Reference 03 November 2026 · 6 min

A plain-English guide to PMI price sub-indices: diffusion, not inflation, and what prices charged adds to prices paid.

Written Tuesday November 3, accompanying the October 23 analysis: the flash composite came in at 57.6, inside the no-call band, while selling prices rose at the fastest pace since August 2022 (S&P Global via Kitco); ten days later the ISM prices index printed 75.2 (ISM). What the price questions ask, how a diffusion index is built and why 75 is breadth not magnitude, the oil link in input prices, why prices charged is the pass-through signal, and how loosely any of it leads CPI.

By Igor Komolov

Written Tuesday November 3, 2026, accompanying the Friday October 23 analysis note, which graded a pre-registered plan against the S&P Global flash US composite PMI. The composite came in at 57.6, down from 58.4, inside the no-call band, and yields rose anyway, the 10-year by 3.5 basis points, with oil up 3.5 percent. The line in the release that was not graded, and that the coverage led with, was that selling prices rose at the fastest pace since August 2022. Ten days later the ISM manufacturing survey's prices index printed 75.2 (the November 2 note). This guide explains what the price sub-indices in the two big business surveys measure, how a diffusion index of prices differs from an inflation rate, why a 75 is not "75 percent inflation," and what these indices can and cannot say about CPI. The flash PMIs vs ISM guide covers the headline surveys; this one is about their price questions.

What the surveys ask

Both the ISM Report on Business and the S&P Global PMI are surveys of purchasing managers who answer each question with one of three words: higher, same, lower, compared with a month ago (ISM Report on Business; S&P Global PMI). The price questions are:

ISM Prices (manufacturing and services): are the prices you pay for materials and services higher, the same or lower than last month? It is an input-cost question. The headline often calls it "prices paid."
S&P Global input prices: the same input-cost question.
S&P Global output prices, or prices charged: are the prices you charge your customers higher, the same or lower? This is the one that read "fastest since August 2022" on October 23, and it is the closer cousin of CPI and PPI because it is about what firms sell for, not what they buy.

ISM does not publish a prices-charged index for manufacturing; its prices index is inputs only. That is the first thing to know when the two surveys seem to disagree.

Diffusion, not inflation

A diffusion index is the share answering "higher" plus half the share answering "same." If 60 percent of respondents say higher, 30 percent same and 10 percent lower, the index is 60 + 15 = 75. It measures how widespread price increases are, not how large. An index of 75.2 says that a large majority of purchasing managers paid more for inputs in October than in September; it does not say whether they paid 1 percent more or 10 percent more. The same 75 could come from mild, universal increases or from a few sharp ones and many small ones.

Three consequences follow. First, 50 is the dividing line, so a fall from 77.9 to 75.2 (the ISM's September to October move) means price increases became slightly less widespread while remaining nearly universal; it is not disinflation. Second, the index is bounded at 100, so it saturates: once almost everyone is paying more, the index stops rising even if the increases get larger. Third, the index is a monthly change question with no memory, so a 75 for twelve months running describes a year of sustained increases, which is a different thing from a single hot month.

Input prices and the oil link

Manufacturing input prices are dominated by commodities, and energy in particular. Brent's daily closes averaged about $102 in September (import prices guide) and the December contract reached $117.12 on October 23. A prices index in the mid-70s in those conditions is unsurprising, and it will fall quickly if oil does. That is the limit of the ISM prices index as an inflation signal: it tracks input costs, and input costs track commodities, so it tells you mostly what you could learn from the oil price with less delay. The oil-inflation transmission guide covers how much of that reaches CPI.

Output prices and the pass-through question

Prices charged is the more useful of the two for inflation, because it answers the question the input index raises: are firms passing costs on? When input prices run far ahead of output prices, margins are absorbing the shock and consumer inflation has a buffer. When output prices catch up, the buffer is gone. S&P Global's October flash reported the fastest rise in selling prices since August 2022, per the secondary coverage quoted in the analysis note (S&P Global's own page returned a 403 that day, and the note said so). The ISM services report has its own prices index, also inputs, and the ISM manufacturing vs services guide covers why the services one matters more for core inflation.

How well do they lead CPI?

The honest answer is: directionally, with a lag of a few months, and with enough noise that no one should set a CPI forecast from them. The relationship is strongest for goods prices and commodity-driven episodes and weakest for services and shelter, which are most of core CPI. A reading of 75 after a year in the 50s is a warning that goods inflation is coming; a reading of 75 after a year in the 70s is a description of the regime you are already in. On October 23 the market's reaction was to oil, not to the survey: the 10-year's 3.5 basis point rise was mostly breakevens, and the flash release window itself moved the 10-year 1.8 basis points.

What the price sub-indices do not tell you

Magnitude. Breadth only. A diffusion index cannot be converted into a percentage change.
The consumer. Both surveys ask firms about their own prices. Retail margins, rents and wages are not in them.
Anything new about oil. If you know the oil price, you know most of what the manufacturing prices index will say.

A checklist for the next survey

Say which index: ISM prices (inputs), S&P input prices, or S&P output prices.
Read the level against 50 and against its own last twelve months, not as a growth rate.
Check the gap between input and output prices; a closing gap is the pass-through signal.
Ask what oil did over the survey month before crediting the index with news.
Treat the composite headline and the price line as separate releases; the plan graded one, the coverage led with the other.