PMI Index

Why in news:

The HSBC India Services PMI rose to 60.5 in July 2025, marking the highest in 11 months, driven by strong demand and sustained new business intake. This reflects robust recovery and expansion in India’s services sector, an essential component of the economy.

UPSC CSE UPSC CSE Relevance:

UPSC CSE in prelims examination has focused every year on reports and indexes.

UPSC Prelims PYQ 2019:

Which one of the following is not a sub-index of the World Bank’s ‘Ease of Doing Business Index’?
A) Maintenance of law and order
B) Paying taxes
C) Registering property
D) Dealing with construction permits

Abou Purchasing Manager Index:

• Purchasing Managers’ Index (PMI) is an indicator used to measure business activity in the manufacturing and services sectors.
• New orders, production, employment, supplier deliveries, and stocks are all given equal weight by the manufacturing PMI.
• Information gathered from non-manufacturing industries like transportation, insurance, construction, and education is included in the ISM services PMI. 
• A PMI gives businesses information on the business climate and the direction of the economy.
• It is released separately for the manufacturing and services sectors.
• It is a survey-based measure.
• PMI data are factual indicators of global economic health based on monthly surveys of business executives covering 45 economies and 30 sectors.
• The PMI is widely used to anticipate changing economic and market trends and as a barometer for economic performance and business conditions.

Features of PMI:

• Headline Number: A number between 0 and 100 indicating the overall health of an economy. A PMI reading over 50 represents economic expansion, and below 50 represents contraction compared to the month prior.
• Sub-Indices: 5700 Individual measures of key economic drivers including business output, inflation, exports, capacity utilization, employment, pricing, and inventories, and more. 

Who releases it?

• It is released by S&P Global (Standard & Poor’s Global).
• S&P Global is an American financial services company and a credit rating agency.

Significance of PMI

• The Purchasing Managers’ Index (PMI) is usually released at the beginning of each month, well before official data on industrial production, manufacturing, and GDP growth becomes available. This makes it a reliable early indicator of overall economic activity.
• Economists view manufacturing PMI as a strong predictor of industrial output, which is typically reported later through official government statistics.
• Many central banks use PMI data as a reference while making decisions about interest rates and other monetary policy measures.
• The PMI is also an important signal for corporate earnings and is closely monitored by investors and bond markets. A strong PMI reading improves a country’s economic attractiveness compared to its global competitors.

Practice Question:

Consider the following statements related to the Purchasing Managers’ Index (PMI):

1. It is released by the National Statistical Office (NSO) for the services and manufacturing sectors.
2. PMI is expressed as a number between 0 and 100.
3. PMI is released once a year.

How many of the above statements are incorrect?

a) Only one

b) Only two

c) All three

d) None of the above