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For immediate release: January 3, 2003

Dallas Fed Analyzes Purchasing Managers’ Index

DALLAS—Just how much attention ought business analysts give to the Purchasing Managers’ Index (PMI) released today by the Institute for Supply Management? Quite a lot, according to the latest issue of Economic and Financial Policy Review, the Federal Reserve Bank of Dallas’ online economic research publication.

Vice president and senior economist Evan Koenig discusses the construction of the PMI and presents evidence that it’s a good indicator of growth in the manufacturing sector and the economy as a whole, and a valuable predictor of changes in Federal Reserve policy. He concludes that PMI values above 47 signal expansion in the manufacturing sector, while the critical value for positive gross-domestic-product (GDP) growth is around 40. Over the past 15 years, PMI values below 52.5 have often been associated with falling short-term interest rates.

Koenig notes that the PMI is more timely than many other economic and policy indicators and is not subject to significant revision—features that contribute greatly to its usefulness.

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Media contact:
Angela West Kogutt
Phone: (214) 922-5449
e-mail: angela.kogutt@dal.frb.org