What a PMI is
A PMI (Purchasing Managers' Index) is a monthly survey of company purchasing managers and senior executives. They answer simple questions about their own business this month compared with last month: are new orders higher, the same or lower? Is output up or down? Are you hiring or cutting staff? Are supplier deliveries slower? Are the prices you pay rising?
The answers are combined into an index. Because the survey asks about direction rather than amounts, a PMI is available quickly. Traders get it well before official data such as industrial production or GDP.
Most major economies have a manufacturing PMI and a services PMI. Many also publish a composite PMI, which blends the two into a single reading of private-sector activity.
- GDP, retail sales or PMI come out stronger than expected.
- The economy looks healthier and companies are expected to earn more.
- Foreign investors want the country's stocks and bonds; rate cuts look less likely.
- The currency tends to firm; weak data usually works the other way.
How the diffusion index works
A PMI is a diffusion index. It does not measure how much output grew. It measures how widespread the improvement or decline is across the companies surveyed.
- Firms reporting improvement push the index up.
- Firms reporting deterioration push it down.
- Firms reporting no change are counted partly, so they hold the index near the middle.
The scale has a midpoint that means "no change":
| Reading | What it means |
|---|---|
| Above the midpoint | More firms report improvement than decline. Activity is expanding. |
| At the midpoint | Improvement and decline are balanced. |
| Below the midpoint | More firms report decline than improvement. Activity is contracting. |
Two details matter for experienced readers:
- Distance from the midpoint shows breadth, not size. A reading far above the midpoint means growth is broad, not that output grew by a large amount.
- Direction and level are separate signals. A PMI can fall and still be above the midpoint. That means growth is continuing, but fewer firms report it. Markets often react to the change as much as to the level.
Sub-indices are published alongside the headline. New orders, output, employment, supplier delivery times, inventories and prices are the main ones. The prices sub-index is watched closely because it can point to cost pressure before it appears in CPI inflation data.
ISM vs S&P Global PMIs
In the United States there are two competing PMI families. They often move together but can disagree.
| ISM | S&P Global | |
|---|---|---|
| Publisher | Institute for Supply Management | S&P Global |
| Coverage | United States | United States plus many other economies (eurozone, UK, Japan, China, India and others) |
| Releases | Manufacturing and Services reports | Flash and final Manufacturing, Services and Composite |
| Flash estimate | No | Yes, for major economies |
| Market attention in the US | Usually higher | High for flash, lower for final |
The ISM reports have a long history and are closely followed by US markets. The ISM services report is formally called the Services PMI (formerly Non-Manufacturing).
S&P Global runs PMIs under local brand names in some countries, for example the HCOB PMIs for the eurozone. For China, traders watch both the official PMI from the National Bureau of Statistics and the private RatingDog (formerly Caixin) PMI compiled by S&P Global. Using the same method across countries makes S&P Global PMIs useful for comparing economies side by side.
Flash and final releases
A flash PMI is an early estimate. It is based on most of the survey responses and is published before the reference month ends. The final PMI comes out later with the full sample. Revisions from flash to final are usually small.
For trading this means:
- The flash release carries the news. It is often the bigger market event for the eurozone, UK and US S&P Global data.
- The final release matters mainly if it is revised a lot from the flash.
- ISM has no flash. Its headline is the only release, so it carries its full weight on the day.
Where to find release dates
Use official calendars, not memory. ISM publishes its report calendar on its own website. S&P Global publishes a PMI release calendar covering flash and final dates by country. A good economic calendar gathers these dates and adds the consensus forecast and the previous reading. Check the time zone it uses against Pakistan time.
Take actual figures only from the official releases or a calendar that cites them. Third-party summaries sometimes mix up flash and final numbers, or ISM and S&P Global numbers.
How markets typically react to PMI data
PMI data in forex is a surprise event. Prices already reflect the consensus, so the reaction depends mostly on the gap between the actual figure and the forecast. More on this in economic surprises and expected news.
Typical patterns, which do not always hold:
- Currency. A stronger-than-expected PMI can support the currency if it makes the central bank more likely to keep rates high or raise them. A weak PMI can do the opposite. For the US dollar, the ISM figures are often the main release of their week. See the US Federal Reserve and European Central Bank pages for how policy links in.
- Bond yields. Strong PMIs tend to lift yields, and weak ones tend to lower them. The prices sub-index can move yields even when the headline is in line.
- Stock indices. The reaction is mixed. Strong data can lift earnings hopes but also raise rate expectations. Which effect wins depends on what the market is focused on at the time. See what moves indices.
- Commodity currencies. Chinese PMIs can affect the Australian dollar and metals through demand expectations. See People's Bank of China.
- Risk mood. A broad run of weak PMIs across regions can feed a risk-off move.
Context changes the reaction. When inflation is the market's main concern, the prices component can matter more than the headline. When recession fears dominate, the new orders and employment sub-indices get more attention.
Practical points around release time
- Spreads can widen and prices can jump in the seconds around the release. Stop orders may be filled at a worse price than set.
- Several PMIs often come out on the same day across Asia, Europe and the US, so volatility can come in separate waves.
- A first move that reverses within minutes is common, especially when the headline and sub-indices point in different directions.
Leveraged CFD and forex trading can lose money fast, and news releases make that risk sharper. Read risk management before trading around data. If you want to see how a release moves prices without risking money, a demo account lets you watch the reaction live.
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Frequently asked questions
What is PMI in simple terms?
It is a monthly survey asking purchasing managers whether business conditions improved, stayed the same or worsened. The answers are turned into an index of how widespread growth or decline is.
What is the difference between manufacturing PMI and services PMI?
Manufacturing PMI covers factories and goods producers. Services PMI covers firms such as retail, finance, transport and hospitality. In most large economies services make up the larger share of output.
Does a falling PMI mean the economy is shrinking?
Not necessarily. If the reading is still above the midpoint, activity is still expanding, but fewer firms report growth than before.
Why do ISM and S&P Global PMIs sometimes disagree?
They use different samples, questions and weightings. Treat a gap between them as a sign of uncertainty rather than a contradiction.
Is the flash PMI or the final PMI more important?
For S&P Global data, the flash usually moves markets more because it is the first look. The final release matters if it is revised noticeably.
Can PMI data tell me where a currency will go?
No. It is one input among many. The reaction depends on expectations, central bank policy and the wider market mood. This page does not give forecasts or trade ideas. For the wider picture, see fundamental analysis.
