Purchasing Manager’s Index
PMI is an indicator of business activity- in the manufacturing and services sectors.
Calculation of PMI
✓ It is a survey-based measure that asks the respondents about changes in their perception about key business variables as compared with the previous month.
✓ It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
✓ The latest composite PMI decreased to 49.8 in September 2019 from 52.6 in August 2019.
✓ The PMI is a number from 0 to 100.
✓ PMI above 50 represents an expansion when compared to the previous month;
✓ PMI under 50 represents a contraction, and
✓ A reading at 50 indicates no change.
✓ If PMI of the previous month is higher than the PMI of the current month (as is the case mentioned above), it represents that the economy is contracting.
✓ The PMI is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.