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ISM Manufacturing Index

Reviewed by Anjaneyulu | Updated on Oct 05, 2020

Catalogue

Introduction

ISM Manufacturing Index, formerly known as Purchasing Managers Index (PMI), calculates manufacturing activity based survey conducted every month by Institute for Supply Management (ISM) of purchasing managers from more than 300 manufacturing companies.

Understanding ISM Manufacturing Index

The ISM Manufacturing Index tracks month-on-month shifts in output rates and is central to ISM Manufacturing Report. The ISM Manufacturing Report is released on the first business day of each month. It is one of the earliest economic activity measures that investors and business people get regularly. The institute also publishes a Semi-Annual Economic Forecast in May and December of each year.

Investors can better understand the national economic patterns and conditions by tracking the ISM Manufacturing Index. In response to higher corporate earnings, investors expect a bullish stock market as the index goes up.

Index Construction

The ISM survey is widely diversified across sectors, based on the North American Industry Classification System (NAICS), weighted by the share of U.S. Gross Domestic Product (GDP) in each industry. Survey responses are delineated into 17 segments of the industry, such as pharmaceutical goods, computer and electronic goods, and equipment for transport.

Survey respondents are asked whether activities are increasing, decreasing, or stagnating within their organisations. The operations include new orders, manufacturing, employment, manufacturer deliveries, inventories, inventories of consumers, product prices, order backlog, new export orders, and imports.

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