What is PMI?

• Purchasing Managers’ Index is an economic indicator which indicates the business activity & economic health of both the manufacturing and service sectors.
• PMI of India is published by Japanese firm Nikkei but compiled and constructed by IHS Markit, a London–based global information provider.
• Unlike the Index of Industrial Production (IIP), which indicates the changes in production volume or output, the PMI is an investor sentiment tracking index and is more dynamic in nature. They are derived from monthly surveys of about 400 private companies.
• Variables used for calculating the PMI are: Output, New Orders, Employment, Input Costs, Output Prices, Backlogs of Work, Export Orders, Quantity of Purchases, Suppliers’ Delivery Times, Stocks of Purchases and Stocks of Finished Goods.

How to read PMI?

• While PMI >50 implies an expansion of business and economic activity, PMI <50 means contraction.

Why in News?

• According to the latest PMI data, India’s manufacturing sector activity contracted at a slightly faster pace in July as demand conditions remained subdued amid prolonged closures, following which firms reduced both staff numbers as well as purchasing activity.
• Manufacturing PMI stood at 46 in July, down from 47.2 in June.
• This is the fourth straight month of contraction for the Indian manufacturing sector. 

Reference:

1. https://www.thehindu.com/business/Industry/manufacturing-contracts-for-fourth-straight-month-july-pmi/article32262101.ece