However, manufacturers reported challenges related to supply chain disruptions and labor shortages, which led to longer lead times for deliveries. Despite these challenges, the overall outlook remained positive, with optimism about future growth prospects. No content on the Webull Financial LLC website shall be considered as a recommendation or solicitation for the purchase or sale of securities, options, or other investment products. All information and data on the website is for reference only and no historical data shall be considered as the basis for judging future trends.

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This index has grown 29 consecutive months prior to this trend reversal. The value of shares and ETFs bought through a share dealing account can fall as well as rise, which could mean getting back less than you originally put in. In this example, the ISM manufacturing index reading of 55.0 suggests expansion in the manufacturing sector, as it exceeds the threshold of 50.

1. The raw results are then compiled from the first five of the sub-indexes with equal weightings to form the ISM Manufacturing Index.
2. Through monitoring the ISM Manufacturing Index and comparing it to consensus estimates, investors gain a better understanding of economic trends and conditions.
3. Survey respondents are asked whether activities in their organizations are increasing, decreasing, or stagnant.
4. Eastern Time by the Institute for Supply Management (ISM), a not-for-profit organization professional supply management organization based in Arizona, USA.
5. A rising level of the ISM manufacturing Index means a healthy manufacturing sector that could bode well for corporate earnings and the stock market.

ISM manufacturing index stands for the Institute for Supply Management index. Established in 1915, ISM was the first professional non-profit supply management organisation. Based in Tempe, Arizona, US, ISM has over 50,000 members across 100 countries. When the PMI is above 50, it indicates the economy (at least, the manufacturing section) is expanding—a growing economy can help create a bull market.

How Does the ISM Manufacturing Index Impact the Markets?

A higher-than-expected reading is bullish for the stock market but bearish for the bond market, and the opposite is true. When the index is greater than expected, it bodes well for the stock market because it indicates healthy economic growth, which translates to higher corporate profits. The ISM survey is broadly diversified across industries based on the North American Industry Classification System (NAICS), which is weighted by each industry’s share of U.S. gross domestic product (GDP).

Gross domestic product ( GDP ) is arguably one of the most important economic indicators. Survey responses are divided into 16 manufacturing industries, including furniture and related products, computer and electronic goods, apparel and transportation equipment. The ISM manufacturing index is a widely recognized economic indicator that measures the health and performance of the manufacturing sector in the United States. Webull Financial LLC is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 in any cash awaiting reinvestment). An explanatory brochure is available upon request or at Webull Financial LLC’s clearing firm Apex Clearing Corp has purchased an additional insurance policy.

What is the ISM Manufacturing Index?

In the example above, the ISM noted that “companies continue to judiciously manage hiring” and “managing head counts and total supply chain inventories remain primary goals”. In addition, the ISM includes commentary on several manufacturing industries not explicitly called out in their table of information. For example, six manufacturing industries reported growth in November, led by the apparel industry. Changes in the index over time can provide insights into trends in economic growth, inflationary pressures, business confidence, and employment conditions.

In the past five years, the ISM PMI stayed below 50 briefly due to the pandemic. The ISM Non-Manufacturing Index is similar, though it covers services instead of products. This index is not as closely followed as its counterpart—it’s not as volatile, usually making it more predictable. The raw results are then compiled from the first five of the sub-indexes with equal weightings to form the ISM Manufacturing Index. Bonds are an important asset class in financial markets that are often used in a diversified… Join the 70,000+ businesses just like yours getting the Swoop newsletter.

The monthly announcement of the ISM manufacturing index can greatly influence investor and business confidence. This is because the index is a survey of purchasing managers and supply management executives who are at the forefront of their companies’ supply chains. Purchasing managers are in the best position to assess the ebb and flow of business conditions. The manufacturers they work for must respond quickly to changes in demand, ramping up or scaling back purchases of materials they use in anticipation of demand for their finished products. The ISM manufacturing index is based on a monthly survey of purchasing managers at manufacturing firms across various industries.

When it drops below 50, it indicates that manufacturing business is contracting and may come with a danger of recession. The ISM Manufacturing Index states figures as a number that indicates whether the manufacturing sector is growing or contracting. A PMI reading over 50 (or over 50%) means the sector is growing compared to the previous month, while a PMI reading under 50 (or under 50%) means the sector has month-over-month contracted. These are services that are set by Third party companies in order to help us to understand and improve our website, remember preferences and to display advertising.

How Do I Read PMI Data?

Advisory accounts and services are provided by Webull Advisors LLC (also known as “Webull Advisors”). Webull Advisors is an Investment Advisor registered with and regulated by the SEC under the Investment Advisors Act of 1940. Trades in your Webull Advisors account are executed by Webull Financial LLC. Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets. The example above from December 2022 was the first time since May 2022 that the manufacturing sector had contracted.

When Is ISM Data Released?

Greater leverage creates greater losses in the event of adverse market movements. The PMI is a leading indicator, which means that it can signal future economic activity. It is closely watched by investors, economists, and policymakers as a gauge of the overall health of the economy, and can indicate whether it is expanding or contracting, and whether inflationary pressures are building. Through monitoring the ISM Manufacturing Index and comparing it to consensus estimates, investors gain a better understanding of economic trends and conditions.

As a result, any deviation from consensus is viewed as a surprise, providing investors with a trading opportunity. The ISM manufacturing index is a composite index that gives equal weighting to new orders, production, employment, supplier deliveries, and inventories. The ISM survey is broadly diversified across industries based on the North American Industry Classification System (NAICS), weighted by each industry’s share of US gross domestic product (GDP). Market volatility, volume and system availability may delay account access and trade executions.