Purchasing managers' indices: mechanisms, players, risks
Analysis: PMI readings above 50 signal expansion, readings below 50 contraction.
PMI readings above 50 signal expansion, readings below 50 contraction.
Several forces are at work in “Purchasing managers' indices”: the interest rate environment, domestic and foreign demand, regulation and, not least, market participants' expectations. None of these can be viewed in isolation.
Risks include unexpected political decisions, supply chain disruptions and abrupt shifts in financial market sentiment. Opportunities arise where companies respond early to changing conditions.
For executives, the main question regarding “Purchasing managers' indices” is their own exposure: which costs, revenues and financing conditions depend on it, directly or indirectly?
A proven approach is to run scenarios and monitor leading indicators regularly. That puts decisions on a solid footing without reacting to every headline.