The Purchasing Managers’ Index (IGC) is a macroeconomic indicator based on a monthly survey of purchasing managers of the most relevant companies in a country.
Its objective is to reflect the economic situation of that country and its evolution. To achieve this, it focuses on those responsible for purchasing, since they are a reliable reflection of the trend of the economy. In this way, the investor obtains information directly from the experts.
This index is the first to appear published each month, unlike many government indicators that take longer. Therefore, you have first-hand knowledge of the evolution of the market.
Calculation of the Purchasing Managers’ Index (PGI)
The Purchasing Managers Index (IGC) is calculated based on surveys conducted with the most representative companies in the country. Specifically, to the purchasing managers of these. To carry out the survey, questions related to the following points are formulated:
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- New commands or orders, with 30%.
- Occupation, with 20%.
- Production, with 25%.
- Purchase stock, with 15%.
- Delivery term of the supplier, with 10%.
Each of these questions has a weighting like the one indicated on the right. The possible answers are: better, the same or worse.
With these five sub-indices and their weights, the IGC is calculated with values between 0 and 100, so that 50 would be the central value. A value above 50 indicates that there are positive changes compared to the previous one and below, negative ones. The central value indicates that there are no changes.
Trading and the Purchasing Managers Index (IGC)
In trading we speculate and focus on making money. Therefore, this is a reliable and useful indicator. In addition, the IGC is related to the gross domestic product (GDP) and its evolution. In fact, the forecasts of this macroeconomic variable tend to vary when this information is known.
It has certain limitations. The most relevant is that it only focuses on the manufacturing sector and takes purchases into account and not other variables. In addition, there are those who consider it susceptible to market panics, since this affects the mood of purchasing managers.
The Purchasing Managers Index (IGC) in the world
Finally, let’s look at this index in more detail in some countries. We will use April 2022 as an example. It should be added that the Markit Group prepares it for 30 countries, and in the US it is published by the Institute for Supply Management:
- In Spain, published by the Spanish Association of Purchasing, Contracting and Supply Professionals (APCCA) in collaboration with Markit Group, it was 56.9 points in April. In this case, we would be facing a positive change.
- In the US it was 57.9, higher than in Spain, but far from the maximum value of 100. A downward trend was observed from the maximum in April 2021. It would be indicating a positive change that tends to be reduced.
- In Mexico, the Purchasing Managers’ Index (IGC) stood at 49.1 points. Therefore, it would be below the central value, although very close to it. We could say that there is a negative change, but of a low magnitude.
