ISM Manufacturing PMI

The release

How it is measured.

Executives are asked whether each of several things was higher, lower or the same as the month before. Each answer set becomes a diffusion index, and the headline is the equal-weighted average of five of them: new orders, production, employment, supplier deliveries and inventories. A reading above 50 means more respondents reported an increase than a decrease.

Why markets watch it.

It is published at the very start of the month, before any official figure for the month just ended. Beyond the headline, the new orders index is read as the forward-looking part, the prices index for cost pressure and the employment index ahead of the official jobs report.

How it is commonly misread.

A diffusion index measures how widespread a change is, not how large. A reading just above 50 says slightly more firms reported an increase than a decrease; it does not say output grew by a small amount. The 50 line is about manufacturing alone, which is a modest share of the United States economy, and the survey published under a similar name by S&P Global asks a different panel and can point the other way.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.