# What Is the Purchasing Managers Index (PMI)?

> **Definition**
>
> The Purchasing Managers Index (PMI) highlights monthly supply and demand trends.

## What Is the Purchasing Managers Index (PMI)?

A monthly Purchasing Managers Index (PMI) for the manufacturing sector is developed by the [Institute for Supply Management (ISM)](https://www.investopedia.com/terms/i/institute-for-supply-management.asp), a nonprofit supply management organization. ISM also tallies a monthly PMI for the service sector and hospitals.

It is a [diffusion index](https://www.investopedia.com/terms/d/diffusionindex.asp) that summarizes whether market conditions are expanding, staying the same, or contracting, as viewed by purchasing managers.

### Key Takeaways

*   The Purchasing Managers Index is based on a monthly survey of supply chain managers across multiple industries, covering upstream and downstream activity.
*   The Purchasing Managers' Index can range between 0 and 100, with a number over 50 citing expansion and under 50 noting contraction.
*   The PMI provides insight to business decision makers, market analysts, and investors.

![Purchasing Managers' Index](https://www.investopedia.com/thmb/sRS5_6kcLsDw0pmrmT7JkQJSdjA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/PMI--f77e0dc1e4fe49b5985b22d1f5494bc0.jpg)

*The PMI is based on monthly surveys that gather data from purchasing managers across various sectors. — Investopedia / Zoe Hansen*

## How the Purchasing Managers Index (PMI) Works

The [manufacturing PMI](https://www.investopedia.com/articles/investing/010914/importance-purchasing-managers-index-pmi.asp) gives equal weight to new orders, production, employment, supplier deliveries, and inventories. The ISM services PMI includes information compiled from non-manufacturing sectors, such as transportation, insurance, construction, and education. A PMI provides insight into the business environment and helps companies see where the economy is headed.

The ISM Report on Business contains PMIs based on surveys. Each PMI is calculated based on responses from senior executives at multiple companies across various industries, which are weighted by their contribution to the U.S. [gross domestic product (GDP)](https://www.investopedia.com/terms/g/gdp.asp). The surveys include questions about business conditions, whether or not they are changing, and whether they are improving or deteriorating.  

The headline PMI is a number from 0 to 100. A PMI above 50 represents an [expansion](https://www.investopedia.com/terms/e/expansion.asp) when compared with the previous month. A PMI reading under 50 represents a [contraction](https://www.investopedia.com/terms/c/contraction.asp), while a reading at 50 indicates no change. The further away from 50, the greater the level of change. 

> **Fast Fact**
>
> The ISM also publishes a monthly Hospital PMI, which surveys inventory levels, supplies, and healthcare patient traffic.

## Who Uses the PMI?

*   **Corporate Managers:** May use the monthly PMI results to make key decisions about future business. For example, an automobile manufacturer makes production decisions based on new orders that drive purchasing decisions about parts and [raw materials](https://www.investopedia.com/terms/r/rawmaterials.asp). Existing inventory balances also drive the amount of production the manufacturer needs to complete to fill new orders and to keep some inventory on hand at the end of the month.
*   **Suppliers**: A manufacturer's parts supplier follows the PMI to estimate future demand. The supplier must determine how much inventory its customers have on hand, which affects the production that its clients generate.
*   **Investors**: PMI is a [leading indicator](https://www.investopedia.com/terms/l/leadingindicator.asp) of economic conditions. The direction of the trend in the PMI may signal changes in the estimates of economic activity and output, such as the GDP, industrial production, and employment.

> **Fast Fact**
>
> A company can use the PMI to help plan its annual budget, manage staffing levels, and forecast cash flow.

## How Does PMI Information Influence Pricing?

PMI information about supply and demand might affect the prices that suppliers can charge. If new orders increase, a manufacturer may raise customer prices and accept a supplier's price increases. When new orders decline, the manufacturer may lower its prices and demand a lower cost for the parts it purchases.

## What Is the Global PMI?

The Global PMI is an economic indicator compiled by S&P Global, derived from survey responses from over 28,000 global companies, and represents 90% of global GDP.

## What Does a High PMI Reading Indicate?

The Purchasing Managers' Index can range between 0 and 100. If the index reading is higher than 50, then it indicates an economic expansion. A reading below 50 indicates an economic contraction, with readings closer to 0 indicating a higher degree of contraction. A reading equal to 50 signals no change in the environment.

## The Bottom Line

Investors, economists, and analysts have a wealth of information to help them gauge where the economy is trending. One leading indicator is the PMI. Released monthly, a PMI is derived from a survey by the Institute for Supply Management for the manufacturing, services, and healthcare sectors.

> **Article Sources**
>
> 1.  Institute for Supply Management. "[ISM Report on Business](https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/)."
>     
> 2.  Institute for Supply Management. "[March 2025 Manufacturing ISM® Report On Business®](https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/march/)."
>     
> 3.  Institute for Supply Management. "[March 2025 Services ISM® Report On Business®](https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/march/)."
>     
> 4.  Institute for Supply Management. "[Report On Business® Roundup: March Hospital PMI®](https://www.ismworld.org/supply-management-news-and-reports/news-publications/inside-supply-management-magazine/blog/2025/2025-04/report-on-business-roundup-march-2025-hospital-pmi/)."
>     
> 5.  S&P Global. "[Purchasing Managers’ Index™ (PMI™)](https://www.spglobal.com/market-intelligence/en/solutions/products/pmi)."