Context: PMI survey shows manufacturing shrank in June

About:

• It is an economic indicator that is calculated from monthly surveys of purchasing managers and supply executives from specific companies.
• PMI Manufacturing gives an indication of the economic health of the manufacturing sector.
• To arrive at PMI, a questionnaire seeking factual information on variables such as new orders, output, employment, supplier deliveries, inventories, new export orders and prices are sent to purchasing managers of business enterprises and they are asked if these factors are above or below the level of the previous month.
• It is calculated separately for the manufacturing and services sectors and then a composite index too is constructed.
• A figure above 50 denotes an expansion while anything below 50 denotes a contraction in activity.
• The higher the difference from this mid-point of 50, greater the expansion or contraction.
• The value and movements in the PMI and its components can provide useful insight to business decision makers, market analysts, and investors, and is a leading indicator of overall economic activity in India.

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