ISM Report On Business Receives Annual Adjustments From Commerce Department

U.S. Department of Commerce Makes Annual Adjustments to Seasonal Factors for ISM Manufacturing PMI^™ and Diffusion Indexes and ISM Non-Manufacturing NMI^™ and Diffusion Indexes

Tempe, AZ — The U.S. Department of Commerce recently completed its annual adjustment to the seasonal factors used in the monthly Institute for Supply Management^™ (ISM) Manufacturing Report On Business^® and the monthly Institute for Supply Management^™ (ISM) Non-Manufacturing Report On Business^®. Economists and managers who track these indexes will note these changes are effective with the January 2013 ISM Manufacturing Report On Business^®, which is scheduled to be released on February 1, 2013, and the January 2013 ISM Non-Manufacturing Report On Business^®, which will be released on February 5, 2013.

Seasonal adjustment factors are used to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-movable holidays. It is standard practice to project the seasonal adjustment factors used to calculate the indexes one year ahead (2013).

The X12-ARIMA program was used to develop the revisions to the Manufacturing and Non-Manufacturing indexes for 2009 through 2012, as well as the 2013 projected seasonal factors. The 2013 seasonal factors will be recomputed when the actual data are known in early 2014. Projected seasonal factors for 2013 and revised seasonally adjusted indexes are shown below, followed by charts tracking both the former and the revised PMI^™for Manufacturing and NMI^™ and Business Activity Indexes for Non-Manufacturing.

To compute the PMI^™:

1)  Calculate the unadjusted diffusion index for New Orders, Production, Employment and Inventories to two decimal places (percent higher or up plus one half of the percent same or unchanged). For Supplier Deliveries, it will be percent slower plus one half of the percent same or unchanged.

2) Divide each unadjusted diffusion index by its seasonal factor (round to one decimal place). Note: As of January 2012, the ISM Manufacturing Inventories Index is no longer seasonally adjusted.

3) Add all five index numbers together and divide by five.

To compute other indexes, follow steps #1 and #2 above for each indicator.

To compute the NMI^™:

1)  Calculate the unadjusted diffusion index for Business Activity, New Orders and Employment to two decimal places (percent higher or up plus one half of the percent same or unchanged). For Supplier Deliveries, it will be percent slower plus one half of the percent same or unchanged.

2) Divide each unadjusted diffusion index by its seasonal factor (round to one decimal place).

3) Add all four index numbers together and divide by four.

To compute other indexes, follow steps #1 and #2 above for each indicator.

Revised Manufacturing Seasonally Adjusted Indexes 2009-2012

*The ISM Manufacturing Inventories Index is no longer seasonally adjusted as of January 2012.

The revised breakeven point for the overall economy is a PMI^™ of 42.2 percent. A PMI^™ over 42.2 percent indicates an expanding overall economy. A PMI^™ below 42.2 percent indicates the overall economy is declining.

Beginning in January 2008, ISM began calculating a composite index for the Non-Manufacturing sector (NMI^™)

Charts Illustrating Former and Revised Indexes can be found at https://www.ism.ws/about/MediaRoom/newsreleasedetail.cfm?ItemNumber=23419 (example below)

The ISM Report On Business^® is considered by many economists to be the most reliable near-term economic barometer available. It is reviewed regularly by top government agencies and economic and business leaders for its timely, accurate information. The Manufacturing and Non-Manufacturing ISM Report On Business^® is published monthly by the Institute for Supply Management™, the first supply institute in the world. Each month, both reports are compiled from responses to questions asked of purchasing and supply executives across the country and reflects change, if any, in the current month compared to previous months. Founded in 1915, ISM exists to lead and serve the supply management profession and is a highly influential and respected association in the global marketplace. By executing and extending its mission through education, research, standards of excellence, influence building and information dissemination — including the renowned monthly ISM Report On Business^® — ISM continues to extend the global impact of supply management. ISM’s membership base includes more than 40,000 supply management professionals in more than 80 countries. Supply management professionals are responsible for trillions of dollars in the purchases of products and services annually. ISM is a member of the International Federation of Purchasing and Supply Management (IFPSM).