Managers' Index (PMI)
The Purchasing Managers' Index (PMI) serves as a critical indicator of the economic health of the manufacturing and service sectors. Compiled from a diffusion index based on surveys of purchasing managers, the PMI reflects whether market conditions, as viewed by these managers, are expanding, constant, or contracting. It provides valuable insights for company decision-makers, analysts, and investors about the current and future state of business conditions.
Functioning of the PMI
As a reliable early indicator of U.S. economic activity, the PMI is reported monthly, covering both manufacturing and service sectors, and includes a hospital PMI. It aggregates data from surveys conducted with senior executives across 19 primary industries, reflecting changes in new orders, inventory levels, production, supplier deliveries, and employment. A PMI above 50 signifies expansion compared to the previous month, while below 50 indicates contraction.
Applications of the PMI
The PMI is a versatile tool used by corporate managers to inform production and purchasing decisions, suppliers to anticipate demand for their products, and investors as a leading economic indicator. It assists in planning, forecasting, and strategic decision-making across various sectors, offering insights that precede major economic trends and outputs, including GDP, industrial production, and employment figures.