Monday, March 4

PMI business activity index: a review of the industrial sector

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PMI business activity index: declining economic performance

A beginner and an experienced investor understands the importance of monitoring economic cycles. With this knowledge, you can vary the composition of your portfolio – reduce or increase the number of risk assets. For those involved in speculation, one should pay attention to the macroeconomic component in order to find an entry point. PMI business activity index will help to increase the volatility of instruments, which will allow impulse traders to increase profits.
The PMI group includes popular instruments for purchasing managers. The results of these macroeconomic indicators are based on surveys. The business activity index shows how relevant this or that product is. If there is an increase in demand for industrial products, managers increase purchases of components and materials for them. It is important to monitor the dynamics in order to respond to the market situation in time.
Surveys, on the basis of which the PMI is formed, are made every month. Managers take part in them, they assess changes in the activity of enterprises on the basis of various factors:

  • volumes and specifics of new orders;
  • state of production;
  • staff employment;
  • inventories;
  • change in the purchase cost.

Investors in the Russian market are primarily interested in the industrial segment, as its products and raw materials are the main component of the country’s exports. To study the indexes of business activity market analysis is conducted in 40 countries. The result of PMI is fluctuating. In late summer it fell to 49.5 points, which is below the critical level of 50 points. Such data indicate a decline in economic indicators in the industrial sector.

Values of the business activity index for the last few months indicate that the sector is slowing down, which has its own echoes in the stock market.
Economic performance in the industrial sector deteriorated in many G20 countries. These countries account for about 85% of the world’s GDP. If we look at PMI by region, Europe’s performance is lower than that of the US. Asia, which has been showing strong economic growth for a long time, is not doing well. But now even this region is slowing down.
Investors are also worried about the employment situation in this sector. In some enterprises, the number of employees is decreasing and new orders are also decreasing.
Experts call the trade conflict between the U.S. and China the main reason for the decline in business activity indexes in the industrial sector. Until the countries come to an agreement there is no reason to expect improvement in the market. Everyone hopes for a new stage of negotiations between the governments of the countries, which should take place in the near future.

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