PMIs and interest rates
Estimates of GDP growth tend to drift up over time and the most significant revisions come some time after the event. In the interim, the PMIs are a more reliable guide to the economy’s true growth rate. As an inflation targeter the central banks are acutely sensitive to the economic cycle. Policymakers seem to set more store by the monthly PMI surveys, as a guide to the cycle, than the official estimates of GDP and use them to help predict the future course of interest rates. All ECB rate reductions have taken place when the Manufacturing PMI has been at 50 or below, while all but two of the 14 increases have taken place when the PMI has been above 55.
- Click here for a NTC research note on the relationship between the UK PMI data and interest rate decisions.
- Click here for an article published within the Financial Times that illustrates how PMI data are key to UK interest rate moves.
- Click here for recent opinion on how the PMI will affect interest rate moves.
- Click here for an article published within the Financial Times that illustrates the relationship between PMI data and Eurozone interest rate moves.