PMI (Purchasing Managers' Index)
Quick Definition
A monthly survey-based indicator measuring the economic health of the manufacturing or services sector, where readings above 50 indicate expansion.
What Is PMI (Purchasing Managers' Index)?
The Purchasing Managers' Index (PMI) is a diffusion index derived from monthly surveys of purchasing managers at private-sector companies. It measures business conditions across five sub-indices: new orders, output/production, employment, supplier delivery times, and inventories. A PMI reading above 50 indicates expansion, below 50 indicates contraction, and exactly 50 signals no change. The further from 50, the stronger the expansion or contraction. Two major PMI series are widely followed: ISM (Institute for Supply Management) PMI for the U.S. and S&P Global PMI for international comparisons. Both manufacturing and services PMIs are published. The ISM Manufacturing PMI is one of the first major economic indicators released each month (on the first business day), making it a timely gauge of economic momentum. Historically, ISM readings below 43-44 have been associated with recessions. PMI data is particularly valuable because it captures business sentiment and forward-looking intentions (new orders signal future production).
PMI (Purchasing Managers' Index) Example
- 1The ISM Manufacturing PMI dropped to 46.3 in late 2022, signaling manufacturing contraction even as the services sector remained expansionary above 50
- 2China's Caixin Manufacturing PMI is closely watched globally — a surprise drop below 50 can trigger sell-offs in commodity markets and emerging market currencies
Related Terms
Leading Economic Indicators
Statistical measures that tend to change before the overall economy shifts, used to predict future economic activity.
Economic Indicator
A statistical data point used to measure and assess the current state or future direction of economic activity.
Consumer Confidence Index (CCI)
A survey-based economic indicator measuring consumers' optimism about the economy, personal finances, and spending intentions.
Non-Farm Payrolls (NFP)
Monthly U.S. jobs report measuring employment changes excluding farm workers, government employees, and nonprofit organization employees.
Business Cycle
The recurring pattern of expansion and contraction in economic activity, typically measured by changes in real GDP and employment.
GDP (Gross Domestic Product)
The total monetary value of all finished goods and services produced within a country's borders in a specific time period.
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