ISM stands for Institute for Supply Management and the indicator, the ISM Manufacturing PMI is a survey of the purchasing managers active in the manufacturing industry and it’s a leading indicator of economic health.
The reason for that is that during troubled times, and not only, this being valid also in expanding economies, these managers hold the most relevant information regarding the company’s view of the economy.
ISM Manufacturing PMI is calculated in the form of a survey, and approximately four hundred managers that are active in the manufacturing industry are asked to respond to questions regarding employment level in the company, production, new orders, fluctuation of personal, inventories, etc, basically this being information regarding the current state of the company.
After having the answers from all these managers, the result is comprised in a release with values higher or lower than 50. Higher than the fifty level means industry expansion, and therefore in theory should be good for the currency, and lower than the fifty level means industry contraction and should be negative for the currency.
However, I would be cautious regarding good/bad for a specific currency as we are living in risk on/off times and with all these central banks intervening all over the place the economic releases are nowadays being interpreted more like keeping the stimulus on the market some more time or not.
Important to know for ISM Manufacturing PMI:
- values above 50 = industry expansion;
- values below 50 = industry contraction
- released monthly, on the first business day after the month end;
- release time: 14:00 GMT, North American trading session.