Purchasing Managers’ Index(PMI)

Purchasing_Managers_Index

Nikkei India PMI or Purchasing Managers’ Index

India's Manufacturing PMI Surges to a Decade High in October, 2020. 

What is PMI?

  • PMI or Purchasing Managers’ Index(PMI) is an indicator of business activity both in the manufacturing and services sectors. It indicates the economic health and investor’s sentiments about the manufacturing and services sectors of the country.
  • Publisher: PMI data is compiled by Markit Economics and published by the Japanese firm Nikkei. PMI is calculated separately for both Manufacturing (Manufacturing PMI) and Services sectors (Services PMI) and then a composite index is published.

How is it Compiled?

  • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
  • PMI is derived from a series of qualitative questions. Executives from a reasonably big sample, running into hundreds of firms are asked whether key indicators such as (a)output (b)new orders (c)business expectations, and (d)employment were stronger than the month before and are asked to rate them.

Expansion or Contraction points 

  • The index is the sum of the percentage of higher responses and half the percentage of unchanged responses.
  • The indices vary between 0 and 100 with a reading above 50 indicating an overall increase compared to the previous month and below 50 an overall decrease.
  • Higher the difference from the Mid-point i.e. 50, greater the expansion or contraction.
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