders and export orders, prices, inventories and imports. On the first business day of each month, the results for the previous month are being reported, along with a preview of government series that will be reported later. The NAPM's reported series are highly correlated with the published government series released weeks or months later. That is why they require thoroughly studying and testing. For example, NAPM employment correlates well with the Bureau of Labor Statistics' manufacturing employment report, and NAPM industrial production with the Federal Reserve's Industrial Production Index.

If accelerations and decelerations are similar, the index is neutral with a value of 50; more decreases than increases puts the value under 50, indicating contraction, and more increases than decreases moves the value of the index above 50, implying expansion. Some indices have break-even value lower than 50. For example, inventory has a break-even value near 42, while employment and prices have a neutral value of 47.

The Purchasing Managers Index for manufacturing represents the combination of five of the reported series, which include the inventory (weighted at .10), lead times (.15), employment (.20), production (.25), and new orders (.30). A PMI value below 43.6 is the symptom of recessionary conditions in the United States. A PMI value less than 50 indicates contraction, and above 50 indicates expansion is under way in U.S. As variations in this index can explain about 60 percent of the changes in U.S. gross domestic product, the PMI is sometimes used to draw broader conclusions about the U.S. economy as a whole.

Home Builders Survey

Information on buyer traffic, NAHB members' current sales conditions, and sales expectations are published in the Home Builders Survey for the next six months./

Buyer traffic and sales expectations usually correspond or slightly overtake housing starts, while, according to by the Department of Commerce, current sales have a modest positive correlation with new homes.

New Home Sales

This indicator is sometimes referred to as New Singly-Family Houses Sold. Interviews of about owners of about 15,000 or 10,000 builders of selected building projects are the bases for it. It shows the number of newly constructed homes that were sold during the month.

It helps to measure the demand for housing as well as the economic momentum. Buying a house means that people feel pretty comfortable and confident in their own financial position. Actually, this narrow piece of data has a significant effect through the economy, and therefore across your investments and the markets. Tracking economic data such as new home sales helps the investors to gain specific investment ideas and provides them with a broad guidance for managing a portfolio.

The construction of a new home requires many construction jobs, and income of those jobs will be returned into the economy. Homebuilder and the realtor gain their profit when the house is sold. Purchasing a house brings provides buyer with a great variety of consumption opportunities. Furniture and home appliances such as washers, refrigerators, and dryers are just a few items new homebuyers might purchase. One-hundred thousand new households around the country every month multiply the economic "ripple effect". The market effect of the report is usually insignificant. Existing home sales report, which has a sample data pool four times as large and is released earlier in the month, is much more popular.

Non Farm Payroll (NFP)

Non Farm Payroll is a measures overall strength of the labor market and the employment rate. It accounts for about 80% of the workers who contribute to GDP, reflecting all business employees excluding private household employees, general government employees, and employees of nonprofit organizations. The full report also represents estimates on weekly earnings of these employees and the average workweek. NFP is very necessary as a general indicator of the health of the economy; usually it affects the dollar in forex trading. NFP rises at a steady pace. Since 1990, it has increased from 109,144 in January of 1990 to 135,106 in May of 2006. When NFP rates are lower than expected it causes selling of the US dollar on the belief that it is weakening, and the opposite is true for an unexpectedly high NFP. NFP is published at 8:30am EST on the first Friday of every month. It tends to cause an average move of 124 pips in the EUR/USD.