NEWS: PMI is a monthly survey-based indicator showing the direction of business activity in manufacturing + services.

ABOUT PMI

• Based on responses of purchasing managers about business conditions.
• Leading indicator → gives an early signal of economic activity.

CALCULATION

• Manufacturing PMI considers → New Orders + Output + Employment + Suppliers’ Delivery Times + Stocks of Purchases.
• Index ranges from 0–100.

INTERPRETATION

• PMI > 50 → Expansion.
• PMI < 50 → Contraction.
• PMI = 50 → No change.
• PMI is a diffusion index → 60 does not mean 60% growth.

TYPES

• Manufacturing PMI → manufacturing activity.
• Services PMI → services activity.
• Composite PMI → manufacturing + services.

IMPORTANCE

• Provides early signals for economic trends.
• Useful for policymakers, businesses + investors.
• Should be analysed along with other economic indicators.