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Manufacturing PMI

The Manufacturing PMI is the results of a survey professional managers for procurement and supply, employed in various segments of the industry in all regions of the country. As part of the survey, respondents are asked to evaluate the current economic indicators compared to those of the previous reporting period. The indicator is calculated as an indicator of the state of business activity in the manufacturing industry and allows you to assess the changes that have occurred in the economy.

Do you know that: The most successful PAMM account managers in Runet operate through Alpari: PAMM account rating ; rating of finished portfolios of PAMM accounts .

The index takes into account the specific values ​​of five indicators:

New production orders (New Orders) - 30%;
the volume of industrial production (Production) - 25%;
employment rate (Employment) - 20%;
speed of work of suppliers (Supplier Deliveries) -15%;
the volume of commodity stocks (Inventories) - 10%.

One of the most authoritative organizations that publishes data on business activity in the manufacturing sector is the US Association of Supply Managers (Institute for Supply Management, ISM). Another example of an indicator of the business climate in the industrial sector is the TANKAN index published by the Bank of Japan.

Purchasing managers' activity in the industrial sector is used by analysts to forecast production and new orders, as well as to calculate the price index and employment rate.

The value of the indicator, equal to 50 points, is considered the balance point. Exceeding this level is viewed by analysts as a trend towards expansion of business activity in the manufacturing segment of the region. The decline in the indicator characterizes the decline in production activity. The growth of the index of business activity is considered a favorable factor for the strengthening of the national currency.

In the economy, in addition to direct indicators such as gross domestic and external product, industrial production growth or the cost of the consumer basket, there are derivatives. PMI PMI is one of them, characterized by powerful calculations and research, but economic sphere indirect influence.

The business activity index is a conditional value showing changes in the behavior of structures and companies in the current economic situation compared to the previous reporting period - a week, a month, a year. If an enterprise reduces production volumes, cuts employees, closes branches, it is considered that the business activity index is decreasing. If output and sales are growing, new markets are opening up and the order book is growing, the business activity index is growing.

The business activity index appeared in the United States of America at the beginning of the 20th century as Purchasing Manager Index(PMI). The Institute of Supply Management was a pioneer in the development and implementation ( Institute for Supply Management, ISM), founded in 1915.

Initially, its specialists called the industrialists of the city of Tampa and asked one question: how are you?

There were three possible answers to choose from: worse, better, and the same. From this the conclusion was drawn: if the vast majority of people are doing worse last month, so the PMI is falling. If everyone has spoken better”, therefore, PMI went uphill. True, this method had a significant drawback: it was the subjectivity of the judgments of businessmen, as well as the influence of mood, unjustified hopes, and family troubles.

Specialists ISM decided to develop a methodology that would realistically reflect the Index. In 1948, letters were sent to the respondents, where they were asked at the end of each month to “tune up” their performance indicators and compare them with the previous reporting period. Of course, the financial side remained classified, but businessmen received a kind of "funnel" containing data on:

• the number of orders;
• output volume;
• team employment;
• warehouse stocks;
• the price of imports and exports.

Such a scheme has drawbacks. If the number of orders and the volume of output can be calculated, then the employment coefficient is conditional - often the respondent works alone from morning until late evening. Warehouse stocks in companies working “for the client” could be equal to zero or one (which side to look at), and the price of imports and exports was of little concern to anyone.

Business activity index in different countries

In 1951 the Bank Japan introduced the indicator TANKAN(短観), short for kigyō tan ki keizai kan soku chōsa - short-term economic forecast. It was based on the work of the Institute for Economic Research of West Germany IFO. True, by 1957 the Japanese had developed an independent indicator, which retained its former name, but somewhat changed the calculation method.

By the way, in Germany The Business Climate Index was launched in 1949 IFO is an acronym for I information (information) und FO rschung (research). The American system served as the basis here, since the United States in the post-war years generously “exported” to Europe the foundations of its economic structure, calculation methods and indices.

It is no coincidence that IFO and PMI are extremely similar.

In Great Britain PMI appeared in 1991, and here it really concerned purchasing managers. The old-world lions reasoned that it was these specialists who saw the greatest state of the market. True, the indicator, developed by the Royal Institute of Purchasing and Supply of Great Britain, was soon transferred to the operational management of Markit Ltd.

In Russia there is Entrepreneurial Confidence Index calculated by the Federal State Statistics Service. It is published monthly, more than 4 thousand medium and large enterprises three sectors of the economy "Mining", "Manufacturing", "Production and distribution of electricity, gas and water".

On average, the Index is 47-48% (which indicates the uncertainty of business), but does not have any impact on the Russian economy.

Impact of the PMI

Over time, PMI has moved from the category of theoretical indicators to conditionally applied. Without having a significant impact on asset quotes or derivatives prices, PMI shows the mood and expectations of investors. In the same States, PMI is calculated in only two versions - industrial and service sectors - and the number of respondents is slightly more than 700.

The Bank of Japan initially tried to include everyone it could: in 1957 there were 524 respondents, and in 2015 there were more than 11 thousand from 93 sectors of the economy. Considering that TANKAN is published quarterly and an entire institute works for it; But there are still ratings calculated in the prefectures!

Great influence on the market is exerted by the British Markit Ltd, which calculates the index for 34 countries of the world. In 2009, it was launched in China under the name Caixin PMI, and differs in the composite scheme. About 400 enterprises are included in the calculation, as industrial plan as well as the service sector. And two years earlier, in 2007, Markit LTD launched the combined Eurozone PMI index.

The decline in the business activity index in the country should alert a trader investing in the instruments of this state. We are talking about a slowdown in economic growth, which means that we can conclude that a recession is coming. When news of a decrease in IDA is released, it is advisable to sell existing assets and transfer funds to developing instruments.

The decline in the US Index leads to a fall in dollar quotes against the main competitor - the euro. At the same time, prices are declining. manufacturing companies and government debt bonds - they are the first to be hit. It is difficult to say how urgent it should be to get rid of depreciating assets: the IDA is similar to a pendulum and shows a constant fall and rise.

First of all, as in any other macroeconomic statistics, attention is drawn to the dynamics. If it is positive (that is, the current value of the indicator exceeds the previous one), then the value of the asset/currency may increase. If business activity decreases (there is a negative trend), this may provoke a depreciation of the asset/currency. It is important to understand that the longer the trend, the more significant the reaction can be. If the business activity index continues to decline from month to month, this may indicate that they will also decline.

What else should you pay attention to when working with PMIs? It is believed that if this indicator is above the mark of 50 basis points, then in general, business activity is in the growth zone. If the indicator falls below 50 points, then there is a reduction in business activity.

• investments in competing assets;
• sale of assets and investment in them after N-time (after depreciation);
• transfer of funds to assets less dependent on IDA - food, telecommunications.

Trader's actions with the growth of IDE:

• investments in the real sector of the economy - it always rises in price more strongly;
• work with currency pairs against a competing currency;
• attracting derivatives with bullish play.

Video about PMI

The formula for calculating the PMI

US PMI is calculated as the sum of scores of five business factors: PMI = 30% (orders) + 25% (production) + 20 (employment) + 15% (supplies - the same imports and exports) + 10% (stocks). The figure obtained during the sampling is compared with the indicator of 50% (“golden mean”). If it is less, PMI falls, if it is more, it grows. Posted on the 1st of each month.

In Germany, the IFO index calculated according to the American model, but put on a scale from -100 to +100. The reference period is the year 2000, when the PIIGS problems had not yet touched the Eurozone, and Germany was not burdened with a monstrous debt burden. The publication of the index takes place at 08:00 German time (-2 hours in Moscow) on the last working day of the month.

In Sweden PMI calculated since 2009, representatives of 200 companies participate in the survey. It is similar to the American methodology, but here orders are allocated 35%, sales volumes 25%, employment and deliveries - 20% each. The index operator is SwedenBank, the world does not pay much heed to the Scandinavian PMI: the state is not a key player and is not even a member of the European Union.

In Japan, TANKAN is published twice a year, at the end of June and December at exactly 08:50 (14:50 Moscow time), 10 minutes before the start of the exchanges. This was done to influence the trading in the beginning half of the year and determine the dominant - bulls or bears. It is noteworthy, but it includes only one digit. Extended information, with explanation and reports, comes out in a week or two.

In the Land of the Rising Sun, two types of surveys are used within TANKAN: quantitative (the larger the company, the more significant its word), and qualitative, where each respondent has one vote. When calculating the index itself, the diffusion principle is applied, where the arithmetic mean of the listed surveys is taken.

Instead of output

It is believed that the Business Activity Index has an indirect impact on the economy, as it is too vague and incorrect. Although a competent investor, tracking the macroeconomic situation, may notice a direct connection. For example, in February 2015, published statistics from China dropped the indices of the Asia-Pacific region. MSCI Asia Pacific shed 0.3%, NIKKEI - 0.7%, Shanghai Composite - 2.6%.

In 2013, after publishing the IFO, Germany brought down the euro-dollar pair below 1:1.3, which was regarded by investors as surrendering the positions of the “locomotive of Europe”. And in February 2016, Chinese statistics, the worst since 2012, drove up the prices of gold, silver and futures in the US. Then ETFs joined in and began to “merge” palladium and platinum, which led to a drop in prices.

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Definition of the term index of business activity

What are they talking about business activity indices

PMI business activity index

Faktura.ru business activity index

However, the main disadvantage of building stock indices based on a continuous sample is the problem of liquidity. The fact is that the last contract price is usually used to calculate the index. However, for some shares agreements may not be carried out for a long time, and the stock exchange index in such cases begins to “lag behind life”. If there are many such stocks, then the index becomes inertial and poorly meets the needs of investors.

The third problem of building an exchange index is related to the fact that the situation on the market is constantly changing - bankruptcies, mergers and acquisitions occur, new organizations arise that rapidly increase capitalization. On the other hand, the longer the history of the index, the greater its value - you can trace the reaction of the stock market in the past to certain events in different macroeconomic environments, which gives good grounds for predicting further market movements. For this reason, a dilemma arises: if changes are made rarely, then the index begins to "lag behind the market", if often - the index "loses history", i.e., retaining its former name, it actually begins to reflect changes in another market sector. Therefore, from time to time, stock markets change the composition of the index - they withdraw some indices and introduce others to replace them. There are no formal criteria for changing the composition of the sample and taking into account ongoing changes in the market; in practice, these issues are resolved by the index calculation, with the involvement of authoritative experts.

Integral (composite) indices

Despite the relative simplicity and convenience of calculating stock indices, they do not always reflect the economic cycle and, accordingly, the current state and dynamics of business activity. This disadvantage is especially pronounced in developing countries and countries with economies in transition, where there are no pronounced economic cycles, there are no stock exchanges, or they are just beginning to develop. In addition, the stock index reflects past events. But investors are primarily interested in what may happen in the near future.

Given these limitations, the so-called integrated business activity indices are increasingly used in international practice. When developing such an index, an attempt is made to combine several indicators into one, which, due to its generality, would predict economic cycles most clearly. Therefore, the index is designed in such a way as to cover all the main components of business activity in the country: employment, production, income, consumption, trade, investments, stocks, prices, money and loan and etc.

Index components are selected based on their economic importance, statistical adequacy and the possibility of operational measurement and accumulate both quantitative and qualitative information in various industries and areas. Such indices have the properties of a leading (predictive) indicator and are able to indicate the moment of a change in the trend in economic activity. This is because polls systematize opinions. a large number people who are professionally engaged in "their" business in different industries, who know and feel the development trends.

The best-known index of this group is the IFO index of the institute in Germany, according to which the level of business activity is assessed on a monthly basis, as well as expectations for the next six months. It is formed by polling more than 7 thousand managers. When calculating the index to assess business activity, companies use the following formulations: good; satisfactory; bad. And to express their business expectations: more favorable; unchanged; more unfavorable.

To calculate the index IFO four sectors are considered, which, through numerous surveys, have been recognized as sectors that form the “face” of business activity in Germany. These include: production of goods, construction, and retail (Fig. 2). Based on them, graphs are drawn up showing an assessment of business activity and an assessment of business expectations.

After that, a business activity trend vector and a vector of expectations are formed in general for four industries. The vector of development of the business environment is “added” to them, and as a result, three vectors are obtained that allow us to give comprehensive assessment the state and development of business activity in the country as a result of measures taken to create a favorable business environment2.

In such indices, the most important question is how to interpret their graphic meaning? After all, the index charts themselves IFO have no effect on the market. They only reflect the psychological, if you like, upward or downward trend that is currently taking over the market.

In general, the chart patterns that have been identified and classified over the past hundred years reflect important features of the PSYCHOLOGICAL state of the market. First of all, they indicate which mood - bullish or bearish3 - dominates the market at the moment. And if these models worked in the past, there is every reason to believe that they will work in the future, because they are based on human psychology, which does not change over the years. We can formulate the main signal of the index: the key to understanding the future lies in the study of the past. Or it can be quite different: the future is just a repetition of the past.

The semantic interpretation of the IFO index is carried out in points: the higher its value, the more favorable the forecasts of the economic condition. The value of the index can vary from 80 to 120; the level of business activity in 2000 is taken as 100. Changes in the index are tracked in dynamics (on a monthly basis) and are given as a percentage. Figures below 100 are an indicator of a slowdown in the rate of economic development compared to the base period (in our case, 2000) and are unambiguously considered by the market as negative factor. A value above 100 shows growing optimism among entrepreneurs, which in turn causes the euro (EUR) to strengthen; SWISS FRANK().

The main purpose of the chart is to help you recognize a trend and follow it throughout its lifespan.

In this case, the correct assessment of the possible time for a trend reversal is important. To do this, any important signal to increase or decrease the rate in the market must pass through the values ​​of all indices. In other words, we can speak about the beginning of an upward trend only if the values ​​of all indices have covered their previous intermediate peaks. If this happens with only one index, then it is too early to talk about an uptrend in the market. The signals do not have to, of course, absolutely coincide with each other, but the less they are separated in time, the more reliable. If there is a discrepancy in the dynamics of the indices, it means that the previous trend is still in effect, the nature of the market has not changed. In particular, the graph of the IFO index clearly shows the moment when all three graphs (business activity, business expectations and business environment) rushed down sharply from the second half of 2008, indicating a sharp change in the trend in the negative direction and thus symbolizing the beginning of the crisis .

Another tool for "measuring" business activity is the ratings compiled by large consulting and international rating agencies based on surveys and studying the opinions of managers large companies around the world. Such indices do not reflect daily, weekly or monthly changes in business activity and have a number of significant differences from stock and integral indices:

The rating sets the classification criterion according to which a phenomenon is ranked, while the index itself is a criterion for assessing the development of this phenomenon in dynamics (i.e., a relative value);

Ratings have, as a rule, a universal methodology, which is based on the calculation of indicators with an unambiguous interpretation. Therefore, this methodology can be used for different countries. At the same time, all known business activity indices "inevitably" have elements of originality in their methodology, because they reflect the features of development and components of the business environment in each particular country.

These differences reduce the attractiveness of the ratings from the point of view of an operational tool for assessing business activity. However, their value lies in the fact that they provide a comprehensive picture of the development world economy and business around the world as a whole and on specific continents, regions, countries.

It is extremely important for governments and businesses to “see the future” and act on the challenges and opportunities that exist today and may arise tomorrow. According to the responses of managers of large companies to the questions of the annual PricewaterhouseCoopers (PWC) survey, 72% of respondents believe that the problem of scarcity of natural resources will only worsen over time. At the same time, only 26% believe that increasing the efficiency of technology can solve this problem. This suggests that competition per Natural resources(primarily energy) will grow in the long term and will lead to a tough struggle for access to them and, accordingly, an increase in the profitability of resource sectors.

The results of such surveys make it possible to determine the prospects for the growth of markets and individual companies, the emergence of new types of products and new customers. To maximize return on investment in the long term, determine the general directions for the development of the company, management needs to have an idea of ​​the risks and opportunities in various regions of the world, track the development of other companies both from the point of view of competition and cooperation opportunities in international markets. To gain access to such a “global vision” is especially important for big business operating at the transnational level (and for those who only plan to enter it), carrying out strategic investments calculated for the medium and long term.

At each stage of development, it is important for a business to understand what exactly is needed for “growth above oneself”. What are the limitations of development and what is important to change in order to achieve the goal. The answers to this question are not always simple and unambiguous.

Let's just give some examples. A rating based on a study by the McKinsey Global Institute showed that a third of the gap in the level labor efficiency in Russian Federation compared to the United States is due to outdated production facilities. It would seem that a fairly simple conclusion suggests itself - it is necessary to modernize the existing capacities and thereby increase their productivity by 30%.

However, as the study shows, another important reason for the backlog is inefficient labor. It takes 3 times more people to produce a ton of rolled steel in the Russian Federation than in the US. Thus, even with investments in the modernization of the industry, success will largely depend on the skillfully carried out optimization of business processes, reducing the number of personnel and redistributing the workforce.

At the same time, comparison with leaders (in certain markets, in certain industries), often called benchmarking today, provides important indicators - both for the business itself and for the state. Continuing with the example of productivity in the steel industry in the Russian Federation, we can make the following comparison made by McKinsey experts: . workers by 2020”. Obviously, the government and business need to solve this problem together, developing adequate options in order to ensure, if possible, a painless flow of surplus labor to other sectors of the economy.

Attempts to “measure” business activity in Uzbekistan

In 1996-2003 center for effective economic policy(CEEP, now the Institute for Forecasting and Macroeconomic Analysis under the Ministry of Economy), together with the State Committee on Statistics, conducted market research on the business activity of industrial enterprises.

When conducting research, it was used, developed and used by member countries of the company for economic cooperation and development (OECD). It is based on a survey and generalization of the opinions of respondents (heads of enterprises) on the main areas of activity of enterprises in comparison with the previous quarter and a forecast of the situation for the next quarter.

When processing questionnaires received from respondents on questions of a qualitative nature, the relative frequency of each answer option was calculated in percent. Next, the difference in the relative frequencies of positive and negative answers to questions, which is an index of changes, was calculated.

1. Traditional, contained in similar foreign questionnaires. This was supposed to achieve comparability of the results of market research in the cross-country context;

2. Related to the peculiarities of the development of the economy of Uzbekistan.

Generalization of the results of the study of business activity of industrial enterprises was carried out in the sectoral context for ten major industries: non-ferrous, chemistry and petrochemistry, mechanical engineering, metalworking, printing, construction industry, light industry, food, flour milling, forestry, woodworking and pulp and paper.

Grade economic changes at industrial enterprises was carried out in the following main areas:

Assessment of the economic situation;

Use of production facilities;

Benefits and privileges for foreign investors.

Production infrastructure;

non-production infrastructure.

The final list of indicators that shape the business environment can be formulated after joint consultations with a wide range of stakeholders, both among entrepreneurs and the expert community. Here, the support of organizations such as the Commercial and Industrial Private Banks annually conducts surveys to assess the business environment in Uzbekistan and therefore has the most complete “set” of expert assessments of the quality and constituent components of the business environment in Uzbekistan today.

The effectiveness of the impact of the business environment on business activity should be reflected in the dynamics of certain indicators (indicators of business activity). What should be the list of these indicators? While it is difficult to give a final list, it seems that the results of the change in the business environment in the industrial sector should be reflected in the dynamics of the following indicators:

The volume of the index of industrial production;

employment;

Investments;

export;

Modernization.

It should be noted that some of the above indicators may be interdependent with each other (for example, investments and). In addition, not all of them may be a reflection of business environment factors. Therefore, additional analysis is required 1) the relationship of these indicators to each other and 2) the relationship of each of the indicators with each of the factors of the business environment. Such an analysis requires numerous calculations and the establishment of the so-called “tightness” of the connection, which in the expert community is commonly called the “correlation coefficient matrix”. And the regression coefficients between the various components of the business environment and the resulting indicators will allow you to determine the weights of each of the business environment factors. This will make it possible to “deduce” the integral index of business activity in industry. In addition, the obtained coefficients correlations will allow predicting changes in business activity in the industrial sector in the short term.

After “working out” the construction of an index of business activity in industry, one can multiply this experience in constructing similar indices in other industries and in general throughout the economy.

The dynamics of the listed indicators is supposed to be analyzed in quantitative (Goskomstat data) and qualitative dimensions (surveys). Both quantitative and qualitative data will be formed from the same sample, which should reflect the characteristics of the general population. Based on the IFC Business Environment Survey, this sample should include at least 500 representatives. However, the question of determining the sample is still open and requires additional consultations with the expert community.

Since a significant part of the calculations will be based on the data of the State Statistics Committee, which are formed mainly on a quarterly basis, it is advisable to calculate the business activity index on a quarterly basis as well.

Only open dialogue Feedback with all stakeholders will help shape the final vision of the business activity index, reflecting the current state and development trends of business in Uzbekistan.

Notes:

1 The very first average price of the Dow Jones index (July 3, 1884) included only 11 stocks different companies, 9 of which were railway. In this form, the index successfully existed until 1897, and then it was divided into two components: an index of 12 industrial companies and an index of 20 railway companies. In 1928, the index of industrial companies included not 12, but 30 shares, and in 1929 there was also an index of public utilities.

2 The indexes of this group include the business activity index of the Association of Managers and Kommersant Publishing House in the Russian Federation, the Japanese Tankan business activity index, etc.

3 these terms are used primarily to characterize the general direction of price changes for stock market(i.e. trend) and mean the following: “Bullish” is rising, and “bearish” is falling.

4 According to the IFC, since 1991, more than 16,000 acts aimed at creating a favorable business climate have been adopted in Uzbekistan.

US Stock Indices Britain and the Russian Federation

IFO business activity index ().

IFO Industry and Business Survey, May 2009. (index, 2000=100 seasonally adjusted)

Sources

glossary.ru - glossary.ru

academic.ru - dictionaries and encyclopedias on Academician

fxeuroclub.ru - Forex currency market Euro club

business.compulenta.ru - Compulenta is an online publication dedicated to the news of the computer industry, science and technology.

subcontract.ru - information support portal for small and medium-sized manufacturing businesses

review.uz - magazine "Economic Review"

Encyclopedia of the investor. 2013 .

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PMI (NationalAssociationofPurchasing, PMIindex) is a report on the results of a survey of managers (managers) in the industry. The PMI index is used to assess the change in the volume of industry output, the number of new production orders, inventory, and the speed of suppliers. The purpose of the economic indicator is to provide information on the formation of pricing policy, on business development trends and the economy as a whole. The PMI index (also called NAPM) is measured as a percentage (%) from 1 to 100.

Business Activity Index Formula

PMI = 0.30∙(New Orders) + 0.25∙(Production) + 0.20∙(Employment) + 0.15∙(Supplier Deliveries) + 0.10∙(Inventories)

New Orders- New orders;

production- Production;

Employment- Employment;

Supplier Deliveries- Supplies;

Inventories- Stocks.

Survey participants answer simple questions. Typically, response options are limited to "yes", "no" and "no change". Given the structure of the questions, a logical conclusion suggests itself that the value of the index will be greatly influenced by psychological factors, due to which the actual readings will be slightly distorted.

The questionnaires for participants included the following items:

Production- production;
New orders– how many orders customers have made;
New export orders– new export orders;
Order backlogs– a portfolio of unfulfilled orders;
Commodity prices- commodity prices;
Inventories of purchased materials– Purchased inventories of materials;
Imports (New import orders)– import (new import orders);
Employment- employment;
Vendor deliveries (Delivery time)- delivery time;
Items in short supply (Supplier)- goods of short-term delivery.

The PMI index is published at 10-00 EST (Washington) or at 18-00 MSK (Moscow) by the National Association of Purchasing Managers. Publication Date: Usually the first business day of the month.

Impact on the Forex market

The PMI manufacturing activity index has a limited impact on the foreign exchange market. Despite this, over a long period of study of the index (40 years), PMI turned out to be a fairly reliable indicator in predicting business cycles. It has been found that when PMI values ​​are high (above 50%), the peak of the business cycle is reached in about 7 months. If the PMI values ​​are low (less than 50%), the decline in the business cycle is reached around the 3rd month. The psychological threshold of 44% is also important. If the index falls below this value, this indicates that the economy has begun a recession (recession), which may adversely affect the growth rate of GDP (Gross Domestic Product). An economic recession is usually accompanied by a PMI level of 34-35%. If the index stays above the 44% mark, recovery will occur at a rapid pace.

The PMI business activity index is classified as a leading indicator, and is often analyzed with other fundamental indicators, namely the industrial production index ( industrial productionIndex) and the Prices diffusion index.

Services index) and aims to study the impact of the economy on the formation of the price space and provides high-quality information about business trends, in fact, it is an index of optimism for the top and middle management of the economy. This index is used to measure changes in new manufacturing orders, industrial output, employment, and inventory and supplier speed.

The indicator is measured in% in the range from 0 to 100%, and depending on the values ​​of the components:

PMI= 0.30*(New Orders) + 0.25*(Production) + 0.20*(Employment) + 0.15*(Supplier Deliveries) + 0.10*(Inventories)

Formal responses to the questions of survey participants are limited to ratings "higher" (more), "lower" (less) or "no change" compared to the previous month, the respondent can also add their own comments. Each component of the report is compiled into a diffusion index, which is calculated as the sum of the simple percentage changes in the above and below values, plus half the percentage of the same or no change responses. The diffuse index can fluctuate between 0 and 100% with different characteristics of the ranges: a value of 50% means no change; above 50% - improvement; and below 50% means a decline. The overall business sentiment score is a composite diffuse index called the Purchasing Managers' Index, based on a weighted average of new orders, products, employment, lead times and inventories.

Period	Source minimum	Normal minimum	Average	Normal maximum	Source maximum	Region definitions
Recovery
Extension

The following items are included in the questionnaire:
· Production - Production;
· New orders (New orders from customers) - New orders;
· New - New export orders;
· Order backlogs - Backlog of Orders;
· Commodity Prices - Commodity prices;
· Inventories of purchased materials - Stocks of purchased materials;
· Imports (New import orders) - New import orders;
Employment - Employment;
· Vendor Deliveries (Delivery time) - Delivery time;
· Items in short supply (Supplier) - short-term supply goods.

The report is published at 10:00 a.m. Washington DC or 6:00 p.m. Moscow time, usually on the 1st business day of the month following the reporting month for logistics (National Association of Purchasing Managers), for the previous month.

Relationship with other indicators and features of the indicator behavior. According to the dynamics of the index, changes in industrial production, orders, industrial prices, employment, and, most importantly, dynamics for six months ahead - if the index value is above 50%, the growth rate will increase, if the index value is below 50%, then the growth rate will fall and when the index reaches 44%, negative growth should be expected GDP.
The indicator is very important for the analysis of the economy and financial markets. Data analysis is carried out at the following 5 levels:

1. Prospects for a reversal of the business cycle.
2. General prospects for economic growth.
3. Prospects for inflation.
4. PMI/NAPM index components.
5. The relationship between PMI, its components, and other indicators calculated by official government bodies.

3. Price Distribution Index(Prices diffusion index) is a leading indicator of inflation. The analysis showed that the Prices diffusion index predicts up to 59% of PPI fluctuations, incl. prices for semi-finished products and raw materials next month.

4. Predicting the state of the business cycle from the components of the NAPM report. provides a fairly complete display of the state of production. For example, at the exit from the recession phase, one should expect that the growth of the new orders component should predetermine the growth of production. The improvement of the economy will cause employment growth and growth of inventories. With some delay, prices will begin to reflect the strengthening of the economy. New orders (new orders index) is also a leading indicator of weakness in the economy. Also, a decline in the business cycle is predicted by the employment and inventory components.

5. Relationship with other indexes: for example, the employment diffusion index is very similar to the manufacturing employment diffusion index of the Bureau of Labor Statistics.