Written by: Sophie May
The manufacturing sector has a powerful influence on the economy and investments. Here are the most useful resources and reports for traders to use when analyzing this sector:
Institute for Supply Management Reports
The ISM issues several publications with data on national manufacturing conditions. The Federal Reserve uses these reports to help it decide on the direction of interest rates when inflation signals appear. The most widely followed report is the PMI, which is sometimes even referred to as the ISM index.
Purchasing Managers Index (PMI)
Produced by the Institute for Supply Management, this is a strong indicator of the overall economic health of the manufacturing sector. The PMI monthly index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment. Readings above 50% indicate an expanding factory sector, and vice-versa.
APICS Survey
The APICS business outlook index is a composite index of the US manufacturing conditions and can indicate trends in production. It gives investors a feel for the general economic backdrop for a variety of investments. An index level of 50 indicates no growth, higher than 50 signals expansion and lower than 50 signals contraction. It is released towards the end of every month.
Industrial Production and Capacity Utilization
This monthly report is a measure of the output of the USA’s factories, mines and utilities, and reflects the usage of available resources. It is important to traders because the Federal Reserve watches the report closely. When setting interest rate policy, the Fed must consider whether production constraints may risk causing inflationary pressures.
Factory Orders
This data reveals how many new orders have been placed for manufacturing goods, and as a result how busy factories are going to be in the coming months. The report covers both the demand for non-durables, for example clothing and cigarettes, and the demand for hard goods, including cars and refrigerators.
Durable Goods Order
This report focuses on new orders for hard goods which are placed with manufacturers for the immediate and future delivery. It reveals how busy factories will be, and is a useful indicator of the demand for hard goods, which in turn affects future business investments.
Philadelphia Fed Survey
This is an index of the manufacturing conditions in the Philadelphia Federal Reserve district. This survey generally correlates well with the ISM and the index of industrial production, making it a useful indicator of the results in these other reports, and of manufacturing trends as a whole.
Producer Price Index (PPI)
This is one of the key indices used for calculating inflation. It is a measure of the average change in selling prices which domestic producers receive for their goods and services. It covers the products of the manufacturing, mining, agriculture, and electric utility industries.
E.U. Industrial Production
Industrial production figures are released monthly, and account for the period 45 days before their release. The report reveals the total value of all industrial output for each month, including factories, mines and utilities. The E.U. version of this data release has a limited impact due to the earlier released German and French industrial production figures, which are far more important to the markets as they provide a valuable reading of Europe’s economic vitality.