The Purchasing Managers Index

The purchasing managers index is a tool that is used to gauge the strength of the economy overall. The data that is used to comprise this index is obtained by surveying 400 purchasing managers in the manufacturing industry. Here are the basics of the purchasing managers index and why it is important.

Every month, the Institute for Supply Management issues a survey to 400 purchasing managers. These managers are selected from different businesses in the manufacturing sector. The survey attempts to determine what the purchasing managers think about business. 

The survey will ask the purchasing managers several questions about their businesses. They will look at several factors including the number of new orders, production level, speed of supplier deliveries, inventory and the level of employment of the business. The purchasing managers can say that things are worse than the previous month, better than the previous month or the same. 

This particular index is released on the first business day of every month. Financial professionals and investors look at this index when determining the overall strength of the economy. If the index is above 50, things are considered to be looking good for the economy. If it is below 50, things are not quite as rosy.