PURCHASING MANAGERS INDEX

Subject: Economy

Context: PMI for India’s manufacturing touched 56.3 in November, signaling that even as an improvement in wider industrial activity continued, the sector’s expansion as well as the pace of new orders slowed down while employment also declined further.

Concept:

• 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.