Daily Tip: Institute for Supply Management (ISM)

FreightWaves Customer SuccessDaily Tips

Did you know? You can gain insight on the direction of market conditions for manufacturing subsectors using the Purchasing Managers Index.

Each day we’ll send you a daily tip designed to guide you to become a SONAR expert. If you have any questions, please contact your Customer Success Representative or email the team at cs@freightwaves.com.

The Institute for Supply Management (ISM) is the largest not-for-profit professional supply management organization in the world. The Purchasing Managers’ Index (PMI) is a diffusion index published by the ISM that gives the direction of the manufacturing segment. The index is based around 50; a reading over 50 indicates expansion within the segment, while below 50 is indicative of contraction.

Purchasing managers in 19 manufacturing subsectors are surveyed each month regarding their perspectives on market conditions, detailing which operations are expanding, unchanged or contracting. The end result is a useful and leading indicator for economic activity, especially within manufacturing.

Purchasing Managers’ Index

The chart above shows the monthly Purchasing Management Index from the Institute for Supply Management.

Analysts use this data to gauge the outlook for manufacturing in the U.S. and the separate components to see what factors are impacting the industry. 

Carriers use the PMI to anticipate increased or reduced activity within manufacturing sectors. They can then adjust expectations and allocate resources more efficiently.

Brokers use this information to target shippers within manufacturing sub-sectors, especially when activity is increasing. The Production and New Orders components will reveal opportunities and provide an outlook for the manufacturing segment.

Shippers use this data to help benchmark their internal trends to see if they are performing in accordance, below, or above the current market conditions. Components from the PMI such as New Orders and Backlog of Orders can help align expectations for market activity in the coming months.

The index is broken out into 10 components in addition to the overall reading. For example, the New Orders Index of the PMI gives a preview of what production is set to take place in the coming months. The Inventories and Backlog of Orders components reveal whether the activity is high and if existing inventory is building up. Wherever you fit in the supply chain, you can utilize the data to enhance decision-making abilities, especially when paired with the near-real-time data in SONAR to complete the picture. 

The Purchasing Managers’ Index is separated into the following indices:

  • ISM.PMI – Purchasing Managers Index
  • ISM.MCIN – Manufacturing Customers Inventory
  • ISM.MDEL – Manufacturing Supplier Deliveries 
  • ISM.MEMP – Manufacturing Employment
  • ISM.MEXP – Manufacturing New Export Orders
  • ISM.MIMP – Manufacturing Import
  • ISM.MINV – Manufacturing Inventories
  • ISM.MLOG – Manufacturing Backlog of Orders
  • ISM.MNEW – Manufacturing New Orders
  • ISM.MPRI – Manufacturing Prices 
  • ISM.MPRO – Manufacturing Production

1) Click the large Plus (+) sign in the top right corner of a custom page.

2) Select the “Chart” option from the drop-down menu.

3) Type ISM.PMI into the search “Enter Symbol” field.

4) Select the “+ Compare” button under the main symbol title and enter FOTRI.USA into the search field.

5) Select the Display drop-down menu and select “Dual” under Y Axis Style for easier comparison between the two indices.

Pro Tip: Turn on large fonts in the display settings under Chart Preferences for viewing ease.

If you have questions about the Purchasing Managers Index, please contact us at cs@freightwaves.com. 

Happy Hauling,

The FW Team