Forecasting the NAPM Purchasing Managers' Index. (National Association of Purchasing Management)

Forecasting the NAPM Purchasing Manager's Index

The Purchasing Managers' Index, published monthly by the National Association of Purchasing Management (NAPM), is a highly recognized indicator of the health of the United States economy. Its information is so highly prized that many desire to get the information early. This article looks at several different indexes published by NAPM each month to help in making estimates of future values of the Purchasing Managers' Index. The results indicate that New Orders and a new index based on New Orders and Vendor Deliveries are both consistent leading indicators of the Purchasing Managers' Index by one month.

The Purchasing Managers' Index, published monthly by the National Association of Purchasing Management (NAPM), is a highly recognized indicator of the health of the U.S. economy. A recent editorial in Electronic Buyers' News (EBN) highlighted the importance of this indicator.[1] EBN commented on a Wall Street Journal article that encouraged NAPM to maintain better control of the dissemination of its report. A supposed leak led to a bond price surge on a Friday afternoon when the sharp decline in the Purchasing Managers' Index was interpreted as a sign of slower economic activity. EBN also reported that some periodicals, such as Business Week, have begun publishing estimates of the index. For example, the June 12, 1989, issue of Business Week predicted a May index of 54.5 percent, while the actual figure turned out to be 49.7 percent. Since then, NAPM has altered its procedures and now releases the survey on the first business day of the month following the survey month.[2]

Previous studies have verified the validity of the NAPM survey relative to the national economy.[3] In one recent study, Hoagland and Taylor proposed two new indexes from the data gathered by NAPM.[4] The first, called the Business Barometer, is an unweighted …