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In a recent announcement, the Institute of Supply Management (ISM) revealed the latest figure for its Non-Manufacturing Purchasing Managers’ Index (PMI). Also known as the ISM Services PMI, the actual figure stood at 50.8, perfectly aligning with the previously forecasted number.
The PMI figure of 50.8 is a significant data point, as it indicates that the non-manufacturing sector economy is generally expanding. This is because any reading above 50 percent on the ISM PMI scale is seen as a sign of expansion in the non-manufacturing sector, while a reading below 50 percent suggests contraction.
When compared to the forecasted number, the actual figure of 50.8 met expectations. This suggests that economists and analysts had accurately predicted the performance of the non-manufacturing sector for this period. A figure that matches the forecast is typically seen as a positive sign, indicating stability in the sector and aligning with broader economic predictions.
In comparison to the previous PMI figure, the current data shows a slight improvement. The previous ISM Non-Manufacturing PMI was 49.9, just below the threshold for expansion. The increase to 50.8 signifies a shift from a contracting to an expanding non-manufacturing sector, marking a positive turn for this segment of the economy.
The ISM Non-Manufacturing PMI is a composite index based on the diffusion indexes for four indicators: Business Activity, New Orders, Employment, and Supplier Deliveries, all seasonally adjusted. The data is compiled from monthly replies to questions asked of more than 370 purchasing and supply executives in over 62 different industries. It serves as a key indicator of the overall economic condition for the non-manufacturing sector.
Given the higher than expected reading, this should be taken as bullish for the USD, while a lower than expected reading would have been bearish for the USD. This data point, therefore, not only indicates positive movement in the non-manufacturing sector but also suggests potential strength for the US dollar.
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