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Monday, August 2, 2010

ISM Manufacturing PMI

The ISM Manufacturing supply was released today at 10am EST.  The ISM Manufacturing PMI measures the amount of manufacturing activity that occurred in the previous month.  This report is released monthly (first business day after the month ends).  This is important to traders and economists, becuase they view this as an indicator of economic health.  A measure above 50 indicates expansion and below 50 indicates a contraction.  This mornings numbers were forcast to be 54.2 and was actually 55.5, but down -0.7% from 56.2 in the previous month (obtained from    The Institute for Supply Management respondents where not very upbeat on the forecast going forward.  Respondents indicate backlogs dropping, sales down on new equipment orders and that retailers are still uneasy as they are unwilling to gamble on inventory.   One respondent (Fabricated metals products) responded positively saying July was their best month since October of 2008, but most respondents were negative.   New orders were down 5% from the previous month with inventories rising 4.4% which is not a good sign.  Oddly enough the market responded favorably to the report as it was above forecasts.  Summer months usually produce a volatile market, so trying to interpret the reaction is somewhat difficult and may very well be related to something else.  News on Yahoo said that the European markets were up based on the manufacturing data.  Our markets opened up ( aprox 150 pts when I looked) on higher volume and went higher after the ISM Manufacturing PMI on lighter volume.

I find it hard to take these numbers too seriously when it comes to the market as I am not sure of their accuracy, as I will discuss in a later blog related to CPI.  The important thing though is that others do take these indicators seriously and it does effect short term market moves.

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