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Improving the usefulness of the Purchasing Managers’ Index

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  • Rolando F. Peláez

    (University of Houston-Downtown)

Abstract

A structural break in the GDP growth—PMI relationship occurred in 2004Q1. The break is likely the result of a secular slowdown in average GDP growth. PMI-based forecasts of GDP growth that ignore the break are biased. Modeling the break eliminates forecast bias, reduces root mean square forecast error, and significantly increases the signaling power of the PMI.

Suggested Citation

  • Rolando F. Peláez, 2018. "Improving the usefulness of the Purchasing Managers’ Index," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 53(4), pages 195-201, October.
    • Handle: RePEc:pal:buseco:v:53:y:2018:i:4:d:10.1057_s11369-018-0092-2
    DOI: 10.1057/s11369-018-0092-2
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    References listed on IDEAS

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