Growth data: GDP, ISM and PMI, retail sales, claims, housing

Inflation and jobs are the two headline acts. The rest of the growth calendar fills in the picture, and a few of these releases move markets nearly as much as NFP when the regime is focused on growth. This lesson walks through them in rough order of market weight.

GDP

Gross Domestic Product is published by the BEA, quarterly, in three passes: the advance estimate about four weeks after the quarter ends, a second estimate a month later, and a third a month after that. All are 8:30 a.m. Eastern. The headline is the quarter-on-quarter change at a seasonally adjusted annualised rate, which is why a 0.6% quarterly gain is reported as "2.4%."

The advance print is the one that moves markets, and it is also the least accurate. Revisions between the advance and third estimates of a full percentage point have happened. Traders watch the components: personal consumption (roughly two-thirds of GDP), business investment, residential investment, inventories (which swing wildly and are usually ignored as noise), government spending and net exports. "Final sales to private domestic purchasers," which strips out inventories, trade and government, is the cleanest underlying-demand read and is often what the Fed cites.

GDP is old news by the time it prints. The Atlanta Fed's GDPNow model publishes a running estimate updated after each input release, so the market's expectation for the advance print is unusually well informed.

ISM and PMI

Purchasing manager surveys ask businesses whether activity rose, fell or stayed flat versus last month. The result is a diffusion index where 50 is the dividing line between expansion and contraction.

Inside the ISM, the sub-indices are read separately: new orders (leads production), employment (a jobs-report preview), prices paid (an inflation preview), and supplier deliveries (which perversely rises when supply chains are stressed). A headline above 50 with new orders below 50 is read as softening.

Retail sales

Retail sales are published by the Census Bureau around the middle of the month for the prior month, at 8:30 a.m. Eastern. The headline is m/m percent change in nominal dollars. Three variations are reported: headline, ex-autos, and the "control group," which excludes autos, gasoline, building materials and food services and feeds directly into the consumption component of GDP. The control group is what moves the market.

Because retail sales are nominal, a hot print during high inflation may reflect prices rather than volume. Divide by the goods CPI to get a rough real number. Retail sales are also heavily revised.

Weekly jobless claims

Initial jobless claims come out every Thursday at 8:30 a.m. Eastern from the Department of Labor, covering the week ending the prior Saturday. Continuing claims cover the week before that. This is the highest-frequency labour data available and it leads the unemployment rate.

Single weeks are noisy (holidays, weather, auto-plant retooling in July), so the four-week moving average is the standard read. Claims rarely move markets on a normal week, but a sustained rise through, say, 250k when the recent range was 200-220k becomes the main story, and each Thursday print becomes a mini-NFP.

Key idea: ISM and claims are the timeliest growth data; GDP is the most comprehensive and the most stale. Trade the sub-indices and the moving averages, not the headlines.

Housing

Housing is the most interest-rate-sensitive sector, so housing data is where rate changes show up first in the real economy.

Housing data rarely moves index futures on the day, but it moves homebuilder stocks, mortgage-related credit, and lumber futures. It matters more for the level than for the surprise.

The rest

Durable goods orders (Census, around the 26th, 8:30 a.m.) with the core capital goods sub-series as a business investment proxy; industrial production (Fed, mid-month, 9:15 a.m.); consumer confidence (Conference Board, last Tuesday, 10:00 a.m.) and consumer sentiment (Michigan, prelim second Friday, final end of month, 10:00 a.m.); trade balance; and the regional Fed manufacturing surveys (Empire State, Philadelphia, Richmond, Dallas, Kansas City), which arrive throughout the month and set expectations for ISM.

Try it: Build a one-month calendar for the coming month with the date and time (in your timezone) of: ISM Manufacturing, ISM Services, retail sales, the advance or latest GDP estimate, and every Thursday claims release. Mark which of these arrive in the ten days before the next FOMC decision. Those are the ones with the most leverage on the decision.

Recap

• GDP (BEA, quarterly, three estimates) is comprehensive but stale; watch final sales to private domestic purchasers and GDPNow.
• ISM Manufacturing (first business day) and Services (third business day) at 10:00 ET are the timeliest broad activity reads; read new orders, employment and prices paid.
• Retail sales: the control group feeds GDP; deflate by goods prices in inflationary periods.
• Weekly claims on Thursdays at 8:30 ET lead unemployment; use the four-week average.
• Housing is the most rate-sensitive sector; it matters for the level more than the surprise.