Purchasing Managers’ Purchasing Managers’ IndexIndex

September 2001 ~ April 2002September 2001 ~ April 2002

Hong Kong Institute of Vocational Hong Kong Institute of Vocational Education (Sha Tin Campus) ~Education (Sha Tin Campus) ~

HD in Purchasing and Supply ManHD in Purchasing and Supply Managementagement

Purchasing Managers’ Purchasing Managers’ IndexIndexPresented by:Presented by:

Mak Mei Ngo, CandyMak Mei Ngo, Candy

Tang Pik Shan, AngellaTang Pik Shan, Angella

Tang Yin Yee, KayTang Yin Yee, Kay

Wong Yu Ping, TammyWong Yu Ping, Tammy

Yung Chau Shun, StephanieYung Chau Shun, Stephanie

ContentsContents PMI’s DefinitionPMI’s Definition Importance of PMIImportance of PMI Generation of PMIGeneration of PMI Strengths and Weaknesses of PMIStrengths and Weaknesses of PMI HK PMIHK PMI Awareness of PMI in Purchasing FieldAwareness of PMI in Purchasing Field Awareness of PMI among Tertiary Awareness of PMI among Tertiary

StudentsStudents ConclusionsConclusions RecommendationsRecommendations

PMI’s DefinitionPMI’s Definition

Originated in America since 1948’sOriginated in America since 1948’s Held by Institute for Supply Held by Institute for Supply

Management (ISM), formerly NAPMManagement (ISM), formerly NAPM Is a composite index, which Is a composite index, which

includesincludes::

New orders (x0.3)New orders (x0.3) Inventories (x0.1)Inventories (x0.1)

Production (x0.25)Production (x0.25) Employment Employment (x0.2)(x0.2)

Supplier delivery Supplier delivery time(x0.15)time(x0.15)

PMI’s Definition (con’t)PMI’s Definition (con’t) Each months, hundreds of purchasing Each months, hundreds of purchasing

managers are asked about their managers are asked about their companies’ performance in the companies’ performance in the current month compared with the current month compared with the prior monthprior month

PMI’s reading over 50 % indicates PMI’s reading over 50 % indicates expansion, sub-50% reading expansion, sub-50% reading indicates contraction relative to the indicates contraction relative to the prior monthprior month

Importance of PMIImportance of PMI Immense recognitionImmense recognition

– Extremely important indicator for Extremely important indicator for financial marketsfinancial markets

– Great recognition from economists Great recognition from economists and forecasters in government and and forecasters in government and businessbusiness

Predict the trend of GDPPredict the trend of GDP

Generation of PMI Generation of PMI Collecting data:Collecting data:

– Based on month-to-month changes Based on month-to-month changes of purchasesof purchases

– Survey responsesSurvey responses ““higher than”higher than” ““the same as”the same as” ““lower than”lower than”

Generation of PMI Generation of PMI (con’t)(con’t) Calculation method:Calculation method:

– ““Higher than” X 1Higher than” X 1– ““The same as” X 0.5The same as” X 0.5– ““Lower than” X 0Lower than” X 0– Percent of positive responses plus Percent of positive responses plus

one-half of those responding the one-half of those responding the samesame

– Diffusion index for each of the 5 Diffusion index for each of the 5 factors is producedfactors is produced

Generation of PMI Generation of PMI (con’t)(con’t) Example: New OrderExample: New Order Survey responses:Survey responses:

– Higher: 20%Higher: 20%– Same: 50%Same: 50%– Lower: 30%Lower: 30%

Calculation : (20% X 1)+ (50% X 0.5) Calculation : (20% X 1)+ (50% X 0.5) =45%=45%

Same calculation for each of 5 factorsSame calculation for each of 5 factors

Generation of PMI Generation of PMI (con’t)(con’t)

New order X 0.3New order X 0.3Output X 0.25Output X 0.25Employment X 0.2Employment X 0.2Supplier’s delivery times X 0.15Supplier’s delivery times X 0.15

++Inventories X 0.1Inventories X 0.1------------------------------------------------------------------------------= PMI= PMI

0

20

40

60

80

ISM PMIISM PMI

Analysis of PMIAnalysis of PMI

Reading above 50%:Reading above 50%:

– manufacturing economy is manufacturing economy is

expandingexpanding

Reading below 50%:Reading below 50%:

– manufacturing economy is decliningmanufacturing economy is declining

Strengths of PMIStrengths of PMI Based on fact not opinionBased on fact not opinion

– Actual happen and base on the real Actual happen and base on the real situation to compare the last month situation to compare the last month indexindex

TimelinessTimeliness– The data is released the first The data is released the first

business day after the end of the business day after the end of the monthmonth

Strengths of PMI Strengths of PMI (con’t)(con’t) No revisionNo revision

– No revision are ever made to the No revision are ever made to the

raw data after publicationraw data after publication

ComparableComparable– Can be compared worldwide easily Can be compared worldwide easily

because of the same calculation because of the same calculation

methodmethod

Weaknesses of PMIWeaknesses of PMI

Answers too generalAnswers too general– Responses on the index limited to Responses on the index limited to

three options : three options : ““higher than”higher than”

““the same as”the same as”

““lower than”lower than”

HK PMIHK PMI

Development of HK Development of HK PMIPMI Conducted by NTC Research in Conducted by NTC Research in

association with CIPS association with CIPS First public released at 10:30 a.m. First public released at 10:30 a.m. on 3on 3rdrd October 2001 October 2001 Cover the whole economyCover the whole economy

– manufacturing at 5.8 %manufacturing at 5.8 %– construction at 5.8 %construction at 5.8 %– retail at 22.6 % retail at 22.6 % – services at 62.8 % services at 62.8 %

Development of HK Development of HK PMIPMI Size of panel members: about 250 Size of panel members: about 250

companies companies Data is collected by phone, fax or e-Data is collected by phone, fax or e-

mail mail Apply the same calculation method Apply the same calculation method

as ISM PMI as ISM PMI

Analysis of HK PMIAnalysis of HK PMI

The difficulties for The difficulties for launching HK PMIlaunching HK PMI Profile of HK economyProfile of HK economy

– Solution: measuring the whole economySolution: measuring the whole economy Language differenceLanguage difference Time differenceTime difference

– Solution: appointing a HK research Solution: appointing a HK research company to collect datacompany to collect data

Low response rateLow response rate– Solution: sending the reminders to non- Solution: sending the reminders to non-

responding panel membersresponding panel members

PMI in other countriesPMI in other countriesCountry

Launching Date

US 1948

UK 1991

Canada 1993

Switzerland 1995

Germany 1996

Italy 1997

France 1997

Ireland 1998

Austria 1998

 

CountryLaunching

Date

Singapore 1999

Russia 1999

Greece 2001

HK 2001

Netherlands 2001

Japan 2002

Spain 2002

Czech Republic

2002

China Soon

Awareness of PMI in Awareness of PMI in purchasing fieldpurchasing fieldNo. of questionnaires No. of questionnaires distributeddistributed 300300

No. of questionnaires No. of questionnaires receivedreceived 205205

Response rateResponse rate 68.3%68.3%

IntervieweesInterviewees

CIPS members, CIPS members, Part-time purchasing Part-time purchasing students, students,

People who are working in People who are working in purchasing fieldpurchasing field

MethodologyMethodology E-mail, Personal interviewE-mail, Personal interview

Findings in purchasing Findings in purchasing fieldfield

Knowing the purpose of PMI

Know67%

Don't Know33%

Having heard of PMI

No33% Yes

67%

Channel of knowing PMI Channel of knowing PMI in purchasing fieldin purchasing field

48%

17% 15%

9%11%

0%

10%

20%

30%

40%

50%

TV Newspaper Magazine Radio Others

Awareness of launching Awareness of launching HK PMI in purchasing HK PMI in purchasing fieldfield

Yes23%

No77%

Awareness of PMI among Awareness of PMI among HK tertiary studentsHK tertiary students

No. of No. of questionnairesquestionnaires

distributeddistributed230230

No. of No. of questionnairesquestionnaires

receivedreceived173173

Response rateResponse rate 75.2%75.2%

IntervieweesInterviewees

Tertiary studentsTertiary studentsMainly ~ IVE (ST), Mainly ~ IVE (ST),

City University of Hong Kong, City University of Hong Kong, Lingnan UniversityLingnan University

MethodologyMethodology E-mail, Personal interviewE-mail, Personal interview

Findings among HK Findings among HK tertiary studentstertiary students

Knowing the purpose of PMI

Don'tKnow65%

Know35%

Having Heard of PMI

Yes24%

No76%

Channel of knowing PMI Channel of knowing PMI among HK tertiary among HK tertiary studentsstudents

44%

25%

13% 15%

3%

0%

10%

20%

30%

40%

50%

TV Newspaper Magazine Radio Others

Awareness of launching HK Awareness of launching HK PMI among HK tertiary PMI among HK tertiary studentsstudents

No94%

Yes6%

10/0110/01 11/0111/01 12/0112/01 01/0201/02 02/0202/02 03/0203/02 04/0204/02蘋果日報蘋果日報Apple Daily Apple Daily 東方日報東方日報Oriental Daily NewsOriental Daily News √√ √√ √√

成報成報Sing Pao Daily NewsSing Pao Daily News √√ √√ √√ √√ √√ √√ √√

星島日報星島日報Sing Tao Daily Sing Tao Daily √√

太陽報太陽報The Sun The Sun 明報明報Ming PaoMing Pao √√ √√

信報 信報 √√ √√ √√ √√

經濟日報 經濟日報 √√ √√South China Morning Post South China Morning Post √√ √√ √√ √√ √√

HK iMail HK iMail √√ √√ √√ √√

Key: √ = News related to HK PMI

ConclusionsConclusions Predict the trend of GDP for a placePredict the trend of GDP for a place

Determine the opportunities and Determine the opportunities and threats of the countrythreats of the country

Both tertiary students and people Both tertiary students and people who are working in purchasing field who are working in purchasing field are not familiar with PMIare not familiar with PMI

RecommendationsRecommendations Putting more effort on promotionPutting more effort on promotion

– SeminarsSeminars– ExhibitionsExhibitions– TV ProgrammesTV Programmes– Press conference Press conference – Press releasePress release

LobbyingLobbying

BibliographiesBibliographies

http://wwwhttp://www.napm.napm.org.org http://wwwhttp://www

.napm.rog/nampreport/overviewofPMI.cfm.napm.rog/nampreport/overviewofPMI.cfm http://www.ismhttp://www.ism.ws.ws http://wwwhttp://www.ntc.ntc-research.com-research.com http:/http://thestreet/thestreet.com.com/tsc/tsc/basics/basics

/tscglossary/purchasingmanagersindex/tscglossary/purchasingmanagersindex .html.html

BibliographiesBibliographies

http:/http://thestreet/thestreet.com.com/tsc/tsc/basics/basics/tscglossary/chicagopurchasingmanagersin/tscglossary/chicagopurchasingmanagersindexdex.html.html

http://about.reuters.com/investormedia/nehttp://about.reuters.com/investormedia/news_releases/art_22-1-1998_id344.aspws_releases/art_22-1-1998_id344.asp

http://http://iveypmi.uwoiveypmi.uwo.ca.ca/faq/faq.html.html http://wwwhttp://www.sipmm.sipmm.org.org.sg.sg http:/http://hk-imail/hk-imail.com.com

THE ENDTHE END