Release Explanation: Similar to the PMI numbers, it surveys Purchase Managers on their sentiment on 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. contracted for a thirteenth straight month in February, the Institute for Supply Management said today, but the rates of contraction in manufacturing and for the overall economy slowed.
While the report shows improvement, the overall sector is still very weak, said Matthew Carniol, chief currency strategist at TheLFB-forx.com. Without improvement in the auto and housing sectors, it will be difficult for manufacturing to make much headway.
As a plus to consumers, the price index decreased for a fifth month in February but employment, which has now contracted for seven straight months, contracted at a faster pace. New orders contracted at a faster pace but production contracted slower. Exports contracted at the same rate in February as the previous month while imports contracted more quickly. Inventories, which have now declined for 34 straight months, contracted at a faster pace.
The report also indicated that the overall economy contracted for a fifth straight month. ISM Readings below 41 indicate overall contraction in the economy.
Forex Technical Reaction: Stocks were approaching session lows immediately after the report and the dollar gained on the higher-yielding euro, pound, Australian dollar and yen.