ISM Manufacturing Index: August 2013 Preview

The ISM Manufacturing Index is expected to increase to 55.8 in next week’s August update (scheduled for release on September 3), based on The Capital Spectator’s average econometric forecast. The estimate reflects a slight rise from the previously reported 55.4 for July. Meanwhile, the Capital Spectator’s average projection is moderately higher than a consensus forecast for August that’s based on a survey of economists.


Here’s a closer look at the numbers, followed by brief summaries of the methodologies behind The Capital Spectator’s projections:
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VAR-1: A vector autoregression model that analyzes the history of industrial production in context with the ISM Manufacturing Index. The forecasts are run in R with the “vars” package.
VAR-6: A vector autoregression model that analyzes six economic time series in context with the ISM Manufacturing Index. The six additional series: industrial production, private non-farm payrolls, index of weekly hours worked, US stock market (S&P 500), spot oil prices, and the Treasury yield spread (10 year Note less 3-month T-bill). The forecasts are run in R with the “vars” package.
ARIMA: An autoregressive integrated moving average model that analyzes the historical record of the ISM Manufacturing Index in R via the “forecast” package.
ES: An exponential smoothing model that analyzes the historical record of the ISM Manufacturing Index in R via the “forecast” package.

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