Purchasing managers are asked simple questions: are new orders, production, employment, inventories and prices higher, the same or lower than last month? The index is the share saying higher plus half the share saying the same. A reading of 50 means as many firms report increases as decreases.
The US ISM surveys about 400 manufacturers and 400 services businesses. Each component (new orders, prices paid, employment) is published as its own index.
Why it matters
PMIs come out on the first business days of the month, weeks before official data for the same month, so markets treat them as an early read on the cycle. New orders lead production; prices paid lead official inflation. A manufacturing PMI below about 42.5 has historically lined up with recessions in the wider US economy.
See the data: ISM manufacturing PMI, ISM services PMI.
General information, not advice.