Improving the usefulness of the Purchasing Managers’ Index

Rolando F. Peláez ()
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Rolando F. Peláez: University of Houston-Downtown

Business Economics, 2018, vol. 53, issue 4, No 4, 195-201

Abstract: 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.

Keywords: Forecasting GDP growth; Structural breaks; Purchasing Managers’ Index (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1057/s11369-018-0092-2

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