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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.

Understanding… PMI new export orders index: Tracking worldwide trade flows and changing demand, by country and sector

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The new export orders index from S&P Global's PMI business surveys tracks foreign demand for both goods and services. The data can be used to gauge export demand over time across countries and sectors.

The new export orders index can also be aggregated to provide a useful and timely guide to global or regional trade flows, allowing insights into changing demand conditions well ahead of comparable official data.

Understanding … PMI suppliers' delivery times: A widely used indicator of supply delays, capacity constraints and price pressures

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.

Understanding … headline PMI vs. subindices: how signals can be lost by focusing exclusively on the headline PMI

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.

Understanding… PMI backlogs of work: a key indicator of capacity utilisation, providing insights into investment, hiring and inflation

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.

PMI surveys: how not to mis-measure manufacturing output

Chris Williamson| Chief Business Economist, IHS Markit

The most common mistake we see in PMI charts is the incorrect use of the headline PMI for manufacturing. The headline PMI is a gauge based on a number of survey sub-indices which is designed to track the overall health of manufacturing. However, often we see this index incorrectly used as a gauge of manufacturing output growth, which can give misleading signals - especially when used to compare manufacturing performance relative to the service sector. Instead, the manufacturing PMI output index needs to be used.

How to interpret and use the PMI survey output index

Chris Williamson| Chief Business Economist, IHS Markit

The PMI output index is the survey's principal gauge of economic growth and can provide valuable insights into GDP, service sector growth and industrial production trends well ahead of official data. A simple statistical process can be used to produce growth rate equivalents for comparable official economic data. This article explains the methodology behind the output index and how to use the index to track economic growth.

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.

Learn how to access and receive PMI data


This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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