Economic news refers to business reports that affect the economy. Its primary purpose is to serve as a gauge of the economy’s health, and its ability to grow. It can also serve as a predictor of future developments.
Generally, economic news is reported in the form of reports from a variety of sources including government agencies, private businesses and academics. Reports can also be based on surveys of consumers or workers. A key ingredient in any good economic news story is a quote from an expert who has a strong, clear opinion on the matter at hand. This allows the reporter to add a human element that is often lacking in business news articles.
When economic news is released, market participants adjust the prices of financial assets. This is especially true of interest rates, such as yields on U.S. Treasury securities, federal funds futures and Eurodollar futures. These price responses typically reflect expectations of future growth and inflation. News of stronger-than-expected growth and inflation usually prompts a rise in bond yields, while news of weaker-than-expected growth and inflation usually prompts asset prices to fall.
A major concern in economic news reporting is that survey data may not capture accurate expectations of market participants. This is particularly true when surveys are conducted well in advance of the release of an indicator. In such cases, a large portion of the “news” that is measured by a survey is actually already baked into the underlying indicator when the survey results are announced.