The PMI™ survey tracks two measures of manufacturers’ prices: their buying (input) prices and the prices that they charge for their goods (output prices). Both are presented as indices where a level of 50 represents no change on the previous month. A reading above 50 signals an increase in prices on the previous month and a reading below 50 signals a decrease.
These data therefore provide a general overview of manufacturers’ price trends. They also provide signals as to how prices are moving in your sector, your suppliers’ sectors and your customers’ sectors, and can be compared against your own price trends.
One interesting aspect is to compare growth of input prices (costs) with
selling prices. The difference between these two series will give an idea
of profit margins. For example, rapid growth of input prices in 2004 in
the Eurozone occurred at a time when manufacturers’ pricing power was
weak, meaning selling prices rose at a far lower pace than input prices.
Looking at the differential between input prices and output prices
for your supplier or customer sectors can provide you with useful
information for negotiating and anticipating problems.
* readings above 50 signal higher prices than a month ago, readings below 50
signal lower prices.
Survey respondents list specific items that have risen or fallen in price each month, and those that have fallen in short supply. These listings – shown in the monthly reports – can help buyers and suppliers of goods see how other companies have experienced price and supply trends in recent months.
For example, the report listings (see example below) might show
that copper tube has been reported as lower in price by purchasing
managers for several consecutive months, so you would want to
question any price rises for copper tube that your suppliers may try to
negotiate. On the other hand, as a supplier of copper tube, you can
expect purchasing managers to try to negotiate a lower price next time
they seek a quote from you.
The Markit Economics panel members’ website also includes historical analysis of how
purchasing managers have reported price trends for certain key items,
as shown by the example below.