PMI: Manufacturing & Services Data

PMI surveys ask purchasing managers about five key components: new orders, production levels, supplier deliveries, inventories, and employment. A reading above 50 indicates expansion, while below 50 signals contraction. The distance from 50 indicates the rate of change — a reading of 55 shows moderate expansion, while 45 suggests meaningful contraction. Sub-components provide additional detail: the new orders index is considered the most forward-looking, while the employment component serves as an early signal for official labor market data released later in the month.

Manufacturing PMI tracks the goods-producing sector including new orders, production output, and supply chain conditions. It is released on the first business day of the month. Services PMI covers the larger services sector, including finance, healthcare, retail, and technology, and is released on the third business day. In modern economies, services represent 70-80% of GDP, making services PMI increasingly important. The composite PMI combines both sectors for an overall economic picture. Divergences between manufacturing and services PMI often signal economic transitions.

PMI releases create immediate volatility, especially when the reading crosses the critical 50 threshold or significantly deviates from consensus. A strategy involves comparing PMI readings across countries — if US PMI is rising while eurozone PMI is falling, this divergence supports USD strength versus EUR. Watch the prices paid sub-index as an inflation leading indicator that can shift interest rate expectations. PMI trends over several months are more meaningful than single readings, helping identify economic acceleration or deceleration cycles that drive medium-term currency and equity index trends.