Purchasing
Manager
Indexes
(PMI)
are
produced
by
processing
answers
to
questionnaires
sent
to
purchasing
managers
of
many
companies
and
are
one
of
the
major
economic
indicators
followed
by
investors.
The
PMI
indices
provide
a
snapshot
of
the
health
of
the
manufacturing,
services
and
construction
sectors.
The
indications
of
purchasing
managers
are
particularly
important
as
they
buy
raw
materials,
semi-finished
goods
and
in
general
everything
their
companies
need
to
produce.
They
are
therefore
operators
who
need
to
be
in
control
not
only
of
the
company’s
operations,
but
also
of
the
situation
in
the
procurement
and
sales
markets
for
their
products
and
services.
The
surveys
sent
to
purchasing
managers
are
then
processed
in
statistical
form
so
that
the
PMI
indices
take
a
value
between
zero
and
100,
where
numbers
above
50
indicate
economic
expansion,
while
those
below
that
threshold
indicate
contraction.
What
are
the
Main
PMI
Indices?
The
most
widely
followed
PMI
index
in
the
world
is
the
one
published
every
month
by
the
Institute
for
Supply
Management
in
the
US,
which
is
known
by
the
acronym
ISM.
It
is
based
on
the
ISM
Manufacturing
Report
on
Business,
a
monthly
analysis
based
on
a
questionnaire
filled
out
by
purchasing
and
supply
managers
of
US
companies.
The
time
series
is
very
long
and
goes
back
to
1948.
The
other
major
research
institute
that
publishes
PMI
indices
is
S&P
Global.
Here,
too,
the
data
are
monthly
and
are
based
on
answers
to
a
questionnaire
of
purchasing
managers
in
the
manufacturing,
services
and
construction
sectors.
For
the
Eurozone
PMI
indices,
approximately
5,000
private
companies
are
involved
and
preliminary
(flash)
estimates
are
released
followed
by
the
final
figure.
The
PMI
indices
for
individual
countries,
including
the
UK,
are
also
available.
(See
here
for
the
latest
Eurozone/UK
PMIs).
Flash
estimates
are
often
revised
higher
or
lower
after
the
event.
Pros
and
Cons
of
the
PMI
Indices
Among
the
main
advantages
of
the
PMI
indices
are
their
monthly
frequency,
the
fact
that
real
data
are
collected
(unlike,
for
example,
business
confidence
surveys
such
as
the
German
IFO)
and
that
they
refer
to
orders,
inventories,
prices
and
employment,
giving
a
concrete
picture
of
the
health
of
a
sector.
PMI
indices
should
not
be
used
as
the
sole
tool
for
making
investment
decisions
because
they
do
not
include
comprehensive
data
on
different
economic
variables,
such
as
the
entire
labour
force,
or
inflation.
Furthermore,
the
manufacturing
sector
used
to
be
the
most
important
sector,
whereas
today
in
many
countries
it
is
no
longer
a
benchmark
due
to
the
advance
of
services.
Consequently,
composite
indices
and
non-manufacturing
indices
may
have
greater
significance.
In
any
case,
PMI
indices
are
a
key
indicator
for
investors
to
understand
market
sentiment
and
thus
what
the
future
direction
of
stock
markets
might
be.
They’re
what
economists
call
a
“leading
indicator”
rather
than
a
“lagging
indicator”
such
as
the
unemployment
rate.
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