Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Institute for Supply Management (ISM)

What it is:

The Institute for Supply Management (ISM) is a professional association for individuals and companies with an interest in supply management.

How it works (Example):

The ISM publishes two important monthly surveys, the Manufacturing ISM Report on Business and the Non-Manufacturing ISM Report on Business

Both the Manufacturing and Non-Manufacturing ISM Reports include surveys of purchasing and supply executives around the country on topics such as the number of new orders they're placing, production levels, hiring/employment, supplier deliveries, inventories, prices, order backlogs, exports and imports.  

The reports also include direct quotations from executives on the state of their businesses. For example, in June 2012, respondents were saying:

"General state of business this month is flat, with no changes." (Construction industry)

"Business is still growing, but there has been a definite slowing in growth." (Wholesale Trade)

"Business is still strong, with some nagging question whether it will be sustained." (Machinery)

Why it Matters:

The ISM releases its reports every month. The results of its survey can be immediately felt throughout the markets. 

The most closely-watch component of the monthly reports is the Purchasing Managers Index (PMI). The PMI is widely regarded as an important and accurate predictor of the broad economy. A number above 50 suggests that the economy is expanding, while a reading below 50 suggests it is contracting.