ISM Index - Investment & Finance Definition
A monthly composite index, released by the Institute for Supply Management, that is based on surveys of 300 purchasing managers throughout the United States in 20 industries in the manufacturing area. The index is released on the first business day of the month and covers the previous month’s data, which makes it particularly timely. If the index is above 50, it indicates that the economy is expanding. Values below 50 indicate a contraction.
Within the overall index, there are nine subindices: new orders, production, supplier delivery times, backlogs, inventories, prices, employment, export orders, and import orders. The index is believed to reflect future movements in gross domestic product, thereby making it a closely watched economic data release. The subindices for new orders and backlogs predict well future production. Formerly, it was called the National Association of Purchasing Management’s survey. A limitation of the survey is that it doesn’t include any questions on wages, which is an important component of overall costs.