Formula and Calculation
PMI data are presented in the form of diffusion indexes and are calculated as follows:
INDEX = (P1*1) + (P2*0.5) + (P3*0)
- P1 = Percentage number of answers that reported an improvement.
- P2 = Percentage number of answers that reported no change.
- P3 = Percentage number of answers that reported a deterioration.
Thus, if 100% of the panel reported an improvement the index would be 100.0. If 100% reported a deterioration the index would be zero. If 100% of the panel saw no change the index would be 50.0 (P2 * 0.5).
Therefore, an index reading of 50.0 means that the variable is unchanged, a number over 50.0 indicates an improvement while anything below 50.0 suggests a decline. The further away from 50.0 the index is, the stronger the change over the month. E.g. a reading of 55.0 points to a stronger increase in a variable than a reading of 52.5.
Read more about this topic: Purchasing Managers Index
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