The Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), a key indicator of the health of the US manufacturing sector, has reported a decline. The actual figure stands at 46.5, indicating a contraction in the sector.
The reported number comes in lower than the forecasted figure of 47.6, suggesting a more significant slowdown in manufacturing activity than anticipated. The ISM Manufacturing PMI is a composite index based on the seasonally adjusted diffusion indices for five of the indicators with varying weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. A higher than expected reading is considered positive for the USD, while a lower than expected reading is seen as negative.
In comparison to the previous month's figure of 47.2, the current reading further underscores a downward trend. This continuous decline in the ISM Manufacturing PMI is indicative of the challenges currently facing the US manufacturing industry.
The report, which is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies, shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction and the negative economic direction, and the diffusion index. Responses are raw data and are never changed.
This dip in the PMI is reflective of a slowdown in production, new orders, and employment, among other factors, which can have a knock-on effect on the broader economy. It also highlights the potential pressures on suppliers and inventories.
The ISM Manufacturing PMI is closely watched by economists and investors as it provides a timely snapshot of the health of the manufacturing sector, which is a significant component of the US economy. The ongoing contraction in the PMI will likely fuel concerns about the resilience of the sector amid global economic uncertainties.
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