PMI is the purchasing managers' index, a survey-based growth gauge. Here's how the 50 line divides expansion from contraction and why it moves FX.

What is PMI? - Karnek

PMI stands for the purchasing managers' index. Each month, survey firms ask the people who buy supplies for businesses whether activity is rising or falling — new orders, output, employment, delivery times. Their answers are boiled down to a single number built around one dividing line: 50. Above it, the sector is growing; below it, shrinking. Because the survey lands early and asks the people closest to demand, PMI is one of the first reliable reads on how an economy is doing.

What it is

PMI is a diffusion index, which is a plain way of saying it measures breadth, not size. Purchasing managers are asked whether conditions are better, worse or the same as last month, and the responses are combined so that:

Above 50 — more firms report growth than decline; the sector is expanding.
Exactly 50 — no change on the month.
Below 50 — more firms report decline than growth; the sector is contracting.

It is published separately for manufacturing and services, with a composite blending the two. Services matters most in economies like the UK's, where it is the bulk of output.

Reading the 50 line

The 50 line is the whole point. A move from 52 to 54 is still growth, just faster; a move from 51 to 49 is the one that matters, because the sector has crossed from expanding to shrinking. Traders watch both the level and the direction. A print that stays above 50 but falls sharply can worry a market as much as one that dips just below, because the trend is what hints at the next central-bank move.

PMI measures how many firms are growing, not by how much. A reading of 55 tells you growth is broad, not that it is large — weigh it against hard data like GDP before drawing firm conclusions.

An example

Say UK services PMI is forecast at 50.5 and prints at 48.9 — a drop from expansion into contraction. Sterling might fall 40 to 60 pips as traders bring forward bets on a Bank of England cut. A trader long one standard lot of GBP/USD — around £8 a pip — could be looking at a £320 to £480 loss as the pound slides. The surprise carries the move: everyone knew growth was near flat, so only the crossing of the 50 line was new information.

Why it matters

PMI is scheduled, timely and forward-looking, which makes it one of the more useful numbers on the calendar.

Early — it arrives before hard data like GDP, so it moves markets first.
The 50 line — crossing it, in either direction, is the headline.
Scheduled — a known date and time you can plan around.

For an automated system the lesson is the familiar one. PMI is high-impact, spreads widen around it, and an EA that does not know the release is due will trade into the volatility and wear the slippage.

The Karnek note

Karnek reads your live terminal, read-only, so it will not trade a PMI release or sidestep one for you. Where it helps is afterwards: you can see how your accounts handled a scheduled high-impact print, and whether a strategy keeps getting caught by them. Karnek can never place or close a trade on the account.

See it in Karnek: monitor your accounts live with Karnek.