PMI (Purchasing Managers’ Index) is an economic indicator that reflects the level of business activity in the manufacturing and service sectors of the economy. The PMI is calculated based on surveys of purchasing managers who evaluate current conditions regarding new orders, production levels, supplier deliveries, inventories, and employment. A PMI value above 50 indicates an expansion of economic activity, while a value below 50 signals a contraction.
Key Aspects of PMI:
- Calculation:
- PMI is derived from monthly surveys conducted among purchasing managers in various industries. The questions focus on changes in the level of new orders, production volumes, delivery times, inventories, and employment compared to the previous month.
- Components:
- The index includes several components such as new orders, production, employment, supplier delivery times, and inventories. Each component is weighted and summed to produce the overall PMI.
- Interpretation:
- A PMI value above 50 indicates growth in business activity and economic expansion, while a value below 50 indicates a decline in business activity and potential economic slowdown.
- Usage:
- PMI is used by governments, central banks, economists, and investors to assess the current state of the economy and forecast future economic conditions. It is a crucial indicator for making decisions in economic policy and investment.
PMI is a key tool for analyzing economic trends and predicting short-term business activity developments.
