At the press conference announcing Taiwan's first Purchasing Managers' Index (PMI) today, Premier Sean Chen said the index is an important tool of economic analysis that is closely followed worldwide and will contribute to Taiwan's economic development.
"I am very happy to see Taiwan have its own PMI," he said. "The index is an important tool of economic analysis that receives great international attention. Taiwan's will be a very important reference which will bring the country in line with international standards and aid its economic development," he said.
According to the Chung-Hua Institution for Economic Research, the U.S.'s Institute for Supply Management has publicly reported the results of its business survey, which would become the PMI, since 1931. The PMI, which is surveyed on a country-by-country basis, receives close attention from banks, stock market investors and business decision-makers and is considered a leading indicator for Gross Domestic Product which can effectively predict current economic trends.
The index measures a country's economic activity through a monthly survey of its purchasing managers, who are privy to their companies' most recent and accurate financial data, about their businesses' acquisitions of goods and services relative to the month before. To further assist analysts, managers are also asked to provide possible explanations for their companies' changing financial circumstances.
The PMI is measured on a scale of 0 to 100, with 50 indicating businesses as a whole are spending the same amount they were the month before, figures above 50 indicating businesses (and by extension the economy as a whole) are growing to a greater or lesser degree, and numbers below 50 showing contraction.
For example, the U.S. PMI was 49.20 in August 2008, the month before the Lehman Brothers bankruptcy; 33.30 in December 2008, as the ensuing crash roiled markets; and 55.80 in October 2009, indicating a recovery. (More U.S. figures are available at YCharts: http://ycharts.com/indicators/purchasing_managers_index)
The premier thanked the Council for Economic Planning and Development and the managers of Taiwan's companies, as well as Chung-Hua Institution for Economic Research President Wu Chung-shu, Institute for Supply Management advisor Norbert J. Ore, Academica Sinica researcher George C. Tiao, and Supply Management Institute Executive Director Steve Lai for their support and participation in the successful establishment of Taiwan's PMI.