The latest Purchasing Managers’ Index (PMI) numbers led to panic in the retail investment community. It is worthwhile explaining PMI. The PMIs are surveys. Senior business executives in various sectors are asked if there’s an improvement, a deterioration, or no change in business conditions, compared to a month ago.
Responses are normalised on a scale of 0-100 where any number above 50 represents expansion, 50 is equilibrium, and anything below 50 is contraction. These responses are sub-divided into Services and Manufacturing to create two sector indices.
So, the PMI is a month-over-month sentiment indicator. Any number over 50 indicates senior
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