The PMI is a key economic tool and is among the most reliable leading indicators of the U.S. economy. The index is reported by manufacturing and services. There is also a hospital PMI that is released on a monthly basis. The index sheds insight into the business environment and also helps companies get a grasp on where the economy is headed.
It is a survey-based indicator that is compiled and released each month by the Institute for Supply Management (ISM). The survey is sent to senior executives at more than 400 companies in 19 primary industries, which are weighted by their contribution to U.S. gross domestic product (GDP).
The surveys include questions about business conditions and any changes, whether they are improving or deteriorating, or have no changes. The PMI is based on five major survey areas—each of which is weighted equally:
- New orders
- Inventory levels
- Production
- Supplier deliveries
- Employment
The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction while a reading at 50 indicates no change. The further away from 50, the greater the level of change.
The Purchasing Managers' Index results are released on the first Monday of every month.