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Purchasing Managers’ Index (PMI)

Purchasing Managers’ Index (PMI)

Context:

According to the latest Purchasing Managers’ Index (PMI), India’s manufacturing sector lost momentum in November.

Key Highlights:

  • India’s manufacturing sector activity lost momentum and fell to a three-month low in November amid slower increases in factory orders, exports, and buying levels.
  • The seasonally adjusted Purchasing Managers’ Index (PMI) highlighted a strong improvement in business conditions.
  • All three broad areas of the manufacturing industry recorded expansion, with growth led by consumer goods which was the only sector to see a stronger rate of increase.
  • The activities in November could not keep pace with October, but that was still higher than pre-Covid activities.

Purchasing Managers’ Index (PMI):

  • It is an economic indicator that is calculated from monthly surveys of purchasing managers and supply executives from specific companies.
  • PMI data are compiled by IHS Markit for more than 40 economies worldwide.
  • The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment, and inventories.
  • The Purchasing Managers' Index is based on five major indicators naming new orders, inventory levels, production, supplier deliveries, and the employment environment.

Significance:

  • PMI Manufacturing gives an indication of the economic health of the manufacturing sector.
  • The investors use PMI surveys as leading indicators of economic health, given their insight into sales, employment, inventory, and pricing.
  • The purchasing managers' index is an extremely important indicator for international investors looking to form an opinion on economic growth.

Source: The Hindu