The Purchasing Managers' Index is a diffusion index derived from monthly surveys of private-sector purchasing managers. A reading above 50 signals expansion; below 50 signals contraction. It is one of the most timely economic indicators, released on the first business day of each month.
Two Major Providers
In the U.S., ISM (Institute for Supply Management) publishes the Manufacturing PMI and Services PMI. S&P Global publishes competing versions with broader country coverage (50+ nations). ISM surveys roughly 400 firms across 18 industries; S&P Global surveys over 800.
Five Sub-Indices
The Manufacturing PMI is a weighted composite of: New Orders (30%), Production (25%), Employment (20%), Supplier Deliveries (15%), and Inventories (10%). New Orders is the most forward-looking component and often leads the headline by 1-2 months.
Why Markets Care
PMI is the earliest monthly snapshot of economic activity β released before most 'hard data.' A Manufacturing PMI below 50 for two or more consecutive months has historically coincided with or preceded recessions. The Services PMI matters more for the U.S. economy, where services represent ~77% of GDP (BEA).
Historical Context
U.S. ISM Manufacturing PMI plunged to 41.5 in April 2020 (ISM), its lowest since April 2009 (36.3). During the 2021 recovery, it surged to 63.7 β the highest since December 1983. Flash PMI (preliminary estimates released ~1 week before final) often moves markets due to its timeliness.
Key Nuance
PMI is a breadth indicator, not a magnitude indicator β it measures the share of firms reporting improvement, not the degree of improvement. A reading of 52 has the same weight whether firms grew 1% or 10%.