The Institute for Supply Management (ISM) apparently used the wrong seasonal adjustment numbers for the calculation of the ISM Manufacturing PMI and initially reported a significantly weaker than expected figures: only 53.2 points. An initial correction sent the number shooting up to 56 points and a second correction to 55.4 points, quite close to 55.7 expected.
This incident is quite unusual for the institution that publishes this figure since 1923 – for over 90 years. Nevertheless, it had immediate market implications as well as implications for the impact of the data.
The initial reaction to the publication was a weaker dollar, especially against the Japanese yen: the pair often reacts better than any other pair to US economic releases. Dollar/yen was on the rise, and it corrected on the first release: from 102.25 to 102.05.
When the surprisingly weak figure was corrected to a much more positive one, USD/JPY resumed its gains and is trading at 102.50 at the time of writing. So, the mistake provided a buying opportunity.
The dollar is also stronger against the euro, but the dip was smaller. The common currency has issues of its own.
The other winner is Markit: this institution’s PMIs have a strong impact in the UK, the euro-zone and also in China (together with HSBC). They entered the US market only recently and their publications had a smaller impact on currencies.
Nevertheless, Markit has one clear advantage: it publishes a “flash” figure before the month ends and before ISM, and then revises it, 15 minutes before the ISM publication. In this specific it revised the figure from 56.2 to 56.4 points. Some market observers were puzzled by the initial ISM figure not only because of economists’ expectations but due to Markit’s number.
With this farce (again, very unusual), it is safe to assume that the market will pay more attention to the flash estimates by Markit.
This is an interesting week already from Monday. Tomorrow’s big event is the euro-zone inflation data.
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