Purchasing Managers Index

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Discussion: Purchasing Managers' Index

Developments in U.S Purchasing Managers Index(PMI)

ISM

Methodology

Developments

General Index Prices Paid
Month PMI Manufacturing[1] PMI Services[2] PMI Manufacturing[3][4] PMI Services[5][6]
Aug-24 54 57.3
July-24 52.9 57
Jun-24 52.1 56.3
May-24 57 58.1
Apr-24 49.2 51.4 60.9 59.2
Mar-24 50.3 52.6 55.8 53.4
Feb-24 47.8 53.4 52.5 58.6
Jan-24 49.1 50.5 52.9 64
Dec-23 47.1 52.7 45.2 57.4
Nov-23 46.7 51.8 49.9 58.3
Oct-23 46.7 53.6 45.1 58.6
Sep-23 49 54.5 43.8 58.9
Aug-23 47.6 52.7 48.4 58.9
Jul-23 46.4 53.9 42.6 56.8
Jun-23 46 50.3 41.8 54.1
May-23 46.9 51.9 44.2 56.2
Apr-23 47.1 51.2 53.2 59.6
Mar-23 46.3 55.1 49.2 59.5
Feb-23 47.7 55.2 51.3 65.6
Jan-23 47.4 49.2 44.5 67.8
Dec-22 48.4 56.5 39.4 67.6
Nov-22 49 54.4 43 70
Oct-22 50.2 56.7 46.6 70.7
Sep-22 50.9 56.9 51.7 68.7
Aug-22 52.8 56.7 52.5 71.5
Jul-22 52.8 55.3 60 72.3
Jun-22 53 55.9 78.5 80.1
May-22 56.1 57.1 82.2 82.1
Apr-22 55.4 58.3 84.6 84.6
Mar-22 57.1 56.5 87.1 83.8
Feb-22 58.6 59.9 75.6 83.1
Jan-22 57.6 62.3 76.1 82.3
Dec-21 58.7 69.1 68.2 82.5
Nov-21 61.1 66.7 82.4 82.3
Oct-21 60.8 61.9 85.7 82.9
Sep-21 61.1 61.7 81.2 77.5
Aug-21 59.9 64.1 79.4 75.4
Jul-21 59.5 60.1 85.7 82.3
Jun-21 60.6 64 92.1 79.5
May-21 61.2 62.7 88 80.6
Apr-21 60.7 63.7 89.6 76.8
Mar-21 64.7 55.3 85.6 74
Feb-21 60.8 58.7 86 71.8
Jan-21 58.7 57.7 82.1 64.2
Dec-20 60.7 55.9 77.6 64.8
Nov-20 57.5 56.6 65.4 66.1
Oct-20 59.3 57.8 65.5 63.9
Sep-20 55.4 56.9 62.8 59
Aug-20 56 58.1 59.5 64.2
Jul-20 54.2 57.1 53.2 57.6
Jun-20 52.6 45.4 51.3 62.4
May-20 43.1 41.8 40.8 55.6
Apr-20 41.5 52.5 35.3 55.1
Mar-20 49.1 57.3 37.4 50
Feb-20 50.1 55.5 45.9 50.8
Jan-20 50.9 54.9 53.3 55.5
Dec-19 47.2 53.9 51.7 58.5

December 2023

Manufacturing

The Manufacturing PMI® registered 47.4 percent in December, up 0.7 percentage point from the 46.7 percent recorded in November. [7]

84 percent of manufacturing gross domestic product (GDP) contracted in December, up from 65 percent in November. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 48 percent in December, compared to 54 percent in November and 35 percent in October.

The past relationship between the Manufacturing PMI and the overall economy indicates that the December reading (47.4 percent) corresponds to a change of minus-0.5 percent in real gross domestic product (GDP) on an annualized basis

  • The New Orders Index remained in contraction territory at 47.1 percent, 1.2 percentage points lower than the figure of 48.3 percent recorded in November. The
  • The Production Index reading of 50.3 percent is a 1.8-percentage point increase compared to November’s figure of 48.5 percent.
  • The Prices Index registered 45.2 percent, down 4.7 percentage points compared to the reading of 49.9 percent in November.
  • The Backlog of Orders Index registered 45.3 percent, 6 percentage points higher than the November reading of 39.3 percent.
  • The Employment Index registered 48.1 percent, up 2.3 percentage points from the 45.8 percent reported in November.

Services

In December, the Services PMI registered 50.6 percent, 2.1 percentage points lower than November’s reading of 52.7 percent. [8]

The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for December (50.6 percent) corresponds to a 0.3-percent increase in real gross domestic product (GDP) on an annualized basis.

  • The Business Activity Index registered 56.6 percent, a 1.5-percentage point increase compared to the reading of 55.1 percent in November.
  • The New Orders Index 52.8 percent is 2.7 percentage points lower than the November reading of 55.5 percent.
  • The Prices Index registered 57.4 percent in December, a 0.9-percentage point decrease from the November reading of 58.3 percent.
  • The Backlog of Orders Index contracted in December for the second consecutive month, registering 49.4 percent, a 0.3-percentage point increase compared to the November reading of 49.1 percent.
  • The Employment Index registered 43.3 percent, down 7.4 percentage points from the November figure of 50.7 percent.

November 2023

Manufacturing

The Manufacturing PMI registered 46.7 percent in November, unchanged from the 46.7 percent recorded in October[9]

65 percent of manufacturing gross domestic product (GDP) contracted in November, down from 75 percent in October. More importantly, the share of sector GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 54 percent in November, compared to 35 percent in October and 6 percent in September. Three of the top six industries by contribution to manufacturing GDP were at or below 45 percent, same as the previous month

The past relationship between the Manufacturing PMI and the overall economy indicates that the November reading (46.7 percent) corresponds to a change of minus-0.7 percent in real gross domestic product (GDP) on an annualized basis.

  • The New Orders Index remained in contraction territory at 48.3 percent, 2.8 percentage points higher than the figure of 45.5 percent recorded in October.
  • The Production Index reading of 48.5 percent is a 1.9-percentage point decrease compared to October’s figure of 50.4 percent.
  • The Prices Index registered 49.9 percent, up 4.8 percentage points compared to the reading of 45.1 percent in October.
  • .The Backlog of Orders Index registered 39.3 percent, 2.9 percentage points lower than the October reading of 42.2 percent.
  • The Employment Index registered 45.8 percent, down 1 percentage point from the 46.8 percent reported in October.

Services

In November, the Services PMI registered 52.7 percent, 0.9 percentage point higher than October’s reading of 51.8 percent. The composite index indicated growth in November for the 11th consecutive month. Fifteen industries reported growth in November.[10]

The past relationship between the Services PMI and the overall economy indicates that the Services PMI for November (52.7 percent) corresponds to a 1-percent increase in real gross domestic product (GDP) on an annualized basis

  • The Business Activity Index registered 55.1 percent; a 1-percentage point increase compared to the reading of 54.1 percent in October.
  • The New Orders Index expanded in November for the 11th consecutive month after contracting in December for the first time since May 2020; the figure of 55.5 percent equals the October reading.
  • The Prices Index registered 58.3 percent in November, a 0.3-percentage point decrease from the October reading of 58.6 percent.
  • The Backlog of Orders Index contracted in November and registered 49.1 percent, a 1.8-percentage point decrease compared to the October reading of 50.9 percent.
  • The Employment Index registered 50.7 percent, up 0.5 percentage point from the October figure of 50.2 percent.

October 2023

Manufacturing

The Manufacturing PMI registered 46.7 percent in October, 2.3 percentage points lower than the 49 percent recorded in September. The overall economy dropped back into contraction after one month of weak expansion preceded by nine months of contraction.[11]

Seventy-five percent of manufacturing gross domestic product (GDP) contracted in October, up from 71 percent in September. More importantly, the share of sector GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 37 percent in October, compared to 6 percent in September and 15 percent in August. Three of the top seven industries by contribution to manufacturing GDP fell into this category

The past relationship between the Manufacturing PMI and the overall economy indicates that the October reading (46.7 percent) corresponds to a change of minus-0.7 percent in real gross domestic product (GDP) on an annualized basis

  • The New Orders Index remained in contraction territory at 45.5 percent, 3.7 percentage points lower than the figure of 49.2 percent recorded in September.
  • The Production Index reading of 50.4 percent is a 2.1-percentage point decrease compared to September’s figure of 52.5 percent.
  • The Prices Index registered 45.1 percent, up 1.3 percentage points compared to the reading of 43.8 percent in September.
  • The Backlog of Orders Index registered 42.2 percent, 0.2 percentage point lower than the September reading of 42.4 percent.
  • The Employment Index registered 46.8 percent, down 4.4 percentage points from the 51.2 percent reported in September.

Sevices

In October, the Services PMI registered 51.8 percent, 1.8 percentage points lower than September reading of 53.6 percent. The composite index indicated growth in October for the 10th consecutive month after a reading of 49.2 percent in December 2022.

Twelve industries reported growth in October.

The past relationship between the Services PMI and the overall economy indicates that the Services PMI® for October (51.8 percent) corresponds to a 0.7-percent increase in real gross domestic product (GDP) on an annualized basis[12].

  • The Business Activity Index registered 54.1 percent, a 4.7-percentage point decrease compared to the reading of 58.8 percent in September.
  • The New Orders Index expanded in October for the 10th consecutive month after contracting in December for the first time since May 2020; the figure of 55.5 percent is 3.7 percentage points higher than the September reading of 51.8 percent.
  • The Prices Index registered 58.6 percent in October, a 0.3-percentage point decrease from the September reading of 58.9 percent.
  • The Backlog of Orders Index registered 50.9 percent, a 2.3-percentage point increase compared to the September reading of 48.6 percent.
  • The Employment Index registered 50.2 percent, down 3.2 percentage points from the September figure of 53.4 percent.

September 2023

Manufacturing

The U.S. manufacturing sector contracted in September, as the Manufacturing PMI® registered 49 percent, 1.4 percentage points higher than the reading of 47.6 percent recorded in August and its highest figure since November 2022 (49 percent). This is the 11th month of contraction, but the third month of positive change. Of the five subindexes that directly factor into the Manufacturing PMI, two (the Production and Employment indexes) are in expansion territory, up from none in August, breaking a three-month streak of no such growth. This good news is somewhat counterbalanced by the New Orders Index logging its 13th month in contraction territory, though at a slower rate. Of the six biggest manufacturing industries, two — Food, Beverage & Tobacco Products; and Petroleum & Coal Products — registered growth in September,” says Fiore. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.[13]

Seventy-one percent of manufacturing gross domestic product (GDP) contracted in September, up from 62 percent in August. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 6 percent in September, compared to 15 percent in August and 25 percent in July, a clear positive. The past relationship between the Manufacturing PMI® and the overall economy indicates that the September reading (49 percent) corresponds to a change of plus-0.1 percent in real gross domestic product (GDP) on an annualized basis

  • New Orders Index remained in contraction territory at 49.2 percent, 2.4 percentage points higher than the figure of 46.8 percent recorded in August.
  • Production Index reading of 52.5 percent is a 2.5-percentage point increase compared to August’s figure of 50 percent.
  • Prices Index registered 43.8 percent, down 4.6 percentage points compared to the reading of 48.4 percent in August.
  • Backlog of Orders Index registered 42.4 percent, 1.7 percentage points lower than the August reading of 44.1 percent.
  • Employment Index registered 51.2 percent, up 2.7 percentage points from the 48.5 percent reported in August.

Services

In September, the Services PMI registered 53.6 percent, a 0.9-percentage point decrease compared to the August reading of 54.5 percent. A Services PMI above 49.9 percent, over time, generally indicates an expansion of the overall economy. Therefore, the September Services PMI® indicates the overall economy is growing for the ninth consecutive month after one month of contraction in December 2022. Thirteen industries reported growth in September. The past relationship between the Services PMI and the overall economy indicates that the Services PMI for September (53.6 percent) corresponds to a 1.3-percent increase in real gross domestic product (GDP) on an annualized basis.[14]

“There has been a slight pullback in the rate of growth for the services sector, which is attributed to slower rates of growth in the New Orders and Employment indexes. The majority of respondents remain positive about business conditions; moreover, some respondents indicated concern about potential headwinds.”

  • The Business Activity Index registered 58.8 percent, a 1.5-percentage point increase compared to the reading of 57.3 percent in August.
  • The New Orders Index expanded in September for the ninth consecutive month after contracting in December for the first time since May 2020; the figure of 51.8 percent is 5.7 percentage points lower than the August reading of 57.5 percent.
  • The Prices Index registered 58.9 percent in September, matching its August reading.
  • The Backlog of Orders Index registered 48.6 percent, a 6.8-percentage point increase compared to the August figure of 41.8 percent.
  • The Employment Index registered 53.4 percent, down 1.3 percentage points from the August figure of 54.7 percent.

August 2023

Manufacturing

The August Manufacturing PMI registered 47.6 percent, 1.2 percentage points higher than the 46.4 percent recorded in July. Regarding the overall economy, this figure indicates a ninth month of contraction after a 30-month period of expansion.

Sixty-two percent of manufacturing gross domestic product (GDP) contracted in August, down from 92 percent in July, a positive trend for the economy. Additionally, the share of manufacturing GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 15 percent in August, compared to 25 percent in July and 44 percent in June, a clear positive. The past relationship between the Manufacturing PMI® and the overall economy indicates that the August reading (47.6 percent) corresponds to a change of minus-0.4 percent in real gross domestic product (GDP) on an annualized basis

“The U.S. manufacturing sector shrank again, but the uptick in the PMI® indicates a slower rate of contraction. The August composite index reading reflects companies managing outputs appropriately as order softness continues, but the month-over-month increase is a sign of improvement. Demand eased again, with the (1) New Orders Index contracting at a slightly faster rate, (2) New Export Orders Index continuing in contraction territory, with minimal signs of improvement and (3) Backlog of Orders Index improving for the third straight month but remaining at low levels. The Customers’ Inventories Index reading indicated appropriate buyer/supplier tension, which is neutral to slightly positive for future production"

  • The New Orders Index remained in contraction territory at 46.8 percent, 0.5 percentage point lower than the figure of 47.3 percent recorded in July.
  • The Production Index reading of 50 percent is a 1.7-percentage point increase compared to July’s figure of 48.3 percent.
  • The Prices Index registered 48.4 percent, up 5.8 percentage points compared to the July figure of 42.6 percent
  • The Backlog of Orders Index registered 44.1 percent, 1.3 percentage points higher than the July reading of 42.8 percent.
  • The Employment Index registered 48.5 percent, up 4.1 percentage points from July’s reading of 44.4 percent.[15]

Services

In August, the Services PMI registered 54.5 percent, 1.8 percentage points higher than July’s reading of 52.7 percent. Thirteen industries reported growth in August.[16] The composite index indicated growth in August for the eighth consecutive month .

"There has been an increase in the rate of growth for the services sector, reflected by increases in all four subindexes that directly factor into the composite Services PMI® and faster supplier deliveries. Sentiment among Business Survey Committee respondents varies by industry; however, the majority of panelists are positive about business and economic conditions.”

  • The Business Activity Index registered 57.3 percent, a 0.2-percentage point increase compared to the reading of 57.1 percent in July.
  • The New Orders Index expanded in August for the eighth consecutive month after contracting in December for the first time since May 2020; the figure of 57.5 percent is 2.5 percentage points higher than the July reading of 55 percent.
  • The Prices Index was up 2.1 percentage points in August, to 58.9 percent.
  • The Backlog of Orders Index registered 41.8 percent, a 10.3-percentage point decrease compared to the July figure of 52.1 percent.
  • The Employment Index registered 54.7 percent, up 4 percentage points from the July figure of 50.7 percent.

July 2023

Manufacturing

The July Manufacturing PMI registered 46.4 percent, 0.4 percentage point higher than the 46 percent recorded in June. Regarding the overall economy, this figure indicates an eighth month of contraction after a 30-month period of expansion. Ninety-two percent of manufacturing gross domestic product (GDP) contracted in July, up from 71 percent in June. However, the share of manufacturing GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 25 percent in July, compared to 44 percent in June, a clear positive. [17]

“The U.S. manufacturing sector shrank again, but the uptick in the PMI indicates a marginally slower rate of contraction. The July composite index reading reflects companies continuing to manage outputs down as order softness continues. Demand eased again, with the (1) New Orders Index contracting, though at a slower rate, (2) New Export Orders Index moving deeper into contraction and (3) Backlog of Orders Index improving compared to June but remaining at a low level. The Customers’ Inventories Index reading indicated appropriate buyer/supplier tension, which is neutral to slightly positive for future production. "

  • The New Orders Index remained in contraction territory at 47.3 percent, 1.7 percentage points higher than the figure of 45.6 percent recorded in June.
  • The Production Index reading of 48.3 percent is a 1.6-percentage point increase compared to June’s figure of 46.7 percent.
  • The Prices Index registered 42.6 percent, up 0.8 percentage point compared to the June figure of 41.8 percent.
  • The Backlog of Orders Index registered 42.8 percent, 4.1 percentage points higher than the June reading of 38.7 percent.
  • The Employment Index dropped further into contraction, registering 44.4 percent, down 3.7 percentage points from June’s reading of 48.1 percent.

Services

In July, the Services PMI registered 52.7 percent, 1.2 percentage points lower than June’s reading of 53.9 percent. The composite index indicated growth in July for the seventh consecutive month after a reading of 49.2 percent in December, which was the first contraction since June 2020. Fourteen industries reported growth in July. The Services PMI®, by being above 50 percent for the seventh month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 161 months [18]

“There has been a slight pullback in the rate of growth for the services sector. This is due mostly to the decrease in the rate of growth for business activity, new orders and employment, as well as ongoing faster delivery times. The majority of respondents are cautiously optimistic about business conditions and the overall economy.”

  • The Business Activity Index registered 57.1 percent, a 2.1-percentage point decrease compared to the reading of 59.2 percent in June.
  • The New Orders Index expanded in July, the figure of 55 percent is 0.5 percentage point lower than the June reading of 55.5 percent.
  • The Supplier Deliveries Index registered 48.1 percent, 0.5 percentage point higher than the 47.6 percent recorded in June.
  • The Prices Index was up 2.7 percentage points in July, to 56.8 percent
  • The Backlog of Orders Index registered 52.1 percent, an 8.2-percentage point increase compared to the June figure of 43.9.

June 2023

Manufacturing

The June Manufacturing PMIregistered 46 percent, 0.9 percentage point lower than the 46.9 percent recorded in May. Regarding the overall economy, this figure indicates a seventh month of contraction after a 30-month period of expansion. Seventy-one percent of manufacturing gross domestic product (GDP) contracted in June, down from 76 percent in May. More industries contracted strongly, however, as the share of manufacturing GDP registering a composite PMI calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 44 percent in June, compared to 31 percent in May. [19]

"The U.S. manufacturing sector shrank again, with the Manufacturing PMI losing ground compared to the previous month, indicating a faster rate of contraction. The June composite index reading reflects companies continuing to manage outputs down as softness continues and optimism about the second half of 2023 weakens. Demand eased again, with the (1) New Orders Index contracting but at a slower rate, (2) New Export Orders Index moving into contraction and (3) Backlog of Orders Index remaining at a level not seen since early in the coronavirus pandemic (May 2020). A potential bright spot: The Customers’ Inventories Index dropped into ‘too low’ territory, a positive for future production."

  • The New Orders Index remained in contraction territory at 45.6 percent, 3 percentage points higher than the figure of 42.6 percent recorded in May.
  • The Production Index reading of 46.7 percent is a 4.4-percentage point decrease compared to May’s figure of 51.1 percent.
  • The Prices Index registered 41.8 percent, down 2.4 percentage points compared to the May figure of 44.2 percent.
  • The Employment Index dropped into contraction, registering 48.1 percent, down 3.3 percentage points from May’s reading of 51.4 percent.

Insights from Tim Fiore, the Institute For Supply Management’s Committee Chair for the Manufacturing Report[20]

  • Companies have burned off their backlogs of orders
  • Demand is non-existent, and new orders not coming in
  • Companies have started to take action to adjust cost structure, in June companies started to destaff. Dont expect to end throughout the summer, maybe Q4
  • China and Europe’s assistance on new exports orders probably not happening for some time, as they are currently pretty weak
  • Dont see the bottom yet for manufacturing

Services

In June, the Services PMI registered 53.9 percent, 3.6 percentage points higher than May’s reading of 50.3 percent. The composite index indicated growth in June for the sixth consecutive month after a reading of 49.2 percent in December. Fifteen industries reported growth in June. The Services PMI by being above 50 percent for the sixth month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector.[21]

“There has been an uptick in the rate of growth for the services sector. This is due mostly to the increase in business activity, new orders and employment. Increased capacity, backlog reduction and continued improvements in logistics have impacted delivery times (resulting in a decrease in the Supplier Deliveries Index). The majority of respondents indicate that business conditions remain stable; however, they are cautious relative to inflation and the future economic outlook.”

  • The New Orders Index expanded in June for the sixth consecutive month, the figure of 55.5 percent is 2.6 percentage points higher than the May reading of 52.9 percent.
  • The Prices Index was down 2.1 percentage points in June, to 54.1 percent.
  • The Backlog of Orders Index registered 43.9 percent, a 3-percentage point increase compared to the May figure of 40.9 percent, which was the index’s lowest reading since May 2009 (40 percent).

May 2023

Manufacturing

The May Manufacturing PMI registered 46.9 percent, 0.2 percentage point lower than the 47.1 percent recorded in April. Regarding the overall economy, this figure indicates a sixth month of contraction after a 30-month period of expansion. [22]

  • The ISM survey's forward-looking new orders sub-index dropped to 42.6 last month from 45.7 in April.
  • Prices paid by manufacturers decreased to 44.2 from 53.2 in the prior month.
  • The survey's gauge of factory employment increased to 51.4 from 50.2 in April.

Services

In May, the Services PMI registered 50.3 percent, 1.6 percentage points lower than April’s reading of 51.9 percent. The composite index indicated growth in May for the fifth consecutive month after a reading of 49.2 percent in December, which was the first contraction since May 2020 (45.4 percent). The index missed expectations as a 52.2 was expected. [23]

  • ISM Services Employment decreased to 49.20 points in May 2023 from 50.80 points in the prior month.
  • ISM Services Prices index decreased to 56.20 points in May of 2023, the lowest level since May 2020, from 59.60 points in April of 2023.
  • ISM Services New Orders index in the United States decreased to 52.90 points in May from 56.10 points in April of 2023.

April 2023

Manufacturing

US factory activity contracted for a sixth-straight month in April, the longest such stretch since 2009.[24]

  • ISM manufacturing PMI rose to 47.1 in April from 46.3 in March, above the 46.8 estimate.
  • ISM employment gauge rose to 50.2 from 46.9 in March. It's the first time in three months that this index moved above 50.
  • New Order Index rose to 45.7 from 44.3.
  • Price Paid Index rose to 53.2 from 49.2.
  • The ISM said 73% of manufacturing gross domestic product was contracting, up from 70% in March.
  • ISM also noted that fewer industries contracted sharply.

Services

March 2023

Services

The ISM service PMI declined to 51.2 in March from 55.1 in February-It was expected to decline to 54.5. The index's measure of new orders received by services businesses dropped to 52.2 in March from 62.6 in February.Meanwhile, the index measure of prices paid by service industries for inputs declined to 59.5 from 65.6 in February.Its gauge of supplier deliveries fell to 45.8 from to 47.6 in February, indicating an improvement in supply. Its measure of employment dropped to 51.3 from 54.0 in February[25].

February 2023

ISM's measure of new orders and employment indicates that the economy continues to expand.The gauge for new orders rose from 60.4 in January to 62.6 in February while the measure for employment grew to 54.0 from 50.0 in January. Meanwhile, the gauge of prices paid for services dipped to 65.6 from 67.8 in January. ISM's non-manufacturing PMI dropped to 55.1 from 55.2 in January, still above the contraction territory and above the 54.5 estimate[26].

US manufacturing sector remained in contraction territory in February as ISM Manufacturing PMI was little changed at 47.7 versus 47.4 in January. Reuters economists were expecting the reading to be 48.0. New orders rose from 42.5 in the previous month to 47.0 in February. The survey indicated that inflation could remain elevated as prices index rose from 44.5 in January to 51.3 last month[27].

S&P

On February 21 2022, S&P Global announced that February U.S. PMI Composite came in 50.2 versus 47.5 consensus and 46.8 in January. This ended the seven months of the index coming below the 50 mark that seperates contraction and expansion. Both the service and manufacturing PMI also saw growth. Service PMI grew from 46.8 in January to 50.5, above the consensus estimate of 47.2. On the other hand, Manufacturing PMI came in 47.8 versus 47.1 consensus and 46.9 in January. Similarly, the measure of prices paid by businesses for inputs declined to 60.6 in February from a final reading of 63.0 in January[28].


Developments in Euro Zone Purchasing Managers Index(PMI)

On February 21 2022, S&P Global said that Euro zone S&P Global's flash Composite Purchasing Managers' Index (PMI) rose to 52.3 in February from 50.3 in January, above the 50.6 consensus and also a nine-month high. Service PMI saw a fastest growth as it increased to 53.0 from 50.8 in January, exceeding the median estimate for 51.0. Similarly, business expectations grew to a nine-month high of 61.5, from 61.2 in January. However, Manufacturing PMI declined to 48.5 from 48.8 in January, below the 49.3 estimate. Of great interest to us is German's S&P Global's flash composite Purchasing Managers' Index (PMI) which returned to growth after 8 months. It rose to 51.1 in February from 49.9 in January,beating the 50.4 consensus estimate. Like in Euro Zone, German's manufacturing PMI fell to 46.5 from 47.3 in January, below the 48.0 consensus and remaining in contraction territoy for an eight month. German's Service PMI, on the other hand, saw slight growth for the second month as it grew to 51.3 from 50.7 in January, in line with analysts' expectations of a reading of 51.0.[29]

What's Purchasing Managers Index(PMI)?

The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.

Investors can also use the PMI to their advantage because it is a leading indicator of economic conditions. The direction of the trend in the PMI tends to precede changes in the trend in major estimates of economic activity and output, such as the GDP, Industrial Production, and Employment. Paying attention to the value and movements in the PMI can yield profitable foresight into developing trends in the overall economy.[30]

The PMI is a survey-based indicator of business conditions, which includes individual measures (‘sub-indices’) of business output, new orders, employment, costs, selling prices, exports, purchasing activity, supplier performance, backlogs of orders and inventories of both inputs and finished goods, where applicable. The surveys ask respondents to report the change in each variable compared to the prior month, noting whether each has risen/improved, fallen/deteriorated or remained unchanged. These objective questions are accompanied by one subjective ‘sentiment’ question asking companies whether they forecast their output to be higher, the same or lower in a year’s time. [31]

https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html

Formula:

PMI data are presented in the form of a diffusion index, which is calculated as follows

where:

  • P1 = Percentage number of answers that reported an improvement.
  • P2 = Percentage number of answers that reported no change.
  • P3 = Percentage number of answers that reported a deterioration.

Because of P1 + P2 + P3 = 100,

Thus, if 100% of the panel reported an improvement, the index would be 100.0. If 100% reported a deterioration, the index would be zero. If 100% of the panel saw no change, the index would be 50.0 (P2 * 0.5).Therefore, an index reading of 50.0 means that the variable is unchanged, a number over 50.0 indicates an improvement, while anything below 50.0 suggests a decline. [32]

The two principal producers of PMIs are the Institute for Supply Management (ISM), which originated the manufacturing and non-manufacturing metrics produced for the United States, and the S&P Global (from 2022 merger with IHS Markit), which produces metrics based on ISM's work for over 30 countries worldwide.

https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html

ISM and S&P differences

  • S&P uses the following weights: production (0.25), new orders (0.30), employment (0.20), supplier deliveries (0.15), and inventories (0.10), while ISM attributes each of these variables the same weighting (0.2) when calculating the overall PMI
  • ISM's surveys cover all NAICS categories, and The S&P survey covers private sector companies, but not the public sector.[33]

For the US specifically, the ISM PMI is the most popular among economist and investors to rely for the economic outllook.

References:

  1. ↑ https://www.investing.com/economic-calendar/ism-manufacturing-pmi-173
  2. ↑ https://www.investing.com/economic-calendar/ism-non-manufacturing-pmi-176
  3. ↑ https://www.investing.com/economic-calendar/ism-manufacturing-prices-174
  4. ↑ https://tradingeconomics.com/united-states/ism-manufacturing-prices
  5. ↑ https://www.investing.com/economic-calendar/ism-non-manufacturing-prices-1049
  6. ↑ https://tradingeconomics.com/united-states/ism-non-manufacturing-prices
  7. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/december/
  8. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/december/
  9. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/november/
  10. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/november/
  11. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/october/
  12. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/october/
  13. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/september/
  14. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/september/
  15. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/august/
  16. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/august/
  17. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/july/
  18. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/july/
  19. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/june/
  20. ↑ https://www.youtube.com/watch?v=20mrqPg8roo&list=PLIsv7Ve1Rbq88YTG_byxd6mrb-zFQuemy&index=1
  21. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/june/
  22. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/may/
  23. ↑ https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/may/
  24. ↑ https://12ft.io/proxy?q=https%3A%2F%2Fwww.reuters.com%2Fmarkets%2Fus%2Fus-manufacturing-sector-contracts-sixth-straight-month-april-ism-2023-05-01%2F
  25. ↑ https://www.reuters.com/markets/us/us-service-sector-slows-march-inflation-cooling-ism-survey-2023-04-05/
  26. ↑ https://www.reuters.com/world/us/us-service-sector-steady-february-ism-survey-2023-03-03/#:~:text=The%20ISM%20survey's%20gauge%20of,responsive%20to%20interest%20rate%20increases.
  27. ↑ https://www.reuters.com/markets/us/us-manufacturing-sector-contracts-february-ism-2023-03-01/
  28. ↑ https://finance.yahoo.com/news/u-business-activity-rebounds-eight-150453541.html
  29. ↑ https://www.reuters.com/video/watch/euro-zone-business-growth-at-9-month-hig-idOV191321022023RP1
  30. ↑ https://www.investopedia.com/terms/p/pmi.asp
  31. ↑ https://www.spglobal.com/marketintelligence/en/mi/products/pmi-faq.html
  32. ↑ https://en.wikipedia.org/wiki/Purchasing_Managers%27_Index#cite_note-19
  33. ↑ https://en.wikipedia.org/wiki/North_American_Industry_Classification_System
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