ISM Manufacturing Index (PMI)

In Depth

The ISM Manufacturing Purchasing Managers' Index (PMI) is published monthly by the Institute for Supply Management and is one of the most closely watched leading indicators of U.S. economic health. The index is based on a survey of purchasing managers at more than 300 manufacturing firms across 18 industries, covering five equally weighted components: new orders, production, employment, supplier deliveries, and inventories. A reading above 50 indicates that the manufacturing sector is expanding; below 50 indicates contraction. The index is reported as a diffusion index, meaning it measures the breadth of change rather than the magnitude. The new orders component is particularly valuable as a forward-looking indicator, rising new orders today translate into production and employment in coming months. The ISM also publishes a separate Services PMI (also known as the Non-Manufacturing ISM), which covers the larger services sector. Global equivalents include the S&P Global/Markit PMIs for various countries and regions. For executives, the ISM Manufacturing PMI provides early warning of shifts in industrial activity, supply chain conditions, input cost pressures, and employment trends in the manufacturing sector, making it useful for production planning and inventory management.