The Purchasing Managers' Index (PMI) is a leading indicator of economic health. Based on monthly corporate surveys, it gauges forward-looking momentum. A reading above 50 signals expansion, while a reading below 50 represents contraction.
CURRENT READINGS
The US Composite PMI (services, manufacturing and construction together) is at 53.6, signaling an expected very strong growth in the wider economy, improving fast since last month (in a positive quarterly trend). Beneath the surface, the two main sectors show distinct trajectories:
Services (Largest GDP Contributor): 54.6 — signaling a very strong growth.
Manufacturing: 53.9 — signaling a very strong growth.
MECHANICS & MEANING
A robust expected expansion should anticipate stronger earnings: it is bullish signal for stocks.
In general, rising PMIs translate into higher growth prospects in the short-term (in 3 to 6 months), which should later translate into higher corporate earnings, supporting bullish equity sentiment. Conversely, contracting PMIs signal economic headwinds and defensive market rotations. Normal, range-bound fluctuations do not provide a meaningful, directional signal for trading.