Markit Composite PMI is a monthly summary report concerning the changes in the working conditions of private companies in the manufacturing and service sectors. The indicator is based on monthly surveys of purchasing managers working in approximately 5000 private companies in 19 eurozone countries.
Often purchasing managers can track changes in market conditions prior to other company employees, because purchases precede company's production activities. Purchasing managers are among the first to notice such changes. The sample for the survey is chosen so as to cover the maximum possible number of large companies across the euro area.
Purchasing managers complete a questionnaire, in which they assess the basic parameters of their work: input and output prices, employment, production, new orders, etc. The survey participants provide relative estimates: whether figures have increased, decreased or remain unchanged. Individual subindexes are calculated based on these answers. These subindexes characterize inflation, employment and other key indicators of economic activity.
Each response is weighted according to the size of a company and its contribution to the total production or services of the subsector it belongs to. Thus, the largest companies make a greater contribution to the indicator calculation.
The index is seasonally adjusted. Individual weights are given to polled companies. Readings above 50 indicate that most of respondents positively characterize current business conditions. Readings below 50 mean worsening of business conditions.
PMI is one of the most popular indexes closely watched by analysts. It provides operational information covering business activity in the entire private sector of the eurozone. It is interpreted as a leading indicator of production and inflation. PMI growth is an indication of favorable changes in market conditions and can be seen as positive for the euro.
The chart of the entire available history of the "S&P Global European Union Composite Purchasing Managers Index (PMI)" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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