FOR RELEASE: January 18, 2008
|Contact:||Andrea Waas, APR
ISM, Vice President
Business & Public Relations
800/888-6276, Ext. 3009
Institute for Supply Management™ (ISM) announces a revision in the formula for calculating the PMI (composite index for the manufacturing sector). ISM also announces the development of a similar composite index for the non-manufacturing sector, NMI (Non-Manufacturing Index).
In late 2006, ISM asked a group of supply management professionals, educators and leading economists to study the relationship between the PMI Index and GDP (gross domestic product). After extensive study, the revised formula was determined to more closely predict GDP. While the impact of the change is marginal, it does provide a more precise measure than the previous formula.
A similar study was conducted with the various indexes in the non-manufacturing sector. The NMI was developed as an overall indicator for the non-manufacturing sector, and is a better indicator of the relationship to GDP than the Business Activity Index alone.
The PMI, first implemented in 1984, summarizes change in the manufacturing sector and is often used as a basis of comparison to changes in GDP. The new formula for the PMI includes the same five indexes as the past formula but at equal weights, instead of the previous weighted formula. The new formula more closely predicts the GDP for the past several years.
|New Orders Index||20%|
|Supplier Deliveries Index||20%|
In addition, ISM has developed a similar composite index for the non-manufacturing sector, NMI (Non-Manufacturing Index), as a predictor of GDP.
|Business Activity Index||25%|
|New Orders Index||25%|
|Supplier Deliveries Index||25%|
Both the revised PMI Index formula and the new NMI Index will be implemented with the January 2008 Report On Business® monthly economic reports to be released in early February.
In late January, ISM will release the annual revised seasonal adjustment factors and the revised seasonally adjusted index numbers. The newly revised PMI Index numbers, revised back to January 2001, will also be released at that time.
The manufacturing and non-manufacturing indexes are reported monthly in the ISM Report On Business® and available at www.ism.ws. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.