ISM Index

Who: Institute for Supply Management

When: Around the first day of the month for month prior

What: The ISM Manufacturing Index, divided into manufacturing and non-manufacturing, is a national survey of purchasing managers which covers such indicators as orders, production, employment, inventories, delivery times, prices, export orders, and import orders. The ISM provides a composite diffusion index of national manufacturing conditions. The total index is calculated based on a weighted average of the following five sub-indexes: new orders (30%), production (25%), employment (20%), deliveries (15%) and inventories (10%). Readings above 50% indicate an expanding factory sector.

Why: Manufacturing is an important sector of the economy and the ISM index is one of the two primary national measures (the Chicago PMI is the other). Looked at as a good indicator for future inflationary pressures and can have a big effect on the markets. Changes in prices paid by manufacturers can be indicative of accelerating or decelerating inflation and future manufacturing activity can be predicted by changes in new orders. Strength in the manufacturing sector may be a sign of a strong economy and is usually negative for bond markets.