Taiwan NMI is compiled by four diffusion indexes, including business activity, new orders, employment, and supplier deliveries. The economic implications of the various indexes are as follows:
- Business Activity
Business activity index is used to measure changes in output the month the company under non-manufacturing is interviewed compared to the previous month. Since most non-manufacturing companies do not produce physical products, the output measurement method mainly involves interviewing companies regarding changes in revenue.
- New Orders
New orders index refers to changes in orders received the month the company is interviewed compared to the previous month. In general, companies commence production or provide services upon receiving orders. They then hire laborers and order from upstream suppliers. Therefore, new orders are said to be the most leading among the indicators that make up the NMI.
Employment index refers to change in number of employees hired the month the company is interviewed compared to the previous month. In general, companies decide the amount of manpower depending on service demand. Hence, employment is more lagging among the indicators that make up the NMI.
- Supplier Deliveries
Delivery time of suppliers under non-manufacturing usually refers to the lead-time needed to complete work or service commissioned to the company. In general, when the economy is booming, demand for orders increases, and companies will extend the completion time (i.e. work or service becomes slower); on the contrary, when the economy deteriorates, demand for orders will decrease, and companied lead time for commissioned work will decrease (i.e. work or service becomes speedier). However, sometimes increases in the delivery time of suppliers may be due to cost factors, such as raw material shortages and so on.