Consumer Confidence Index
OECD composite consumer confidence indicator (100 = long-run average)
Historical Data
What Is the PMI Manufacturing?
The Purchasing Managers' Index for manufacturing is a survey-based indicator that captures the prevailing direction of activity in the factory sector. Each month, purchasing managers at hundreds of manufacturing firms are asked whether key business conditions — new orders, production, employment, supplier deliveries, and inventories — have improved, stayed the same, or deteriorated compared with the previous month. Their responses are distilled into a single composite number that serves as one of the earliest and most influential readings on the state of the industrial economy.
The PMI's power lies in its timeliness and its construction. Because surveys can be collected and processed far more quickly than hard data on output or shipments, the PMI is typically published on the first business day after the reference month ends — weeks before industrial production figures and months before GDP. This speed makes it a favourite of financial markets, central banks, and media outlets seeking a quick pulse-check on the economy.
The concept was pioneered in the United States in the 1940s and has since been adopted globally. Private survey firms now produce PMIs for dozens of countries using a harmonised methodology, enabling direct cross-country comparison. The manufacturing PMI is complemented by services and composite variants, but the manufacturing reading retains a special status because of the goods sector's role as a bellwether for the broader business cycle.
How It Is Calculated
The composite PMI is a weighted average of five sub-indices, each constructed from the net balance of survey responses:
Each sub-index is computed as a diffusion index. If 40 per cent of respondents report an improvement, 35 per cent report no change, and 25 per cent report a deterioration, the diffusion index for that component is:
D = (\text{% Improved}) + 0.5 \times (\text{% Unchanged}) = 40 + 0.5 \times 35 = 57.5
The resulting index fluctuates between 0 and 100, with 50 as the theoretical neutral line. A reading above 50 indicates that a majority of firms reported improvement, while a reading below 50 indicates that a majority reported deterioration.
Seasonal Adjustment
Raw survey responses are seasonally adjusted before the diffusion indices are calculated. This removes predictable calendar-related patterns — summer plant shutdowns, year-end inventory clearances — that would otherwise distort the signal. The seasonal factors are recalculated annually and can themselves introduce small revisions to the historical series.
Interpreting the Neutral Line
The 50 threshold is the most important reference point. However, it is crucial to understand what crossing 50 does and does not mean. A reading of 48 does not necessarily indicate that industrial output is falling — it means that more firms reported worsening conditions than improving ones, but the magnitude and breadth of the weakness may be modest. Empirical research has found that the PMI level consistent with zero growth in industrial production is often slightly below 50, typically around 48 to 49, because firms that report "no change" may still be experiencing modest growth in volumes.
How to Read the Numbers
| PMI level | Interpretation |
|---|---|
| Above 55 | Strong expansion in manufacturing; broad-based improvement across firms |
| 50 – 55 | Moderate expansion; a majority of firms report improving conditions |
| 48 – 50 | Near neutral; expansion may be stalling or contraction beginning |
| 45 – 48 | Moderate contraction; industrial output likely declining |
| Below 45 | Severe contraction; consistent with a significant industrial downturn or recession |
The direction of change matters as much as the level. A PMI rising from 46 to 49 — still below 50 — signals that the pace of contraction is easing and a recovery may be forming. A PMI falling from 56 to 52 — still above 50 — signals decelerating momentum even though expansion continues. For this reason, analysts track both the level of the PMI and its month-to-month change.
Sub-indices provide additional colour. The new-orders component is widely regarded as the most forward-looking, since orders precede production. The new-orders-to-inventories ratio is a popular derivative indicator: a high ratio suggests that orders are running ahead of stockpiles, pointing to future production increases, while a low ratio suggests inventories are piling up and production cuts may follow.
Economic Significance
The PMI's influence on financial markets is difficult to overstate. Because it is released before virtually every other indicator for a given month, it sets the tone for the economic narrative. A sharply weaker-than-expected PMI can send equity markets lower and government bond yields down as traders price in slower growth and a more dovish central bank. A strong upside surprise has the opposite effect. Currency markets are also sensitive, since PMI differentials between countries inform expectations about relative growth and, by extension, relative monetary-policy paths.
Central banks treat the PMI as a key input to their real-time assessment of economic conditions. Minutes and reports from major central banks regularly reference PMI readings when discussing the balance of risks to the growth outlook. Because the PMI captures both the direction and the breadth of change across firms, it provides information that hard data alone cannot — namely, how widespread a trend is across the manufacturing base.
The PMI has a well-documented track record as a leading indicator. Academic and practitioner studies have shown that sustained readings below 50 tend to precede recessions, while sustained readings above 50 tend to precede periods of above-trend GDP growth. The lead time varies but is typically one to three quarters, making the PMI valuable for nowcasting — the practice of estimating current-quarter GDP before official data are released.
For supply-chain managers and procurement professionals — the very people who respond to the survey — the PMI and its sub-indices are operational tools. The supplier-deliveries sub-index, which rises when delivery times lengthen, signals bottlenecks that may require firms to seek alternative sources or build buffer stocks. The employment sub-index offers an early read on hiring intentions in the manufacturing sector, useful for workforce planning and labour-market analysis.
One limitation deserves mention. The PMI is a breadth measure — it asks whether conditions improved or deteriorated, not by how much. A reading of 55 in which many firms report slight improvement can look identical to one in which a few firms report dramatic improvement while others are flat. Hard data on production volumes, shipment values, and order backlogs remain essential for gauging the magnitude of change.
Related Indicators
- Industrial Production — the hard-data counterpart to the survey-based PMI
- Business Confidence — broader survey of business expectations across all sectors
- Composite Leading Indicator — aggregated forward-looking index incorporating the PMI and other signals
- Real GDP Growth (QoQ) — the broadest measure of economic output that the PMI helps to forecast
Why it matters
Above 100 = above-average optimism. Consumer spending drives ~60% of GDP.