Purchasing Managers Index | 03 Jan 2023

Why in News?

As per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI), the manufacturing sector in India had its most significant production growth in 13 months in December 2022.

• For the October to December quarter, the PMI averaged 56.3, the highest in a year. It indicates that the manufacturing sector is performing well and may be contributing to job creation.

What is Purchasing Managers Index?

• It is a survey-based measure that asks the respondents about changes in their perception about key business variables as compared with the previous month.
• The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
• It is calculated separately for the manufacturing and services sectors and then a composite index is also constructed.
• The PMI is a number from 0 to 100.
  • A print above 50 means expansion, while a score below that denotes contraction.
  • A reading at 50 indicates no change.
• If PMI of the previous month is higher than the PMI of the current month, it represents that the economy is contracting.
• It is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.
• PMI is compiled by IHS Markit for more than 40 economies worldwide.
  • IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
  • IHS Markit is part of S&P Global.

What is the Significance of PMI?

• The PMI is widely followed as an indicator of economic health because the manufacturing and services sector is a key driver of economic growth.
• In general, a high PMI reading is seen as a positive sign for the economy, as it indicates that the manufacturing and services sectors are performing well and contributing to economic growth.
• A low PMI reading is seen as a negative sign, as it indicates that the manufacturing and services sectors are struggling and may be dragging down overall economic performance.

Source: TH