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Trading Economics: A Guide to Economic Statistics for Practitioners and Students



Trading Economics: A Guide to Economic Statistics for Practitioners and Students

Trevor Williams, Victoria Turton

ISBN: 978-1-118-76638-5 April 2014 288 Pages


A practical guide to understanding how key economic and market statistics drive financial market trends

The recent global financial crisis stressed the need for economists who understand how key economic and market statistics drive financial market trends and how to mitigate the risks for businesses that those trends affect. Trading Economics provides guidance for navigating key market figures in a convenient and practical format. Emphasizing the link between economic data and market movements, this book analyzes surveys, economic growth statistics, inflation, labor markets, international trade, monetary and fiscal indicators, and their relevance in financial markets. It bypasses complex terminology to offer a hands-on, accessible introduction to financial statistics and how to profit from them.

  • Offers clear illustrations and an easy-to-read layout to teach you how to trade profitably in financial markets and minimizes risk for your business
  • Written Trevor Williams and Victoria Turton, authoritative public figures with experience working on the New York Stock Exchange
  • Includes a website featuring a blog and new surveys as they develop accompanies the book

Complete with worked examples and updated information, Trading Economics is an essential, comprehensive guide to understanding every aspect of financial market trends and how to navigate them to your advantage.

Acknowledgements ix

Introduction xi

Surprise Indices xii

Mapping a New Landscape xix

1 Surveys 1

Surveys and Behavioural Economics 2

Types of Survey 3

Business Surveys 3

Consumer Surveys 21

Conclusion 28

2 Economic Growth 31

Economic Growth Through the Ages 31

GDP 34

What Is GDP? 39

Breaking Down GDP 42

Why Is GDP Important? How Is It Measured? 43

Index Numbers of GDP and the Price Deflators

Used in Calculating Them 45

Detailed Breakdown of the GDP Measures 48

AMarket Link 61

Components of GDP 62

Conclusion 64

3 Labour Markets 65

Employment Trends 66

What Has Driven the Change? 70

Consequences for Economic Growth 72

Phillips Curve Shows no Durable Trade-Off Exists 74

NAIRU Matters More 75

Employment Measures 76

Why We Measure Unemployment 77

The Nature of Unemployment 79

The Impact of Demographics on Labour Markets 81

Vacancies 90

Changing Labour Patterns 92

The UK in Comparison to Its Global Competitors 96

How Do We Extract Value from This? 96

Conclusion 98

4 Inflation 99

What Is Inflation? 99

The History of Inflation 99

Causes of Inflation 101

Earnings/Wage Inflation 109

Price Basket 110

How Is Price Inflation Measured? 110

GDP Deflator 111

Why so Many Measures of Inflation? 112

A Focus on the CPI and RPI 118

Why Is Inflation Important? 122

Deflation 123

Other Measures of Inflation Targeting 123

How Can We Extract Value from This? 125

Conclusion 125

5 Monetary Statistics 127

Monetary Policy and Inflation Management 130

The UK in a Global Context 133

Central Bank’s Role 133

What About the Bank of England? 135

How Monetary Policy Works in the UK 136

Decomposition of Money 144

Why Does Money Supply Matter? 149

Why Is This Sort of Analysis Useful? 155

A Brief History of Monetary Targeting 155

How Do We Extract Value from This? 158

Conclusion 158

6 Fiscal Indicators 161

A Brief History of UK Fiscal Policy 163

Measuring Government Debt 164

Fiscal Policy Impact and Terminology 166

The Impact of Government on Markets 168

Fiscal Policy and Growth 168

The Data We Should Consider 169

Fiscal Policy in Boom and Bust 170

Market Relevance 173

Bank of England Regains Regulatory Powers 176

What Role Does the Office for Budget Responsibility Play in the Fiscal Policy Process? 180

The Monetary Policy Committee 181

Forward Guidance – Another Bank Innovation 183

The Debt Management Office’s Role 185

Comparison of International Debt 188

Fiscal Targets Add Credibility to Debt Reduction 190

How Can We Extract Value from This? 192

Conclusion 193

7 Global Trade Statistics 195

What Is a Country’s Balance of Payments? 197

Why Do We Measure the Balance of Payments? 197

What Does It Mean? 198

The Concept of the Balance of Payments 199

UK Is Not Alone in Having a Trade Deficit 204

A Chronic Goods Deficit 208

A Chronic Services Surplus to Offset (Almost) the Trade Deficit 210

The Ever-Changing Pattern of Visible and Invisible Trade 213

Balance of Payments and GDP 222

Shifting Trade Patterns 222

How Can We Extract Value from This? 224

Conclusion 225

Conclusion 227


Appendix 1 Surveys 235

Appendix 2 Bank of England: Agents’ Summary of Business Conditions (January 2014) 241

Appendix 3 Inflation: Contributions to Change in the 12-Month Rate 247

Appendix 4 Voting on Interest Rates by the Monetary Policy Committee – 1997 to January 2014 249

Appendix 5 Voting on Asset Purchases Financed with central bank reserves by the Monetary Policy Committee – March 2009 to January 2014 251

Bibliography 253

Index 255