The ISM Manufacturing Index is expected to increase to 55.5 in tomorrow’s update for June—a marginal gain vs. the previous month, based on The Capital Spectator’s median econometric forecast.
The Capital Spectator’s median projection is just below the range of three consensus forecasts via surveys of economists.
Here’s a closer look at the numbers, followed by brief summaries of the methodologies behind The Capital Spectator’s projections:
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 (Wilshire 5000), 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.
TRI: A model that’s based on combining point forecasts, along with the upper and lower prediction intervals (at the 95% confidence level), via a technique known astriangular distributions. The basic procedure: 1) run a Monte Carlo simulation on the combined forecasts and generate 1 million data points on each forecast series to estimate a triangular distribution; 2) take random samples from each of the simulated data sets and use the expected value with the highest frequency as the prediction. The forecast combinations are drawn from the following projections: Econoday.com’s consensus forecast data and the predictions generated by the models above. The forecasts are run in R with the “triangle” package.
This piece is cross-posted from the Capital Spectator with permission.