What is the 'Purchasing Managers' Index - PMI' ?
- The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector.
- It based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
- The purpose of the PMI is to provide information about current business conditions to company decision makers, analysts and purchasing managers
In detail : 'Purchasing Managers' Index - PMI'
The information to produce the PMI is gathered using monthly surveys sent to purchasing executives at approximately 300 companies.
A PMI of more than 50 represents expansion of the manufacturing sector when compared to the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change.
The Institute of Supply Management (ISM) generates the PMI each month.
The Index of Industrial Production (IIP) and the Purchasing Manager's Index (PMI) :
- There are two main points of difference between the PMI and the IIP.
- The first is that the PMI is a private sector survey while the IIP is gauged by the government.
- The second difference is in what is being measured. While the IIP is a measure of output, PMI, as the name suggests, measures activity at the purchasing or input stage.
- Together the two indices provide a composite and reasonably comprehensive information about the formal manufacturing sector.
- As with the IIP, the PMI suffers from the lacuna of not measuring informal sector activity.