Economic news can affect the price of financial assets. It can also influence business decisions, for example whether to invest in a new production line. But, not all economic news is equally significant. Some announcements have little effect on asset prices or interest rates, while others cause large and surprising shifts. Moreover, the type of asset that is affected depends on the announcement. For example, announcements about some economic indicators primarily affect bond yields, while other economic news is mainly relevant for stock prices.
The best way to understand how different types of economic news are likely to affect markets is to study the past history of their impacts. This can be done by examining the responses to specific economic releases, such as the monthly employment report or the quarterly gross domestic product (GDP) estimate.
Another important source of information about expected market reactions is survey data. Surveys, however, may contain errors and accumulated noise. Moreover, survey data typically have leads of a few days or a week before the release of the underlying indicator. As a result, the true news contained in a survey may have already been “filtered out” by the time the released data is announced.
A final key element of economic news is to take a broad perspective when writing about it. It is tempting to focus on a single number, especially when it is significant, but this can lead to a narrow and incomplete story.