uploads/2016/04/ISM-Manufacturing-PMI-Expanded-in-March-After-6-Months-of-Contraction-2016-04-031.jpg

US ISM Manufacturing PMI Expanded: Will Investors’ Sentiment Rise?

By

Updated

US ISM manufacturing PMI 

The US ISM manufacturing PMI (purchasing managers’ index) rose to 51.8 in March 2016 from 49.5 in February, according to a report published by the Institute for Supply Management. It was higher than the Market’s expectation of 50.7. Manufacturing activity expanded for the first time in the last six months. A level above 50 indicates an expansion and a level below 50 indicates a contraction. The ISM manufacturing PMI posted the lowest measure of 48 in December. Since crude oil (USO) and commodity prices (DBC) saw higher selling pressure and the stronger US Dollar (UUP) in December, it hampered the manufacturing activity in the US economy (QQQ) (VFINX).

Article continues below advertisement

Rise in manufacturing PMI will improve investors’ sentiment

The rise in the manufacturing PMI indicates that there was growth in the economy’s business activity. New orders increased in the economy. Since the new orders increased, it shows that domestic and overseas demand increased in the economy. The broad-market SPDR S&P 500 ETF (SPY) also gained 5.6% in March. When consumer expenditure and consumption improve in the economy, it also improves business confidence in the economy. The rise in the manufacturing PMI indicates a rise in business confidence in the economy.

Advertisement

More From Market Realist