What usually occurs to the PMI indicator at the onset of a recession?

The PMI (Purchasing Managers' Index) is a critical economic indicator that reflects the prevailing direction of economic trends in manufacturing and service sectors. At the onset of a recession, the PMI typically declines as businesses begin to reduce production and cut back on purchasing due to decreased demand.

When economic activity slows, purchasing managers often report lower levels of new orders and production cuts, which directly contribute to a lower PMI reading. A declining PMI signifies that the economy is contracting, which aligns with the general characteristics of a recession. This drop indicates a weakening economy, where businesses are cautious about their operations and investments.

Maintaining a stable PMI or seeing it rise during a recession would contradict the usual economic behavior observed in such periods, as declining consumer confidence and spending lead to decreased manufacturing activity. Therefore, the observation that the PMI goes down at the onset of a recession accurately reflects the prevailing economic conditions.