The Purchasing Managers' Index (PMI) is a concept and a leading economic indicator that quantifies changes in business activity within the private sector. The concept originated in the United States, with the composite index for manufacturing formally established and first published in June 1948 by the Institute for Supply Management (ISM) to provide early insights into business conditions.
The PMI works by surveying purchasing managers—the professionals responsible for a company's procurement—on whether key business conditions have improved, deteriorated, or remained unchanged compared to the previous month. The headline PMI is a single number calculated as a weighted average of five sub-indices: New Orders (30%), Output (25%), Employment (20%), Suppliers' Delivery Times (15%), and Stocks of Purchases (10%). The critical mechanism is the 50-point threshold: a reading above 50 indicates an expansion of the sector, while a reading below 50 signals a contraction.
In India, the PMI data is compiled and released monthly by S&P Global (which acquired IHS Markit). The PMI connects directly to broader economic analysis, serving as a timely, forward-looking proxy for official statistics like Gross Domestic Product (GDP) and the Index of Industrial Production (IIP). The indicator is released separately for the Manufacturing PMI and the Services PMI, and a Composite PMI is also calculated to provide an overall picture of the economy. The core methodology of the five weighted components has remained the standard, though the compiling institution for India's data changed following the merger of IHS Markit into S&P Global.