ISM INDEX

An index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

By monitoring the ISM Manufacturing Index, investors are able to better understand national economic conditions. When this index is increasing, investors can assume that the stock markets should increase because of higher corporate profits. The opposite can be thought of the bond markets, which may decrease as the ISM Manufacturing Index increases because of sensitivity to potential inflation.



Highlights

The ISM Non-manufacturing Index dropped to 52.2 in June from 53.7 in May. That was the lowest reading in the index since February 2010, but it was the 42nd consecutive monthly expansion. The Briefing.com consensus expected the ISM Non-manufacturing Index to increase to 54.0.

Key Factors

Business activity levels fell 4.8 points from 56.5 in May to 51.7 in June. New orders levels barely managed to stay in an expansion as the relative index fell from 56.0 in May to 50.8 in June. Order backlogs managed to eek out a small gain as that index increased to 52.0 from 51.5.

In a surprise amid the decline in business activities, employment levels strengthened considerably in June. The Employment Index increased to 54.5 from 51.5 in May. That gain was in-line with the better-than-expected June ADP report.

Big Picture

The market generally doesn't pay much attention to the services index because the services sector is less cyclical than the manufacturing sector.

Category



ISM INDEX in Economic Calendar