Understanding the headline PMI™ and its subindices

Learn in-depth tips and background insights about Purchasing Managers Index (PMI™) from the experts who compile and analyse the survey data at S&P Global. These articles dig into the history of the PMI surveys and illustrate how the headline PMI and its various subindices can be used to gain valuable insights into economic growth, hiring, inflation, supply delays and capacity constraints around the world and across business sectors. As such, the articles also provide substantial insight into how to use the PMI for economic analysts, investors, traders and policymakers.

PMI survey response rates: Survey response rates continue to average 73%, in line with pre-pandemic averages

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The total number of S&P Global PMI survey panels has risen from just one in 1992 to 70 at present, with more panels currently being constructed. At the same time, the total number of survey contributors participating in S&P Global survey panels has risen to an all-time high of over 28,000, with response rates running at 73%, broadly in line with the survey's pre-pandemic average, albeit below the highs seen during the pandemic.

Using the Global PMI instead of GDP as a macro indicator for investing

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

PMI survey data offer investors an indicator of economic growth conditions which is historically more highly correlated with equity market prices than widely-used GDP data. Moreover, the PMI is available months before GDP data, and is not subject to revision. We also show how the PMI data can also be easily converted into GDP-equivalent growth rate, or 'nowcast', providing investors with an accessible substitute for GDP in their models and analysis.

Productivity PMI: How to interpret and use the Productivity PMI

Eleanor Dennison| Economist, S&P Global Market Intelligence

The Productivity PMI from S&P Global Market Intelligence is a measure of labour efficiency and therefore a key determinant of corporate profitability, earnings growth, and overall economic performance. Based on individual company productivity scores, the index provides accurate monthly productivity insights for comparison across economies.

The Productivity PMI also provides real insights into firm-level productivity trends, rather than relying on implied relationships, which helps to form a more accurate picture of productivity trends in both the short- and long-run.

S&P Global PMI® and ISM survey comparisons

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

Two different sets of surveys of US business conditions are provided by S&P Global (previously IHS Markit) and the ISM. This document analyses the main differences in the methodologies, which can cause divergences between the survey findings and also generate different use-cases for the surveys.

We note that S&P Global PMI data offer benefits in terms of earlier publication and higher correlations with comparable official data, as well as exhibiting lower volatility (providing clearer signals of turning points in key economic metrics) and providing greater insights into sub-sector level economic trends. These advantages of the S&P Global PMI can be traced to larger survey sample sizes and the use of a more advanced and widely used methodology than adopted by the ISM.

S&P Global PMI® and NBS survey comparisons

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

Comparisons between two PMI surveys for mainland China - one published by the National Bureau of Statistics of China (NBS) and the other by Caixin, compiled by S&P Global Market Intelligence - have often been made, especially during times when the figures diverge in short-term trends.

Here we explore the most recent divergence for the manufacturing gauges in more detail, and draw the conclusion that both surveys are in fact sending similar signals on the health of the manufacturing economy in mainland China. While the Caixin PMI is slightly more aligned with official data over the year-to-date in terms of the production trend on average, it overstated growth late in the second quarter such that the NBS survey sent an earlier signal of a slowing manufacturing economy.

Understanding… PMI new export orders index: Tracking worldwide trade flows and changing demand, by country and sector

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The new export orders index from S&P Global's PMI business surveys tracks foreign demand for both goods and services. The data can be used to gauge export demand over time across countries and sectors.

The new export orders index can also be aggregated to provide a useful and timely guide to global or regional trade flows, allowing insights into changing demand conditions well ahead of comparable official data.

Understanding … PMI suppliers' delivery times: A widely used indicator of supply delays, capacity constraints and price pressures

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The suppliers' delivery times index from IHS Markit's PMI business surveys captures the extent of supply chain delays in an economy, which in turn acts as a useful barometer of capacity constraints. The index therefore helps gauge the degree to which the current demand/supply environment is indicative of either a buyers'- or sellers'-market, and hence provides valuable information on developing inflation trends.

Understanding … headline PMI vs. subindices: how signals can be lost by focusing exclusively on the headline PMI

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The aggregation of different components into one headline 'PMI' indicator, designed as an overall barometer of business conditions, means a considerable amount of the value can be found in the PMI's component indices that is not always seen in the headline figure.

Understanding… PMI backlogs of work: a key indicator of capacity utilisation, providing insights into investment, hiring and inflation

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The backlogs of work index from IHS Markit's PMI business surveys captures the volume of orders that a company has received but has yet to either start work on or complete.

As such, the index is a useful barometer of the extent to which companies are struggling to cope with demand and can hence act as a leading indicator of the expansion of capacity through either investment or hiring. The index can also provide useful information about pricing power and developing inflation trends, as well as corporate earnings.

As such, the backlogs of work index also generates powerful signals for investment strategy.

PMI surveys: how not to mis-measure manufacturing output

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The most common mistake we see in PMI charts is the incorrect use of the headline PMI for manufacturing. The headline PMI is a gauge based on a number of survey sub-indices which is designed to track the overall health of manufacturing. However, often we see this index incorrectly used as a gauge of manufacturing output growth, which can give misleading signals - especially when used to compare manufacturing performance relative to the service sector. Instead, the manufacturing PMI output index needs to be used.

How to interpret and use the PMI survey output index

Chris Williamson| Chief Business Economist, S&P Global Market Intelligence

The PMI output index is the survey's principal gauge of economic growth and can provide valuable insights into GDP, service sector growth and industrial production trends well ahead of official data. A simple statistical process can be used to produce growth rate equivalents for comparable official economic data. This article explains the methodology behind the output index and how to use the index to track economic growth.