Pepperstone logo
Pepperstone logo
  • English
  • 中文版
  • Ways to trade

    Pricing

    Trading accounts

    Pro

    Premium clients

    Refer a friend

    Active trader program

    Trading hours

    24-hour trading

    Maintenance schedule

  • Trading platforms

    Trading platforms

    TradingView

    Pepperstone platform

    MetaTrader 5

    MetaTrader 4

    cTrader

    Integrations

    Trading tools

  • Markets

    Markets to trade

    Forex

    Shares

    ETFs

    Indices

    Commodities

    Currency Indices

    Cryptocurrencies

    Dividends for index CFDs

    Dividends for share CFDs

    CFD forwards

  • Market analysis

    Market news

    Navigating Markets

    The Daily Fix

    Meet the analysts

  • Learn to trade

    Trading guides

    CFD trading

    Forex trading

    Commodity trading

    Stock trading

    Crypto trading

    Bitcoin trading

    Technical analysis

    Candlestick patterns

    Day trading

    Scalping trading

    Upcoming IPOs

    Gold trading

    Oil trading

    Webinars

  • Pepperstone Pro

  • Partners

  • About us

  • Help and support

  • English
  • 中文版

Analysis

Understanding PMI Surveys

Michael Brown
Michael Brown
Senior Research Strategist
7 Feb 2024
Share
The Purchasing Managers' Index (PMI for short) survey is one of the most impactful major economic releases, providing market participants with a timely, and reliable indication of economic activity across a range of economic sectors.

PMIs are released for the majority of major global economies, with separate surveys covering the manufacturing, services, and construction sectors, in addition to an overall composite gauge measuring output across the economy in its entirety. The data is typically collected S&P Global (previously IHS Markit) and released in two tranches on a monthly basis; a ‘flash’ estimate figure released towards the end of the reference month containing responses from around 85% of the survey pool, before a ‘final’ figure is released at the start of the month following the reference month using responses from the full survey pool. Typically, S&P release ‘final’ manufacturing data on the first day of the month, with the services survey following on the third trading day of the month.

In the US, the ISM PMI (which is calculated in the same manner, albeit using a slightly different sample) is the most closely watched gauge. The ISM do not release ‘flash’ estimates, with their release pattern typically following that of the ‘final’ S&P figures.

The PMI is a diffusion index ranging between 0-100, measuring the month-on-month change in economic conditions. Whereby a reading of 50.0 indicates precisely unchanged conditions, a reading above 50.0 suggests an improvement, and a reading below 50.0 suggests a decline in the metric in question. In order to produce the index, the following formula is used:

PMI = ('% reporting improvement') + (0.5 x ‘% reporting unchanged’) + (0.0 * ‘% reporting decrease’)

Note, the PMI figure is a seasonally adjusted metric. It is therefore, technically, and theoretically, possible for the index to read above 100, or below 0. This would require 100% of respondents to report an improvement, or a deterioration, respectively in a given month, and for the seasonal adjustment factor to then push the data beyond one of these boundaries. This is an extremely unlikely, but plausible, scenario.

Furthermore, it is important to consider how PMI surveys should be interpreted:

  • A fall in a PMI gauge from 55.0 to 52.3 represents continued expansion of the sector in question, simply at a slower pace than the month prior
  • A further fall in the PMI from 52.3 to 47.7 would represent that the sector in question is now experiencing a contraction
  • Another fall from 47.7 to 45.6 implies that said contraction is ongoing, and the pace of said contraction has quickened
  • A subsequent rebound in the gauge from 45.6 to 50.0 would imply that the contraction has bottomed out, with activity unchanged compared to the prior month

While it is the headline metric that attracts most attention, and has the most significant impact on financial markets upon release, the PMI surveys released by both S&P Global and the ISM also contain a number of useful sub-indices, the most important of which are:

  • Prices Paid - a measure of inflationary pressures within the sector in question
  • Employment - a gauge showing how overall employment trends are developing, whether hiring is rising, or layoffs are mounting
  • New Orders - a forward looking indicator describing respondents' future purchasing intentions

All of these sub-indices are calculated in the same way as the headline gauge, with 50.0 again representing the breakeven mark between an MoM increase or decrease.


Related articles

Understanding GDP

Understanding GDP

Understanding Retail Sales

Understanding Retail Sales

Understanding Inflation

Understanding Inflation

Understanding The US Labour Market Report

Understanding The US Labour Market Report

Understanding Leading, Lagging, and Coincident Indicators

Understanding Leading, Lagging, and Coincident Indicators

Understanding The Business Cycle

Understanding The Business Cycle

Trading Guide
Understanding Treasury Auction Results

Understanding Treasury Auction Results

Treasuries

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Premium Clients
  • Active Trader program
  • Refer a friend
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets & Symbols

  • Forex
  • Shares
  • ETFs
  • Indices
  • Commodities
  • Currency indices
  • Cryptocurrencies
  • CFD Forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Pepperstone Pulse
  • Meet the analysts

Learn to Trade

  • Trading Guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
1300 033 375
Level 16, Tower One, 727 Colins Street
Melbourne, VIC Australia 3008
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy
  • Whistleblower Policy

© 2025 Pepperstone Group Limited

Risk Warning: Trading CFDs and FX is risky. It isn't suitable for everyone and if you are a professional client, you could lose substantially more than your initial investment. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your personal objectives, financial circumstances, or needs. You should consider whether you’re part of our target market by reviewing our TMD, and read our PDS and other legal documents to ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice if necessary.

Pepperstone Group Limited is located at Level 16, Tower One, 727 Collins Street, Melbourne, VIC 3008, Australia and is licensed and regulated by the Australian Securities and Investments Commission.

The information on this site and the products and services offered are not intended for distribution to any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

© 2024 Pepperstone Group Limited | ACN 147 055 703 | AFSL No.414530