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The PMI
The PMI is the major element of the Manufacturing ISM Report On Business®. The PMI is a composite index based on the seasonally adjusted diffusion indexes for five of the indicators (New Orders represents 30%, Production represents 25%, Employment represents 20%, Supplier Deliveries represents 15%, and Inventories represents 10%) by the varying weights.
Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50% indicates that the manufacturing economy is generally expanding; below 50%, that it is generally declining. A PMI over 42.7%, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP) is generally expanding, below 42.7%, that it is generally declining. The distance from 50% or 42.7% is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analyses.
The Manufacturing ISM Report On Business® and the PMI have earned immense recognition over the years from the economists and forecasters in government and business because of the report's early and accurate reflection with the manufacturing sector of the economy and the PMI's close correlation with the entire economy.
PMI History
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