The ISM Manufacturing Index is a widely followed economic indicator that measures the level of manufacturing activity in the United States. The index is based on a monthly survey of purchasing managers at manufacturing companies, who are asked about their business activity, new orders, production, employment, supplier deliveries, and inventories.
The index is calculated by taking a weighted average of the responses, with a reading above 50 indicating expansion in the manufacturing sector and a reading below 50 indicating contraction. The index is released on the first business day of each month and covers the previous month’s data.
The ISM Manufacturing Index is considered a leading economic indicator because manufacturing activity tends to be sensitive to changes in overall economic conditions. Changes in the index can impact financial markets, as they may indicate changes in the pace of economic growth or contraction. For example, a reading above 50 could suggest that the economy is expanding, which could be positive for stock prices, while a reading below 50 could suggest that the economy is contracting, which could be negative for stock prices.
The ISM Manufacturing Index is closely watched by investors, economists, and policymakers, as it provides insights into the health of the US economy and can be used to anticipate changes in employment, inflation, and other key economic indicators.
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