PMI: Purchasing Managers’ Index

This index is a composite of various business indicators, including new orders, inventory levels, and employment. 

The PMI is a crucial tool for understanding the current status of the business sector and can often forecast economic conditions before they reach a critical mass. 

A PMI above 50 usually signifies an expanding economy, whereas a reading below 50 suggests contraction.

A decreasing PMI may signal that businesses are less optimistic about the future, often leading to reduced spending and hiring, (which can prelude a recession).

Recessionary signal: When it comes to the PMI trough, the market low comes when the inversion (below 50) has come back at least 70% of it’s way to 50.

On average PMI gain before a metric (on past recessions) is 92% back to neutral (the 50 line) and the on many occasions it’s back to positive again.

Track it yourself

You can find the PMI on TradingView: https://www.tradingview.com/chart/v7ZG3yMA/?symbol=ECONOMICS%3AUSBCOI

To make your life easy, draw a red line on 50, Install indicator: “US recessions”, and look out for the PMI to drop to 42, before retracing back up to the mid line.