Purchasing Managers’ Index (PMI)

Source: IE

Context: India’s Composite Flash Purchasing Managers’ Index (PMI) increased to 60.6 in February 2025, marking the first rise after three consecutive quarters of decline.

About Purchasing Managers’ Index (PMI):

• What is PMI?

• PMI (Purchasing Managers’ Index) is an economic indicator derived from monthly business surveys. It measures activity at the purchasing/input stage, unlike IIP (Index of Industrial Production), which tracks actual output. There are two types: Manufacturing PMI – Tracks industrial and factory activity. Services PMI – Assesses the growth in the services sector. PMI above 50 indicates economic expansion, while below 50 signals contraction.

• PMI (Purchasing Managers’ Index) is an economic indicator derived from monthly business surveys.

• It measures activity at the purchasing/input stage, unlike IIP (Index of Industrial Production), which tracks actual output.

• There are two types: Manufacturing PMI – Tracks industrial and factory activity. Services PMI – Assesses the growth in the services sector.

• Manufacturing PMI – Tracks industrial and factory activity.

• Services PMI – Assesses the growth in the services sector.

• PMI above 50 indicates economic expansion, while below 50 signals contraction.

• Who Releases PMI in India?

• S&P Global (earlier released by IHS Markit) conducts PMI surveys in India. Based on a survey of 500 manufacturing companies for the Manufacturing PMI.

• S&P Global (earlier released by IHS Markit) conducts PMI surveys in India.

• Based on a survey of 500 manufacturing companies for the Manufacturing PMI.

• PMI Calculation Methodology:

• Derived from qualitative responses of purchasing managers. Five key indicators with assigned weights:

• Derived from qualitative responses of purchasing managers.

• Five key indicators with assigned weights:

• Significance of PMI: Early Indicator: Released before official industrial and GDP data, making it a leading economic indicator. Monetary Policy Tool: Central banks use it to assess inflationary trends and adjust interest rates. Investor Confidence: PMI influences stock markets, bond markets, and corporate earnings forecasts. Economic Competitiveness: A strong PMI boosts investor confidence, enhancing a nation’s economic attractiveness.

• Early Indicator: Released before official industrial and GDP data, making it a leading economic indicator.

• Monetary Policy Tool: Central banks use it to assess inflationary trends and adjust interest rates.

• Investor Confidence: PMI influences stock markets, bond markets, and corporate earnings forecasts.

• Economic Competitiveness: A strong PMI boosts investor confidence, enhancing a nation’s economic attractiveness.