Purchasing Managers Index 'Overstates the Gloom'

  • January 08, 2020

Purchasing Managers Index ‘overstates the gloom’

I always keep an eye on any reporting on the IHS Markit’s Purchasing Managers’ Indices (PMI) as an early barometer of how the economy is doing before the official figures are released.

I was surprised to read in the Times today (7/1/20) therefore that this indicator, which is watched closely by economists, policymakers and CIPS members (myself included), may not paint as complete a picture of the state of the economy as we thought.

This is predominantly because the PMI does not include the retail or public sectors and therefore it does not align with official data. Gurpreet Narwan, Economics Correspondent of The  Times, says: ‘According to Capital Economics (a research consultancy) , the index has underestimated GDP by 0.2% over the last year’. Ruth Gregory of Capital says that ‘We think that the PMIs are overstating the gloom’.

What a shame, I thought – I’ve always been proud of the PMI and how our procurement profession can be used to indicate how well the economy is doing. And it does give our profession lots of good publicity in the press.

The latest PMI index rose to 50 after the election, a rise from 49.3 in November and above economist forecasts of 49.1. Any reading of 50+ signifies growth. So – hang on a minute:  ‘THINGS ARE PERHAPS BETTER THAN WE THOUGHT!’  Growth may be weak, but it is there.

Perhaps IHS Markit, who compile the Purchasing Managers Indices, might take a look and get the source data more closely aligned to make it more accurate?

Your thoughts and comments please…………….

Christina Langley is the founder of Langley Search & Interim (www.langleysearch.com), the leading ‘niche’ recruiter in the procurement & supply chain area.  Langley manages permanent and interim positions at Executive, Management and Junior Levels.  Langley delivers recruitment solutions across a range of globally based clients from large international organisations through to start ups, all of whom are looking for an effective, partnered recruitment solution. Contact: Christina.Langley@langleysearch.com