PMI formula. Business Activity Index (PMI) in different countries
Definition of the term index of business activity
What are they talking about business activity indices
PMI business activity index
Faktura.ru business activity index
However, the main disadvantage of building stock indices based on a continuous sample is the problem of liquidity. The fact is that the last contract price is usually used to calculate the index. However, for some shares agreements may not be carried out for a long time, and the stock exchange index in such cases begins to “lag behind life”. If there are many such stocks, then the index becomes inertial and poorly meets the needs of investors.
The third problem of building an exchange index is related to the fact that the situation on the market is constantly changing - bankruptcies, mergers and acquisitions occur, new organizations arise that rapidly increase capitalization. On the other hand, the longer the history of the index, the greater its value - it is possible to trace the reaction of the stock market in the past to certain events in different macroeconomic conditions, which gives good grounds for predicting further market movements. For this reason, a dilemma arises: if changes are made rarely, then the index begins to "lag behind the market", if often, the index "loses history", i.e., retaining its former name, it actually begins to reflect changes in another market sector. Therefore, from time to time, stock markets change the composition of the index - they withdraw some indices and introduce others to replace them. There are no formal criteria for changing the composition of the sample and taking into account ongoing changes in the market; in practice, these issues are resolved by the index calculation, with the involvement of authoritative experts.
Integral (composite) indices
Despite the relative simplicity and convenience of calculating stock indices, they do not always reflect the economic cycle and, accordingly, the current state and dynamics of business activity. This disadvantage is especially pronounced in developing countries and countries with economies in transition, where there are no pronounced economic cycles, stock exchanges no, or they are just starting to develop. In addition, the stock index reflects past events. But investors are primarily interested in what may happen in the near future.
Given these limitations, the so-called integrated business activity indices are increasingly used in international practice. When developing such an index, an attempt is made to combine several indicators into one, which, due to its generality, would predict economic cycles most clearly. Therefore, the index is designed in such a way as to cover all the main components of business activity in the country: employment, production, income, consumption, trade, investments, stocks, prices, money and loan and etc.
The components of the index are selected based on their economic significance, statistical adequacy and the possibility of operational measurement and accumulate both quantitative and qualitative information in various industries and areas. Such indices have the properties of a leading (predictive) indicator and are able to indicate the moment of a change in the trend in economic activity. This happens because the polls systematize the opinions of a large number of people who are professionally engaged in "their" business in different industries, who know and feel the development trends.
The best-known index of this group is the IFO index of the institute in Germany, according to which the level of business activity is assessed on a monthly basis, as well as expectations for the next six months. It is formed by polling more than 7 thousand managers. When calculating the index to assess business activity, companies use the following formulations: good; satisfactory; bad. And to express their business expectations: more favorable; unchanged; more unfavorable.
To calculate the index IFO four sectors are considered, which, through numerous surveys, have been recognized as sectors that form the “face” of business activity in Germany. These include: production of goods, construction, and retail(Fig. 2). Based on them, graphs are drawn up showing an assessment of business activity and an assessment of business expectations.
After that, a business activity trend vector and a vector of expectations are formed in general for four industries. The vector of development of the business environment is “added” to them, and as a result, three vectors are obtained that allow us to give comprehensive assessment the state and development of business activity in the country as a result of measures taken to create a favorable business environment2.
In such indices, the most important question is how to interpret their graphic meaning? After all, the index charts themselves IFO have no effect on the market. They only reflect the psychological, if you like, upward or downward trend, which in this moment takes over the market.
In general, the chart patterns that have been identified and classified over the past hundred years reflect important features of the PSYCHOLOGICAL state of the market. First of all, they indicate which mood - bullish or bearish3 - dominates the market at the moment. And if these models worked in the past, there is every reason to believe that they will work in the future, because they are based on human psychology, which does not change over the years. We can formulate the main signal of the index: the key to understanding the future lies in the study of the past. Or it can be quite different: the future is just a repetition of the past.
The semantic interpretation of the IFO index is carried out in points: the higher its value, the more favorable the forecasts economic condition. The value of the index can vary from 80 to 120; the level of business activity in 2000 is taken as 100. Changes in the index are tracked in dynamics (on a monthly basis) and are given as a percentage. Figures below 100 are an indicator of a slowdown in the pace of economic development compared to the base period (in our case, 2000) and are unambiguously considered by the market as a negative factor. A value above 100 shows growing optimism among entrepreneurs, which in turn causes the euro (EUR) to strengthen; SWISS FRANK().
The main purpose of the chart is to help you recognize a trend and follow it throughout its lifespan.
In this case, the correct assessment of the possible time for a trend reversal is important. To do this, any important signal to increase or decrease the rate in the market must pass through the values of all indices. In other words, we can speak about the beginning of an upward trend only if the values of all indices have covered their previous intermediate peaks. If this happens with only one index, then it is too early to talk about an uptrend in the market. The signals do not have to, of course, absolutely coincide with each other, but the less they are separated in time, the more reliable. If there is a discrepancy in the dynamics of the indices, it means that the previous trend is still in effect, the nature of the market has not changed. In particular, the graph of the IFO index clearly shows the moment when all three graphs (business activity, business expectations and business environment) rushed down sharply from the second half of 2008, indicating a sharp change in the trend in the negative direction and thus symbolizing the beginning of the crisis .
Another tool for "measuring" business activity is the ratings compiled by large consulting and international rating agencies based on surveys and studying the opinions of managers large companies all over the world. Such indices do not reflect daily, weekly or monthly changes in business activity and have a number of significant differences from stock and integral indices:
The rating sets the classification criterion according to which a phenomenon is ranked, while the index itself is a criterion for assessing the development of this phenomenon in dynamics (i.e., a relative value);
Ratings have, as a rule, a universal methodology, which is based on the calculation of indicators with an unambiguous interpretation. Therefore, this methodology can be used for different countries. At the same time, all known business activity indices "inevitably" have elements of originality in their methodology, because they reflect the features of development and components of the business environment in each particular country.
These differences reduce the attractiveness of the ratings from the point of view of an operational tool for assessing business activity. However, their value lies in the fact that they provide a comprehensive picture of the development world economy and business around the world as a whole and on specific continents, regions, countries.
It is extremely important for governments and businesses to “see the future” and act on the challenges and opportunities that exist today and may arise tomorrow. According to the responses of managers of large companies to the questions of the annual PricewaterhouseCoopers (PWC) survey, 72% of respondents believe that the problem of scarcity of natural resources will only worsen over time. At the same time, only 26% believe that increasing the efficiency of technology can solve this problem. This suggests that competition behind Natural resources(primarily energy) will grow in the long term and will lead to a tough struggle for access to them and, accordingly, an increase in the profitability of resource sectors.
The results of such surveys make it possible to determine the prospects for the growth of markets and individual companies, the emergence of new types of products and new customers. To maximize return on investment in the long term, determine the general directions for the development of the company, management needs to have an idea of the risks and opportunities in various regions of the world, track the development of other companies both in terms of competition, as well as opportunities for cooperation on international markets. To gain access to such a “global vision” is especially important for big business operating at the transnational level (and for those who only plan to enter it), carrying out strategic investments calculated for the medium and long term.
At each stage of development, it is important for a business to understand what exactly is needed for “growth above oneself”. What are the limitations of development and what is important to change in order to achieve the goal. The answers to this question are not always simple and unambiguous.
Let's just give some examples. A rating based on a study by the McKinsey Global Institute showed that a third of the gap in the level labor efficiency in Russian Federation compared to the United States is due to outdated production facilities. It would seem that a fairly simple conclusion suggests itself - it is necessary to modernize the existing capacities and thereby increase their productivity by 30%.
However, as the study shows, another important reason for the backlog is inefficient labor. It takes 3 times more people to produce a ton of rolled steel in the Russian Federation than in the US. Thus, even when investing in the modernization of the industry, success will largely depend on the skillfully carried out optimization of business processes, reducing the number of personnel and redeploying work force.
At the same time, comparison with leaders (in certain markets, in certain industries), often called benchmarking today, provides important indicators - both for the business itself and for the state. Continuing the example of productivity in the steel industry in the Russian Federation, the following comparison made by McKinsey experts can be made: . workers by 2020”. Obviously, the government and business need to solve this problem together, developing adequate options in order to ensure, if possible, a painless flow of surplus labor to other sectors of the economy.
Attempts to “measure” business activity in Uzbekistan
In 1996-2003 The Center for Effective Economic Policy (CEEP, now the Institute for Forecasting and Macroeconomic Analysis under the Ministry of Economy), together with the State Committee on Statistics, conducted market research on business activity industrial enterprises.
When conducting research, it was used, developed and used by member countries of the company for economic cooperation and development (OECD). It is based on a survey and generalization of the opinions of respondents (heads of enterprises) on the main areas of activity of enterprises in comparison with the previous quarter and a forecast of the situation for the next quarter.
When processing questionnaires received from respondents on questions of a qualitative nature, the relative frequency of each answer option was calculated in percent. Next, the difference in the relative frequencies of positive and negative answers to questions, which is an index of changes, was calculated.
1. Traditional, contained in similar foreign questionnaires. This was supposed to achieve comparability of the results of market research in the cross-country context;
2. Related to the peculiarities of the development of the economy of Uzbekistan.
Generalization of the results of the study of business activity of industrial enterprises was carried out in the context of ten major industries: non-ferrous, chemistry and petrochemistry, mechanical engineering, metalworking, printing, construction industry, light industry, food, flour milling, forestry, woodworking and pulp and paper.
Grade economic changes at industrial enterprises was carried out in the following main areas:
Assessment of the economic situation;
Use of production capacities;
Benefits and privileges for foreign investors.
Production infrastructure;
non-production infrastructure.
The final list of indicators that shape the business environment can be formulated after joint consultations with a wide range of stakeholders, both among entrepreneurs and the expert community. Here, the support of such organizations as the Commercial and Industrial Private Banks annually conducts surveys to assess the business environment in Uzbekistan is of no small importance and therefore has by far the most complete “set” expert assessments quality and constituent components of the business environment in Uzbekistan.
The effectiveness of the impact of the business environment on business activity should be reflected in the dynamics certain indicators(indicators of business activity). What should be the list of these indicators? While it is difficult to give a final list, it seems that the results of the change in the business environment in the industrial sector should be reflected in the dynamics of the following indicators:
Index volume industrial production;
employment;
Investments;
export;
Modernization.
It should be noted that some of the above indicators may be interdependent with each other (for example, investments and). In addition, not all of them may be a reflection of business environment factors. Therefore, additional analysis is required 1) the relationship of these indicators to each other and 2) the relationship of each of the indicators with each of the factors of the business environment. Such an analysis requires numerous calculations and the establishment of the so-called “tightness” of the connection, which in the expert community is commonly called the “correlation coefficient matrix”. And the regression coefficients between various components business environment and the resulting indicators will determine the weighting of each of the factors of the business environment. This will make it possible to “deduce” the integral index of business activity in industry. In addition, the obtained coefficients correlations will allow predicting changes in business activity in the industrial sector in the short term.
After “working out” the construction of an index of business activity in industry, one can multiply this experience in constructing similar indices in other industries and in general throughout the economy.
The dynamics of the listed indicators is supposed to be analyzed in quantitative (Goskomstat data) and qualitative dimensions (surveys). Both quantitative and qualitative data will be formed from the same sample, which should reflect the characteristics of the general population. Based on the IFC Business Environment Survey, this sample should include at least 500 representatives. However, the question of determining the sample is still open and requires additional consultations with the expert community.
Since a significant part of the calculations will be based on the data of the State Statistics Committee, which are formed mainly on a quarterly basis, it is advisable to calculate the business activity index on a quarterly basis as well.
Only open dialogue Feedback with all stakeholders will help shape the final vision of the business activity index, reflecting the current state and development trends of business in Uzbekistan.
Notes:
1 The very first average price of the Dow Jones index (July 3, 1884) included only 11 stocks of different companies, 9 of which were railroad. In this form, the index successfully existed until 1897, and then it was divided into two components: an index of 12 industrial companies and an index of 20 railway companies. In 1928, the index of industrial companies included not 12, but 30 shares, and in 1929 there was also an index of public utilities.
2 The indexes of this group include the business activity index of the Association of Managers and Kommersant Publishing House in the Russian Federation, the Japanese Tankan business activity index, etc.
3, these terms are used primarily to characterize the general direction of price changes in the stock market (i.e., a trend) and mean the following: “Bullish” is rising, and “bearish” is falling.
4 According to the IFC, since 1991, more than 16,000 acts aimed at creating a favorable business climate have been adopted in Uzbekistan.
US Stock Indices Britain and the Russian Federation
IFO business activity index ().
IFO Industry and Business Survey, May 2009. (index, 2000=100 seasonally adjusted)
Sources
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fxeuroclub.ru - Forex currency market Euro club
business.compulenta.ru - Compulenta is an online publication dedicated to the news of the computer industry, science and technology.
subcontract.ru - portal information support small and medium manufacturing business
review.uz - magazine "Economic Review"
Encyclopedia of the investor. 2013 .
- - (business index) - an index that characterizes the state of the economy or its individual sectors in a particular country, as well as the investment market conditions (see also Investment index) at certain periods and points in time. Used in... ... Economic and Mathematical Dictionary
business activity index- An index that characterizes the state of the economy or its individual sectors in a particular country, as well as the investment market conditions (see also Investment Index) at certain periods and points in time. Used in fundamental... Technical Translator's Handbook
Business Activity Index BUSINESS ACTIVITY INDEX- used in economic analysis index is an indicator of activities, the dynamics of which reflects changes in the economic situation ... Big Economic Dictionary
Chicago Managers Association PMI- monthly index based on the results of a survey of purchasing managers in the field of industry from Chicago and surrounding regions. The index characterizes the state of production orders, prices for manufactured products and inventory in warehouses. By… … Financial vocabulary
Business Activity Index of the National Association of Service Managers- in the US, a monthly report on the results of a survey of managers in the service sector. The survey is organized to assess the changes taking place in the service sector. In English: National Association of Purchasing Managers services index English synonyms: NAPM… … Financial vocabulary
Federal Reserve Bank of Philadelphia PMI- a monthly report on the results of a survey of manufacturers in Philadelphia (USA) regarding their attitude to the current economic situation. In English: Philadelphia Fed index See also: US macroeconomic indicators Financial Dictionary Finam ... Financial vocabulary
PMI ( project management Institute) - This business activity in the industrial sector - It represents the results of a survey of purchasing managers in the industrial sector. This index is used to estimate changes in new production orders, industrial production index volume, employment, as well as inventories and the speed of suppliers. Figures below "45-50" are an indicator of a slowdown in economic development. Often the amount of this index have a greater impact psychological factors than the actual state of affairs. Since the volume industrial production index is not automatically a source of consumer demand, then this indicator approach with care. Has limited effect on . An increase in the index value leads to an increase in the exchange rate. The Eurozone summary is published on the first business day of each month at 09:00 GMT (GMT).
PMI (Project Management Institute) (services) - in the services sector - It represents the results of a survey managers in the service sector in order to assess the changes taking place in this industry. The numbers below "45-50" are indicator slowdown in economic development. Often, the value of this index is more influenced by psychological factors than by the actual state of affairs. consumption of services tends to change at a relatively constant rate, so it is psychological factors that influence sharp changes in the value of this indicator. Therefore, when analyzing the index, special attention is paid to this. Has a limited impact on the market. The growth of the value of this index is a favorable factor for the growth of the euro. Composite index for Eurozone published on the first days of each month at 09:00 GMT one day after the publication of the index in the field industry.
The PMI (Project Management Institute) index is
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PMI manufacturing index - PMI (Project Management Institute) manufacturing. shows the level of business activity in the industrial sector. If, after a period of strengthening, the PMI (Project Management Institute) begins to show a decrease, then this anticipates a downward reversal of the business cycle and the curtailment of industrial activity. If the PMI (Project Management Institute), having reached a minimum, turns up, then this is a sign of a future economic recovery.
PMI (Project Management Institute) is an index of industrial enterprises in the Chicago region. Represents the results of a survey managers for procurement in the field industry from Chicago. This index affects the state of production orders, prices for manufactured products and inventory in warehouses. Figures below 50 are an indicator of a slowdown in the economy, and vice versa - it signals an increase in economic activity in the region if its value exceeds 50. It is closely monitored, as it is published shortly before the release of the National Managers Association Business Activity Index (ISI, formerly NAPM). This index has a fairly high impact on the market, as it can give an idea of how business activity will turn out at the national level (ISI, formerly NAPM). An increase in the index value leads to an increase in the dollar exchange rate.
PMI (Project Management Institute) manufacturing - Purchasing Managers Index for the manufacturing sector - a monthly report on the results of a survey of managers in the manufacturing sector, organized to assess the changes taking place in this area. Published monthly. The report is taken into account by the market. The growth of the index has a positive effect on the exchange rate of the national currency
Index of the National Association of Managers - in the US - a monthly report on the results of a survey of purchasing managers in the industry, characterizing the impact of the economy on the formation of price space. The report is used to evaluate changes in the area of new production orders, volume industrial production index, employment, and inventory and speed work suppliers. The index is a fairly reliable indicator for predicting turning points in the business cycle.
Sources
Wikipedia - the free encyclopedia
WikiKnowledge - the free encyclopedia
Great Soviet Encyclopedia
Dictionaries and encyclopedias on academician
Encyclopedia of the investor. 2013 .
- Nikkei Index
See what the "PMI Index" is in other dictionaries:
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Home - Analytics - Indices - Manufacturing PMI
Manufacturing PMI
The index of business activity in the manufacturing sector is the results of a survey of professional purchasing and supply managers employed in various industry segments in all regions of the country. As part of the survey, respondents are asked to rate current economic indicators compared with similar indicators of the previous reporting period. The indicator is calculated as an indicator of the state of business activity in the manufacturing industry and allows you to assess the changes that have occurred in the economy.
Do you know that: The most successful PAMM account managers in Runet operate through Alpari: PAMM account rating ; rating of finished portfolios of PAMM accounts .
The index takes into account the specific values of five indicators:
New production orders (New Orders) - 30%;
the volume of industrial production (Production) - 25%;
employment rate (Employment) - 20%;
speed of work of suppliers (Supplier Deliveries) -15%;
the volume of commodity stocks (Inventories) - 10%.
One of the most reputable organizations that publishes data on business activity in the manufacturing sector is the US Association of Purchasing Managers (Institute for Supply Management, ISM). Another example of an indicator of the business climate in the industrial sector is the TANKAN index published by the Bank of Japan.
Purchasing managers' activity in the industrial sector is used by analysts to forecast production and new orders, as well as to calculate the price index and employment rate.
The value of the indicator, equal to 50 points, is considered the balance point. Exceeding this level is viewed by analysts as a trend towards expansion of business activity in the manufacturing segment of the region. The decline in the indicator characterizes the decline in production activity. The growth of the index of business activity is considered a favorable factor for the strengthening of the national currency.
an important economic indicator, compiled on the basis of a survey of a number of professional managers, for improvement or deterioration in the main microeconomic indicators of the country's economy
Determination of the business activity index, types of business activity index, structure of the business activity index, methodology for constructing the business activity index, calculation of the business activity index, publication of the business activity index, interpretation of business activity index data, regional examples of the business activity index, charts of business activity index data of countries around the world
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The business activity index is, the definition
PMI - This a report on the results of a survey (managers) in the field, used to assess the change in industry volume, the number of new production orders, as well as the speed of suppliers, the purpose of which is to provide information on price formation, business and economic trends as a whole.
PMI - This general state of the economy, published monthly by managers and the Kommersant Publishing House.
PMI - This a special numerical indicator used in the economy and serving to reflect the state of a particular industry, the state of the economy, and assessments of the conjuncture.
What is business activity index - This an index that characterizes changes in the economic situation in various sectors of the economy.
Business activity index, what is it - This a leading indicator generated in the form of a report based on the results of a survey of managers (purchases in the industrial sector).
Business activity index, where - This aggregated purely subjective indicator, which reflects only the participants' perception of the current situation economic activity and business prospects.
PMI where it is - This an indicator of business optimism of business participants, regularly published (under the names PMI) in the USA, England and where it is created by the relevant associations and is used both to assess the direction public opinion, and for measuring objective indicators.
What is the business activity index?
The term "business activity" began to be used in the domestic accounting and analytical literature relatively recently - in connection with the introduction of methods widely known in various worlds based on a system of analytical coefficients. Of course, the interpretation of this term can be different.
To date, business activity is considered from three positions: the individual (micro level), the country (macro level). At the level of the enterprise, business activity is most often considered as the performance of the enterprise in relation to the amount of advanced resources or the amount of their consumption in production. Such a definition practically closes the concept of business activity and work efficiency.
From the position of sociologists, business activity is a set of actions that contribute to the economic growth of an organization (including the production and marketing system) based on the coordinated development of its components in harmony with external environment. In a broad sense, business activity means the whole range of efforts aimed at promoting products, labor, . In the context of the analysis of financial and economic activities, this term is understood in a more narrow sense- as the current production and commercial activity enterprises; in this case, the phrase "business activity" is perhaps not a completely successful translation of the English term "business activity", which characterizes the corresponding group of coefficients from the system of indicators.
Review of the index of business activity of the United States of America
US PMI chart
Euro Area PMI chart
Chinese PMI chart
Japanese PMI chart
German PMI chart
UK PMI chart
French PMI chart
brazil business activity index chart
Italian PMI chart
Indian PMI chart
Russian business activity index chart
Canadian business activity index chart
Australian PMI chart
PMI chart of South Korea
Spanish PMI chart
Mexico PMI chart
Indonesia PMI chart
Turkish PMI chart
Saudi Arabia PMI chart
Swedish PMI chart
Methodology for constructing the index of business activity
After calculating the results for each of the 10 listed categories, a diffuse index is displayed. Only four of the 10 items are adjusted for seasonality: business activity, new orders, employment, and . With the value of the main business activity index equal to 50, we can say that the expectations of purchasing managers regarding its increase and decrease were divided in half. A reading above 50 indicates an increase in activity, while a reading below 50 indicates that activity is falling. Since the very first publications in 1998 and to this day, the non-manufacturing index of business activity according to the ISM has rarely fallen below 50%.
Components of the business activity index
Respondents are asked to answer questions about whether their business activity has increased, decreased or remained unchanged in 11 areas.
Service Business Activity (PMI)
Business activity is a criterion for changes in the level of business activity in the service sector. It represents the results of a survey of managers in the service sector in order to assess the changes taking place in this industry. Figures below "45-50" are an indicator of a slowdown in economic development. Often the value of this index is influenced by psychological factors rather than the actual state of affairs. The process of consumption of services tends to change at a relatively constant rate, so it is psychological factors that influence sharp changes in the value of this indicator. Therefore, when analyzing the index, special attention is paid to this. Its value is published on the first days of each month at 10:00 am EST (New York) one day after the publication of the index of business optimism. Has a limited impact on the market. The growth of the value of this index is a favorable factor for the growth of the exchange rate.
New orders
New orders - reflects changes in the number of new orders received from customers. The value of orders received by firms in sectors where goods are made to order rather than first produced and then sold. This is primarily the construction industry and those manufacturing industries that sell the means of production. Changes in the volume of new orders are one of the leading indicators of changes in economic activity.
Production
Production index - relative indicator characterizing the change in the scale of production in the compared periods. The production index is used in the analysis of the dynamics of the physical volume of production. There are individual and composite production indices. Individual reflect the change in the emission of one product and are calculated as the ratio of production volumes of this type of product in physical terms in the periods being compared. Composite indices characterize the cumulative changes in all types of products and reflect changes in the value created in the production process as a result of changes only in the physical volume of manufactured products. The index is an aggregate index of production by types of activity "Mining", "Manufacturing", "Production and distribution of gas and water".
Employment
Backlog of orders
Benefits of the PMI
PMI surveys are the first economic indicators released monthly and well ahead of comparable data released government organizations. Among the advantages of PMI indices are the following:
Provide reliable, evidence-based indicators, as opposed to indicators based on opinions or expectations;
Released faster and faster than comparable official data;
Issued on a monthly basis;
Cover the economic activity of virtually the entire private sector in many countries (including the most important service sector);
Results after publication are not revised;
The compilation and release of data uses the same methodology for all countries, allowing for direct international comparisons.
An example of calculating the business activity index
In many cases, the strength of the data offered by the Index of business activity reflects a lack of official statistics, including:
Irregularity of publications. Many government series, such as GDP, are only published quarterly, while PMI is released monthly;
Published late. It takes quite a long period of time before official data is published. The data provided by the Index of business activity is several months ahead of the official data;
Revisions of official data since the first publication. Official data is subject to significant revision even after it has already been published. Such revisions are a problem when making business decisions based solely on such statistics. In contrast, PMI data are not revised post-release, except in very rare cases of seasonal adjustment;
Lack of ability to compare with equivalent calculations used in other countries. Not all statistical institutes operate data using identical methodologies. In the Eurozone, for example, for calculating GDP, a statistical methodology is significantly different from that used in Japan.
As a result, the above problems lead to a situation where purchasing managers and analytical economists are forced to examine the current state of the industry using data that is already out of date at the time of issue and is likely to be significantly revised after the first publication, which in turn will raise doubts when comparing data for other countries.
Examples of Regional PMIs
Business cycles are a natural form of economic development and are divided into three phases:
Recession phase, i.e. decline in business activity, falling production, employment and income;
The recovery phase, reflecting the rise in economic activity, the growth of market conditions, the increase in emissions to the previous level after its fall, which took place during the recession;
The development phase characterizing the continued growth of the economy after the recovery phase.
The main idea of compiling business activity indices is to show the cyclical dynamics of economic processes and reliably predict the turning points of cycles (busts and booms), and therefore predict changes in business activity. Insofar as main motivation is the expectation of future profits, with positive forecasts, companies will expand the production of goods and services, increase investment in production facilities, etc. If a decline in income is forecast, the economic activity of companies decreases.
Historically, it has been noted that the highs and lows of the indices precede the reversals of the economy, i.e. recession or recovery in the economic cycle. Thus, by tracking the behavior of the index, companies can make business decisions more efficiently. In this sense, the index of business activity can be called a "barometer" of the state of health of the economy and an assessment of the prospects for its development in the short term. Therefore, indices are a good reference point in decision-making for both economic agents and analysts, scientists and politicians. At the same time, indices may tend to outpace the overall dynamics or lag behind the main course of the economic cycle. On this basis, they are classified into: leading, lagging and coinciding economic indices.
PMI (Purchasing Managers" Index, USA)
We will consider in detail the structure and properties of business optimism indices using the example of the American Purchasing Managers "Index (Index of business activity), NAPM. This is an indicator of business activity in the manufacturing sector of the US Institute of Supply Management. Until January 2002, it was called NAPM - by the name of the National Association purchasing managers (National Association of Purchasing Management).
US National Association of Purchasing Managers releases Index of business activity
Usually abbreviated to NAPM or PMI. The report is the results of a survey of purchasing managers in the industry (for services, which occupy about 40% of US GDP, a separate Business Activity Index of the National Association of Service Managers - PMI services index is calculated) and aims to study the impact of the economy on the formation of price space and provides quality information about trends in business, in fact - this is for the top and middle management of the economy. This index is used to measure changes in new production orders, industrial output, employment, and inventory and supplier speed.
The Index of business activity in the USA is calculated based on the data of purchasing managers
Formal responses to the questions of survey participants are limited to ratings "higher" (more), "lower" (less) or "no change" compared to the previous month, the respondent can also add their own comments. Each component of the report is compiled into a diffusion index, which is calculated as the sum of the simple percentage changes in the above and below values, plus half the percentage of the "same" or "no change" responses. The diffuse index can fluctuate between 0 and 100% with different characteristics of the ranges: a value of 50% means no change; above 50% - improvement; and below 50% means a decline. The indicator is measured in% in the range from 0 to 100%, and depending on the values of the components:
The business sentiment summary is a composite diffuse index called the Purchasing Managers' Index (PMI) based on a weighted average of new orders, products, employment, lead times and inventories. The Index of business activity indexes are based on monthly surveys conducted among carefully selected companies.
This provides an early indication of what is really going on in the private sector economy by tracking variables such as production, new orders, inventory levels, employment and prices in the manufacturing, construction and service sectors, and the . The Index of business activity is based on facts, not opinions, and is one of the earliest monthly economic indicators published. Data collection uses identical methods for all countries, allowing for international comparisons.
Comparison of graphs of Index of business activity index values in different countries peace
The main property of the index is a leading indicator of the business cycle. A number of basic indicator levels are singled out for interpretation: cyclic high and cyclic low; 50% - level; 44% - level. If, after a period of growth, the Index of business activity turns down, then this predicts a downward turn in the business cycle. On the contrary, if after the fall of PMI, having reached a minimum, it turns up, then this is a sign of a future recovery.
A fall in the Index of business activity below 50 predicts a two-month average recession, while a fall below 44 always predicts an absolute decline in economic activity. The lows reached by the Index of business activity in the stages of recession are on average 35, and after turning from the low, it reached the level of 44 on average in 4 months, which always coincided with the low of the economic cycle. In general, PMI reliably predicts the turning points of growth cycles (that is, cyclical changes in the growth stages of an economy), but it is difficult to distinguish a growth cycle from the overall global economic cycle using it.
Chicago PMI (USA)
The index of business activity in the manufacturing industry according to the Chicago Association of Managers. The index is based on a survey of Chicago industrial purchasing managers. The indicator reflects the situation in the segment of production orders, product prices and wholesale stocks in warehouses. If the indicator falls below the 50 bp mark, this indicates a slowdown in the US economy, if the index is above the 50 bp level, then this indicates an increase. The Chicago Index of business activity is being watched closely by market participants, as it is released shortly before the release of the ISM index at the national level, calculated by the research institute and supply (index of business optimism). According to the dynamics of the employment component within the Chicago PMI index, in particular, one can judge the upcoming report on the labor market (). The indicator value is published by the Purchasing Managers Association of Chicago on the last business day of each month.
Chicago Fed Midwest Mfg Index (USA)
Midwest Manufacturing PMI. The index is based on a survey of Chicago industrial purchasing managers. The indicator reflects the situation in the segment of production orders, product prices and wholesale stocks in warehouses, adjusted for the territorial factor. Compared to the overall Chicago Index of business activity for the country as a whole, it has a modest impact on Kansas City Fed Mfg index chart, USA for 2011-2015.
NY Fed Empire State index (USA)
New York Fed Business Activity Index. The index is based on the results of a survey of top managers and is provided by the Federal. The indicator reflects the situation in the segment of production orders and business optimism in the business environment.
Richmond Fed Mfg Index (USA)
Fed Richmond Business Activity Index. The index is based on the results of a survey of top managers and is provided by the Federal Reserve Bank in Richmond Chart of the Philadelphia Fed Index, USA for 1968-2015.
Chicago Fed National Activity Index (USA)
Chicago Fed National PMI. The index reflects the level of psychological comfort and satisfaction of American consumers with the situation in the national economy. The indicator consists of two main components: characteristics of current conditions (sentiment index) and characteristics of expectations (expectations index). At its core, the University of Michigan Consumer Sentiment Index is one of the key barometers of the US economy, which is why it has a very strong impact on the US currency.
ISM (Institute of Supply Managers, USA)
ISM (formerly NAPM (National Association of Purchasing Managers)) comes from the Institute of Supply Managers, an association that publishes a monthly "Report on Business" that provides an integral view of the state of the industry, expressed in the so-called diffusion index. The Business Confidence Index is the American analogue of the European and Russian Index of business activity (Product Manufactoring Index), which is calculated by the agency.
What is the ISM Business Activity Index?
US Manufacturing Purchasing Managers Index, calculated by the Institute of Supply Management (ISM). Reflects the state of business activity in the country's manufacturing industry. The indicator is based on a survey of purchasing and supply managers of 400 companies from 20 industrial sectors in various regions of the country, is published once a month and is not revised further. The equilibrium level for this indicator is 50 points - if the index is above 50 points, there is an expansion of business activity in the industry. The index consists of the following components: index of new orders, production, employment, shipments, supplier stocks, customer stocks, prices, outstanding orders, new export orders, imports.
US Non-Manufacturing Purchasing Managers' PMI, calculated by the Institute of Supply Management (ISM). It reflects the state of business activity in the service sector, which forms about 90% of GDP. The equilibrium level for this indicator is 50 points - if the index is above 50 points, there is an expansion of business activity in the service sector. One of the most significant components of the Non-Manufacturing index of business optimism is the employment component - a leading indicator of the key labor market report Non-farm Payrolls.
PMI (Markit Economics, Germany)
These indices show the state of the economy of the European Union and Germany as a whole. If the indicator grows and exceeds 50, then it is possible to draw conclusions about the improvement in the future. economic development countries of the European Union as a whole. If the indicator decreases and is below 50 and continues its decline to the level of 40, then this indicates that the situation of the economies of the EU states is deteriorating and is in a recession.
The Index of business activity index is published by the analytical agency Markit Economics and evaluates the business and development conditions in the manufacturing sector of Germany. This sector forms most total GDP, which makes PMI an important economic indicator of the business environment and the overall health of the German economy.
Graph of the composite index Index of business activity in Germany for 2013-2015.
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ISM Services Index - an index of business optimism in the services sector. This indicator characterizes the opinion of managers about the changes taking place in this industry. A value below 50 indicates a slowdown in economic development.
At 15:00, ISM data for the United States came out. Forecast value: 56.6. Actual value: 57.0. Since the actual value is higher than the predicted one, it probably follows expect growth US dollar exchange rate against other currencies. As you can see from the chart below, the USD/JPY exchange rate market reacted with growth dollar.
Rice. Impact of US data on the USD/JPY rate. The moment of data release is marked with an arrow.
Data release time:
Note: ISM is the former NAPM Services index (an index of the National Association of Purchasing Managers).
Services activity index
The index is the results of a survey of managers in the service sector in order to assess the changes taking place in this industry. Values below 45 are an indicator of a slowdown in the economy. Often the value of this index is influenced by psychological factors rather than the actual state of affairs. The process of consumption of services tends to change at a relatively constant rate, so it is psychological factors that influence sharp changes in the value of this indicator.
At 09:30 GMT data on the index of activity in the service sector in the UK came out. Forecast value: 51.0. Actual value: 54.5. Since the actual value is better than the predicted value, it is likely that expect growth reacted with growth pounds.
Rice. The impact of UK data on the GBP/USD exchange rate. The moment of data release is marked with an arrow.
Data release time:
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PMIPMI - the index of optimism of purchasing managers - reflects the level of business activity of the country's industrial sector, in fact, the change in the pace of industrial production. An indicator value above 50% corresponds to growth, and below 50% - to a slowdown in industrial production. At 09:30 GMT, the UK PMI data came out. Forecast value: 58.0. Actual value: 58.3. Since the actual value is higher than the forecast, it is likely that expect growth pound exchange rate against other currencies. As you can see from the chart below, the GBP/USD exchange rate market reacted with growth pounds.
Rice. Impact of UK data on the GBP/USD exchange rate. The moment of data release is marked with an arrow. Data release time:
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