Econoday Why Investors Care

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ISM Non-Mfg Survey

Definition
The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Financial market players monitor the business activity index, because a composite index, like its manufacturing cousin, is not compiled by the ISM.

Why Investors Care?
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the ISM non-manufacturing survey's business activity index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly-and causing potential inflationary pressures.

The ISM manufacturing index has a long history - dating to the 1940s. This new report (beginning in 1998) was originally not adjusted for seasonal variation, but the ISM has since established seasonally adjusted figures for several of the ISM non-manufacturing components (including the business activity index) since 2002. As a result, the ISM non-manufacturing survey has garnered more attention and is almost as widely followed by financial market participants as its manufacturing cousin.