Q: How is the PMI calculated, and what does it mean?
A: The PMI is a composite index based on the diffusion indexes for the following five indicators at equal weights:
New Orders (seasonally adjusted) 20%
Production (seasonally adjusted) 20%
Employment (seasonally adjusted) 20%
Supplier Deliveries (seasonally adjusted) 20%
Inventories 20%
A PMI index over 50 represents growth or expansion within the manufacturing sector of the economy compared with the prior month. A reading under 50 represents contraction, and a reading at 50 indicates an equal balance between manufacturers reporting advances and declines in their business.