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Institute for Supply Management Indices

The Purchasing Managers’ Index (PMI) garners quite a lot of attention and it has been said that it was former Federal Reserve chairman Alan Greenspan’s Desert Island Statistic – the one he would need to conduct policy if he were stranded on a desert island and only had access to one economic indicator. The PMI is the headline index of the Manufacturing ISM Report on Business. This report is created by the Tempe, Arizona based Institute for Supply Management (ISM), a not for profit professional association and is made available on ISM’s website at www.ism.wson the first business day of every month..

The Report on Business discusses the current readings of ten seasonally adjusted diffusion indices constructed by the ISM from the responses to a survey of approximately 400 purchasing managers across the United States. The survey polls participants about their opinions on prices of materials paid in the production process, production levels, new orders, order backlog, the speed of supplier deliveries, inventories, customer inventories, employment, new export orders, and imports. The PMI is a weighted composite of the following five indices:

  • New orders
  • Production
  • Employment
  • Vendor performance
  • Inventories

The ISM manufacturing report is valued not only for the diffusion indices but also for the accompanying discussion and comments made by the purchasing and supply executives participating in the survey. Together, the indices and executives’ anecdotal insights form a fairly detailed picture of the state of the manufacturing sector.