Nowcasting US GDP: The Role of ISM Business Surveys

33 Pages Posted: 30 May 2012

See all articles by Kajal Lahiri

Kajal Lahiri

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics

George Monokroussos

Joint Research Centre, Italy

Date Written: November 2011

Abstract

We study the role of the well-known monthly diffusion indices produced by the Institute for Supply Management (ISM) in nowcasting current quarter U.S. GDP growth. In contrast to the existing literature on ISM surveys, we investigate their marginal impact on these nowcasts when large unbalanced (jagged edge) macroeconomic data sets are used in real time to generate them. We find evidence that these ISM indices are helpful in improving the nowcasts when new ISM information becomes available in the beginning of the month, ahead of other monthly indicators. Furthermore, and while the existing literature has focused almost exclusively on manufacturing information, here we establish the increasingly significant role of the recently created non-manufacturing ISM diffusion indices in such nowcasting contexts.

Keywords: Forecasting, ISM, PMI, NMI, factor models, Kalman filter, Real time data

JEL Classification: C33, C53

Suggested Citation

Lahiri, Kajal and Monokroussos, George, Nowcasting US GDP: The Role of ISM Business Surveys (November 2011). International Journal of Forecasting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1977270

Kajal Lahiri (Contact Author)

State University of New York (SUNY) at Albany, College of Arts and Sciences, Economics ( email )

Department of Economics
1400 Washington Avenue
Albany, NY 12222
United States
518-442 4758 (Phone)
518-442 4736 (Fax)

HOME PAGE: http://www.albany.edu/~klahiri

George Monokroussos

Joint Research Centre, Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

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