The ISM® PMI® Reports, also known as ISM Report On Business, ROB or the ISM Report, is the collective name for two monthly United States statistical business reports, the Manufacturing PMI and the Services PMI (formerly Non-Manufacturing), published by US Institute for Supply Management. The PMI Reports are based on a national survey of purchasing and supply chain professionals tracking changes in the manufacturing and services sectors. It is considered to be one of the most reliable economic barometers of the U.S. economy and gives an important early look at the health of the nation's economy. In addition to being market moving, the PMI Reports makes an important contribution to the American statistical system and to economic policy. It also has one of the shortest reporting lags of any macroeconomic series.
History The origin of the Manufacturing ISM Report On Business can be traced back to 1923. The ISM, then known as the National Association of Purchasing Agents (N.A.P.A.), began to survey its members and share the results with them. Three years later, N.A.P.A. selected Edward T. Gushee, a purchaser from Detroit, Michigan, to supervise the organization's survey group and expand the information they gathered. In 1930, U.S. President Herbert Hoover sought information that could help resolve the economic difficulties of the Great Depression. With President Hoover's support, the U.S. Chamber of Commerce organized a committee to gather pertinent business data from companies that were members of the Chamber. However, after many attempts efforts to gather this information, the committee disbanded in June 1931. Both John R. Whitehead, the newly elected president of N.A.P.A. who represented the association on this committee, and George A. Renard, N.A.P.A's executive secretary, wanted to continue the committee's work. They believed a survey would support the country's economy and help purchasing professionals. Under their leadership, the newly founded Business Survey Committee surveyed the association's membership on business conditions. Renard tabulated the results and sent them to President Hoover. The positive feedback from N.A.P.A. members and the government led N.A.P.A. to continue to survey its members. Other than for a four-year interruption during World War II, ISM (and its predecessors) have published the report since 1931.
Manufacturing PMI While the ISM has published the manufacturing report since 1931, in the early 1980s, the U.S. Department of Commerce (DOC) and ISM developed the Purchasing Managers' Index (PMI). The index, based on analytical work by the DOC, adjusts four of the five components of ISM's monthly survey — new orders, production, employment, supplier and deliveries — for normal seasonal variations, adds in inventories, applies equal weights to each and then calculates a single monthly index number. An update of research performed by Theodore S. Torda, a DOC economist, shows a close parallel between growth in real Gross Domestic Product (GDP) and the PMI. The index can explain about 60 percent of the annual variation in GDP, with a margin of error that averaged ± .48 percent during the last ten years. George McKittrick, a former DOC economist said "Not only does the PMI track well with the overall economy, but the indication provided by ISM data about how widespread changes are, complements analogous government series that show size and direction of change." In January 1989, the Supplier Deliveries Index from the Report became a standard element of the DOC's Bureau of Economic Analysis Index of Leading Economic Indicators. The data was incorporated into the index from June 1976 forward. In January 1996, The Conference Board began to compile this index.
Services PMI (formerly Non-Manufacturing) The origin of the Services PMI can be traced to 1996. Over the years, there had been a shift in ISM's membership from nearly 100 percent manufacturing firms in the 1930s to almost 50 percent services firms by 1996 such as:
Financial services Health services Transportation Communication Public administration Also, by this time, the services sector of the U.S. economy was responsible for about 80 percent of gross domestic product (GDP), the primary measure of economic activity. There also was a trend toward the services share of the economy continuing to increase in the future. While the existing ISM Manufacturing Report On Business was well-accepted as one of the primary indicators of overall U.S. economic activity, ISM felt that to fully capture all economic activity and to enable all members of ISM to participate in the survey, a services version of the Report On Business should be considered. As a result, in 1996, it formed a committee to explore the development of the Services ISM Report On Business. By the spring of 1997 the pilot was considered successful. In July of that year, routine monthly data collection began. Monthly public reporting and release of data debuted in June 1998 with the release of the May 1998 data and ten months of data history. The Services PMI is released on the third business day of each month, and is based on data compiled from monthly surveys sent to purchasing executives working in the services industries across the country. The process, content and format of the report parallel that of the manufacturing report with only a few differences. Each month, the survey responses reflect change, if any, in the current month's report compared to the previous month. The report covers:
Services Index Business Activity New Orders Backlog of Orders New Export Orders Inventory Change Inventory Sentiment Imports Prices Employment Supplier Deliveries The Services Index which is a weighted composite index for services data (similar to the Purchasing Managers' Index (PMI)) was developed and first published in the January 2008 Non-Manufacturing ISM Report On Business. This was not available prior to that date because there was insufficient services historical data to develop a composite index.
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