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Friday, December 28, 2007

Chicago Purchasing Manager index Indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change.

General Effect

In General, the importance of the Chicago 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 the 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.

Chicago Purchasing Manager index has the same effect on Industrial companies shares included in the stock market indices.

Posted by MOHAMED SAID at 9:20 AM  


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