Using the Purchasing Managers' Index to assess the economy's strength and the likely direction of monetary policy
When economists are concerned that the economy may be about to change direction, one of the indicators to which they give special scrutiny is the Purchasing Managers’ Index (PMI), released monthly by the Institute for Supply Management. This article discusses the construction and interpretation of the PMI and presents evidence of its usefulness as an indicator of growth in the manufacturing sector and the economy as a whole, and as a predictor of changes in Federal Reserve policy. PMI values above 47 generally signal expansion in manufacturing, while the critical value for positive GDP growth is around 40. Over the past fifteen years, PMI values above 52.5 have tended to be associated with rising short-term interest rates.> When economists are concerned that the economy may be about to change direction, one of the indicators to which they give special scrutiny is the Purchasing Managers’ Index (PMI), released monthly by the Institute for Supply Management. This article discusses the construction and interpretation of the PMI and presents evidence of its usefulness as an indicator of growth in the manufacturing sector and the economy as a whole, and as a predictor of changes in Federal Reserve policy. PMI values above 47 generally signal expansion in manufacturing, while the critical value for positive GDP growth is around 40. Over the past fifteen years, PMI values above 52.5 have tended to be associated with rising short-term interest rates.>
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Volume (Year): (2002)
Issue (Month): ()
Pages:
| Handle: | RePEc:fip:fedder:y:2002:n:v.1no.6 |
| Contact details of provider: | Web page: http://www.dallasfed.org/ Email: More information through EDIRC
|
| Order Information: | Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evan F. Koenig & Sheila Dolmas & Jeremy Piger, 2003.
"The Use and Abuse of Real-Time Data in Economic Forecasting,"
The Review of Economics and Statistics,
MIT Press, vol. 85(3), pages 618-628, August.
- Koenig, Evan F. & Dolmas, Sheila & Piger, Jeremy M., 2000. "The use and abuse of "real-time" data in economic forecasting," Working Papers 0004, Federal Reserve Bank of Dallas.
- Evan F. Koenig & Sheila Dolmas & Jeremy M. Piger, 2002. "The use and abuse of 'real-time' data in economic forecasting," Working Papers 2001-015, Federal Reserve Bank of St. Louis.
- Evan F. Koenig & Sheila Dolmas & Jeremy M. Piger, 2000. "The use and abuse of "real-time" data in economic forecasting," International Finance Discussion Papers 684, Board of Governors of the Federal Reserve System (U.S.).
- Balke, Nathan S & Petersen, D'Ann, 2002. "How Well Does the Beige Book Reflect Economic Activity? Evaluating Qualitative Information Quantitatively," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 114-136, February.
- Balke, Nathan S. & Petersen, D'Ann M., 1998. "How well does the Beige Book reflect economic activity? Evaluating qualitative information quantitatively," Working Papers 9802, Federal Reserve Bank of Dallas.
- Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
- Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
- Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
- Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
- Athanasios Orphanides, 1998. "Monetary policy rules based on real-time data," Finance and Economics Discussion Series 1998-03, Board of Governors of the Federal Reserve System (U.S.).
- Stephen K. McNees, 1986. "Modeling the Fed: a forward- looking monetary policy reaction function," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 3-8.
- Ethan S. Harris, 1991. "Tracking the economy with the purchasing managers' index," Research Paper 9124, Federal Reserve Bank of New York.
- Ethan S. Harris, 1991. "Tracking the economy with the purchasing managers' index," Quarterly Review, Federal Reserve Bank of New York, issue Aut, pages 61-69.
- R. Mark Rogers, 1992. "Forecasting industrial production: purchasing managers' versus production-worker hours data," Economic Review, Federal Reserve Bank of Atlanta, issue Jan, pages 25-36. Full references (including those not matched with items on IDEAS)