Sunday, April 1, 2012

PMI on its 44th reading

In April 2007, we conducted the pilot test for the Purchasing Manager's Index (PMI) Philippines. Fifteen months after (July 2008), PMI Philippines made its foundational run featuring PMI Manufacturing. Since its initial run, the PMI has been conducted every month without fail.

Now on its 44th reading, PMI Philippines has become the earliest leading economic indicator available to planners and decision makers. It provides policy decision makers with a directional tool based on actual conditions in industry. Two other PMI surveys have been activated -- PMI Retail/wholesales which is now on its 35th run, and PMI Services which is now on its 17th run.

Together, these three economic surveys provide policy decision makers in government and industry with a significant foresight about the economy month on month. PMI users were asked to evaluate how this economic indicator is able to help the company. Significantly, 58% of PMI subscribers use PMI as a management reference while 15% use this indicator for decision making.

PMI Manufacturing, as a leading economic indicator, has been able to sufficiently plot the direction of the economy -- whether it expanded or contracted -- each current month as compared to the previous month. This reading is reported to readers during the first week of the succeeding month -- three months ahead of the GDP.

Where PMI is extensively used (such as North America and Europe), PMI is used as a leading economic indicator to predict way in advance the GDP. It confirms if the economy expanded, a confirmation that gives decision makers a persuasive guideline for action. It is most useful, however, when it gives readers a bold reading of when the economy is contracting. The PMI was able to foresee the economic contraction in the last quarter of 2008.

For more information on PMI Philippines or if you have questions, send an email to nick_fontanilla@ascendph.com.