ISM Manufacturing PMI

The Institute for Supply Management publishes it under the Manufacturing Business Survey, running since 1931 except for a World War II break. It tracks monthly change in US factory activity through answers from purchasing and supply executives. Answers are weighted by 18 industries' shares of GDP under the North American Industry Classification System. It measures how widespread change is, not its size, so it covers factories only, not services, output volumes or sales.

The survey goes to the panel early in the month about US operations for that month, and most replies arrive late in the month. The report appears on the first business day of the next month after 10:00 a.m. Eastern time, and on January's second business day. Each release adds subindexes for orders, output, jobs, deliveries, stocks, prices, backlogs and trade, plus industries ranked from fastest growth to deepest contraction. Responses are raw and never revised, seasonal factors are reviewed yearly, and markets read the level against 50 with the trend across months.

The index averages five equally weighted components at 20% each.

• New Orders (20%): captures change in customer demand for factory goods.
• Production (20%): reflects change in actual factory output.
• Employment (20%): tracks change in factory headcounts.
• Supplier Deliveries (20%): gauges delivery speed, where a higher reading means slower delivery.
• Inventories (20%): records change in raw material stocks.

In April 2020 the index printed 41.5%, down 7.6 points from March and the lowest since April 2009, when it reached 39.9%. That same month the deliveries gauge jumped to 76%, up 11 points for its highest mark since April 1974. Shutdowns had slowed delivery, and slower delivery lifts this inverted component. The strong component thus cushioned the headline fall, while only 2 of 18 industries grew.

1. Diffusion index: each question combines the share reporting higher conditions with half the share reporting no change. For example, 30% higher plus 50% unchanged gives 55%.
2. Seasonal adjustment: qualifying indexes are divided by their seasonal factors, which are reviewed every year. Adjusted series include New Orders, Production, Employment and Inventories with the headline index.
3. Equal weighting: the headline index sums the five components and divides by five.
4. Thresholds: above 50% means manufacturing expansion and below means contraction. A separate economy-wide breakeven, revised by the institute over time, marks overall US growth.
5. Special readings: for Customers' Inventories, above 50% means stocks look too high and below means too low. In practice, readings between 48% and 52% count as broadly balanced.