Question

how purchasing manager's index is importantly cited or valued to the economy?

Answer 1

Purchasing Managers Index (PMI) measures the direction of economic trends in manufacturing sector.It is based on a monthly survey of supply chain managers across 19 industries, including both upstream and downstream activity.The value and movements in the PMI and its components can display useful insight to business decision makers, market analysts, and investors, and is a leading indicator of overall economic activity in the U.S.

It is compiled and released monthly by the Institute for Supply Management (ISM). The PMI is computed on a monthly survey sent to senior executives at more than 400 companies in 19 primary industries, which are weighted by their contribution to U.S. GDP. PMI is based on five major survey areas: new orders, inventory levels, production, supplier deliveries, and employment. The ISM weighs each of these survey areas equally. The surveys include questions about business conditions and any changes, whether it be improving, no changes, or deteriorating. The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change.

The most reliable leading indicators for assessing the state of the U.S. economy is the PMI, formerly known as the Purchasing Managers' Index.

PMI is the headline indicator in the ISM Manufacturing "Report on Business," an influential monthly survey of purchasing and supply executives across the United States. The acronym PMI stood for Purchasing Managers’ Index prior to September 1, 2001. But since that date, the Institute for Supply Management (ISM) has used PMI as a stand-alone acronym to reflect its corporate name change (the ISM was called the National Association of Purchasing Management – NAPM – until January 2, 2002) and broader reach into strategic supply management beyond just the purchasing function.