How to read the ISM and PMI business surveys

What these surveys measure

The Institute for Supply Management (ISM) surveys purchasing and supply managers at US companies. It asks whether conditions such as new orders, production, employment and prices were higher, the same or lower than the month before. The answers are combined into a diffusion index, a number that tracks how widely a change is spread across respondents rather than how large it is.

S&P Global runs similar purchasing managers' index (PMI) surveys in the US and many other countries. Because both ask about direction, a reading tells you how many firms report improvement or deterioration. It does not tell you by how much output actually changed.

• ISM Manufacturing PMI: first business day of the month, 10:00 AM ET
• ISM Services PMI: third business day of the month, 10:00 AM ET
• S&P Global flash PMIs: preliminary readings released late in the month the survey covers
• S&P Global final PMIs: released around the start of the following month

The 50 line

A diffusion index is built so that 50 means the share of firms reporting improvement roughly equals the share reporting deterioration. Readings above 50 point to expansion in that activity. Readings below 50 point to contraction.

Distance from 50 and direction both matter. A reading of 48 that has climbed from lower levels tells a different story than 48 falling from the mid-50s. Traders also compare the result with the consensus forecast, the median expectation of economists surveyed before the release, because markets have tended to react more to the surprise than to the level itself.

For prices paid, above 50 means more firms report paying higher prices, which says prices are rising, not that they are high.

Sub-indexes worth reading

The headline ISM Manufacturing PMI is an equal-weighted average of five sub-indexes: new orders, production, employment, supplier deliveries and inventories. The services report has its own headline built from a similar set of components. Many traders find the sub-indexes more informative than the headline because they show where pressure is building.

Supplier deliveries reads in a counterintuitive way. A higher number means deliveries are slowing, which often happens when demand is strong, though it can also reflect supply disruptions.

• New orders: often read as a forward-looking demand signal
• Prices paid: watched for input cost pressure that may later reach consumer inflation
• Employment: a hint about hiring, though it does not always line up with the jobs report
• Backlog of orders and new export orders: context on demand depth and foreign demand
• Inventories: can rise because firms build stock or because sales disappoint

ISM versus S&P Global

The two survey families use different samples, questions and weightings, so they sometimes disagree. ISM has a longer history in the US and tends to get more market attention on release day. S&P Global offers flash estimates, which arrive earlier, and covers many countries with a consistent method, which helps when comparing the US with Europe or Asia.

When the surveys point in opposite directions, neither is automatically right. Many traders treat agreement between them as a stronger signal and disagreement as a reason for caution in how much weight to give either one.

How markets have tended to react

Readings stronger than expected have often lifted Treasury yields and the US dollar, since they suggest firmer growth or inflation. Equity index futures have reacted in both directions: stronger data can lift earnings hopes or raise concern that the Federal Reserve will keep policy tight.

Context drives which interpretation wins. When inflation is the main worry, a jump in prices paid can matter more than the headline. When recession is the main worry, new orders and employment can matter more. Exceptions are common, and a move at 10:00 AM ET can fade or reverse as other news arrives.

Early but noisy

Surveys arrive weeks before hard data such as industrial production, retail sales or GDP. That timing is their main value. The trade-off is noise: responses reflect sentiment, seasonal adjustment can shift readings, and one month can swing on weather, holidays or a single shock.

Many analysts look at the trend over several months and check whether hard data later confirms what the surveys suggested. A single reading near 50 rarely settles the question of whether the economy is speeding up or slowing down.

• Compare the latest reading with the prior few months
• Check whether manufacturing and services are moving together
• Look for confirmation in later hard data before drawing firm conclusions

Key terms

PMI (purchasing managers' index)

A survey-based index of business conditions built from the answers of purchasing and supply managers.

Diffusion index

A measure of how widely a change is spread across respondents, where 50 means improvement and deterioration are roughly balanced.

New orders

A sub-index showing whether firms report more or fewer incoming orders, often read as a forward-looking demand signal.

Prices paid

A sub-index showing whether firms report paying more or less for inputs, watched as an early sign of cost pressure.

Supplier deliveries

A sub-index where a higher reading means slower deliveries, often linked to strong demand or supply strain.

Flash PMI

A preliminary S&P Global PMI estimate released late in the survey month, before the final figure.

Consensus forecast

The median expectation of economists surveyed before a data release, used to judge whether a result is a surprise.

Hard data

Measured economic activity such as production, sales or employment counts, as opposed to survey responses.