ISM Manufacturing Index: October 2013 Preview

The ISM Manufacturing Index is expected to increase marginally to 56.3 in tomorrow’s October update (scheduled for release on November 1), based on The Capital Spectator’s average econometric forecast. The estimate reflects a trivial rise from the previously reported 56.2 for September. Meanwhile, the Capital Spectator’s average projection is substantially higher than three consensus forecasts for September via surveys of economists. Indeed, all three surveys project that today’s ISM number will decline sharply vs. the previous month.


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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