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Manufacturing Purchasing Managers’ Index or PMI
Context
Despite having elevated inflationary pressures, India's manufacturing activity in June witnessed a rebound, thanks to strong demand leading to the fastest rate of hiring in more than 19 years. The seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index or PMI increased from 57.5 in May to 58.3 in June, indicating a sharper improvement in business conditions. In PMI parlance,
- print above 50 means expansion
- while, a score below 50 denotes contraction
What is manufacturing PMI?
- Manufacturing PMI, or Purchasing Managers’ Index, is an economic gauge derived from monthly surveys of companies.
- It assesses business conditions in manufacturing and services sectors.
- Types of PMI:
- Manufacturing PMI
- Services PMI
- PMI helps determine if conditions are expanding, contracting, or stable, offering insights into current and future economic health.
- Variables: For manufacturing PMI, surveys are sent to manufacturing firms with factual questions about key areas: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stock levels (10%).
- A PMI number above 50 indicates growth, below 50 signals contraction.
- Started in 1948 by the Institute for Supply Management, PMI is produced globally.
- It's a leading indicator, often released before GDP data, providing early signals about economic trends. Investors and businesses use PMI to gauge economic conditions and make informed decisions.
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