1. Purchasing Managers ’ Index September 2001 ~ April 2002 Hong Kong Institute of Vocational Education (Sha Tin Campus) ~ HD in Purchasing and Supply Management

2. Purchasing Managers ’ Index Presented by: Mak Mei Ngo, Candy Tang Pik Shan, Angella Tang Yin Yee, Kay Wong Yu Ping, Tammy Yung Chau Shun, Stephanie

3. Contents PMI ’ s Definition PMI ’ s Definition Importance of PMI Importance of PMI Generation of PMI Generation of PMI Strengths and Weaknesses of PMI Strengths and Weaknesses of PMI HK PMI HK PMI Awareness of PMI in Purchasing Field Awareness of PMI in Purchasing Field Awareness of PMI among Tertiary Students Awareness of PMI among Tertiary Students Conclusions Conclusions Recommendations Recommendations

4. PMI ’ s Definition Originated in America since 1948 ’ s Originated in America since 1948 ’ s Held by Institute for Supply Management (ISM), formerly NAPM Held by Institute for Supply Management (ISM), formerly NAPM Is a composite index, which includes : Is a composite index, which includes : New orders (x0.3) New orders (x0.3) Inventories (x0.1) Inventories (x0.1) Production (x0.25) Production (x0.25) Employment (x0.2) Employment (x0.2) Supplier delivery time(x0.15) Supplier delivery time(x0.15)

5. PMI ’ s Definition (con ’ t) Each months, hundreds of purchasing managers are asked about their companies ’ performance in the current month compared with the prior month Each months, hundreds of purchasing managers are asked about their companies ’ performance in the current month compared with the prior month PMI ’ s reading over 50 % indicates expansion, sub-50% reading indicates contraction relative to the prior month PMI ’ s reading over 50 % indicates expansion, sub-50% reading indicates contraction relative to the prior month

6. Importance of PMI Immense recognition Immense recognition –Extremely important indicator for financial markets –Great recognition from economists and forecasters in government and business Predict the trend of GDP Predict the trend of GDP

7. Generation of PMI Collecting data: Collecting data: –Based on month-to-month changes of purchases –Survey responses “ higher than ” “ higher than ” “ the same as ” “ the same as ” “ lower than ” “ lower than ”

8. Generation of PMI (con ’ t) Calculation method: Calculation method: –“ Higher than ” X 1 –“ The same as ” X 0.5 –“ Lower than ” X 0 –Percent of positive responses plus one- half of those responding the same –Diffusion index for each of the 5 factors is produced

9. Generation of PMI (con ’ t) Example: New Order Example: New Order Survey responses: Survey responses: –Higher: 20% –Same: 50% –Lower: 30% Calculation : (20% X 1)+ (50% X 0.5) =45% Calculation : (20% X 1)+ (50% X 0.5) =45% Same calculation for each of 5 factors Same calculation for each of 5 factors

10. Generation of PMI (con ’ t) New order X 0.3 Output X 0.25 Employment X 0.2 Supplier ’ s delivery times X 0.15 +Inventories X 0.1 --------------------------------------- = PMI

11. ISM PMI ISM PMI

12. Analysis of PMI Reading above 50%: Reading above 50%: –manufacturing economy is expanding Reading below 50%: Reading below 50%: –manufacturing economy is declining

13. Strengths of PMI Based on fact not opinion Based on fact not opinion –Actual happen and base on the real situation to compare the last month index Timeliness Timeliness –The data is released the first business day after the end of the month

14. Strengths of PMI (con ’ t) No revision No revision –No revision are ever made to the raw data after publication Comparable Comparable –Can be compared worldwide easily because of the same calculation method

15. Weaknesses of PMI Answers too general Answers too general –Responses on the index limited to three options : “ higher than ” “ higher than ” “ the same as ” “ the same as ” “ lower than ” “ lower than ”

16. HK PMI

17. Development of HK PMI Conducted by NTC Research in association with CIPS Conducted by NTC Research in association with CIPS First public released at 10:30 a.m. First public released at 10:30 a.m. on 3 rd October 2001 on 3 rd October 2001 Cover the whole economy Cover the whole economy –manufacturing at 5.8 % –construction at 5.8 % –retail at 22.6 % –services at 62.8 %

18. Development of HK PMI Size of panel members: about 250 companies Size of panel members: about 250 companies Data is collected by phone, fax or e-mail Data is collected by phone, fax or e-mail Apply the same calculation method as ISM PMI Apply the same calculation method as ISM PMI

19. Analysis of HK PMI

20. The difficulties for launching HK PMI Profile of HK economy Profile of HK economy –Solution: measuring the whole economy Language difference Language difference Time difference Time difference –Solution: appointing a HK research company to collect data Low response rate Low response rate –Solution: sending the reminders to non- responding panel members

21. PMI in other countries Country Launching Date US1948 UK1991 Canada1993 Switzerland 1995 Germany1996 Italy1997 France1997 Ireland1998 Austria 1998 Country Launching Date Singapore 1999 Russia 1999 Greece 2001 HK2001 Netherlands2001 Japan 2002 Spain2002 Czech Republic 2002 ChinaSoon

22. Awareness of PMI in purchasing field No. of questionnaires distributed 300 No. of questionnaires received 205 Response rate 68.3% Interviewees CIPS members, CIPS members, Part-time purchasing students, Part-time purchasing students, People who are working in purchasing field People who are working in purchasing field Methodology E-mail, Personal interview

23. Findings in purchasing field

24. Channel of knowing PMI in purchasing field

25. Awareness of launching HK PMI in purchasing field

26. Awareness of PMI among HK tertiary students No. of questionnaires distributed 230 received 173 Response rate 75.2% Interviewees Tertiary students Mainly ~ IVE (ST), City University of Hong Kong, Lingnan University Methodology E-mail, Personal interview

27. Findings among HK tertiary students

28. Channel of knowing PMI among HK tertiary students

29. Awareness of launching HK PMI among HK tertiary students

30. 10/0111/0112/0101/0202/0203/0204/02 蘋果日報 Apple Daily 東方日報 Oriental Daily News √√√ 成報 Sing Pao Daily News √√√√√√√ 星島日報 Sing Tao Daily √ 太陽報 The Sun 明報 Ming Pao √√ 信報 √√√√ 經濟日報 √√ South China Morning Post √√√√√ HK iMail √√√√ Key: √ = News related to HK PMI

32. Conclusions Predict the trend of GDP for a place Predict the trend of GDP for a place Determine the opportunities and threats of the country Determine the opportunities and threats of the country Both tertiary students and people who are working in purchasing field are not familiar with PMI Both tertiary students and people who are working in purchasing field are not familiar with PMI

33. Recommendations Putting more effort on promotion Putting more effort on promotion –Seminars –Exhibitions –TV Programmes –Press conference –Press release Lobbying Lobbying

34. Bibliographies http://www.napm.org http://www.napm.org http://www.napm.org http://www.napm.rog/nampreport/overvie wofPMI.cfm http://www.napm.rog/nampreport/overvie wofPMI.cfm http://www.napm.rog/nampreport/overvie wofPMI.cfm http://www.napm.rog/nampreport/overvie wofPMI.cfm http://www.ism.ws http://www.ism.ws http://www.ism.ws http://www.ntc-research.com http://www.ntc-research.com http://www.ntc-research.com http://thestreet.com/tsc/basics/tscglossary/ purchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ purchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ purchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ purchasingmanagersindex.html

35. Bibliographies http://thestreet.com/tsc/basics/tscglossary/ chicagopurchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ chicagopurchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ chicagopurchasingmanagersindex.html http://thestreet.com/tsc/basics/tscglossary/ chicagopurchasingmanagersindex.html http://about.reuters.com/investormedia/ne ws_releases/art_22-1-1998_id344.asp http://about.reuters.com/investormedia/ne ws_releases/art_22-1-1998_id344.asp http://about.reuters.com/investormedia/ne ws_releases/art_22-1-1998_id344.asp http://about.reuters.com/investormedia/ne ws_releases/art_22-1-1998_id344.asp http://iveypmi.uwo.ca/faq.html http://iveypmi.uwo.ca/faq.html http://iveypmi.uwo.ca/faq.html http://www.sipmm.org.sg http://www.sipmm.org.sg http://www.sipmm.org.sg http://hk-imail.com http://hk-imail.com http://hk-imail.com

36. THE END