Alroy Commentary - Important indicators to measure US manufacturing activities
US services sector is taking more than 70 percent of GDP and is the main part of US economy, so why investors still pay attention to manufacturing activities? The main reason is manufacturing sector is very sensitive to changes in interest rate, foreign exchange and economic growth, so this sector is a very good thermometer to understand the health of US economy. Here are some economic indicators that are commonly used by economists and investors:
1. ISM Manufacturing Index: It is the manufacturing index that caught most of the market attention and is a excellent indicator of growth of US economy. The index covers around 20 different sectors, so investors can see the status of different sector. The index above 50 means both manufacturing and the economy are expanding, in contrast, the index below 50 implied contacting.
2. Industrial Production: It is an indicator published by Federal Reserve and is an important data to gauge the situation in industrial sector. It measures the volume of goods produced in US, and nearly covered everything produced in the US.
3. Capacity Utilization: It is another indicator published by Federal Reserve and measures the current production compared to the maximum potential production capacity. Normally, if the demand is strong, the figure should go higher. In past 10 years, this figure stays around 74 to 82.
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