Purchasing managers index (PMI)

A survey based measure of business conditions. Purchasing managers at a panel of firms are asked whether output, new orders, employment, supplier delivery times and inventories are higher, unchanged or lower than the previous month. Each answer set becomes a diffusion index: the proportion reporting an improvement plus half the proportion reporting no change. The headline is a weighted composite of those sub-indices, and separate readings are published for manufacturing, for services and for the two combined.

It is watched chiefly for its timing. The panel is polled during the month and the result is published within days of the month ending, well ahead of the official statistics on output, which is why it is treated as one of the earliest reads on activity and why an advance estimate and a final version of the same month are both released. Compilers are not interchangeable, since national bodies and commercial survey firms run different panels with different weights, and their series for the same economy can diverge.

The trip is reading breadth as size. A reading above the mid point says that more firms improved than deteriorated and says nothing at all about by how much, so a wide but tiny improvement and a narrow but large one produce the same number. It is also a comparison with the previous month rather than with a level, so a high reading sustained for several months describes continued expansion rather than an accelerating one. Individual sub-indices can invert their usual meaning too, since lengthening delivery times normally signal strong demand but signal the opposite during a supply disruption. Analysts disagree about how much the reading adds once other data for the same month are already available.