PURCHASING MANAGER’S INDEX Syllabus GS Paper 3 - Economy)

Context: Recently, the manufacturing sector has experienced a boost in November, driven by an upswing in demand and a reduction in pricing pressure, as indicated by the Purchasing Managers Index (PMI) reaching 56, according to the survey released by S&P Global.

PMI or a Purchasing Managers’ Index (PMI)

• About: It is an indicator of business activity - both in the manufacturing and services sectors. 

oIt is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before. 

• PMI is based on five major survey: New orders, Inventory levels, Production, Supplier deliveries, and Employment.
• Types of PMI:  Manufacturing PMI and Services PMI.
• Calculation: It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
• PMI is a number from 0 to 100: Above 50 denotes expansion in business activity. 

oAnything below 50 denotes contraction.

• Global PMI: The Global PMI is an economic indicator that is derived from questionnaires sent to manufacturing and services companies in more than 40 different countries.