Purchasing Manager Index (PMI)

Purchasing Manager Index (PMI)

News: India’s manufacturing sector continued to perform better with S&P Global Purchasing Managers’ Index (PMI) rising to 56 in November against 55.5 in October.

What is PMI?
• The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
• It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
• The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
• PMI is compiled by IHS Markit for more than 40 economies worldwide – IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.

How to anaylize PMI?
• The PMI is a number from 0 to 100.
• A number above 50 means expansion, while a score below that denotes contraction.
• A reading at 50 indicates no change.
• It is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.
• It is different from the Index of Industrial Production (IIP), which also gauges the level of activity in the economy.
• IIP covers the broader industrial sector compared to PMI. However, PMI is more dynamic compared to a standard industrial production index.