PMI (Purchasing Managers Index)
In short
Monthly survey of manufacturing and service sector activity — above 50 = expansion
PMI asks business purchasing managers if activity is better or worse than last month. Above 50 means expansion; below 50 means contraction. It's one of the fastest economic indicators — released monthly before most other data.
PMI surveys manufacturing and services sector activity monthly. The ISM Manufacturing PMI and S&P Global PMI are widely followed. Above 50 signals expansion; below 50 signals contraction. PMI is a leading indicator — it often changes before GDP data.
Thresholds
- < 45
- Strong contraction
- 45-50
- Mild contraction
- 50-55
- Mild expansion
- 55-60
- Strong expansion
- > 60
- Very strong — potential overheating
Related concepts
- GDP Growth — GDP growth measures how much the economy grew (or shrank). Think of it as the economy's report card. Above 2-3% is healthy. Two consecutive negative quarters = recession. Recessions hurt stocks but eventually lead to recoveries.
- Consumer Confidence — Consumer confidence surveys ask regular people if they feel good or bad about the economy and their finances. Since consumer spending is 70% of GDP, when people feel bad, they spend less, and the economy slows.
- Unemployment Rate — The unemployment rate shows what percentage of people who want to work can't find a job. Below 5% is considered healthy. Very low unemployment (below 3.5%) can actually cause inflation as companies compete for workers.