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Purchasing Managers’ Index (PMI)

(SYLLABUS RELEVANCE: GS 3: Economy)

Why is it in the news?

India’s services sector output, as measured by Purchasing Managers’ Index (PMI), eased from a 13-year high of 62.3 in July to 60.1 in August.

Purchasing Managers’ Index (PMI): An Economic Indicator

  1. The Purchasing Managers’ Index (PMI) is a crucial economic indicator that provides insights into the prevailing direction of economic trends in both the manufacturing and service sectors.
  2. It is derived from monthly surveys conducted among various companies to gauge their economic activities.

Types of PMI

  1. Manufacturing PMI
  2. Services PMI
  3. Combined Index (Manufacturing and Services PMI)

Methodology

  1. Compiled by IHS Markit.
  2. Panel of approximately 400 manufacturers surveyed.
  3. Survey responses collected in the second half of each month.
  4. Indicates the direction of change compared to the previous month.
                                      IHS Markit
1)A London-based global leader in information, analytics, and solutions.
2)Focuses on major industries and markets that drive worldwide economies.

 

Calculation of PMI

  1. PMI is represented on a scale of 0 to 100;
  2. Above 50 indicates expansion;
  3. Below 50 denotes contraction;
  4. A reading of 50 signifies no change; and
  5. A decrease from the previous month suggests economic contraction.

Purpose

  1. To provide information about current and future business conditions.
  2. Target audience includes company decision-makers, analysts, and investors.
  3. Helps assess whether market conditions, as perceived by purchasing managers, are expanding, contracting, or remaining stable.

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