Purchasing Manager’s Index (PMI)

The Purchasing Manager’s Index (PMI) is a measure of the economic performance of a country. The PMI is designed to cover the performance of the manufacturing sector and the service sector activities. The survey asks the respondents about their perceptions about changes in major business variables.

How PMI is calculated and derived?

The index is first calculated separately for the manufacturing and service sector and then a composite index is released.

The index is derived from the answers provided by the top executives of various firms regarding major indicators like output, employment, business expectations, new orders, etc.

Key Points

• The index is calculated on a monthly basis by the Institute for Supply Management (ISM), the United States of America, the Singapore Institute of Purchasing and Materials Management (SIPMM), and the Markit Group. The data on the Indian economy is released by IHS Markit Group.
• The PMI index provides ratings from 0 to 100. A score above 50 means expansion in the activity while a score below 50 indicates contraction in the activity. The expansion and contraction rate can be determined on the basis of the previous month’s score.
• The PMI is compiled by a monthly survey sent to senior executives of over 500 companies that covers a wide range of industries and sectors.
• Markit Group PMI, which releases the data in India, covers only private entities and not the public sector.

Purchasing Manager’s Index (PMI) November 2020

As per the Purchasing Manager’s Index (PMI) of November 2020, the manufacturing sector of the country has come to a three-month low. The sector has a score of 56.3 in November on the PMI index. The score of the sector in October was 58.9. This is contributed to increasing COVID-19 cases.

Outputs in the sector have expanded at a much slower pace and new orders are the lowest in the last 3 months. In addition to this, employment has continued to decline in the sector.