Finding the necessary information to making investments is key to generating profits but for many investors finding the data that the professionals rely on for their judgments is elusive.
However, many investors will not be aware of Purchasing Managers’ Indexes (PMIs) which provide an accurate set of data to understand industry conditions better.
This is a quick guide to what PMIs are and what they could do for you.
What is PMI?
PMIs are used by purchasing professionals, as well as business decision makers, to help them make decisions using accurate data. They are used in many countries and are useful to economic analysts as well.
How did PMIs work?
The data used is compiled from surveys of 20,000 companies worldwide which provide an accurate indicator of what is occurring within a private sector economy. The PMI does this by tracking orders, stock levels, and output and employment levels.
PMIs also track prices through various sectors including construction, retail, manufacturing and services.
So why are PMIs important?
The big difference between PMIs and other information sources is that these surveys are not based on opinions but real data reporting exactly what is happening in the private sector. They are vital to many decision makers because they provide real evidence of economic conditions each month.
The data used to compile the PMI index is identical in every country so international comparisons can be made.
Who uses PMIs?
They were created to help purchase managers but they generate large amounts of media coverage because of their accurate data. That means they are important to economic analysts working in financial institutions and to central banks that use the data to help inform their decisions over the setting of interest rates.
Why should investors use PMIs?
Aside from PMIs providing accurate data they are also not revised after publication like other sources of data and because each country uses identical date they are a better indication of GDP with each country using different elements to calculate its own GDP figure.
For investors looking abroad for profits the PMI index can give an instant and honest appraisal of a country’s potential without having to do too much research.
Essentially, the PMI is a snapshot on the health of the country’s economy and it is often the most up to date information available. The PMI covers every major economy, as well as emerging economies, to help give investors confidence about how a potential investment may develop.
Where do I get PMI data?
Outside America, the Markit Group www.markit.com/en/ an information services company, compiles the information and in the US it’s the responsibility of the Institute for Supply Management www.ism.ws/ismreport/mfgrob.cfm
