The ISM stands for the Institute of Supply Management. The NON-Manufacturing Index focuses on the non-manufacturing portion of the services sector. This Manufacturing Index is closely watched by traders. Purchasing managers are surveyed on the present situation of economic factors relevant to their position. Factors such as new orders, inventories, production, employment, etc are all considered in this report.
This indicator tends to feed data into other indicators that will be released later. Investors monitor this indicator, so as to have some idea as to how the economy is doing, and what the other indicators still to come might be like. A reading of 50 measures the lack of expansion, and a reading above 50 would indicate economic expansion.