ISM Non-Manufacturing PMI

The ISM Non-Manufacturing PMI, now officially Services PMI, tracks monthly change across U.S. services activity. ISM, the Institute for Supply Management in Tempe, Arizona, surveys purchasing and supply executives about U.S. operations versus the previous month. The panel covers 18 service industries by GDP share, meaning gross domestic product, using diffusion indexes that track breadth, not output volume. It excludes manufacturing, regional detail and foreign activity, which separate reports cover.

Surveys go out early each month about the current month versus the previous month, with most replies arriving late before compilation. Release covers the prior month on the third business day after 10:00 a.m. Eastern Time, shifting once yearly or when the exchange is closed. Each release shows the blended composite, all 10 gauges, industry ranks, comments, price lists and history tables, and raw responses are never revised. Read direction against 50% for services and near 49% for the whole economy, noting ISM revises that lower line by edition and distance shows strength.

4 equal parts drive the headline, while other indexes track prices, backlogs, trade and inventories.

• Business Activity, 25%: current services output versus the previous month.
• New Orders, 25%: new demand and bookings versus the previous month.
• Employment, 25%: staffing and hiring activity versus the previous month.
• Supplier Deliveries, 25%: delivery speed, inverted so above 50% means slower deliveries.
• Companions: Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports and Prices track backlogs, trade, stocks and prices paid.

1. Responses: panelists report Better, Same or Worse versus the previous month, with raw answers never changed.
2. Diffusion index: each index equals the share reporting Better plus 0.5 times the share reporting Same. For example, 30% Better with 50% Same and 20% Worse gives 55.0.
3. Seasonal adjustment: Business Activity, New Orders, Employment and Prices use adjusted values removing normal seasonal swings, while Supplier Deliveries and others show raw results. ISM reviews seasonal factors yearly and changes them only slightly when warranted.
4. Composite: Services PMI is the mean of the 4 composite indexes: Business Activity plus New Orders plus Employment plus Supplier Deliveries, divided by 4. For example, 55.0, 53.0, 45.0 and 47.0 average to 50.0, exactly the no change line.
5. Thresholds: 50% marks expansion or contraction for services, while near 49% marks whole economy direction and Supplier Deliveries reads inverted. Quote the lower line with its edition, since ISM has used 48.5% and 49.2% in past editions.