Hi Mohan,..Re:. NAPAM #,even at 46.8 it represents 1.1% GDP annualized
You are right, don't know where I got that 15% number. Maybe from output? Anyway, went back to look up the relationship and found this from thestreet.com's James Padhina.
archive.thestreet.com
The Invisible Mouth: The Problem with GDP Predictions
By James Padinha
Economics Correspondent
11/2/98 2:33 PM ET
Every month the National Association of Purchasing Management, or
NAPM, releases a blurb relating the level of its PMI to GDP growth.
The one that accompanied the October numbers released this morning
appears below.
The past relationship between the PMI and the overall economy
indicates that the average PMI for January through October (51.0%)
corresponds to a 2.5% increase in GDP. However, if the PMI for
October (48.3%) turned out to be the annual average for 1998,
this would correspond to a 1.6% increase in GDP.
Statements like this (along with a very simple one-variable
regression) reveal that one can generally expect a 0.3% change
in GDP for every 1% change in the PMI. A 51.0% PMI, for
example, generally coincides with GDP growth in the 2.5% area,
a 50.0% PMI generally coincides with GDP growth in the 2.2% area,
and so on.
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So, even if manufacturing is slowing some, as long as we consumers keep spending, we should be able to prop up GDP! <vbg>
Regards,
Lee |
