PURCHASING MANAGERS INDEX

PURCHASING MANAGERS INDEX

Subject: Economics

Context: India’s manufacturing sector activity was largely flat in April, as rates of growth for new orders and output eased to eight-month lows amid the intensification of the Covid-19 crisis, a monthly survey said.

Concept:

• The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) was at 55.5 in April, little changed from March’s reading of 55.4.

Purchasing Managers’ Index

• 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.