Are we loosing or gaining momentum in the manufacturing sector here in the U.S.? If you ask the Institute for Supply Management, things are looking pretty good. They stated recently that their PMI, or Report on Business, climbed 0.3 percent totaling out at 55.7 percent in the month of August, reaching its highest peak of the year. As long as the number is over 50 percent, manufacturing is heading in the right direction.
But the Institute’s competitor, Markit, answers the question a little differently. Markit’s PMI for the month of July read 53.7 percent and has since slipped down to a 53.1 percentile in the month of August.
Having the clearest picture of manufacturing ups and downs is crucial for currency traders. If manufacturing sectors are swinging up, it’ll clear a faster path for the Federal Reserve’s monetary assistance and would ultimately make a stronger dollar. However, if manufacturing sectors are struggling Fed officials will draw out their time reducing the much-anticipated bond-buying program.
Both the Institute for Supply Management and Markit get their monthly surveys from managers at private companies; however, the information is compiled in different ways. Both companies get together their information from different groups and sort through the responses using different techniques and methods which weigh the responses at different values. The Institute for Supply Management values its five subcomponents equally. But, Markit uses the same categories and assigns different values to each response from the survey.
While both companies are equally credited and established, equity traders usually keep a closer eye on Institute for Supply Management’s monthly reports of the two indexes, but currency traders would be wise to keep tabs on both companies, especially when the numbers say two different forecasts. Both reports are issued monthly.