A monthly survey of U.S. purchasing managers published by the Institute for Supply Management. Readings above 50 indicate manufacturing expansion, while readings below 50 signal contraction.
What the ISM Manufacturing Index Measures
The ISM Manufacturing Index (also called the ISM PMI) is compiled from surveys of purchasing and supply executives at over 300 U.S. manufacturing companies. It tracks five components: new orders, production, employment, supplier deliveries, and inventories. Each component is equally weighted to produce the composite index.
Interpreting ISM Readings
A reading above 50 indicates the manufacturing sector is expanding, while below 50 signals contraction. The ISM also publishes sub-indices that provide detail on specific areas. The new orders component is particularly watched as a leading indicator of future production.
The ISM Manufacturing Index is related to, but distinct from, the S&P Global Purchasing Managers' Index (PMI). Both measure manufacturing activity but survey different groups and use different methodologies. Traders watch both for confirmation or divergence signals.
Forex Impact
The ISM release often produces significant U.S. Dollar (USD) volatility, particularly when the reading crosses the 50 threshold or surprises versus expectations. It frequently sets the tone for trading in the first week of the month.
Related Terms
Purchasing Managers' Index (PMI)
A survey-based indicator measuring the prevailing direction of economic trends in manufacturing and services. PMI readings above 50 indicate expansion, while readings below 50 signal contraction.
Industrial Production
A monthly measure of output from the manufacturing, mining, and utilities sectors. Industrial production data helps gauge the strength of a country's productive economy and can influence currency direction.
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