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Is the Purchasing Managers' Index useful for assessing the economy's strength? A directional analysis

Author

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  • Yoichi Tsuchiya

    () (State University of New York at Buffalo)

Abstract

The Purchasing Managers' Index (PMI) is one of the key variables to which economists pay considerable attention for assessing US economic activities, particularly, business conditions in the manufacturing sector. Although the PMI has been used to assess the US economy, there is hardly any attempt to evaluate the directional accuracy of the PMI to predict the direction of change in the index of industrial production (IP) and Gross Domestic Production (GDP). We present evidence that the PMI is a useful predictor of the direction of change in the IP, particularly in the recent decade.

Suggested Citation

  • Yoichi Tsuchiya, 2012. "Is the Purchasing Managers' Index useful for assessing the economy's strength? A directional analysis," Economics Bulletin, AccessEcon, vol. 32(2), pages 1302-1311.
  • Handle: RePEc:ebl:ecbull:eb-11-00903
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P124.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tsuchiya, Yoichi, 2013. "Do corporate executives have accurate predictions for the economy? A directional analysis," Economic Modelling, Elsevier, vol. 30(C), pages 167-174.
    2. Khundrakpam, Jeevan Kumar & George, Asish Thomas, 2012. "An Empirical Analysis of the Relationship between WPI and PMI-Manufacturing Price Indices in India," MPRA Paper 50929, University Library of Munich, Germany.
    3. Tsuchiya, Yoichi, 2014. "Purchasing and supply managers provide early clues on the direction of the US economy: An application of a new market-timing test," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 599-618.

    More about this item

    Keywords

    directional analysis; forecast evaluation; forecast accuracy; survey data;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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