Did you know? You can measure which direction the manufacturing segment is moving by using the Purchasing Managers Index.
What is it?
Purchasing Managers Index (ISM) – 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, wherein a reading over 50 indicates expansion within the segment, while below 50 is indicative of contraction.
Purchasing managers for 19 manufacturing sub-sectors are surveyed each month on their perspectives on market conditions, detailing that operations are expanding, unchanged or contracting. The end result is a useful and leading indicator for economic activity, especially within manufacturing.
The chart above shows the monthly Purchasing Management Index from the Institute for Supply Management.
Who needs it?
Analysts can use this data to gauge the outlook for manufacturing in the U.S. and separate the components to see what factors are impacting the industry.
Brokers can use this information to target shippers within the manufacturing segment, especially when activity is increasing. The Production and New Orders components will reveal opportunities and outlook for the manufacturing segment.
Shippers can 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.
Carriers can use the PMI to anticipate increased or reduced activity within manufacturing. They can adjust expectations and allocate resources more efficiently.
What can I do with it?
The index is broken out into 10 components outside of the overall reading. 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 can be 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
Show me how!
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 indexes.
Pro Tip: Turn on large fonts in the display settings under Chart Preferences for viewing ease.
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