Business confidence announcements report on how confident the business managers within an economy are. Confident business managers tend to hire more people and invest in business expansion, new products, and more inventory. Insecure business managers tend to hire fewer people (or even lay off employees) and invest less in business expansion, new products, and more inventory.
Business confidence data are released in multiple announcements that you need to be aware of:
- Institute for Supply Management (ISM) Manufacturing Business Survey: Survey of purchasing managers’ confidence in the economy based on new orders, production, employment, deliveries, inventories, and so on.
- German ZEW (Zentrum fur Europaische Wirtschaftsforschung) Indicator of Economic Sentiment: Survey of institutional investors’ and analysts’ confidence.
- German IFO (Institut fiir Wirtschaftsforschung) Business Climate Index: Survey of manufacturers’, builders’, wholesalers’, and retailers’ confidence
- Tankan Manufacturing Index (Japan): Survey of manufacturers’ confidence.
Impact on Trade Flows
Rising Business Confidence –> Increase in Corporate Spending –> Increased Demand for Imports –> Increase in Trade Flows
Falling Business Confidence –> Decrease in Corporate Spending Decreased Demand for Imports –> Decrease in Trade Flows
Impact on Investment Flows
Rising Business Confidence –> Increase in Corporate Spending–> Increase in Corporate Profits –> Rising, More Attractive Stock Market–> Increase in Investment Flows
Rising Business Confidence –> Increase in Corporate Spending –> Rising Inflation–> Central Bank Raising Interest Rates –> More Attractive Government Debt Market –> Increase in Investment Flows
Falling Business Confidence -> Decrease in Corporate Spending –> Decline in Corporate Profits –> Falling, Less Attractive Stock Market –> Decrease in Investment Flows
Falling Business Confidence –> Decrease in Corporate Spending –>Falling Inflation –>Central Bank Lowering Interest Rates –> Less Attractive Government Debt Market –> Decrease in Investment Flows
Impact on Money Supply
Rising Business Confidence –>Increase in Corporate Spending Rising Inflation –> Central Bank Raising Interest Rates –>Decrease in the Money Supply
Falling Business Confidence –> Decrease in Corporate Spending –> Falling Inflation –>Central Bank Lowering Interest Rates -> Increase in the Money Supply
Impact on Investor Fear
Rising Business Confidence –> Confident Investors
Falling Business Confidence –> Nervous Investors
Typical Impact on the Currency
Rising Business Confidence –> Stronger Currency
Falling Business Confidence–> Weaker Currency
