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Purchasing Managers Index: Difference between revisions
→Developments in U.S Purchasing Managers Index(PMI)
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== Developments in U.S Purchasing Managers Index(PMI) == | == Developments in U.S Purchasing Managers Index(PMI) == | ||
'''ISM''' | '''ISM''' | ||
April 5,2023. The ISM service PMI declined to 51.2 in March from 55.1 in February-It was expected to decline to 54.5. The index's measure of new orders received by services businesses dropped to 52.2 in March from 62.6 in February.Meanwhile, the index measure of prices paid by service industries for inputs declined to 59.5 from 65.6 in February.Its gauge of supplier deliveries fell to 45.8 from to 47.6 in February, indicating an improvement in supply. Its measure of employment dropped to 51.3 from 54.0 in February<ref>https://www.reuters.com/markets/us/us-service-sector-slows-march-inflation-cooling-ism-survey-2023-04-05/</ref>. | |||
March 3, 2023: ISM's measure of new orders and employment indicates that the economy continues to expand.The gauge for new orders rose from 60.4 in January to 62.6 in February while the measure for employment grew to 54.0 from 50.0 in January. Meanwhile, the gauge of prices paid for services dipped to 65.6 from 67.8 in January. ISM's non-manufacturing PMI dropped to 55.1 from 55.2 in January, still above the contraction territory and above the 54.5 estimate<ref>https://www.reuters.com/world/us/us-service-sector-steady-february-ism-survey-2023-03-03/#:~:text=The%20ISM%20survey's%20gauge%20of,responsive%20to%20interest%20rate%20increases.</ref>. | March 3, 2023: ISM's measure of new orders and employment indicates that the economy continues to expand.The gauge for new orders rose from 60.4 in January to 62.6 in February while the measure for employment grew to 54.0 from 50.0 in January. Meanwhile, the gauge of prices paid for services dipped to 65.6 from 67.8 in January. ISM's non-manufacturing PMI dropped to 55.1 from 55.2 in January, still above the contraction territory and above the 54.5 estimate<ref>https://www.reuters.com/world/us/us-service-sector-steady-february-ism-survey-2023-03-03/#:~:text=The%20ISM%20survey's%20gauge%20of,responsive%20to%20interest%20rate%20increases.</ref>. | ||
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On February 21 2022, S&P Global announced that February U.S. PMI Composite came in 50.2 versus 47.5 consensus and 46.8 in January. This ended the seven months of the index coming below the 50 mark that seperates contraction and expansion. Both the service and manufacturing PMI also saw growth. Service PMI grew from 46.8 in January to 50.5, above the consensus estimate of 47.2. On the other hand, Manufacturing PMI came in 47.8 versus 47.1 consensus and 46.9 in January. Similarly, the measure of prices paid by businesses for inputs declined to 60.6 in February from a final reading of 63.0 in January<ref>https://finance.yahoo.com/news/u-business-activity-rebounds-eight-150453541.html</ref>. | On February 21 2022, S&P Global announced that February U.S. PMI Composite came in 50.2 versus 47.5 consensus and 46.8 in January. This ended the seven months of the index coming below the 50 mark that seperates contraction and expansion. Both the service and manufacturing PMI also saw growth. Service PMI grew from 46.8 in January to 50.5, above the consensus estimate of 47.2. On the other hand, Manufacturing PMI came in 47.8 versus 47.1 consensus and 46.9 in January. Similarly, the measure of prices paid by businesses for inputs declined to 60.6 in February from a final reading of 63.0 in January<ref>https://finance.yahoo.com/news/u-business-activity-rebounds-eight-150453541.html</ref>. | ||
== Developments in Euro Zone Purchasing Managers Index(PMI) == | |||
== Developments in Euro Zone Purchasing Managers Index(PMI)== | |||
On February 21 2022, S&P Global said that Euro zone S&P Global's flash Composite Purchasing Managers' Index (PMI) rose to 52.3 in February from 50.3 in January, above the 50.6 consensus and also a nine-month high. Service PMI saw a fastest growth as it increased to 53.0 from 50.8 in January, exceeding the median estimate for 51.0. Similarly, business expectations grew to a nine-month high of 61.5, from 61.2 in January. However, Manufacturing PMI declined to 48.5 from 48.8 in January, below the 49.3 estimate. Of great interest to us is German's S&P Global's flash composite Purchasing Managers' Index (PMI) which returned to growth after 8 months. It rose to 51.1 in February from 49.9 in January,beating the 50.4 consensus estimate. Like in Euro Zone, German's manufacturing PMI fell to 46.5 from 47.3 in January, below the 48.0 consensus and remaining in contraction territoy for an eight month. German's Service PMI, on the other hand, saw slight growth for the second month as it grew to 51.3 from 50.7 in January, in line with analysts' expectations of a reading of 51.0.<ref>https://www.reuters.com/video/watch/euro-zone-business-growth-at-9-month-hig-idOV191321022023RP1</ref> | On February 21 2022, S&P Global said that Euro zone S&P Global's flash Composite Purchasing Managers' Index (PMI) rose to 52.3 in February from 50.3 in January, above the 50.6 consensus and also a nine-month high. Service PMI saw a fastest growth as it increased to 53.0 from 50.8 in January, exceeding the median estimate for 51.0. Similarly, business expectations grew to a nine-month high of 61.5, from 61.2 in January. However, Manufacturing PMI declined to 48.5 from 48.8 in January, below the 49.3 estimate. Of great interest to us is German's S&P Global's flash composite Purchasing Managers' Index (PMI) which returned to growth after 8 months. It rose to 51.1 in February from 49.9 in January,beating the 50.4 consensus estimate. Like in Euro Zone, German's manufacturing PMI fell to 46.5 from 47.3 in January, below the 48.0 consensus and remaining in contraction territoy for an eight month. German's Service PMI, on the other hand, saw slight growth for the second month as it grew to 51.3 from 50.7 in January, in line with analysts' expectations of a reading of 51.0.<ref>https://www.reuters.com/video/watch/euro-zone-business-growth-at-9-month-hig-idOV191321022023RP1</ref> | ||
== What's Purchasing Managers Index(PMI)? == | ==What's Purchasing Managers Index(PMI)?== | ||
The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. | The Purchasing Managers' Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. | ||
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[[File:PMIs 2.PNG|thumb|https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html]] | [[File:PMIs 2.PNG|thumb|https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html]] | ||
=== Formula: | ===Formula:=== | ||
PMI data are presented in the form of a diffusion index, which is calculated as follows | PMI data are presented in the form of a diffusion index, which is calculated as follows | ||
where: | where: | ||
* P<sub>1</sub> = Percentage number of answers that reported an improvement. | *P<sub>1</sub> = Percentage number of answers that reported an improvement. | ||
* P<sub>2</sub> = Percentage number of answers that reported no change. | *P<sub>2</sub> = Percentage number of answers that reported no change. | ||
* P<sub>3</sub> = Percentage number of answers that reported a deterioration. | *P<sub>3</sub> = Percentage number of answers that reported a deterioration. | ||
Because of P<sub>1</sub> + P<sub>2</sub> + P<sub>3</sub> = 100, | Because of P<sub>1</sub> + P<sub>2</sub> + P<sub>3</sub> = 100, | ||
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[[File:PMIs.PNG|thumb|https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html]] | [[File:PMIs.PNG|thumb|https://www.spglobal.com/marketintelligence/en/mi/research-analysis/sp-global-and-ism-service-sector-surveys-compared.html]] | ||
=== ISM and S&P differences | ===ISM and S&P differences=== | ||
* S&P uses the following weights: production (0.25), new orders (0.30), employment (0.20), supplier deliveries (0.15), and inventories (0.10), while ISM attributes each of these variables the same weighting (0.2) when calculating the overall PMI | *S&P uses the following weights: production (0.25), new orders (0.30), employment (0.20), supplier deliveries (0.15), and inventories (0.10), while ISM attributes each of these variables the same weighting (0.2) when calculating the overall PMI | ||
* ISM's surveys cover all [[wikipedia:North_American_Industry_Classification_System|NAICS]] categories, and The S&P survey covers private sector companies, but not the public sector.<ref>https://en.wikipedia.org/wiki/North_American_Industry_Classification_System</ref> | *ISM's surveys cover all [[wikipedia:North_American_Industry_Classification_System|NAICS]] categories, and The S&P survey covers private sector companies, but not the public sector.<ref>https://en.wikipedia.org/wiki/North_American_Industry_Classification_System</ref> | ||
* | * | ||
For the US specifically, the ISM PMI is the most popular among economist and investors to rely for the economic outllook. | For the US specifically, the ISM PMI is the most popular among economist and investors to rely for the economic outllook. | ||
== References: == | ==References:== | ||
<references /> | |||