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Purchasing Manufacturing Index (PMI)

Importance: Average **

Influence: Forex, Equity Markets

US PMI Release: Monthly, The first business day of the month (Each Month the previous month data)

EU Industrial Production Release: Monthly between the 12th and the 14th day of each month, (two months prior -each month is released the figure of two months ago)

 

PMI in the US

The two principal producers of PMIs in the US are the Markit Group, and ISM. The Markit Group measures the PMIs for over 30 countries worldwide. ISM (Institute for Supply Management) measures the PMI solely for the US. The US Purchasing Manufacturing Index measures the activity of 400 manufacturers. This is a simple explanation of the PMI index:

◙ PMI above 50 indicates expansion

◙ PMI below 50 indicates contraction

This is how the US PMI is calculated:

PMI Breakdown:

1. New orders: weight 30%

2. Production: weight 25%

3. Employment: weight 20%

4. Supplier Deliveries: weight 15%

5. Inventory: weight 10%

Purchasing Manufacturing Index (PMI)

 

Europe’s Industrial Production

In the European Union, Eurostat measures Europe’s Industrial Production in a monthly basis.

 

The Effect of PMI in the Forex and Equity Markets

The higher the PMI readings the better for the domestic currency and the domestic equity markets. Note that in order to trade based on PMI results you should seek for changes of at least 50 basis points (0.5%). That means in other words that the actual PMI results must be at least 50 points (0.5%) higher or lower than the forecasted PMI results.

 

Related Links: US PMI (ISM)|Markit Group | ► Eurostat

 

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Purchasing Manufacturing Index (PMI)

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