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ISM® Announces Annual Adjustments for 2025

The Institute for Supply Management® (ISM®) has recently finalized its annual revisions to the seasonal factors utilized in the ISM® Manufacturing PMI® and the ISM® Services PMI®. This decision comes after consulting with an independent expert and emphasizes ISM's commitment to providing accurate economic indicators. The adjustments will be effective with the January 2025 ISM® Manufacturing PMI®, scheduled for release on February 3, 2025, followed by the January ISM® Services PMI® on February 5, 2025.

Understanding Seasonal Adjustments

Seasonal adjustment factors are crucial as they help account for fluctuations that occur at specific times of the year. These variations are driven primarily by typical weather patterns, institutional arrangements, and fixed holidays. By projecting seasonal adjustment factors for the coming year, ISM aims to ensure its reports offer pertinent insights into economic trends. Similar to previous years, the adjustments were derived using the X-13-ARIMA methodology, which is recognized for its reliability in estimating seasonal factors. The revisions apply to data spanning from January 2021 until December 2024, and projections for 2025 have also been developed.

Detailed Calculations for 2025

For the Manufacturing PMI® Index, several categories such as New Orders, Production, Employment, and Inventories have yielded new seasonal adjustment factors. For instance:

• - New Orders for January 2025 will have a seasonal adjustment factor of 0.966.
• - Production will be adjusted by 0.962.
• - Employment sees an adjustment of 0.980.
• - Inventories will hold a seasonal factor of 1.001.

These numeric adjustments reflect normal fluctuations that occur across the year, facilitating a clearer understanding of manufacturing trends.

Similarly, the Services PMI® Index also underwent seasonal adjustments. For example:

• - Business Activity for January 2025 will be adjusted by 0.930.
• - New Orders will experience adjustments of 0.939.
• - Employment factors will be set at 0.952.
• - Prices will see a seasonal factor of 1.010.

The Importance of PMI Reports

The ISM® Report On Business® provides a vital economic barometer that is widely relied upon by economists and policymakers. The insights garnered from the Manufacturing and Services PMI® reports reflect timely, accurate data derived from purchasing and supply executives nationwide. The comprehensive data collection allows stakeholders to gauge economic conditions and make informed decisions.

Moreover, the PMI indicators have gained a reputation for being among the most dependable predictors of economic performance. Each month, data is compiled from responses to key questions posed to purchasing and supply executives, offering a snapshot of activity compared to previous months.

As a result, variations stemming from the newly adjusted seasonal factors will influence the interpretation of these indicators for 2025, allowing economists and businesses to align their strategies appropriately.

Conclusion

These annual adjustments are a testament to ISM's commitment to maintaining the integrity and accuracy of its economic indicators. With significant shifts anticipated due to these updates, stakeholders in both manufacturing and service sectors should stay informed about the new indicators to better navigate the upcoming economic landscape. The announcements pave the way for a more insightful understanding of market dynamics in 2025, contributing to better foresight in procurement and supply chain strategy.