The Purchasing Managers' Index (PMI) is an economic indicator derived from monthly surveys of private sector companies. It reflects the prevailing direction of economic trends in manufacturing and services sectors.
| PMI Type | Sector Covered |
|---|---|
| Manufacturing PMI | Factories, industrial output |
| Services PMI | Banking, IT, hospitality, etc. |
| Composite PMI | Weighted average of Manufacturing & Services PMI |
Based on responses to 5 key components from a survey of purchasing managers:
Each component is assigned a weight, and the PMI is calculated as a diffusion index.
| PMI Value | Economic Signal |
|---|---|
| > 50 | Expansion in economic activity |
| = 50 | No change (neutral) |
| < 50 | Contraction in activity |
Higher the value above 50, stronger the expansion.
Example
If India’s Manufacturing PMI rises from 52.0 to 55.5 in a month:
| Aspect | PMI | IIP / GDP |
|---|---|---|
| Frequency | Monthly | IIP (monthly), GDP (quarterly) |
| Timeliness | Very timely (early signal) | Often delayed |
| Based On | Survey (perception-based) | Actual data (fact-based) |
| Sector Coverage | Manufacturing/Services | Entire economy (incl. agri.) |
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