The Purchasing Managers’ Index (PMI) is one of the fastest, most timely economic surveys available, often released weeks before official government data covering the same period. This guide explains how to read it.
What PMI surveys measure
PMI surveys ask purchasing managers at manufacturing and services companies about current business conditions: new orders, output, employment, prices and supplier delivery times. The responses are combined into a single index.
Why 50 is the key threshold
A PMI reading above 50 indicates expansion in that sector; below 50 indicates contraction. The distance from 50, not just which side of it the number falls on, indicates the pace of expansion or contraction.
Flash vs final PMI
Flash PMI readings are released before the month ends, based on roughly 85-90% of survey responses, giving markets an early signal. The final PMI, released after month-end, incorporates the complete data set and can occasionally differ from the flash reading.
Why PMI matters to traders
- It is one of the most current, forward-looking economic indicators available
- It often moves markets on release day, given how far ahead of official data it arrives
- Manufacturing and services PMI can diverge, giving a more nuanced picture of the economy than either alone
Key takeaways
- PMI surveys purchasing managers on current business conditions across manufacturing and services.
- A reading above 50 signals expansion; below 50 signals contraction.
- Flash PMI arrives before month-end, making it one of the most current economic signals available.
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