As a general rule, individual investments rise and fall with the tide. This means that even a fundamentally strong company that is somewhat undervalued may lose value during economic recessions and fundamentally weaker companies that are slightly overvalued may rally during bull markets. Because of this, it is prudent to consider the overall economic environment while making investment decisions.
We know that individual investors typically come out on the wrong end of market timing. However, economic indicators may provide a gauge to the strength of the current market conditions. It is never wise to jump into and out of investments strictly due to weak or strong economic indicators. However, if you have new money to invest, economic research can point you toward investments that may be more appropriate for the economic climate.
In this issue of On the Internet, the focus is on websites that provide economic data. The data offered on these websites can help you ascertain the strength of the economy and provide insight into which sectors and companies may be strong performers in the coming market cycle.
U.S. Department of Commerce Bureau of Economic Analysis
The U.S. Department of Commerce Bureau of Economic Analysis is the top source for domestic economic data. The government website provides comprehensive national, international, regional, industry and integrated accounts economic data.
National data is separated into several sections—gross domestic product, personal income and outlays, corporate profits, and government current receipts and expenditures, just to name a few. The most recent news releases for gross domestic product, personal income and outlays and corporate profits are provided. The gross domestic product news release provides detailed data on the expansion or contraction of various areas of the economy and can provide investors with information not only on the health of the overall economy but also on the strengths and weaknesses of economic elements, such as personal consumption and government expenditures. The personal income and outlays news releases detail trends in income, savings and spending, another important metric on the health of the economy. Needless to say, the overall movement in corporate profits should also be closely scrutinized.
The regional data provided includes gross domestic product by state and metropolitan area, state personal income and local area personal income. It can be of use when investing in companies with a strong footprint in certain areas of the country. GDP growth rates are also available by industry. Gross domestic product data by industry can be found in the Industry tab.
Finally, the Interactive Data tab shows data in line and bar chart format.
International Monetary Fund Data and Statistics
A great complement to the Bureau of Economic Analysis, the International Monetary Fund IMF Data and Statistics is a top website for international economic data. Data is split into three sections—Global Data, IMF Financial Data and Exchange Rate Data. The links are provided directly on the home page.
Every other year, the International Monetary Fund releases the World Economic Outlook database, which contains selected macroeconomic data presenting the IMF’s analysis and projections of economic developments at the global level. The data is presented by major country groups and at the individual country level. Each year’s report—going back to 1999—is provided free of charge. The website also provides detailed economic indicators such as interest rates, reserves and growth of prices and production for each country.
The International Monetary Fund also releases the Global Financial Stability Report twice a year. The report assesses the global financial system and markets, and discusses emerging market financing in a global context. It focuses on current market conditions, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging market borrowers. The report shows the financial ramifications of the economic imbalances highlighted by the World Economic Outlook.
Two other major publications are available on the IMF website—Regional Economic Outlook and Fiscal Monitor. The Regional Economic Outlook summarizes recent economic developments for countries in various regions and discusses economic policy developments that have affected economic performance, as well as challenges faced by policymakers. The Fiscal Monitor, also prepared twice a year, offers fiscal projections for individual countries, assuming that announced policies will be implemented.
The IMF website provides a bevy of other information on the country level, as well as international news and videos.
U.S. Department of Commerce Economic & Statistics Administration
The Economic & Statistics Administration is responsible for disseminating national economic indicators and overseeing the U.S. Census Bureau and the Bureau of Economic Analysis.
The 12 monthly and quarterly principal federal economic indicators presented on the Web page are: advance monthly retail sales; advance report on durable goods; construction spending; current account balance; gross domestic product; manufacturers’ shipments, inventories and orders; manufacturing and trade inventories and sales; new home sales; new residential construction; personal income and spending; U.S. trade balance; and wholesale trade reports. You can enter your email to receive updates for these indicators from the Department of Commerce. Furthermore, an Economic Release Calendar outlines the major releases of economic indicators throughout the year.
Yahoo! Finance Economic Calendar
Yahoo! Finance’s Market Overview section offers an economic calendar presenting previous and upcoming economic releases, as well as links to about half of the releases. The links offer a short description of the economic indicator, as well as its importance, source, release time and raw data. The calendar also presents a forecast from Briefing.com and from the market.