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With reference to the Purchasing Managers’ Index, consider the following statements:
1. The index shows trends in both the manufacturing and services sector.
2. A PMI number greater than 50 indicates contraction in business activity.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
With reference to the Purchasing Managers’ Index, consider the f...
The Manufacturing Purchasing Managers' Index, compiled by S&P Global, fell to 55.1 in September from 56.2 in August 2022.
- It was the 15th straight month the figure was above the 50-mark separating growth from contraction.
- The survey pointed out that Indian businesses become more confident in the outlook as inflation worries were tamed.
- The overall level of positive sentiment seen in September was the best in over seven-and-a-half years, according to the survey.
Purchasing Managers’ Index
- Purchasing Managers’ Index or PMI is an economic indicator, which is derived after monthly surveys of different companies.
- The index shows trends in both the manufacturing and services sector.
- The index helps in determining whether the market conditions, as seen by purchasing managers, is expanding, contracting or staying the same.
- It is used to provide information regarding the current and future business conditions.
- PMI is one of the closely watched indicators of business activity and helps in predicting the economic health of a country.
- There are two types of PMI — Manufacturing PMI and Services PMI. A combined index is also made using both manufacturing PMI and services PMI.
- A PMI number greater than 50 indicates expansion in business activity. A number less than 50 shows contraction. The rate of expansion is also judged by the difference from the mid-point (50) and also by previous month’s data.
Hence only statement 1 is correct.
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With reference to the Purchasing Managers’ Index, consider the f...
Explanation:
Statement 1: The index shows trends in both the manufacturing and services sector.
- The Purchasing Managers' Index (PMI) is a widely recognized leading economic indicator that surveys purchasing managers in various sectors.
- The PMI provides insights into the health of the manufacturing and services sectors by measuring factors such as new orders, production, employment, supplier deliveries, and inventories.
- Therefore, statement 1 is correct as the PMI covers trends in both the manufacturing and services sector.
Statement 2: A PMI number greater than 50 indicates contraction in business activity.
- This statement is incorrect. In fact, a PMI number greater than 50 indicates expansion in business activity, while a number below 50 indicates contraction.
- A PMI reading above 50 suggests that the economy is expanding, while a reading below 50 indicates a contraction.
- Therefore, statement 2 is incorrect as a PMI number greater than 50 signifies expansion, not contraction.
Therefore, the correct answer is:
a) 1 only
Statement 1: The index shows trends in both the manufacturing and services sector.
- The Purchasing Managers' Index (PMI) is a widely recognized leading economic indicator that surveys purchasing managers in various sectors.
- The PMI provides insights into the health of the manufacturing and services sectors by measuring factors such as new orders, production, employment, supplier deliveries, and inventories.
- Therefore, statement 1 is correct as the PMI covers trends in both the manufacturing and services sector.
Statement 2: A PMI number greater than 50 indicates contraction in business activity.
- This statement is incorrect. In fact, a PMI number greater than 50 indicates expansion in business activity, while a number below 50 indicates contraction.
- A PMI reading above 50 suggests that the economy is expanding, while a reading below 50 indicates a contraction.
- Therefore, statement 2 is incorrect as a PMI number greater than 50 signifies expansion, not contraction.
Therefore, the correct answer is:
a) 1 only
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With reference to the Purchasing Managers’ Index, consider the following statements:1. The index shows trends in both the manufacturing and services sector.2. A PMI number greater than 50 indicates contraction in business activity.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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