Purchasing Managers’ Index (PMI)
Why in news?
India's HSBC Manufacturing PMI for December 2025 dropped to 55.0, revised down from an initial 55.7 and below November's 56.6, marking the weakest expansion in two years.
About Purchasing Managers’ Index (PMI)
The Purchasing Managers’ Index (PMI) is a key economic indicator that measures the health of the manufacturing and services sectors. It reflects business conditions such as output, new orders, employment, supplier deliveries, and inventories. A PMI above 50 indicates expansion, while below 50 signals contraction.
- Definition: PMI is a survey-based measure compiled monthly by organizations like S&P Global and local partners. It captures the sentiment of purchasing managers about current and future business conditions.
- Coverage: Separate PMIs exist for manufacturing and services, and sometimes a composite index combines both.
- Interpretation:
- > 50 → Expansion in activity
- = 50 → No change
- < 50 → Contraction
Importance of PMI
- Leading Indicator: PMI is one of the earliest signals of economic trends, often preceding GDP growth or industrial output data.
- Investor Tool: Financial markets watch PMI closely to gauge economic momentum and adjust investment strategies.
- Policy Use: Governments and central banks use PMI to assess whether stimulus or tightening measures are needed.
Recent PMI Trends
- India’s Manufacturing PMI (Dec 2025): Fell to 55.0 from 56.6 in November, marking a two-year low.
- Reason for Decline:
- Slower growth in output and new export orders
- Weakening employment growth
- Reduced business optimism
- Despite the slowdown, a reading of 55.0 still indicates expansion, just at a weaker pace.
Key Components of PMI
| Component |
What It Measures |
Impact on PMI |
| New Orders |
Demand from domestic & export markets |
Strong driver |
| Output/Production |
Actual goods/services produced |
Core measure |
| Employment |
Hiring trends in the sector |
Moderate |
| Supplier Deliveries |
Speed of supply chain deliveries |
Inverse effect |
| Inventories |
Stock levels maintained by firms |
Minor impact |
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