The ISM, an indicator auguring an optimistic future
Despite the volatility and uncertainty reported worldwide in the first three months of the year, the major leading indicator, the US manufacturing index (ISM) is indicating that this country is going to undergo an improvement in its economy over the coming quarters. This indicator is an excellent thermometer for activity and business confidence which forecasts how the US economy will perform. In the first quarter of the year, growth rates for the world’s biggest economy fell sharply, a slow-down analysts were not expecting and one which, therefore, caused certain alarm in the world of finance. However, the manufacturing ISM had already anticipated this moderation in growth and this indicator is now forecasting an important economic improvement over the coming quarters. Hence, the growth figure for Q1 appears only to have been a hiccup in the economic improvement process. The Federal Reserve (Fed) itself has indicated that this slow-down was due to interim factors and that they were expecting growth to gradually return to normal. Everything, therefore, fits for the US authorities to continue with their official rate hike process over the year, in a stronger economic environment.
“This indicator is an excellent thermometer for activity and business confidence which forecasts how the US economy will perform.”