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.
• 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.
• PMI, which is usually released at the start of the month, serves as a leading indicator of economic activity. It comes before the official data on industrial output, core sector manufacturing and GDP growth.

How to read PMI?

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

Why in News?

• India’s dominant services industry grew faster than expected in August amid favourable demand conditions and some easing in cost pressures.
• The Services Purchasing Managers’ Index rose to 57.2 in August from a four-month low of 55.5 in July. It remained above the 50-mark separating growth from contraction for a 13th straight month.

Reference:

1. https://www.livemint.com/economy/indias-services-activity-rebounds-in-august-hiring-at-over-14-year-high-11662354452593.html