The first business day of every month, the Institute for Supply Management, popularly known as the ISM, issues the closely watched ISM Manufacturing Survey. This survey tracks the health of the manufacturing sector. The survey is comprised of 400 member companies across 20 industry groups. The ISM Manufacturing Survey is the first report issued each month that describes how well or how poorly the economy has fared over the previous four weeks.
Essentially, the ISM Survey chronicles orders for production materials and supplies. This survey should not be confused with regional surveys, which gauge activity in certain more-confined regions. The most notable among these regional surveys is the Chicago-area Purchasing Managers’ report. This survey is issued on the last business day of the prior month. It is often, but not always, a reliable guide to how the U.S. manufacturing sector has performed.
The ISM Manufacturing Survey provides an important measure of the industrial health of the nation’s economy and should be looked at in concert with other industrial measures to forecast aggregate movements within the economy. The measurement scale starts at 0 and works its way higher to 100. If the Index has a value of less than 50, but more than 44, it signals that the manufacturing sector is declining, but that we are not necessarily in a recession. If the Index falls below 44, the measure suggests that the nation is in a recession. A value substantially above 50 likely indicates a time of economic growth and expansion.
Within this composite survey are individual readings on business activity, new orders, employment, supplier deliveries, inventories, prices, backlogs, exports, and imports. Here as well, each individual component of the overall index has a scale of 0 to 100.