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The Institute of Supply Management (ISM) released its Manufacturing Purchasing Managers Index (PMI) Report, revealing a further contraction in the manufacturing sector. The PMI, a key barometer of manufacturing health, came in at 48.5, a slight decline from the previous month’s figure.
This latest reading fell short of the forecasted 49.3, indicating a more pronounced slowdown in the manufacturing sector than anticipated by economists. This is the second consecutive month the PMI has landed below the 50-mark, the threshold separating expansion from contraction.
In comparison to the previous month, the PMI also dropped marginally from 48.7. This continued slide, albeit small, suggests persistent challenges in the manufacturing sector. The PMI is a composite index, taking into account new orders, production, employment, supplier deliveries, and inventories, with varying weights.
The ISM Manufacturing PMI is based on data compiled from monthly surveys of purchasing and supply executives in over 400 industrial companies. The report 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.
A higher than expected PMI reading is usually taken as positive or bullish for the USD, while a lower than expected reading is seen as negative or bearish. The lower than forecasted PMI might exert downward pressure on the USD, as it suggests a slowdown in the manufacturing sector, which is a significant component of the overall economy.
The PMI data is seasonally adjusted to account for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays.
The continued contraction in the manufacturing sector, as indicated by the PMI, underscores the challenges facing the sector amid global economic uncertainties. Economists and investors will be closely watching the upcoming reports for signs of a turnaround or further slowdown.
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