why NMI has great importance
The ISM Non-Manufacturing Index (NMI) is also called the Services PMI. There are two releases of this report. One is released at the start of each month is a form of a preliminary report, and the final report is published at the end of each month. You can find these Non-Manufacturing Index reports at the given link.
The service sector represents almost 80% of the US economy, and that’ why NMI has great importance. The data available for NMI goes back to 2008 only. The data for NMI is comparatively less than ISM. NMI only deals with contracts only and not the real goods bought or sold. If we have a detailed look at both NMI and ISM, there are just small differences between the composition and make-up of both.
We, as Portfolio Managers or Traders, treat NMI and ISM in the same manner. We use these reports to gain our views and directions about GDP and, therefore, a view on the US economy and our Currency Views on the USD.
In the world of Professional Traders or Portfolio Managers, the NMI Services PMI is one of the most important leading indicators as NMI predicts the US GDP with a 12-month time lag with 85% accuracy. As the GDP of the US drives the global economy, we use NMI as a guide to overall medium to longer-term (Absolute) fundamental Currency (USD) direction. By comparing the service sector (NMI) to the manufacturing sector (ISM), it also serves as the head check.
The study of the NMI also tells us a lot what to expect from policymakers in Washington and at the Prediction (ISM) VS Reaction (Federal Reserve & Washington).