Manufacturing Sector PMI Rises

The Nikkei India Manufacturing Purchasing Managers Index (PMI), improved to 52.7 in May from 51.8 in April. It was the strongest improvement in the health of the sector in three months.

Purchasing Managers Index

• The Purchasing Managers’ Index (PMI) presents the prevailing direction of economic trends in the manufacturing and service sectors. It is a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
• PMI is based on a survey of the purchasing managers in more than 400 manufacturing and service companies. It measures activity at the purchasing or input stage. PMI is based on the survey.
• The PMI is calculated with the weight under 5 indices- new orders (weight 0.3), output (0.25), employment (0.2), suppliers delivery times (0.15).
• A score above 50 means expansion, while a score below that indicates contraction.
• PMI is calculated separately for the manufacturing and services sectors and then the composite index is constructed.

Since PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth is made available. Hence it is considered as a good leading indicator of economic activity.