What is Purchasing Manager Index – PMI?
An indicator of the economic health of the manufacturing sector, the Purchasing Managers’ Index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
The headline manufacturing PMI is a composite of five of the survey indices. These are New orders, Output, Employment, Suppliers’ delivery times (inverted) and Stocks of purchases.
The Purchasing Managers Index (PMI) is used as an indicator of economic activity. It is a reflection of how many purchasing managers have reported better than normal business conditions in any given month. A figure of 50 is average and anything below 50 means that the economy is contracting.
How PMI data is compiled?
Manufacturing PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP. The responses are collected in the second half of each month, and indicate the direction of change compared to the previous month. This index reflects changes in manufacturing sector and is used by policy makers.
The graph shows Factories’ output recorded a grand opening in January 2020 , as Purchasing Managers’ Index (PMI) for manufacturing surged to 55.3 in the month, the highest in nearly eight years.