Financial conditions and purchasing managers’ indices: exploring the links

Purchasing Managers’ Indices (PMI) is becoming increasingly popular with analysts.

In the BIS quarterly review (Sep-19), Burcu Erik, Marco Jacopo Lombardi, Dubravko Mihaljek and Hyun Song Shin explore links between PMI and Financial conditions:

Purchasing managers’ indices (PMIs) have found a place in global conjunctural analysis and quarterly GDP nowcasting, serving as reliable concurrent indicators of real economic activity. They also closely mirror changes in equity prices and corporate bond spreads. More surprisingly, PMIs react to changes in the dollar index, and do so in a way that runs counter to a trade competitiveness explanation. We show that the financial variables help predict PMIs and explain a significant proportion of their variation. The two seem to be linked through shifts in macroeconomic sentiment and global financing conditions.

 

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