ISM Manufacturing Index.

In plain English

The Institute for Supply Management asks purchasing managers whether new orders, production, employment, deliveries, and inventories are better, the same, or worse than the prior month. Those answers become a diffusion index rather than a measure of volume, which is why 50 is the dividing line. The new orders sub-index is watched most closely as a forward signal. Because it comes out early in the month, it lands before most hard data for the same period. A companion services index covers the much larger non-manufacturing side of the economy.

01Why it matters

This is one of the earliest monthly reads on the industrial economy, so it moves markets and shapes expectations well before output and employment figures arrive.

02The math, step by step

Say the index reads 47.5, down from 51.2. Both the level and the direction matter: crossing below 50 signals contraction, and the 3.7-point drop shows how quickly conditions changed. A reading of 47.5 does not mean output fell 2.5 percent.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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