“the Institute for Supply Management is the company creating manufacturing and non-manufacturing ISM Reports on Business “(www.ism.ws). Published on the first business day of each month, these manufacturing reports are considered by many investors as the most reliable economic indicators on the market. The ISM reports represent questionnaires on general manufacturing activity that are sent on a monthly basis to 18 different manufacturing industries1. From these 18 industries each consisting of different types of raw materials, the ISM index is broken down into 9 “sub-indexes2” in which five are most important: Prices, Production, Employment, New Orders and Supplier Deliveries. These indexes are thoroughly analyzed, to result in an index of a number; a number over 50 represents growth or expansion within the manufacturing sector of the economy compared with the prior month; a reading under 50 represents contraction and a reading at 50 indicates an equal balance between manufacturers reporting advances and declines in their business” (www.ism.ws). Regardless of the result, the ISM Manufacturing index is highly related to the Gross Domestic Product, and according to economist Theodore S. Torda, ISM index can justify approximately 60 % of annual GDP changes. Therefore, if the manufacturing sector is in expansion (>50), GDP will grow; implying that the market is also doing well and the population is consuming finished goods. However, if the sector is in contraction, not only will GDP be affected, the stock market in general and especially for all these sectors will go down.
The non-farm payroll.
This index is given in a report issued by the Bureau of Labour Statistics on the first Friday of every month; It informs investors and traders about the country’s labour force and releases a total of all salaries earned by workers of the country excluding: general government employees, private household employees, employees of non-profit organizations that provide...
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