What is the Purchasing Managers’ Manufacturing Index?
Based on monthly surveys of selected companies, the Purchasing Managers’ Manufacturing Index (PMI) is an advance indication of month-to-month activity in the private sector of the economy. It tracks changes in variables such as output, new orders, stock levels, employment and prices across manufacturing industries.
The final index for the current month is released roughly a week after the flash PMI.
Why is the Purchasing Managers’ Manufacturing Index important?
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. & the Markit PMIs in the U.S., and elsewhere, investors will know what the economic backdrop is for various markets.
- The stock market likes to see healthy economic growth because that translates to higher corporate profits.
- The government likes higher corporate profits so it can collect more tax revenue to fund political projects and wars.
- The bond market prefers slow growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
The Markit PMI
The Markit PMI manufacturing data give a detailed look at the manufacturing sector. The manufacturing sector is a major source of cyclical variability in the economy and this report has major influence on the markets. Its sub-indexes provide a picture of orders, output, employment and prices.
- April 2004, Markit begins collecting monthly U.S. PMI data from a panel of manufacturers in the U.S. electronics goods producing sector.
- May 2007, Markit’s U.S. PMI research was extended out to cover producers of metal goods.
- October 2009, Markit’s U.S. Manufacturing PMI survey panel was extended further to cover all areas of U.S. manufacturing activity.
Back data for Markit’s U.S. Manufacturing PMI between May 2007 and September 2009 are an aggregation of data collected from producers of electronic goods and metal goods producers, while data from October 2009 are based on data collected from a panel representing the entire U.S. manufacturing economy.
Markit’s total survey panel comprises over 600 U.S. companies.