Why Should We Bother with Services PMIs
|What the heck are services PMIs?
A Purchasing Manager Index (PMI) is basically the assessment of purchasing managers with regard to the business and economic environments. Managers in the services industry are asked to answer a survey which covers different aspects of their businesses from employment, production, new orders, prices, to inventories.
Their sentiments are then quantified and when the math whiz kids are done, they publish a headline figure for the services PMIs.
If the reading is below 50.0, it indicates that the services industry is contracting. Meanwhile, a reading higher than 50.0 would indicate that the industry is growing.
Why do they matter?
Central bankers, economists, industry analysts, businessmen, and traders pay close attention to services PMIs. Heck, who better to tell us how business conditions are than business managers themselves, right? Because of this, services PMIs are seen as reliable leading indicators of economic health.
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