All posts by Kristina Cahill

Is The Economy Heating Up, Or Cooling Off?

What do the stats from ISM’s Report On Business reveal about the economy and how can they help you on the job?

The October Purchasing Managers’ Index (PMI®)  registered 58.7 per cent in the U.S. It showed a decrease of 2.1 percentage points from the September ISM® Manufacturing ROB reading, yet the report stated that the economy has been growing for the past 14 consecutive months.

What do all these numbers mean and how can they help you in your job?

These reports have been correctly forecasting major turns in the business cycle for more than 70 years. Savvy purchasing executives have been using the keen insights provided to help with their strategic and tactical plans for just as long.

First things first, any PMI® above 50 indicates expansion in the ISM® report. So even if ‘the rate of up is down’, as our former chair used to joke, if the index is above 50 it signals a growing economy. If you are new to reading this report, start with the ‘Table At A Glance’ so you can familiarise yourself with the comparison of this month to last month for all 11 indicators.

Next, start listening in to the radio broadcasts each month following the report, on Manufacturing Talk Radio – not only will you get analysis of the latest numbers, there is also an archive of shows from which to put everything in context, and help you make the most of these reports.

ISM Report On Business

The foundation of the ISM® ROB and the primary reason for its credibility as an accurate indicator of the U.S. economy is the Business Survey Committee. The committee is composed of supply management professionals who are responsible for the purchases at their company.

Membership of the committee is based on the Census Bureaus’ North American Industry Classification System (NAICS) and diversified on each industry’s contribution to Gross Domestic Product (GDP).

Data is collected through a monthly survey, which asks how certain economic events have changed, if at all, in the current reporting month compared to the previous month. Committee members are only required to indicate for each of the activities has moved in one of three ways: has there been no change (same), or has there been a positive change in the economic directions (better, higher, and for Supplier Deliveries, slower) or a negative change in the economic direction (worse, lower, and for Supplier Deliveries, faster).

Members are encouraged to make additional comments about any of the activities that are affecting their purchasing operation or the outlook of their company. These comments provide valuable insight and depth to the reasons for the changes which might not otherwise be apparent form the statistics alone.

Are you interested in joining the panel of supply management professionals whose input informs the ISM® Manufacturing Report On Business®? It’s also a great way to learn what each index means!

To find out if you qualify and fill out an interest form, please click here.