Purchasing Managers’ Index (PMI)

In News 

  • India’s manufacturing sector witnessed faster growth in April, sequentially, due to quicker increases in production and factory orders, as well as renewed expansion in international sales. 
    • The Index (PMI) rose from 54 in March to 54.7 in April. 

About Purchasing Managers’ Index (PMI)

  • It is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
  • It is an economic indicator, which is derived after monthly surveys of different companies.
  • There are two types of PMI Manufacturing PMI and Services PMI.
    • A combined index is also made using both manufacturing PMI and services PMI.
  • Methodology: 
    • The PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers, based on company workforce size, based on contributions to GDP. 
    • Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month.
      • IHS Markit is a London based global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
  • Calculation of PMI:
    • It is indicated by a number from 0 to 100.
    • A print above 50 means expansion while a score below 50 denotes contraction.
    • A reading at 50 indicates no change.
    • If the previous month PMI is higher than the current month PMI, it represents that the economy is contracting.
  • Purpose: 
    • To provide information about current and future business conditions to company decision-makers, analysts, and investors.
    • The index helps in determining whether the market conditions, as seen by purchasing managers, is expanding, contracting or staying the same

Source:TH