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๐ PMI index: what it means and how to use it โ
๐ On Friday, we will have another publication of PMI data for Japan, Europe and the United States. The economic calendar suggests paying special attention to these statistics.
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PMI refers to poll or diffusion indices and is considered a leading indicator of the financial situation. Correlation of manufacturing PMI with economic dynamics allows predicting the rate of GDP growth.
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The responses of the participants โ managers and analysts of large businesses โ are formalized to ยซhigherยป (more), ยซlowerยป (less) or ยซnot changedยป in comparison with the previous report; respondents can add personal comments.
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PMI above the level of 50 is interpreted as growth of the relevant sector and is considered a positive factor for the national currency, a value below 50% indicates a slowdown in dynamics. Values in the 44% zone โ the reaction of investors will be slightly negative since the probability of recovery is quite high. Indicators below 35% are a sign of stagnation and serious problems in the economy of the country or region.
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The impact of PMI on the currency is at least medium-term, for example, the fall in PMI occurs about 2 months before the real downturn in the business cycle. Although speculators may create a strong price spike in case of a strong deviation from previous values at the time of publication, we believe that scalping fans should not try their luck โ the retracement will be too fast.
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Profits to yโall!