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?
- According to the latest Purchasing Managers’ Index, India’s services sector activity expanded at the second-fastest pace in more than a decade during November, driven by sustained rise in new work and improvement in market conditions.
- The Purchasing Managers’ Index for the service sector was at 58.1 in November, fractionally down from 58.4 in October. The November figure points to the second-fastest rise in output since July 2011.
- For the fourth straight month, the services sector witnessed an expansion in output.