The ISM Services PMI (Purchasing Manager's Index) is the most influential US economic report.
It likely trumps the Bureau of Labor Statistics (BLS) monthly jobs report. Indeed, according to study of two University of Cambridge researchers, the stress levels of traders are higher during ISM releases than during the BLS jobs report.
The ISM Services (also called Non-manufacturing) PMI is the most important gauge of the strength of the US services industry, which makes up over 75 percent of the economy. Not only is it the most important gauge, it’s one of the few gauges of the services industry.
When the US government/industry groups first decided to collect and publish economic data, the US economy was dominated by manufacturing. The reports created back then therefore reflect this bias, according to Anthony Crescenzi of PIMCO.
Now, as the US economy shifted towards the services sector, economic reports are still dominated by the manufacturing sector, so traders pay great attention to the few services reports currently available.
On Tuesday, the ISM Services PMI fell to a reading of 57.3 from 59.7 last month and below economists’ expectation of 59.5. The stock market, which was slightly down before the report, is now positive 30 minutes after the release of it (while one would expect the market to fall further).
This, of course, illustrates complexity and unpredictability of the market, and that the ISM Services PMI (like everything else) is no simple or magic indicator.
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