Purchasing Managers’ Index
September 2001 ~ April 2002
Hong Kong Institute of Vocational
Education (Sha Tin Campus) ~
HD in Purchasing and Supply
Management
Purchasing Managers’ Index
Presented by:
Mak Mei Ngo, Candy
Tang Pik Shan, Angella
Tang Yin Yee, Kay
Wong Yu Ping, Tammy
Yung Chau Shun, Stephanie
Contents





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PMI’s Definition
Importance of PMI
Generation of PMI
Strengths and Weaknesses of PMI
HK PMI
Awareness of PMI in Purchasing Field
Awareness of PMI among Tertiary Students
Conclusions
Recommendations
PMI’s Definition

Originated in America since 1948’s
Held by Institute for Supply
Management (ISM), formerly NAPM

Is a composite index, which includes:

New orders (x0.3)
Production (x0.25)
Supplier delivery time(x0.15)
Inventories (x0.1)
Employment (x0.2)
PMI’s Definition (con’t)


Each months, hundreds of purchasing
managers are asked about their
companies’ performance in the current
month compared with the prior month
PMI’s reading over 50 % indicates
expansion, sub-50% reading indicates
contraction relative to the prior month
Importance of PMI

Immense recognition
– Extremely important indicator for financial
markets
– Great recognition from economists and
forecasters in government and business

Predict the trend of GDP
Generation of PMI

Collecting data:
– Based on month-to-month changes of
purchases
– Survey responses
“higher than”
 “the same as”
 “lower than”

Generation of PMI (con’t)

Calculation method:
– “Higher than” X 1
– “The same as” X 0.5
– “Lower than” X 0
– Percent of positive responses plus onehalf of those responding the same
– Diffusion index for each of the 5 factors is
produced
Generation of PMI (con’t)


Example: New Order
Survey responses:
– Higher: 20%
– Same: 50%
– Lower: 30%


Calculation : (20% X 1)+ (50% X 0.5)
=45%
Same calculation for each of 5 factors
Generation of PMI (con’t)
New order X 0.3
Output X 0.25
Employment X 0.2
Supplier’s delivery times X 0.15
+ Inventories X 0.1
--------------------------------------= PMI
Ja
n
98
M
ay
98
Se
p
98
Ja
n
9
M 9
ay
99
Se
p
99
Ja
n
0
M 0
ay
00
Se
p
00
Ja
n
0
M 1
ay
01
Se
p
01
Ja
n
02
ISM PMI
80
60
40
20
0
Analysis of PMI

Reading above 50%:
– manufacturing economy is expanding

Reading below 50%:
– manufacturing economy is declining
Strengths of PMI

Based on fact not opinion
– Actual happen and base on the real
situation to compare the last month
index

Timeliness
– The data is released the first business
day after the end of the month
Strengths of PMI (con’t)

No revision
– No revision are ever made to the raw
data after publication

Comparable
– Can be compared worldwide easily
because of the same calculation method
Weaknesses of PMI

Answers too general
– Responses on the index limited to three
options :

“higher than”

“the same as”

“lower than”
HK PMI
Development of HK PMI



Conducted by NTC Research in
association with CIPS
First public released at 10:30 a.m.
on 3rd October 2001
Cover the whole economy
– manufacturing at 5.8 %
– construction at 5.8 %
– retail at 22.6 %
– services at 62.8 %
Development of HK PMI

Size of panel members: about 250
companies
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Data is collected by phone, fax or e-mail
Apply the same calculation method as
ISM PMI
Analysis of HK PMI
The difficulties for
launching HK PMI

Profile of HK economy
– Solution: measuring the whole economy


Language difference
Time difference
– Solution: appointing a HK research company
to collect data
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Low response rate
– Solution: sending the reminders to nonresponding panel members
PMI in other countries
Country
Launching
Date
Country
Launching
Date
US
1948
Singapore
1999
UK
1991
Russia
1999
Canada
1993
Greece
2001
Switzerland
1995
HK
2001
Germany
1996
Netherlands
2001
Italy
1997
Japan
2002
France
1997
Spain
2002
Ireland
1998
Austria
1998
Czech
Republic
China
2002
Soon
Awareness of PMI in
purchasing field
No. of questionnaires
distributed
300
No. of questionnaires
received
205
Response rate
68.3%
CIPS
Interviewees
Methodology
members,
Part-time purchasing students,
People who are working in
purchasing field
E-mail, Personal interview
Findings in purchasing field
Don't Know
33%
Know
67%
No
33%
Yes
67%
Having heard of PMI
Knowing the purpose of PMI
Channel of knowing PMI in
purchasing field
48%
50%
40%
30%
17%
15%
20%
9%
11%
10%
0%
TV
Newspaper Magazine
Radio
Others
Awareness of launching HK
PMI in purchasing field
No
77%
Yes
23%
Awareness of PMI among
HK tertiary students
No. of questionnaires
distributed
230
No. of questionnaires
received
173
Response rate
75.2%
Interviewees
Tertiary students
Mainly ~ IVE (ST),
City University of Hong Kong,
Lingnan University
Methodology
E-mail, Personal interview
Findings among HK
tertiary students
Don't
Know
65%
No
76%
Yes
24%
Having Heard of PMI
Know
35%
Knowing the purpose of PMI
Channel of knowing PMI
among HK tertiary students
50%
44%
40%
25%
30%
13%
20%
15%
3%
10%
0%
TV
Newspaper Magazine
Radio
Others
Awareness of launching HK PMI
among HK tertiary students
Yes
6%
No
94%
Key: √ = News related to HK PMI
10/01
11/01
12/01
01/02
02/02
03/02
04/02
蘋果日報
Apple Daily
東方日報
Oriental Daily News
成報
Sing Pao Daily News
√
√
√
星島日報
Sing Tao Daily
太陽報
The Sun
√
√
√
√
√
√
明報
Ming Pao
√
信報
√
經濟日報
√
South China Morning Post
√
HK iMail
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Conclusions
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Predict the trend of GDP for a place
Determine the opportunities and
threats of the country
Both tertiary students and people who
are working in purchasing field are not
familiar with PMI
Recommendations

Putting more effort on promotion
– Seminars
– Exhibitions
– TV Programmes
– Press conference
– Press release

Lobbying
Bibliographies
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
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http://www.napm.org
http://www.napm.rog/nampreport/overvie
wofPMI.cfm
http://www.ism.ws
http://www.ntc-research.com
http://thestreet.com/tsc/basics/tscglossary/
purchasingmanagersindex.html
Bibliographies
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http://thestreet.com/tsc/basics/tscglossary/
chicagopurchasingmanagersindex.html
http://about.reuters.com/investormedia/ne
ws_releases/art_22-1-1998_id344.asp
http://iveypmi.uwo.ca/faq.html
http://www.sipmm.org.sg
http://hk-imail.com
THE END