Definition: The National Association of Purchasing Managers (NAPM) index is a leading indictor of economic activity. It is based on a survey of over 250 companies within twenty-one industries covering all 50 states. Its importance derives form the fact that it is the first indicator each month of manufacturing performance during the past 30-day period and is also a leading indicator of future economic activity and pricing decisions.
Source: National Association of Purchasing Managers (NAPM)
Availability: First working day of the month following the reported period.
Timing: Leading indicator
Likely Impact of Financial Markets:
Stock Prices: Ambiguous. On one side it signals high economic activity and profits in the future that is bullish for the stock market. On the other side, it may lead to higher inflation and interest rate that is bearishj for the market. The second effect dominates when the economy is close to full capacity.
Exchange Rates: Modest effect. As long as it signals higher future interest rates, it leads to a currency appreciation.
Analysis of the Indicator:
The survey covers the six areas: Production; Orders; Commodity Prices; Inventories; Vendor Performance; Employment. Participants to the survey are asked to characterize each of these categories as "up", "down", or "unchanged". The calculated index is next seasonally adjusted. A reading of 50 indicates that conditions are unchanged. A reading over 50 suggests an expanding economy and under 50, a declining economy. The index for the Chicago region is published a day before national index. While the Chicago index is volatile and not a perfect predictor of the national index, it is also an important early leading indicator of economic activity.
For more information on this indicator take a look at The NAPM homepage.
A graph of the latest NAPM Data.
See the Dismal
Scientist Homepage for charts, tables and analysis of the latest NAPM