The consensus forecast expects the index to come in at 51.0. Predictions range between 48.5 and 53.6.

Economists will be looking for the NMI to confirm the better-than-expected ISM manufacturing report from Monday, which rebounded into growth mode at 50.2 in June, against expectations of a decline to 48.5.

In the April NMI report, the headline index fell to 51.7 from a 52.0 reading in April. New orders continued expanding for the third consecutive month and production/business activity saw the fourth month in a row of growth, but employment fell into contraction and prices moved up five points to 77.0.

This month, economists at RBC expect the NMI to remain "consistent with the most recent retail sales data for May, which showed continuing strong monthly sales activity." On the downside, they said employment will likely continue to decline, which argues against the NMI showing any "marked improvement" in the month.

Joseph Brusuelas, chief economist from Merk Mutual Funds, said the rebate cheques helped fuel the last NMI and it should continue showing modest growth in June. "The primary risk to our forecast will be the rise in prices in June, which surely weighed heavy on consumers attempting to estimate just how much further the cost of energy and gasoline will continue to rise," he said.

Eric Lascelles, chief rates and economics strategist at TD Securities, said "it's not 100% clear why services are doing better than goods," but the fact of the matter is that the current downturn is not being led by the business sector. He added that it remains to be seen whether services will be "engulfed" by bad news in the rest of the economy.

Lascelles said the index is a proxy for overall activity and deserves to be closely watched, but the nonfarm payrolls report will mute its release on Thursday.

The NMI report is based on data from the Institute of Supply Management, who survey purchasing and supply executives nationwide. Survey responses reflect the change in the current month compared to the previous month, and the index is compiled using the net difference between the percentage of responses in the positive economic direction versus the negative. A reading above 50 indicates growth, whereas a figure below 50 indicates slowdown.

The composite index is based on four of the top indicators, each given equal weight: business activity, new orders, employment, and supplier deliveries.

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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