What is the ISM?

The ISM manufacturing report is a national survey of manufacturing sector executives on their assessment and expectations for future production, new orders, inventories, employment, and deliveries.

The ISM index measures how various business activities have changed since the prior month. An ISM value above 50 represents growth or expansion within the manufacturing sector compared to the prior month; a reading below 50 represents contraction, while a reading equal to 50 indicates an equal balance between manufacturers reporting advances and declines in their business. For those who want to learn more, the Institute of Supply Managements provides the full calculation of the ISM in the Frequently Asked Questions portion of their Web site (www.ism.ws). People who recognize the U.S. has a service-oriented economy rather than manufacturing-oriented might find the market’s focus on the manufacturing-sector ISM report over the equivalent service-sector ISM report a bit odd.

However the ISM manufacturing survey has been around much longer than the service-sector “non-manufacturing” survey, which was established in 1997. Also, even though the manufacturing sector only represents a small portion of U.S. GDP, it still tends to be a good gauge of how well the overall economy is performing.