What it is
The ISM index consists of two main reports: the Manufacturing PMI (Purchasing Managers' Index) and the Services PMI. These indices are derived from monthly surveys of purchasing and supply executives regarding new orders, production, employment, supplier deliveries, and inventories. A reading above 50 generally indicates expansion in the sector, while a reading below 50 suggests contraction.
The ISM reports are closely watched by economists, investors, and the Federal Reserve as timely indicators of economic health. They provide forward-looking insights into business conditions, often signaling shifts in GDP growth, employment, and inflation. For instance, rising new orders and employment components within the ISM index can suggest a strengthening economy and potential inflationary pressures, influencing market sentiment and policy expectations.
Why it matters
The ISM index offers a quick, forward-looking snapshot of economic expansion or contraction in key sectors. It helps predict GDP trends and inflation, impacting market outlook.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice