Purchasing Managers’ Index
The Purchasing Managers’ Index (PMI) is a survey-based indicator that measures business activity in the manufacturing and services sectors.
Meaning in Practice
The PMI is derived from monthly surveys of purchasing managers who report on output, new orders, employment, and prices. A reading above 50 indicates expansion, while below 50 signals contraction. It is considered a leading indicator of economic trends.
Why It Matters
The PMI provides timely insight into business conditions and economic momentum. Investors and policymakers monitor it to anticipate GDP growth and inflation trends. It often influences short-term market expectations.
Market Impact
Stronger-than-expected PMI data can boost equities and support bond yields due to growth optimism. Weak readings may increase recession concerns and lower yields. Currency markets react to changes in economic outlook.
Example
A manufacturing PMI rising from 48 to 52 suggests the sector has moved from contraction to expansion.