ISM® Makes Annual Adjustments to Seasonal Factors for ISM® Manufacturing PMI® and Diffusion Indexes and ISM® Services PMI® and Diffusion Indexes

TEMPE, Ariz., Jan. 28, 2021 /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 PMI® Report On Business® and the monthly Services PMI® Report On Business®. Purchasing managers and economists who track these indexes will note that changes are effective with the January 2021 ISM® Manufacturing PMI® Report On Business®, which is scheduled to be released on February 1, 2021, and the January 2021 ISM® Services PMI® Report On Business®, which will be released on February 3, 2021.

NOTE: Beginning with the February 2019 report (January 2019 data), ISM® only rounds the final published numbers rather than also rounding intermediate numbers.

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 (2021).

As in previous years, the X-13-ARIMA program was used to develop the revisions to the Manufacturing and Services indexes for January 2012 through December 2020, as well as the 2021 projected seasonal factors. The 2021 seasonal factors will be recomputed when the actual data are known in early 2022. Projected seasonal factors for 2021 are shown below.

To compute the PMI®:

1)  Calculate the unadjusted diffusion index for New Orders, Production, Employment and Inventories to two decimal places. Supplier Deliveries (which are not seasonally adjusted) 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 five index numbers together and divide by five.

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

To compute the Services PMI®:

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 revised breakeven point for the overall economy is a Services PMI® of 49.2 percent. A Services PMI® over 49.2 percent indicates an expanding overall economy. A Services PMI® below 49.2 percent indicates the overall economy is declining.

About ISM® Report On Business®
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 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.

About Institute for Supply Management®
Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about $1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM® is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM® leads the profession through the ISM® Report On Business®, its highly regarded certification programs and the ISM® Mastery Model™. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

SOURCE Institute for Supply Management

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