S&P Global/CIPS United Kingdom Manufacturing Purchasing Managers Index (PMI)

Markit/CIPS Manufacturing PMI is calculated by Markit together with the Chartered Institute of Procurement & Supply (CIPS). It characterizes business conditions and purchasing managers' activity level in the UK economy's manufacturing sector.

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 country.

PMI calculation is based on data collected from monthly replies to questionnaires sent to purchasing executives in over 600 UK companies which provide the highest contribution to GDP. Managers are asked to characterize current business and economic conditions in the national construction sector. The questionnaire covers the following economic variables:

• Production output
• New orders
• Backlogs
• Prices paid (for materials, services and goods purchased in the production process)
• Prices received
• Suppliers' delivery times
• Inventories
• Employment
• Near-term productivity outlook

The survey participants provide relative estimates: whether figures have increased, decreased or remain unchanged. PMI is a composite index, which is made up of 5 separate indices, characterizing new orders, production level, employment, supplier delivery times and inventories in warehouses.

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 the entire manufacturing sector. It is interpreted as a leading indicator of production and inflation. Manufacturing PMI growth is an indication of favorable market conditions and can be seen as positive for the pound sterling growth.