Purchasing Managers' Index (PMI)

The Purchasing Managers' Index is compiled from monthly surveys of purchasing managers at a panel of firms (in India, by S&P Global for HSBC, from a panel of roughly 400 manufacturers for the manufacturing index and a comparable panel for services), who report whether output, new orders, employment, and other indicators improved, worsened or stayed the same compared to the previous month. It is a diffusion index: it captures the proportion of respondents reporting improvement versus deterioration, not the level or magnitude of activity. Reading a diffusion index correctly is the standard examiner trap. A reading above 50 means a majority of surveyed firms report expansion, so the sector is growing; a reading below 50 means a majority report contraction. Critically, a falling PMI that remains above 50 means fewer firms are reporting expansion than in the previous month, so growth is decelerating, not reversing. 'PMI at a multi-year low' and 'the sector has expanded for dozens of consecutive months' can both be true of the same reading simultaneously. PMI's analytical value lies in its timeliness: it is released within days of month-end and functions as a leading indicator, signalling turning points before slower, volume-based measures like the Index of Industrial Production (IIP, released with roughly a six-week lag) or GVA in the national accounts (quarterly) confirm them. Its limitation is that, because it measures direction rather than magnitude, a PMI reading cannot be converted into an actual growth rate.

• 1 PMI is a diffusion index: measures the share of firms reporting improvement vs deterioration, not the level of output.
• 2 50 is the no-change threshold; above 50 = expansion, below 50 = contraction.
• 3 A falling PMI that stays above 50 means growth is decelerating, not reversing, a common examiner trap.
• 4 Compiled monthly by S&P Global for HSBC in India, from a panel of roughly 400 manufacturers (manufacturing PMI) or a comparable services panel.
• 5 PMI is a survey-based leading indicator, released within days of month-end.
• 6 IIP (Index of Industrial Production) is a volume-based lagging indicator with about a six-week release lag; GVA is a quarterly national-accounts measure.
• 7 India's manufacturing PMI stood above 50 for 57 consecutive months through July 2026, even as the reading itself eased to a nearly five-year low of 53.5.

India's July 2026 Manufacturing PMI fell to 53.5 from 54.2 in June, its weakest reading since August 2021, while marking a 57th straight month of expansion, illustrating that a falling PMI above 50 signals slower growth, not decline.