ISM Services New Orders

The ISM Services New Orders Index tracks incoming demand placed with U.S. services firms. It is a diffusion index, a breadth gauge showing whether more firms report higher orders than lower ones. It is one part of the ISM Services PMI, the monthly gauge of U.S. services activity published by ISM, the Institute for Supply Management.

Responses come from purchasing and supply executives reporting only on U.S. operations, spread across 18 industries with weights based on each industry's share of GDP. It excludes manufacturing, which has its own ISM survey.

ISM sends surveys early each month, and panel members report on that month's U.S. operations, mostly replying late in the month. ISM compiles the results for release on the third business day of the following month, and monthly readings are never revised.

Each release publishes the Services PMI plus every related gauge, with values, monthly changes, direction, trend length and reporting industries. It also carries commodity notes, respondent comments and a comparison table with manufacturing.

Raw responses are never changed. Seasonal factors are reviewed each year, so past adjusted values can shift slightly. Readings above 50% mean expansion and below mean contraction, with distance showing strength.

New Orders is itself one of the four equal building blocks of the composite, moving with its partners.

• Business Activity (25% weight): tracks monthly change in services output.
• New Orders (25% weight): tracks monthly change in incoming orders, a forward demand signal.
• Employment (25% weight): tracks monthly change in services jobs.
• Supplier Deliveries (25% weight): tracks delivery speed in reverse: above 50% means slower delivery and demand strain.

The same release adds related order detail: backlog, new export orders, imports, inventories and inventory sentiment.

In June 2024 the composite fell 5.0 points from 53.8% to 48.8%, and New Orders fell 6.8 points from 54.1% to 47.3%. That was its first contraction since December 2022, confirming a demand-led downturn.

In the same release Business Activity slid 11.6 points to 49.6%, and backlog of orders fell 6.8 points to 44.0%. Yet new export orders still grew at 51.7%, and supplier deliveries stayed above 50% at 52.2%, meaning slower delivery. The lesson: one part can diverge from the whole, and New Orders mixes home and foreign demand while export orders isolate the foreign slice.

1. Survey answers: Each executive reports whether new orders rose, held steady or fell versus the prior month. Raw responses are never changed.
2. Diffusion formula: Add the share reporting higher to half the share reporting the same. For example, 30% higher, 50% same and 20% lower gives 55.0. The math uses unrounded inputs, then rounds the published index to one decimal.
3. Seasonal adjustment: ISM corrects the raw index for repeating yearly effects such as weather and holidays. The remaining gauges show no clear seasonality and stay unadjusted.
4. Composite use: The adjusted index enters the Services PMI at 25% weight with the other three parts equally.