The key data releases

Central banks say their decisions are "data dependent". This lesson covers the releases they — and the markets — watch most closely: what each measures, how it is presented and why a surprise matters.

A quick overview

Inflation: the consumer price index (CPI)

The consumer price index tracks the price of a representative basket of goods and services bought by households. It is reported as:

• year on year — the change compared with the same month a year earlier, the figure most often compared with the 2% targets; and
• month on month — the change from the previous month.

You will also see headline and core figures. Core inflation strips out volatile items, typically food and energy, though the exact exclusions differ by country. Central banks often pay close attention to core inflation because it gives a clearer view of underlying price pressure.

Publishers include the US Bureau of Labor Statistics, the UK Office for National Statistics and Eurostat for the euro area.

Employment, including US non-farm payrolls

The best-known jobs release is the US Employment Situation report, usually published on the first Friday of the month at 8:30 am New York time. It contains several figures at once:

• Non-farm payrolls (NFP) — the monthly change in the number of jobs, excluding farm workers and a few other categories.
• Unemployment rate — the share of the labour force without a job and looking for one.
• Average hourly earnings — wage growth, which feeds into inflation.

These figures can point in different directions — strong job creation but slowing wages, for instance — so the first price move can reverse as traders digest the full report. Revisions to the previous two months can also be large.

Gross domestic product (GDP)

GDP measures the total value of goods and services an economy produces. It is the broadest picture of growth but also the slowest: it covers a whole quarter, arrives weeks later and is often revised.

Worked example: quarterly versus annualised growth

Countries present GDP growth differently. The UK and the euro area usually report the change on the previous quarter. The US usually reports an annualised rate — what growth would be if the quarter's pace continued for a full year.

Suppose, as an illustration, an economy grows 0.5% in one quarter.

• Simple approximation: 0.5% × 4 quarters = 2.0% annualised
• Compounded: 1.005 × 1.005 × 1.005 × 1.005 = 1.0202, so about 2.0%

So "0.5% growth" and "2.0% growth" can describe the same quarter. Always check which convention a headline uses before comparing countries.

Purchasing managers' indices (PMIs)

PMIs are monthly surveys asking businesses whether conditions such as output, new orders and employment are better, the same or worse than the month before. The answers are combined into a diffusion index:

Index = percentage reporting "better" + half the percentage reporting "the same"

Worked example

If 40% of firms report higher output, 30% report no change and 30% report lower output:

• 40 + (30 ÷ 2) = 40 + 15 = 55

A reading above 50 suggests expansion compared with the previous month; below 50 suggests contraction. Note that 55 does not mean "the economy grew 5%" — it means more firms reported improvement than deterioration.

Markets watch PMIs because they arrive early — "flash" readings come out before the month has even ended.

Retail sales

Retail sales measure spending at shops, online retailers and similar outlets. Since household spending is a large part of most economies, a strong or weak figure can shift growth expectations.

Two points help you read them correctly:

• Retail sales are volatile — weather and holidays can distort a single month.
• Some countries report sales by value (not adjusted for inflation), while others focus on volume. US retail sales are reported in value terms, so higher prices alone can lift the figure. The UK's headline focuses on volume.

Putting it together

No single release decides a central bank's next move. Traders build a picture: inflation shows the problem the bank is trying to solve, employment and retail sales show how much pressure the economy is under, and GDP and PMIs show the direction of growth. A surprise in a release the market is currently focused on — often inflation or jobs — tends to have the largest effect.

Key takeaways

• CPI measures consumer price changes; watch year-on-year, month-on-month, headline and core figures.
• The US jobs report bundles payrolls, the unemployment rate and wages, so early moves can reverse.
• GDP is broad but slow; check whether growth is quoted quarter on quarter or annualised.
• A PMI above 50 indicates more firms reporting improvement than decline, not a growth percentage.
• Retail sales are volatile and may be reported by value or by volume.