Why is the ISM Services PMI important?
The Fed (Federal Reserve, the U.S. central bank) regularly announces or updates index numbers and percentages. Some people are aware of this, while others are not. One of the news reports that indicate economic growth trends is the Services PMI. So, what exactly is the Services PMI? What does the abbreviation stand for? Why is it important? And how is it related to the Forex market? In this article, we will get to know more about the Services PMI news.
What is ISM Services PMI?
“Service” means services, and “PMI” stands for Purchasing Managers’ Index. Together, Service PMI refers to the Purchasing Managers’ Index for the service sector. The ISM Services PMI measures an index derived from the perspective of purchasing managers in the non-manufacturing (service) sector, based on surveys conducted by the Institute for Supply Management (ISM) in the United States.
How important is the ISM Service PMI?
The index number ranges from 0 to 100. These numbers indicate economic growth. If the index is above 50, it means the economy is expanding. If the index is below 50, it indicates economic contraction. If the number is exactly 50, it means there is no change in the economy. Currently, the index stands at 52.6, which means the economy is growing. This should give traders an idea of what the economic number signifies. However, traders still need to follow this news every month when the Service PMI index is announced.
Why does the Forex market need to pay attention?
This index is announced as a tool to help traders like us make decisions because it can impact the value of the USD dollar as follows:
-If the number is higher than expected, the USD will increase.
-If the number is lower than expected, the USD will decrease.
Ultimately, even though the index reflects the economic condition of the United States, it can have a broad impact on executives, suppliers, investors, and traders like us, who all analyze charts to increase investment value and profit through the Service PMI index figures.
