Purchasing and supply managers provide early clues on the direction of the US economy: An application of a new market-timing test

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

We evaluate the directional accuracy of Institute for Supply Management (ISM) indices in predicting the direction of the US economy direction; to do so, we make use of a method developed by Pesaran and Timmermann (2009). By illustrating an application of the new market-timing test and extending it to a joint evaluation of increase/decrease and acceleration/deceleration, we show that while the ISM indices are useful predictors of industrial production and employment with regard to monthly economic activity and to business cycle expansion/recession, they are not useful predictors of real gross domestic product or hours worked. Our findings suggest that the ISM indices broadly provide early qualitative information on the US economy. Our findings also suggest that the importance of the nonmanufacturing sector becomes clear when examining business cycles in the U.S.

Original languageEnglish
Pages (from-to)599-618
Number of pages20
JournalInternational Review of Economics and Finance
Volume29
DOIs
Publication statusPublished - 2014 Jan

Keywords

  • Directional analysis
  • Institute for Supply Management
  • Nonmanufacturing index
  • Purchasing Managers' Index
  • Survey data

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Purchasing and supply managers provide early clues on the direction of the US economy: An application of a new market-timing test'. Together they form a unique fingerprint.

  • Cite this