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International Macro and Financial Markets > PMI > Flashcards

PMI Flashcards

1
Q

PMI Weights

new orders

production

employment

supplier deliveries

inventories

A

new orders (0,3)

production (0,25)

employment (0,2)

supplier deliveries (0,15)

inventories (0,1)

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2
Q

What does PMI stand for?

A

The purchasing managers index

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3
Q

What does ISM stand for?

A

Institute for supply management

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4
Q

The PMI is a weighted composite of five indexes, which?

A

new orders

production

employment

vendor performance

inventory

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5
Q

In what range does the scores for ISM index fall?

A

btw 0-100

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6
Q

What is the contraction-ekspansion cutoff in the ISM index?

A

50

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7
Q

What scores indicate an expansion in the ISM index?

A

>50

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8
Q

What scores indicate a contraction in the ISM index?

A

<50

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9
Q

What five indexes forms the PMI

A

new orders

production

employment

supplier deliveries

inventories

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10
Q

How does the PMI relate to GDP growth?

A

PMI acts as a leading indicator for GDP, and they tend to move closely together. PMI is made more often, and thus used as a predictor for GDP

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11
Q

When is the ISM report made available?

A

First business day of every month at 10:00 am (ET)

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12
Q

What values does the individual ISM historically fluctuate between?

A

35 - 70

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13
Q

What is associated with a reading of 42.0 in the PMI?

A

A turning point in the overall business cycle.

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14
Q

Is the PMI a leading or lagging indicator of GDP?

A

Leading

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15
Q

Consider the ISM employment index. Explain why sub-50 readings are the norm.

A

Globalisation and and movement of production of manufacturing overseas is the reason.

The economy is mostly services now.

Productivity increases.

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16
Q

There are 10 ISM indeces, which?

A
  1. Prices (paid for materials)
  2. Production levels
  3. New orders
  4. Order backlogs
  5. Speed of supplier delivery
  6. Inventories
  7. Customer inventories
  8. Employment
  9. New export orders
  10. Imports
17
Q

What does the ISM price index indicate?

A

It indicates possible inflationary pressures faced by manufacturers

18
Q

What is special about an ISM price reading at 47,1?

A

A price index above 47,1 for a sustained period of time is generally consistent with an increase in the BLS’s index of manufacturing prices, which is one the measures of price inflation on the wholesale level.

19
Q

Describe the correlation between the ISM price index and crude oil

A

Highly correlated. Many businesses use oil or derivatives in the process of manufacturing.

20
Q

What is ISM supplier index a barometer of?

A

Inflation

21
Q

What can be concluded if the ISM supplier index has exceeded 50?

A

Delivery has slowed

22
Q

When did the ISM nonmanufacturing index appear?

A

July 19997

23
Q

What does the ISM nonmanufacturing basically describe?

A

The service sector.

24
Q

What can be expected from an ISM nonmanufacturing index reading above 50?

A

A growth rate of 3.5% p.a. in the consumption of services.

25
Q

What does the New Orders minus Inventories depict?

A

Percentage change in GDP
or in other words the economic growth rate

26
Q

What can be inferred from New Orders minus Inventories being zero?

A

The economy tends to contract

27
Q

What has historically be associated with negative readings of New Orders minus Inventories?

A

Economic recessions

28
Q

Reading of New Orders minus Inventories of 10 or higher has equated real economic growth rates of__?

A

3,5%

29
Q

What crude model has a relationship the the S&P500 index?

A

The difference between the ISM new orders index and the price index

30
Q

What can be expected if the difference between ISM new orders and the price index is greater than -20?

A

The total return of the S&P500 (year-on-year) will be postiive.

International Macro and Financial Markets (12 decks)

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