A monthly survey-based indicator measuring business activity in the manufacturing or services sector - above 50 signals expansion, below 50 signals contraction.
The PMI is published by S&P Global (formerly IHS Markit) and ISM for most major economies and released around the first business day of each month, making it one of the earliest and most reliable leading indicators of economic activity. Survey respondents are purchasing managers at large companies who report whether conditions for new orders, output, employment, supplier delivery times, and inventories are better, the same, or worse than the previous month.
The index is constructed as a diffusion index: a reading above 50 means more respondents reported improvement than deterioration, signalling expansion; below 50 signals contraction. The manufacturing PMI typically moves first in the economic cycle; the services PMI often provides a broader read on the economy since services dominate developed-market GDP.
For forex traders, PMI is significant for two reasons. First, it provides an early read on economic momentum that feeds directly into central bank rate expectations - a series of PMI readings above 55 typically precedes hawkish communication and can support currency appreciation. Second, the deviation between the actual reading and the consensus forecast is what drives the immediate market reaction: a manufacturing PMI of 53.5 against a consensus of 51.0 is a meaningful positive surprise for the currency.
The US ISM Manufacturing PMI and Non-Manufacturing (Services) PMI, Eurozone Composite PMI, UK Composite PMI, and Chinese Caixin PMI are the most market-relevant surveys for major pairs. They are typically released at fixed times in the first week of each month, making them predictable scheduled events on the economic calendar.