# PMI > PMIs survey purchasing managers about business conditions, giving an early read on growth. Learn how ISM and S&P Global PMIs work, the 50 line and market reactions. Source: https://learn.tradelabsai.com/macro/pmi/ Track: Economics and Macro · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "PMI", https://learn.tradelabsai.com/macro/pmi/ Purchasing Managers' Indices (PMIs) are monthly surveys asking managers at companies whether conditions such as new orders, output, employment and prices are improving or worsening. Because they are released early in the month and respond quickly to changes, PMIs are among the most timely indicators of economic momentum. A reading above 50 signals expansion; below 50, contraction. Traders watch them for early signs of turning points in growth, especially in manufacturing. ## How a PMI is calculated Respondents say whether each factor is higher, the same or lower than the previous month. Each component is converted to a diffusion index: ``` diffusion index = % reporting improvement + (0.5 × % reporting no change) ``` A reading of 50 means as many firms reported improvement as deterioration. The headline PMI combines several components with weights. ## Main PMI families | Survey | Publisher | Coverage | Timing | |---|---|---|---| | ISM Manufacturing PMI | Institute for Supply Management (US) | US manufacturing | First business day of the month | | ISM Services PMI | Institute for Supply Management | US services | Third business day | | S&P Global PMIs | S&P Global | US, euro area, UK, Japan, China and many others | Flash estimates late in the month; finals early next month | | China official PMI | National Bureau of Statistics | China manufacturing and non manufacturing | Last day of the month | ## Key components of the ISM Manufacturing PMI | Component | What it shows | |---|---| | New orders | Future demand; often the most watched | | Production | Current output | | Employment | Hiring trends | | Supplier deliveries | Slower deliveries can signal strong demand or supply problems | | Inventories | Stock levels | | Prices paid | Input cost pressures; linked to inflation. See [Inflation](https://learn.tradelabsai.com/macro/inflation/) | **Example: Reading the ISM report** The ISM Manufacturing PMI comes in at 47.8, below 50 for the fourth month, but new orders rise to 50.5 from 46.0 and prices paid fall. Traders may read this as early signs of a manufacturing bottom with easing cost pressure. Industrial stocks and copper might rise, and bond yields might edge up. A headline below 50 does not always mean bad news if components show improvement. See [Copper](https://learn.tradelabsai.com/commodities/copper/). ## PMIs and the economy - **Manufacturing PMIs** are sensitive to the goods cycle, inventories and global trade. - **Services PMIs** cover the larger part of developed economies. - **Composite PMIs** combine both and correlate reasonably well with GDP growth. See [GDP](https://learn.tradelabsai.com/macro/gdp/). The ISM notes that a manufacturing PMI above a level in the low 40s, sustained over time, has generally been consistent with overall economic expansion, because manufacturing is a smaller part of the economy than services. ## PMIs and markets | Market | Typical sensitivity | |---|---| | Cyclical stocks | Industrials, materials and energy often track PMI direction | | Copper and industrial metals | Linked to manufacturing demand | | Bond yields | Stronger PMIs tend to lift yields | | Currencies | Strong PMIs can support a currency | | Earnings estimates | Analysts' revisions often follow PMI trends | Research by brokers and strategists has found that the direction of PMIs, rising or falling, often matters more for asset returns than the level. ## Limits of PMIs - **Sentiment based:** they measure the breadth of change, not the size. - **Supplier deliveries quirk:** supply chain disruptions can raise the index even when activity weakens, as in 2021. - **Seasonal adjustment** challenges. - **Volatility** month to month; trends are more informative. ## Frequently asked questions ### What is a PMI? A Purchasing Managers' Index: a monthly survey based indicator of business conditions, where readings above 50 signal expansion and below 50 contraction. ### What is the difference between ISM and S&P Global PMIs? Both survey purchasing managers but use different samples and methods; ISM covers the US, while S&P Global publishes PMIs for many countries, including flash estimates. ### Why do traders watch PMIs? Because they are timely and often signal turning points in economic growth before official data such as GDP. Next, learn how consumer mood is measured in [Consumer Confidence](https://learn.tradelabsai.com/macro/consumer-confidence/). ## Continue learning - Next lesson: [Consumer Confidence](https://learn.tradelabsai.com/macro/consumer-confidence/) - Previous lesson: [Employment Data and Non-Farm Payrolls](https://learn.tradelabsai.com/macro/non-farm-payrolls/) - Related: [Employment Data and Non-Farm Payrolls](https://learn.tradelabsai.com/macro/non-farm-payrolls/): The US jobs report includes non farm payrolls, unemployment and wage growth. Learn what each number means, release timing, revisions and how markets react. - Related: [GDP](https://learn.tradelabsai.com/macro/gdp/): GDP measures the total value of goods and services an economy produces. Learn how it is calculated, real vs nominal GDP, release timing and how markets react. - Related: [Business and Economic Cycles](https://learn.tradelabsai.com/macro/business-and-economic-cycles/): Economies move through expansions and contractions. Learn the phases of the business cycle, what drives them, how sectors and assets tend to behave and the limits. - Related: [Trading Economic Releases](https://learn.tradelabsai.com/macro/trading-economic-releases/): Economic data releases cause sharp moves in rates, currencies and stocks. Learn the key US releases, how surprises are measured and how to manage the risk. - Related: [Copper](https://learn.tradelabsai.com/commodities/copper/): Copper prices track global industry, China and the energy transition. Learn copper futures on COMEX and LME, supply and demand, inventories and key drivers. - Related: [Recession Indicators](https://learn.tradelabsai.com/macro/recession-indicators/): Recession indicators like the yield curve, the Sahm rule and leading indices have warned of past downturns. Learn how each works, its record and its limits.