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Purchasing Manager’s Index UPSC NOTE

 Why in News

  • New orders and output levels in India’s manufacturing sector may have hit a 42-month high in March.

  • This leads in lifting overall private sector output to an eight-month peak despite a slight moderation in Services sector activity, as per the HSBC Flash PMI for this month.

  • The Manufacturing sector Flash PMI stood at 59.2 for March from a 56.9 PMI reading in February.

  • While the Services PMI eased from 60.6 last month to 60.3

  • A reading of 50 on the PMI or Purchasing Managers’ Index indicates no change in activity levels.

Purchasing Manager’s Index(PMI)

  • The PMI is a forward-looking indicator of economic health, particularly in the manufacturing and service sectors.

  • It's a survey-based index derived from monthly surveys of purchasing managers in various industries.

What it measures:

  • The PMI doesn't directly measure economic output, but rather gauges business sentiment.

The survey asks purchasing managers about their expectations for factors like:

  1. New orders

  2. Production levels

  3. Employment

  4. Supplier deliveries

  5. Inventories

How it's calculated:

  • Each question in the survey has three possible answers: 'higher,' 'no change,' or 'lower' compared to the previous month.

  • A diffusion index is then calculated, assigning a value to each response.

  • These values are summed up and weighted to create a final PMI score between 0 and 100.

What the score means:

  • A PMI score above 50 indicates expansion in the sector, suggesting economic growth.

  • A score below 50 indicates contraction, suggesting a decline in economic activity.

  • A score of exactly 50 suggests no change from the previous month.

Importance of PMI:

  • Provides valuable insights for businesses, investors, and policymakers.

  • Helps businesses with inventory management, production planning, and investment decisions.

  • Helps investors gauge economic trends and make informed investment choices.

  • Helps policymakers understand economic conditions and formulate policies accordingly.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Purchasing Manager’s Index UPSC NOTE
Purchasing Manager’s Index UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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