ISM Manufacturing (DEC)
The index is compiled and released by the Institute for Supply Management, the ISM Manufacturing is a composite diffusion index regarding manufacturing conditions across the United States by targeting roughly supply purchasing managers are roughly 300 industrial firms across the 50 states.
The survey queries managers about the general direction of production, orders, inventories, employment, vendor deliveries and prices. The headline figures represents expansion above 50 and contraction below that, and the contained sub-indices as queried above are looked at as well and count for markets. The relevance of this indicator is enhanced by the fact that it is available very early in the month and not subject to revisions.
The ISM is the leading indicator to the manufacturing industry therefore it is highly deliberated, analyzed, and anticipated by various parties, for this indicator has provide its accuracy in providing an overviewed perspective on the manufacturing industry.
As manufacturing is a key determining factor in the business cycle then is accordingly affected by this cyclic motion. In analyzing the ISM figure it comes in the 50 barrier a reading above fifty is considered a healthy growth level and implies growth that is a reading below that number is an indicator of slowing economy as the lower the number gets it might indicate the recession state the economy might lead to.
The indicator is valuable as well for the complex diversities contained in this index such as production, employment, durable goods, and others for those are key aspects to determine the current conditions of the economy as well as to the early release of this index as it might as well put investors, analysts, and policy makers at ease.
A stronger reading on the ISM is a very strong push for the currency that is gained from the economical growth that is reflected in the reading, which is why this is one of the market mover indicators. In addition to that the stocks respond positively to this stronger reading on this index as well as stronger growth means vital economy means higher production therefore higher corporate earnings, that is this effect on the stock markets is in a timely manner as the realization of inflation pressure could be an indicator of upcoming change in monetary policies therefore might drop again. Generally speaking the effect in strong and positive in favour of the currency and stocks when the ISM reading is strong and above 50, as the opposite is as well applicable in both scenarios.
|Best Case||The US is scheduled to release its ISM Manufacturing in which expectations show the manufacturing sector will further contract and the best case scenario would be if the reading come in higher than expectations as this will still mean that the sector is contracting but at a lower pace therefore keeping the economy away from a prolonged recession.|
|Worst Case||The worst case scenario would be if the ISM comes in showing a deeper contraction than expectations therefore pushing the US economy faster towards a prolonged recession as important sectors in the nation continue to hold back growth from reviving.|
PMI Manufacturing (Dec)
Is a widely used indicator in industrialized nations; measures the health of the manufacturing and the services sector. The diffusion index is compiled through a survey for purchasing managers covering a wide range of sectors.
The questionnaires cover basically five major indicators new orders, inventory levels, production, supplier deliveries, and employment environment.
The indicator is released in the United Kingdom, Germany, and the Euro Zone as well. Digesting the index generally a reading above 50 resembles expansion and below the marginal 50 level it resembles the opposite with is contraction.
In General, the importance of the Purchasing Manager Index is considered significant, and appears obviously on currencies exchange market, so at the point when this index or any of its components show an increasing value, that will cause a rising of production quantity which is considered a basic factor to achieve required economic growth. Then the effect of this factor supports the country's currency pushing it to appreciate.
On the other hand and as result of this economic growth, inflation factor with time might increase under current economic conditions which accompanies growth, which starts to rise prices levels, which reduces the major utility of this economic improvement.
In order to confront price stability threats the government starts executing different monetary policies in purpose to stimulate and ensure robust economic growth levels.
The PMI has the same effect on Industrial companies' shares included in the stock market indices.
|Best Case||The UK is scheduled to release its PMI Manufacturing in which expectations show the manufacturing sector will further contract and the best case scenario would be if the reading come in higher than expectations as this will still mean that the sector is contracting but at a lower pace there keeping the economy away from a prolonged recession.|
|Worst Case||The worst case scenario would be if the PMI comes shows a deeper contraction than expectations therefore pushing the UK economy faster towards a prolonged recession which will prompt the Bank of England (BoE) to reduce interest rates further to fight the recession.|