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FOREX ECONOMIC INDICATOR:PURCHASE MANAGER INDEX

Purchase Manager Index (PMI) is an economic indicator that helps to understand the health of an economy. The index is constructed on the survey conducted on the responses by selected purchase managers from different geographical areas of a country. 

The composite Purchase Manager index is composed of five sud-indexes e.g. Production level (.25), New orders (from customers) (.30), Supplier deliveries (.15), Inventories (.10) and Employment level (.20).

Source: topnews.com.sg
Purchase Manager Index is measured in different business areas, e.g. manufacturing PMI, non-manufacturing PMI and service PMI. The importance of a PMI index depends on the economy, e.g. if an economy is greatly service oriented then service PMI is most important for that economy. 

Forex traders keep eyes on the PMI releases to conduct the fundamental analysis of a currency. A better than expected PMI has bullish effect on a currency. The magic numbers for the PMI is 50 and 42 because a PMI higher than 50 indicates an expansion and a PMI lower than 42 indicates a recession.

Purchase Manger Index economic indicator can be considered as a hybrid indicator, but it can also be considered as a confidence element like the Consumer Confidence Index.

Dear Traders, if you have any questions, suggestions or complement, you can drop a comment below.