Concept of PMI or Purchasing Managers’ Index

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PMI or a Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors.

It is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before.

It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

The Nikkei India Services PMI Business Activity Index rose to 52.2 in May from 50.2 in April, the fastest increase in output in the current four-month sequence of expansion.

The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available. It is, therefore, considered a good leading indicator of economic activity.

The PMI also gives an indication of corporate earnings and is closely watched by investors as well as the bond markets.

It was first started in 1948 by the US-based Institute of Supply Management.

The information to produce the PMI is gathered using monthly surveys sent to purchasing executives at approximately 300 companies. A PMI of more than 50 represents expansion of the manufacturing sector when compared to the previous month.

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