ISM Makes Annual Adjustments to Seasonal Factors for ISM Manufacturing PMI® and Diffusion Indexes and ISM Non-Manufacturing NMI® and Diffusion Indexes

TEMPE, Ariz., Jan. 29, 2015 /PRNewswire/ -- Based on input from an independent expert, Institute for Supply Management^® recently announced the completion of its annual adjustments 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 that changes are effective with the January 2015 ISM Manufacturing Report On Business^®, which is scheduled to be released on February 2, 2015, and the January 2015 ISM Non-Manufacturing Report On Business^®, which will be released on February 4, 2015.

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 (2015).

As in previous years, the X-13-ARIMA program was used to develop the revisions to the Manufacturing and Non-Manufacturing indexes for 2011 through 2014, as well as the 2015 projected seasonal factors. The 2015 seasonal factors will be recomputed when the actual data are known in early 2016. Projected seasonal factors for 2015 and revised seasonally adjusted indexes are shown below.

To compute the PMI®:

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

The revised breakeven point for the overall economy is a PMI® of 43.1 percent. A PMI® over 43.1 percent indicates an expanding overall economy. A PMI® below 43.1 percent indicates the overall economy is declining. The ISM Manufacturing Inventories Index is no longer seasonally adjusted as of January 2012.

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®. 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. Institute for Supply Management® (ISM) is the first supply management institute in the world. Founded in 1915, ISM's mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM Report On Business® — ISM maintains a strong global influence among individuals and organizations.

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SOURCE Institute for Supply Management