The Chicago Purchasing Managers’ Index (PMI) is provided by the Institute for Supply Management and is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The survey is conducted by Kingsbury International, LTD. Manufacturing and non-manufacturing firms are both surveyed. Hence, it is not directly comparable to pure manufacturing surveys.
A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change. Although the ISM publishes several indexes, the PMI is the most widely followed and is sometimes referred to as the ISM index.
Many market players don’t realize that non-manufacturing activity is covered in this index and tend to focus on the manufacturing side only. On its own, it can be viewed as a regional indicator of general business activity. Some of the Chicago PMI’s sub-indexes also provide insight on commodity prices and other clues on inflation. One should be aware that Kingsbury International, LTD releases the monthly report to those with private subscriptions three minutes prior to release to the media. This may account for occasional market activity just prior to public release.
This survey is somewhat local in nature – reflecting overall economic activity in the Chicago area. But many see the Chicago PMI as being representative of the overall economy.