- 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 manufacturing industry clocked a strong start to financial year 2022-23, posting marked and accelerated expansion in new orders and production despite a rise in inflation. Rising from 54.0 in March to 54.7 in April, the Manufacturing Purchasing Managers’ Index (PMI) highlighted a solid and faster improvement in operating conditions across the sector.
- A PMI number greater than 50 shows expansion in business activity, and less than 50 indicates contraction.
- PMI is a leading indicator, giving analysts a good sense of the direction of a country’s economy.
- The PMI in manufacturing is obtained based on the results of a survey sent to a set of manufacturing companies.