Gross Domestic Product

Release Date: The fourth week of every month

Released By: Bureau of Economic Analysis

What is it? The Gross Domestic Product (GDP) is the King of Kings in the indicator world. The GDP represents the market value (a fair estimate of what a buyer would pay a seller for a product) of all goods and services produced by the economy during the quarter. Markets, businesses and economists closely monitor any change in GDP since it is the broadest measure of the rate at which the economy is growing.

When the GDP growth rate is negative for two consecutive quarters, the economy is considered to be in recession.

How It Affects Investors: The GDP is the one indicator that says the most about the fiscal health of our economy. Its quarterly release is by far, the most followed, discussed and digested indicator out there–useful for Wall Street analysts, economists, policymakers and last but not least, individual investors. But what does the GDP mean to you and me? A healthy GDP translates into healthy corporate earnings, higher stock prices and happy investors.

Usually, 2.5%–3.5% growth in GDP signals a healthy economy. However, if the economy is slowly coming out of a recession, investors can expect the GDP to jump to 6%–8%. As a general rule of thumb, look for GDP numbers to hover around the 3% level.

Unemployment
(a.k.a The Jobs Report)

Release Date: The first Friday of every month

Released By:  Bureau of Labor Statistics

What is it? If there were ever an economic report that gets everyone's attention… this is it!

As the first major release of the month, the Unemployment Situation report sets the tone (and the market psychology) for the other indicators to come. The Jobs Report shows us how many people are looking for jobs, how many have them, and how much they're getting paid. Like the GDP, economists look to the Jobs Report to gauge the current state and future direction of the economy. Let's face it, employment fuels income and income powers spending habits, which in turn, boosts company revenue and stock prices.

How It Affects Investors: What many don't realize is that the data from the Jobs Report are categorized by sectors–such as manufacturing, construction, and basics goods and services. Sector data go a long way in helping investors evaluate and choose where to invest their money. Changes in unemployment and job growth also have huge effects on stocks and bonds. If unemployment is low, strong employment and wage increases beat back inflation–and with inflation at bay–the Fed will most likely lower interest rates. As a result, bond prices will fall.

Looking to invest in health care? Then you might want to check the latest jobs report to see what the unemployment stats look like in that industry.

Housing Starts

Release Date: Around the third week every month

Released By: U.S. Census Bureau

What is it? Housing Starts have a powerful economic ripple effect throughout the rest of our economy. See, homebuilders will only begin to construct a house if they are completely confident it will sell. So changes in the rate of housing starts tell a lot about the demand for new homes and the general outlook on the construction industry.

The economic repercussions of just one house being built (or not) in a neighborhood can have a huge effect on the local economy, not to mention on a national scale. Once that house is built and sold, it keeps generating revenue for the local and national economy for years to come. How? Well, think back to when you first bought your house. What was the first thing you did? I bet you called movers, ordered furniture and probably hired someone to mow that newly sodded lawn.

Multiply one new home sale by an estimated one hundred thousand new home sales per month, and you can easily see why an investors should keep a close eye on Housing Starts.

How It Affects Investors: By tracking housing starts, individual investors gain valuable clues for the stock prices in other industries like home builders, banks, mortgage lenders and even home furnishing companies.

The Retail Sales Report

Release Date: The second or third week of every month

Released By: The Census Bureau and The Commerce Department

What is it? Retail sales figures are a major economic indicator of the consumer sector and not only give investors a sense of the economic big picture, but insight into the trends among the different types of retailers. Think auto sales are hot? Look to invest in Apple? Before you do, check the retail sales report findings first.

Here's the deal: When analyzing monthly retail sales reports, notice how retail sales are constantly being revised. That's because retailers are trying to move inventory anyway they know how. Auto dealers are trying to drive more inventory off the lot through factory rebates and dealer discounts. Retail outlets try to move inventory through those seasonal sales we all love.

How It Affects Investors: By keeping up with consumer trends, you can get a good idea of where the economy is headed. Since retail sales are subject to multiple revisions, investors should follow the three-month moving average or the year-over-year percent change to track different trends in sales.

By far, economic indicators are the best tool investors can use to gauge where they should be investing over the next year or so. However, knowing the ins and outs of economic indicators is only one piece of the investment puzzle. Investors still need to do stock research and stay on top of emerging industry trends.

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