Economic Event · monthly

ISM Manufacturing PMI

Source: Institute for Supply Management (ISM)Release: First business day of monthTime: 10:00 AM ET

The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index is a monthly survey of manufacturing executives covering new orders, production, employment, supplier deliveries, and inventories. Readings above 50 indicate expansion; below 50, contraction. Released at 10:00 AM ET on the first business day of each month. ISM Manufacturing is a classic leading indicator for industrial activity, corporate earnings, and the business cycle. The new orders and employment subindices are particularly watched. Prolonged readings below 50 historically precede recessions; moves from below to above 50 signal cycle turns. The prices-paid subindex also functions as an inflation signal.

Why It Matters

ISM Manufacturing has correctly flagged every US recession with 6-12 months of lead time since 1960, though with false positives. Readings below 45 nearly always correspond to recession. The 2022-2023 sub-50 stretch is a notable recent exception, a manufacturing recession without a broader economic one. Markets watch ISM for turning points. The move from below 50 to above 50 (and vice versa) often triggers sector rotation: industrial/cyclical outperformance when ISM crosses above 50; defensive rotation when below.

What to Watch For

•Headline ISM vs 50 threshold
•New orders subindex, forward indicator
•Employment subindex
•Prices paid, inflation signal
•Supplier deliveries, supply chain signal
•Inventories relative to new orders

Market Reaction Pattern

ISM beat with strong new orders: industrials/cyclicals outperform, copper/oil up, rates up. ISM miss with weak new orders: defensives outperform, rates down, dollar up.