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Glossary

PMI

PMI (Purchasing Managers Index) is a macroeconomic indicator that reflects the level of business activity in certain sectors of the economy.

PMIs are calculated based on the results of a survey of purchasing managers for goods and materials for the company in which they work. These managers, answering questions, tell whether business activity is growing, falling, or not changing. During the survey, the following parameters are analyzed, each of which has its own weight when calculating the indicator:

1. New orders

2. Employment rate

3. The volume of production

4. Stocks of goods

5. Activities of suppliers

Most countries publish PMI data on a monthly basis. In practice, business activity indices can be calculated in the manufacturing sector (for example, in Canada, the United States, Russia, Turkey, Sweden, Poland, and the Netherlands), in the non-manufacturing sector (China, the United States, and Japan can be cited as examples), in the service sector (in Brazil, France, New Zealand, Switzerland, Ireland, India, Kazakhstan, and other countries), and in construction (for example, Australia, Eurozone, France, Germany, Ireland, Italy, and the United Kingdom).

In addition, in a number of countries, such as Germany, Russia, the United Kingdom, Spain, and the United States, the Composite PMI index is calculated and published, showing the monthly weighted average movement of PMI indices in the service and production sectors. The weights of both indices take official GDP data into account.

The United States also produces the Chicago PMI index, which measures the level of business activity in the Chicago manufacturing and non-production sector, the second- largest US commercial, industrial, and financial center after New York.

The PMI index is measured in points and can be 0 to 100. If the index value is less than 50, this indicates an economic downturn and a decline in the level of activity in specific industries, especially if this pattern continues for several months. If the value is higher than 50, it is an indicator of economic growth.

The graph below shows the development of Composite PMI values in countries with the highest values of this indicator (as of July-August 2021).
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