Gross domestic product, inflation, employment, wage growth, and interest rates are all lenses through which to view the economy. A Purchasing Managers’ Index (PMI), however, looks forward at the economic trends to expect. The PMI is a leading indicator, meaning it often predicts changes in broader economic metrics like GDP, industrial production, and employment before they are reflected in official data.

• The PMI is a leading economic indicator that provides insights into the health of the manufacturing and services sectors, influencing investment decisions and economic forecasts.
• For example, ISM takes a broader view of the services sector, including anything that’s not manufacturing as a service industry.
• Suppliers use it to estimate future demand, while investors and traders watch PMI trends to anticipate market movements and adjust their strategies accordingly.
• When talking about PMI, there are three principal bodies that should be noted.
• Survey respondents are asked to report whether they see an improvement, deterioration, or no change in each of the categories.
• As a leading indicator, investors can identify meaningful trends before indicators like GDP, employment, and industrial production reflect them.

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PMI is derived from monthly surveys of supply chain managers in over 40 countries, covering 90% of the global economy’s GDP. Its data is then referred to by market watchers, analysts, traders, and investors alike to understand the growth, stability, or downtrends in the manufacturing sector. Various industries, including manufacturing, services and construction, utilize the Purchasing Managers’ Index (PMI) to make informed decisions regarding production levels, inventory management and workforce planning. It’s a simple question with a potentially complicated answer that can be framed many different ways.

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A PMI is measured from 0 to 100, with 50 showing no change compared to the prior month, and above or below 50 showing positive or negative change, respectively. A PMI above 50 indicates that business activity is expanding compared to the previous month, suggesting economic growth. For those interested in trading or investing, understanding the PMI can provide a valuable edge. For example, a rising PMI may signal improving business conditions, which could boost confidence in stocks or commodities.

Key data points

A PMI provides insight into the business environment and helps companies see where the economy is headed. This monthly indicator is a key piece of macroeconomic data, offering a snapshot of business conditions that can help guide decisions in everything from manufacturing to trading. Let’s dive into what the PMI is, how it works, and why it matters for anyone interested in the world of finance and economics. PMI is a monthly, early indicator of economic performance, providing timely data on the manufacturing sector.

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For example, small business owners can use the information to make decisions about the need to hire new employees or invest in new equipment if demand is rising. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction, while a reading at 50 indicates no change. It is a diffusion index that summarizes whether market conditions are expanding, staying the same, or contracting, as viewed by purchasing managers. Invesco is an independent investment management company built to help individual investors, financial professionals, and institutions achieve their financial goals.

The PMI consists of several key components, including new orders, inventory levels, production, supplier deliveries and employment. Together, these elements provide a comprehensive overview of the manufacturing and services sectors, aiding in economic analysis and decision-making. The PMI is a leading economic indicator that provides insights into the health of the manufacturing and services sectors, influencing investment decisions and economic forecasts. The Purchasing Managers’ Index (PMI) is a less well-known but unique measure of economic health.

Key Takeaways

By providing timely, data-driven insights into business conditions, What Is a Stock Index the PMI helps everyone from corporate leaders to investors make informed decisions. Unlike some economic indicators that are released with a lag or based on sentiment, the PMI is one of the first data points released each month and is grounded in actual business conditions. The Purchasing Managers Index, commonly known as PMI, is a monthly survey-based indicator that measures the prevailing direction of economic trends in the manufacturing and service sectors. Investors, economists, and analysts have a wealth of information to help them gauge where the economy is trending.

The Purchasing Managers’ Index (PMI) is a crucial economic indicator that assesses the overall health of the manufacturing and services sectors. Derived from monthly surveys conducted among purchasing managers, the PMI provides valuable insights into various business conditions, including employment trends, production levels and new order volumes. A PMI reading above 50 signifies economic expansion, while a reading below 50 indicates contraction. This index is widely regarded as a leading indicator of economic performance, helping businesses and investors make informed decisions. But there is no lack of economic data that can be used to gauge the health and prospects of the overall economy and individual sectors.

What is a PMI?

• If new orders increase, a manufacturer may raise customer prices and accept a supplier’s price increases.
• PMI is a monthly, early indicator of economic performance, providing timely data on the manufacturing sector.
• Unlike some economic indicators that are released with a lag or based on sentiment, the PMI is one of the first data points released each month and is grounded in actual business conditions.

The report monitors activity in production, new orders, supplier deliveries, inventory, employment, prices, exports and imports. A major feature of the report is the composite index, the Purchasing Managers’ Index (PMI). The PMI is calculated using a weighted formula based on the percentage of purchasing managers reporting improvement, no change, or deterioration in key business areas. For businesses, the PMI helps with planning production, managing inventory, and setting budgets. Suppliers use it to estimate future demand, while investors and traders watch PMI trends to anticipate market movements and adjust their strategies accordingly. Each month, these managers are asked about key aspects of their business, such as new orders, production levels, employment, supplier delivery times, and inventory levels.

The Three Principal Producers of PMI Surveys

And, it might not come as a surprise to learn that PMI can have direct effects on related stocks. S&P Global is a New York-based corporation that focuses on providing financial and analytical data in various industries and it is the subsidiary of S&P Global Ratings. Originally, S&P Global Inc. was called McGraw Hill Financial, Inc. and The McGraw-Hill Companies, Inc. until it changed its name to S&P Global Inc. in April 2016. The Purchasing Managers Index (PMI) highlights monthly supply and demand trends. Institutional Separate Accounts and Separately Managed Accounts are offered by affiliated investment advisers, which provide investment advisory services and do not sell securities.

Copyright © 2025 FactSet Research Systems Inc.Copyright © 2025, American Bankers Association. Whether you’re a seasoned trader or just starting to explore the world of macroeconomics, keeping an eye on the PMI can help you stay ahead of the curve. Visit Bitrue Exchange to start trading, or stay updated with the latest crypto news and analysis on the Bitrue Blog. It would be nice to have a crystal ball that could tell you whether the economy is about to enter a period of healthy growth or has ailments that will soon cause it to stumble. Starting in January 2003, the Commodity Prices Index stopped being seasonally adjusted.

PMI only reflects the performance of the manufacturing sector and may not fully represent the overall economy, especially with the decreasing dominance of manufacturing in some countries. Generally speaking, PMI levels over 50 may suggest that the US manufacturing sector is growing MoM. On the other hand, a reading of 50 means businesses that are performing well and those that are underperforming are equal in terms of their amounts. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions. This site may provide reference to Internet sites as a convenience to our readers.