What is it?
The ISM Manufacturing Index (also called the PMI - not to be confused with the Chicago PMI) is the result of a survey of over 400 companies, where each supplies information about changes in nine different characteristics. It is regarded as a solid measure of the strength of the manufacturing sector, as well as an indicator of future inflationary pressures. Readings over 50 indicate manufacturing sector expansion. This is a report the Fed monitors in setting monetary policy. It is also very timely, and it is considered the top manufacturing index available.
The Manufacturing Index has nine subcomponents. These are New Orders, Production, Employment, Supplier Deliveries, Inventories, Prices, New Export Orders, Imports, and Backlogs. The Prices component of the report is of particular interest to the mortgage market, because it is a leading indicator of inflation trends.
Often, references to the PMI will attribute it to the National Association of Purchasing Managers (NAPM). The NAPM is now the Institute for Supply Management (ISM).
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