Reading PMI and ISM Surveys: The Economy's Early Warning System

Every month, purchasing managers at businesses across manufacturing and services answer a simple survey: is business better, worse, or the same as last month? They evaluate categories like new orders, production, employment, and supplier deliveries. These responses create the Purchasing Managers' Index (PMI). This single number is one of the fastest, most closely watched economic signals out there. The interpretation is straightforward: a reading above 50 usually means expansion, while a reading below 50 indicates contraction. The distance from 50 shows how strong that change is.

In the U.S., the Institute for Supply Management (ISM) publishes key PMI-style surveys. They cover manufacturing and services separately. This matters because the two sectors can behave differently. A slowdown in manufacturing doesn’t mean services are slowing too, and the reverse is also true. These surveys are especially valuable due to their timing. They’re released early in the following month, often before more detailed government data for the same period becomes available. This gives analysts and investors an earlier look at economic trends than they’d otherwise have.