The PMI numbers are improving

OK, by now it’s a broken record: Jason sees signs of recovery. Sorry. Some of these numbers need watchin‘ and well, due to a horrible chemical accident I don’t have eyelids, so I can’t help but watch. Hah!

What the heck is the PMI? PMI is short for the Purchasing Managers’ Index and is an economic indicator of production. The number is based on a monthly survey of 400 businesses and their purchasing managers. Because the 400 companies polled are diverse, the PMI is seen as an indicator of production levels, new orders, supplier deliveries, inventories and circumstantially as an indicator of employment. PMI ranges between 0 and 100. The critical threshold is at 50%. An index number of below 50% indicates contraction of the economy. While a number above 50% is an indication of economic growth. A number spot on at 50% indicates stability.

The PMI has been well below 50% for over a year. However, the number is improving and now sits just below 50%. What’s more, some sectors are actually above 50%. The PMI is seen as a leading indicator because for the economy to expand new goods have to be manufactured, so purchasing manager orders expanding means that manufacturers have to start making stuff. So the PMI presages economic growth. Since we are hovering just below 50% in the aggregate, and we actually have expansion is some sectors, this is yet another indication that the recession is bottoming and nearly over.

Maybe now I can afford that surgery to repair my eyelids and can stop watching.

Jason