Previous : 48.6
Forecast : 48.0

Definition :
The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.

The survey queries purchasing managers about the general direction of production, orders, inventories, employment, vendor deliveries and prices. The questions are qualitative rather than quantitative; that is, they ask about the general direction, rather than the specific level, of business. Each question is transformed into a diffusion index which is calculated by adding the percentage of positive responses to one-half of the unchanged responses. Five components are weighted to form the composite

The ISM manufacturing composite index indicates overall factory sector trends. The relevance of this indicator is enhanced by the fact that it is available very early in the month and not subject to revision.

Why is it useful?
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.