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Purchasing Managers Index (PMI)

By:   Crown Forex
  • 01-10-2008
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Previous       45.3
Forecast       45.3

Definition     

Is a widely used indicator in industrialized nations; measures the health of the manufacturing and the services sector. The diffusion index is compiled through a survey for purchasing managers covering a wide range of sectors.

The questionnaires cover basically five major indicators new orders, inventory levels, production, supplier deliveries, and employment environment.

The indicator is released in the United Kingdom, Germany, and the Euro Zone as well. Digesting the index generally a reading above 50 resembles expansion and below the marginal 50 level it resembles the opposite with is contraction.

General Effect     

In General, the importance of the Purchasing Manager Index is considered significant, and appears obviously on currencies exchange market, so at the point when this index or any of its components show an increasing value, that will cause a rising of production quantity which is considered a basic factor to achieve required economic growth. Then the effect of this factor supports the country's currency pushing it to appreciate.

On the other hand and as result of this economic growth, inflation factor with time might increase under current economic conditions which accompanies growth, which starts to rise prices levels, which reduces  the major utility of this economic improvement.

In order to confront price stability threats the government starts executing different monetary policies in purpose to stimulate and ensure robust economic growth levels.

The PMI has the same effect on Industrial companies' shares included in the stock market indices.

Best Case     An improvement in the PMI manufacturing reading will indicate that the sector is picking up in the Euro Zone which has been retreating in the last period, and will also show that consumer demand has inclined to positively boost the Euro

Worst Case     Readings below 50 show contraction in the sector where a revision to the downside will assure the fact that higher prices and inflation has crippled demand where production will decrease and as a result the European currency will decline as well

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Content Provided by:
Crown Forex
CROWN FOREX SA, located at St-Hubert 38, 2854 Bassecourt, P.o.box 247, Switzerland, is fully regulated as a financial intermediary under Swiss federal law on the prevention of money laundering (LBA, MLA). Our company is also affiliated with the ARIF association, thus overseen by the Swiss federal de

DISCLAIMER:

The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness.  I am not liable for any losses or damages, monetary or otherwise that result.  I recommend that anyone trading currencies, gold, silver &energies should do so with caution and consult with a broker before doing so.  Prior performance may not be indicative of future performance. Currencies, gold, silver &energies  presented should be considered speculative with a high degree of volatility and risk


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