Manufacturing PMI

The ISM Manufacturing PMI Report (PMI means Purchasing Managers' Index) tracks US factory direction each month. ISM (Institute for Supply Management) runs it through the Manufacturing Business Survey Committee.

It surveys purchasing executives on US operations across 18 industries sorted by NAICS (a standard industry code) and weighted by GDP (gross domestic product). It is a diffusion index (a gauge of change breadth), not output, spending, or GDP. It is not the S&P Global gauge, and it excludes services. A reading above 50% means factories are expanding, while above 47.5% across time means the wider economy is expanding.

The survey goes out in the first part of the survey month and asks change versus the prior month, with most replies arriving late. ISM posts results after 10:00 ET on the first business day of the next month, shifting only when the exchange is closed.

Each release adds the chair summary, the headline reading, and 10 sub-indexes. It also lists commodities moving up or down or in short supply, plus Buying Policy (lead-time commitments). It ranks industries by growth, adds a table holding 12 readings, and maps the reading to GDP change.

Raw answers are never revised, and seasonal factors pass a scheduled review that leaves only small shifts.

5 parts shape the headline, each at 20%, while other gauges inform but do not enter it.

• New Orders, 20%: captures incoming demand as a seasonally adjusted gauge and leads the headline.
• Production, 20%: captures factory output activity, seasonally adjusted.
• Employment, 20%: captures hiring versus cuts, seasonally adjusted.
• Supplier Deliveries, 20%: captures delivery speed unadjusted, where slower readings lift the index.
• Inventories, 20%: captures raw-material stock change, seasonally adjusted.

In one past stress episode, the headline fell to 41.5% from 49.1% as factories and the wider economy contracted after 131 readings of growth. New Orders sank to 27.1%, Production and Employment each sank to 27.5%, Inventories held at 49.7%, and Prices sank to 35.3%. Supplier Deliveries jumped 11 points to 76% as shutdowns slowed freight, and slower delivery counts as higher, softening the headline fall. The chair warned that 41.5% mapped to a 0.4% annualized GDP dip, and that the true contraction ran deeper.

1. Diffusion index: Replies split into higher, same, or lower versus the prior month across 9 gauges; Supplier Deliveries uses slower, same, or faster. For each gauge, D = P + 0.5 x S, where P is the share higher (or slower) and S is the share same. For example, 30% higher with 52% same gives 56.0; this only illustrates the math.
2. Seasonal adjustment: The PMI, New Orders, Production, Employment, and Inventories adjust for repeating seasonal swings; Supplier Deliveries enters unadjusted. Factors refresh on a set cycle, so past adjusted values can shift slightly while raw replies never change.
3. Headline blend: The headline averages the 5 parts with adjusted values except Deliveries, so PMI = 0.20 x their sum. Thus 56.0, 58.0, 52.0, 54.0, and 51.0 average to 54.2% (illustration only), above 50%, so factories are expanding.