top of page
  • Writer's pictureRealFacts Editorial Team

ISM Manufacturing and Service Index Report


graphic of reports

What is an ISM Report? 


The ISM Manufacturing Index, also known as the Purchasing Managers' Index (PMI), is a crucial economic indicator in the United States. It provides insights into the health of the manufacturing sector based on monthly surveys of purchasing managers at over 400 manufacturing firms across various industries. Here's a summary of its significance and workings: We will later discuss the ISM Services Index which is similar in terms of measurements however it measures the services industry rather than the manufacturing industry. 


1. Indicator of Economic Health: The ISM Manufacturing Index is considered a leading indicator of economic activity because it reflects changes in production levels from month to month. A reading above 50 indicates expansion in the manufacturing sector, while a reading below 50 suggests contraction. 

2. Components: The index is composed of several components, each weighted equally: new orders, production, employment, supplier deliveries, and inventories. These components are seasonally adjusted to provide a clearer picture of trends. 

3. Survey Methodology: Purchasing managers are surveyed about changes in their organizations' activities—whether they are increasing, decreasing, or stagnant. Responses are used to calculate diffusion indexes for each component, which are then aggregated to derive the overall PMI.

Cole Wall Date: 7/3 

4. Timing and Release: The PMI is released on the first business day of each month at 10:00 a.m. EST. This early release makes it one of the first indicators of economic performance available to investors and policymakers. 

5. Market Impact: The PMI has significant implications for financial markets. A rising PMI often signals potential stock market growth and increased corporate profitability, while a declining PMI can indicate economic slowdown or recessionary pressures, influencing bond markets and investor sentiment accordingly. 

6. Forecasting Tool: Beyond its immediate impact, the PMI is used by economists, policymakers, and businesses to forecast future economic conditions. Its forward-looking nature helps in anticipating changes in business cycles and inflationary pressures. 


In summary, the ISM Manufacturing Index is a vital tool for assessing the health and direction of the U.S. economy, particularly its manufacturing sector. Its monthly release provides valuable insights that guide investment decisions, economic policy formulation, and broader market sentiment. 


June ISM Manufacturing Report 


The latest Manufacturing ISM® Report On Business® for June 2024 reported Monday July 1st indicates that the U.S. manufacturing sector continued to contract for the third consecutive month, with a Manufacturing PMI® of 48.5%. Here are some key highlights from the report:


PMI graphic

1. New Orders: The New Orders Index improved slightly to 49.3%, up from 45.4% in May, but still indicating contraction. 

2. Production: The Production Index fell to 48.5%, indicating contraction for the second consecutive month. 

3. Employment: The Employment Index dropped to 49.3%, indicating contraction in employment after a brief expansion in May.

Cole Wall Date: 7/3 

4. Supplier Deliveries: The Supplier Deliveries Index rose to 49.8%, indicating faster deliveries for the fourth consecutive month. 

5. Inventories: The Inventories Index fell to 45.4%, indicating faster contraction in inventories. 

6. Prices: The Prices Index decreased to 52.1%, indicating that prices continued to increase but at a slower rate than in May. 

7. Backlog of Orders: The Backlog of Orders Index decreased to 41.7%, indicating contraction for the 21st consecutive month. 

8. New Export Orders and Imports: Both the New Export Orders Index (48.8%) and Imports Index (48.5%) indicated contraction in June. 

9. Industry Performance: Eight manufacturing industries reported growth, including Chemical Products and Petroleum & Coal Products, while nine industries reported contraction, including Machinery and Transportation Equipment. 

10. Commodities: Commodities such as Aluminum, Copper, and Plastic Resins were reported as up in price, while commodities like Steel showed decreases in price. 


Overall, the report reflects ongoing challenges in the manufacturing sector, including weak demand, reduced production levels, and cautious investment in inventories and capital expenditures due to economic uncertainty and supply chain constraints. 


June ISM Services Report 


Also reporting Wednesday July 3rd was The June 2024 Services ISM® Report On Business® indicates a contraction in economic activity within the services sector, following a decline in the Services PMI® to 48.8%, down from 53.8% in May. Here are the key points from the report:


Chart of PMI

1. Services PMI: Registered at 48.8%, indicating contraction for the third time in the last 49 months, with significant decreases compared to May's figures across various indices. 

2. Business Activity Index: Dropped to 49.6% from 61.2% in May, marking the first contraction since May 2020. 

3. New Orders Index: Contracted to 47.3%, down from 54.1% in May, the first contraction since December 2022.

Cole Wall Date: 7/3 

4. Employment Index: Contracted to 46.1% in June, indicating a decline in employment for the sixth time in seven months. 

5. Supplier Deliveries Index: Slowed to 52.2% from 52.7% in May, indicating slower delivery times. 

6. Prices Index: Decreased slightly to 56.3% from 58.1% in May, marking the 85th consecutive month of price increases. 

7. Inventories Index: Contracted sharply to 42.9% from 52.1% in May, the lowest since October 2021. 

8. Backlog of Orders Index: Contracted to 44.0% from 50.8% in May, the lowest since August 2023. 

9. New Export Orders Index: Declined to 51.7% from 61.8% in May, showing a slowdown in demand from abroad. 

10. Imports Index: Contracted to 44.0% from 42.8% in May, indicating reduced imports for the second consecutive month. 

11. Inventory Sentiment Index: Grew to 64.1% from 57.7% in May, indicating a sentiment that inventories are too high relative to business activity levels. 


Overall, the report highlights broad-based weakness across various sectors of the services economy, with significant contractions in business activity, new orders, and employment. Factors contributing to these declines include ongoing supply chain challenges, labor shortages, and inflationary pressures.

Comments


bottom of page