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Understanding the headline PMI™ and its subindices
28 September 2021
Learn in-depth tips and background insights about Purchasing
Managers Index (PMI™) from the experts who compile and analyse the
survey data at IHS Markit. These articles dig into the history of
the PMI surveys and illustrate how the headline PMI and its various
subindices can be used to gain valuable insights into economic
growth, hiring, inflation, supply delays and capacity constraints
around the world and across business sectors. As such, the articles
also provide substantial insight into how to use the PMI for
economic analysts, investors, traders and policymakers.
Chris Williamson| Chief
Business Economist, IHS Markit
The suppliers' delivery times index from IHS Markit's PMI
business surveys captures the extent of supply chain delays in an
economy, which in turn acts as a useful barometer of capacity
constraints. The index therefore helps gauge the degree to which
the current demand/supply environment is indicative of either a
buyers'- or sellers'-market, and hence provides valuable
information on developing inflation trends.
Chris Williamson| Chief
Business Economist, IHS Markit
The aggregation of different components into one headline 'PMI'
indicator, designed as an overall barometer of business conditions,
means a considerable amount of the value can be found in the PMI's
component indices that is not always seen in the headline
figure.
Chris Williamson| Chief
Business Economist, IHS Markit
The backlogs of work index from IHS Markit's PMI business
surveys captures the volume of orders that a company has received
but has yet to either start work on or complete.
As such, the index is a useful barometer of the extent to which
companies are struggling to cope with demand and can hence act as a
leading indicator of the expansion of capacity through either
investment or hiring. The index can also provide useful information
about pricing power and developing inflation trends, as well as
corporate earnings.
As such, the backlogs of work index also generates powerful
signals for investment strategy.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
