Economic indicators for event-driven trading

This is one of the most closely monitored indicators of employment in the US after the non-farm payrolls and is highly regarded as a comprehensive measure of job creation in the country. An increase in this figure indicates rising employment and potential inflation pressures, which can lead to rate increases.

The ADP national employment report is released monthly. This measures the estimated monthly change in employment in the US, excluding the farming and government sectors.

Business inventories often reflect turning points in the state of the economy. Low inventories can mean the economy is about to flourish because businesses' stock rooms are empty and need to be replenished, in turn requiring higher production. High inventories combined with low sales indicate a slowing economy as wholesale orders lessen, slowing production.

Business inventory reports are released monthly and they measure the change in the value of unsold goods held by manufacturers, wholesalers and retailers.

This report corresponds with a country's consumer confidence and spending. An increasing consumer credit figure indicates that lenders are feeling more comfortable with issuing loans, and consumers are more confident in their financial positions and are therefore more eager to spend money.

The consumer credit report is released monthly and measures the change in the total value of outstanding consumer credit that requires instalment payments.

The main measure of inflation in a country at both consumer and producer levels is the CPI. This is often used by central banks when deciding where to set the country's official interest rate, as well as indexing pensions, wages and benefits.

The CPI report is released monthly by the ONS. It measures changes in the cost of living and is calculated by tracking changes in the price of a basket of goods and services used by a typical household.

A positive value on a current account means that the flow of capital in a country exceeds the capital leaving the country. A negative value reflects a current account deficit, where there is a flow of capital out of the country. Ongoing current account deficits can lead to a weakening of the country's currency.

Current account reports are released quarterly and measure the flow of goods, services, transfer payments and income into and out of a country.

So, which economic indicator measures economic growth? GDP reports are perhaps the broadest indicator of overall economic activity and growth. There are three versions of GDP released about a month apart: advance, preliminary and final. The advanced version tends to have the most impact on the market as it is the first to be released, whereas the final GDP is the change in the value of all final goods and services produced in the country.

The GDP report is released quarterly and measures the change in the value of all final goods and services produced in a country. Nominal GDP is also used to measure the world's strongest economies​​.

This figure has an impact on inflation for both consumers and businesses that rely on imported goods and services. If the import price goes up, costs are passed on to these businesses and consumers.

Import prices are released monthly and measure the change in the prices of goods and services imported in a country.

This release measures the number of jobs added or lost in the US during a particular month. Agricultural jobs are excluded due to their large seasonal fluctuations. Non-farm payrolls​​ are a notable economic indicator, released on the first Friday of every month by the US Department of Labor. It represents the number of people on payrolls for all businesses, with the exception of agricultural, local government, private household and non-profit. The monthly figure can change significantly and this often leads to a high level of volatility in FX pairs, such as EUR/USD, around the time of the release. Generally, a high reading is seen as positive (or bullish) for the US dollar, while a low reading is seen as negative (or bearish).

Non-farm payrolls are released monthly, usually on the first Friday after the end of the month. They aim to measure the percentage of the total US workforce that was unemployed but actively seeking employment during the previous month.

PPI rates give an early indication of inflation that consumers will face later, because this index analyses changes that take place before goods reach the retail level. When producers charge more for goods and services, these costs are usually passed on to the consumer. A rise in prices and inflation may lead to the increasing interest rates. A falling PPI may suggest an economic slowdown.

The PPI reports are released monthly and measure the change in the price of goods and services sold by producers in any country.

The retail sales figure is an important measure of consumer demand and spending. Increased retail sales mean higher retail output and economic growth, as consumer spending makes up a majority of the overall economic activity.

Retail sales reports are released monthly to indicate the change in the total value of sales by a country's retailers.

Employment is vital to the economy. If unemployment is up, consumer spending goes down and there is less demand for goods and services. Employment is a good indicator of an economy's health.

The unemployment indicator report is released weekly.

Event-driven trading can also help to take advantage of the stock market through private equities or hedge funds. Corporate events, such as mergers and acquisitions, bankruptcy and takeovers can lead to share price inefficiencies within the stock market. The hedge fund manager can open both long and short positions in an attempt to profit from the temporary inequality between prices. For example, a fund manager may purchase a share​​ that has a potential acquisition, and then sell if after the acquisition, when its price has risen to a higher figure.

Institutional investors​​ are the most common users of event-driven trading strategies, as they have the level of expertise ready to analyse high volumes of corporate events.