The ISM Non-Manufacturing Index (now called the Services PMI) is an index used to assess the performance of services companies in the United States. The reading, published monthly, is based on surveys of more than 400 purchasing and supply managers in non-manufacturing (services) firms.
Monitoring the ISM Services PMI helps traders and investors in US markets get a detailed snapshot and insight into the country’s economic conditions.
The index is compiled and published by the ISM (Institute for Supply Management) as part of the ISM Report On Business.
Understanding the ISM Non-Manufacturing Index
The ISM services report measures the economic activity of more than 15 industries, measuring prices, inventory levels and employment. A reading which comes in above 50 indicates economic growth, while below 50 indicates contraction.
The reading can prove helpful when choosing which sectors to trade. The US dollar may also react to bullish or bearish ISM readings.
The various PMI/ISM readings are considered leading rather than lagging indicators, because purchasing manager activity predicts future business activity and trends.
The ISM Services PMI gets published in the first week of each month. Trends in the ISM can continue for months, which can be valuable for economists and analysts looking to make long-term financial forecasts.
The index has five major components: business activity, new orders, inventories, employment trends and prices.