PURCHASING MANAGERS INDEX

Subject : Economy

Context : India’s manufacturing sector activity improved for the third straight month in October with companies raising output to the greatest extent in 13 years amid robust sales growth, PMI survey indicated .

Concept : 

• PMI is an indicator of business activity- in the manufacturing and services
• 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 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.

Purpose: To provide information about current and future business conditions to company decision-makers, analysts, and investors. As the official data on industrial output, manufacturing and GDP growth comes much later, PMI helps to make informed decisions at an earlier stage.