What is PMI economic indicator in forex trading ?

PMI stands for Purchasing Managers Index that refers to an economic indicator and measures the total amount of demand for the manufacturing in the economy of a country. The PMI report is published monthly. The index is a combination of five sub indices from which each index is being measured with those orders that are heavily weighted.
The five sub-indices
In a survey, the questions can only be answered with the options like ‘better’ or ‘worse’ or ‘same’. The last PMI figure is premeditated by calculating the proportion of answers that affirmed that improved conditions triumphed than the preceding month and totaling that number to half of the proportion of companies that affirmed no alter in conditions. Hence, if the PMI result is showing a figure of 50 points, then it means that same number of companies gave the survey as either better or worse.
PMI is a very significant index that can be used as economic indicators. It not just brings the data from the manufacturing industry but also brings important information from the economy as well. Manufacturing sector is an important part of a country’s GDP, and hence it is being closely watched by the investors. The index report is being published at the start of every month, and hence it becomes a predecessor of a month that may have positives and negatives to come. Analyst uses this index because they believe the recession is started and finished because of manufacturing.
The figure of 50 is considered as important for the PMI index. If the economy with manufacturing is progressing, the PMI index should show above 50 points. PMI numbers can also be a useful indictor for the GDP. Economist can modify their analyses after watching the PMI numbers. Another important number is 42% as anything below this indicates a recession position in the economy. GDP seems to be in a good position if the PMI index remains between 42%-50%.
Marking these numbers monthly isn’t a big deal if they aren’t compared with the previous months. By comparing the current data with the previous months or year, an analyst can observe the trigger of the market. Since, the PMI is a subjective indicator, and it also includes various figures based on perceptions, so it can be called as a confidence index. Regardless of the way, an investor looks at the PMI index, it is very important indicator and source of information for the forex market.