ISM Manufacturing Index (Feb) Actual 40.1, Expected 38.4, Previous 36.3
Release Explanation: Similar to the PMI numbers, the independent survey garners thoughts from Purchase Managers on their sentiment regarding orders, hiring, inventories, and deliveries. A number above 50 indicates expansion in the sector while a number below indicates contraction.
Split into the Manufacturing Index (above), and then Manufacturing Prices which look at the rate of Inflation when materials and services are purchased. Builds an economic picture of the strength of manufacturing activity ahead of official Government reports.
These numbers usually are a pre-cursor to the PMI numbers later in the month. A currency can be very reactive to these numbers as over time they have been a reliable read on Government reports to come.
Trade Desk Thoughts: Manufacturing in the U.S. stayed below the 50% expansion read, extending a fifteenth month run, the Institute for Supply Management said today, but the rates of contraction in manufacturing and for the overall economy slowed in April at the slowest pace in seven months after a collapse in inventories caused orders and production to steady.
While the report shows improvement, the overall sector is still very weak, said TheLFB-forex.com Trade Team. Without improvement in the auto and housing sectors, it will be difficult for manufacturing to make much headway, and right now neither sector look capable of quickly turning much around.
The price index increased in April, helped by a huge reduction in inventory levels. The decline in the manufacturing sector continues to moderate, after six consecutive months below the 40-percent mark, the PMI, driven by the New Orders Index at 47.2 percent, shows a significant improvement. the report states. While this is a big step forward, there is still a large gap that must be closed before manufacturing begins to grow once again. The Customers' Inventories Index indicates that channels are paring inventories to acceptable levels after reporting inventories as 'too high' for eight consecutive months. The prices manufacturers pay for their goods and services continue to decline; however, copper prices have bottomed and are now starting to rise. This is definitely a good start for the second quarter.
ISM Readings below 50 indicate overall contraction in the economy.
Forex Technical Reaction: Stocks were pushed much lower after the report and the dollar gained on the higher-yielding euro, pound, Australian dollar and yen.