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The Sales Managers Index: United States

Released: January19, 2016

US Economy Continues to Slow in January

  • Manufacturing and Services growth slowing
  • Prices continue to fall sharply
  • Employment growth slowing

Sales Managers Index (SMI) data for January indicated that the rate of economic activity in the United States continues to slow down from a July high of 59.9 to 51.7 in January. The data suggests that the deceleration in economic growth that began in the second half of last year will continue into Q1 2016. Following GDP growth of 3.9% (yoy) in Q2 the third and final advance estimate for GDP growth in Q3 released by the Bureau of Economic Analysis on December 22 was for growth of 2.0%. SMI Sales Index data for the last three months of 2015 indicates that Q4 is expected to show a rate of GDP growth of only 0.7%. The January SMI Sales data suggests the economy could stagnate in Q1 if the trend does not change. The SMI is the first monthly indicator to gauge the speed and direction of economic growth across all private sectors of the US economy.

Sector analysis shows that the Manufacturing SMI registered a value of 52.3 in January down on its value the month before, the sixth successive monthly fall. The Services SMI was also down on the previous month and again the sixth consecutive decrease. The levels for these SMI indexes indicate that both sectors of the US economy are experiencing decelerating growth. A reading above 50 percent indicates that the economic activity is generally expanding; below 50 percent indicates that it is generally contracting.

The Business Confidence Index in January registered a rise of 1.0 to reach a value of 58.4 taking it back to its level in November. This indicates that despite the slowdown panellists remain optimistic about future business conditions.

Panellists are reporting a sharp slowdown in the markets in which they operate which is having an immediate impact on their sales. The Product Sales Index, which measures demand conditions facing individuals firms, registered a value below the 50 no change level for the second successive month in January, down by 0.8 from December. The strong relationship between this variable and GDP indicates zero or even negative growth as 2016 opens. Falling growth is also indicated by the value of the Market Growth Index, which reflects growth of the general marketplace in panellists’ own industry sectors. This registered a value of 51.7 in January, down by 1.3 on its value the previous month and the ninth consecutive monthly fall.

Panellists reported that prices in January fell. The Prices Charged Index recorded a value of 49.0, down by 1.7 from the previous month and the seventh successive monthly fall.

The SMI data also showed that the rate of jobs growth continued to slow in January. The Staffing Levels Index, which reflects the number of staff taken on compared to the same period in the last year, recorded a value of 51.5, down by 1.2 on the previous month and the seventh successive monthly fall in the index.


Summary
World Economics Chief Executive Ed Jones commented on the release:

“The January SMI Index for the US economy indicates a continuation of the slowdown in the rate of economic growth which began in the second half of 2015. SMI data estimates that GDP growth could be around 0.7% in Q4, with January data suggesting that economic conditions are likely to be challenging at the start of 2016.”





 















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Notes to Editors
The SMI’s (Sales Managers’ Indexes) are compiled and analysed by World Economics and are based on survey data collected from a panel of US companies balanced by the all Industry Classification Board (ICB) sectors which are weighted to reflect their contribution to national Gross Domestic Product.

The Sales Managers’ Index results are calculated as
diffusion index which have the characteristics of leading indicators by taking the percentage of respondents that report that activity has risen (“Increasing") and adding it to one-half of the percentage that report the activity has not changed (“Unchanged"). Using half of the “Unchanged" percentage effectively measures the bias toward a positive (above 50 points) or negative (below 50 points) index. An example of how to calculate a diffusion index: if the response is 40% “Increasing," 40% “Unchanged," and 20% “Reducing," the Diffusion Index would be 60 points (40% + [0.50 x 40%]). A value of 50 indicates "no change" from the previous month.

The more distant the index is from the amount that would indicate "no change" (50 points), the greater the rate of change indicated. Therefore, an index value of 58 indicates a faster rate of increase than an index value of 53, and an index value of 40 indicates a faster rate of decrease than an index value of 45. A value of 100 indicates all respondents are reporting increased activity while 0 indicates that all respondents report decreased activity.

Three month Moving Averages are applied to each index to mitigate the effect of seasonal variations, original un-adjusted data are not revised after publication.


About the Sales Managers’ Indexes

The Sales Managers' Index provide the earliest monthly data on the speed and direction of US economic activity.


Key advantages of the US SMI:
  •   The SMI provides the first indication each month of the speed and direction of economic growth.   
  •   The SMI provides the most complete indication of growth, covering all private sector activity.
  •   The SMI is based on a key occupational group - sales executives - uniquely able to sense accurate changes in business activity levels.

  •  The SMI survey base - salespeople - are used by virtually all businesses, unlike other occupational groups.

  •   The SMI's focus on the world’s growth areas – providing comparative data for Asia, the America's and Africa.

The Sales Managers’ Index has been developed by World Economics, a leading edge provider of original economic data. Sister products include the World Price Index, Global Marketing Index, World Economics Journal, as well as country level Growth Trackers.


About World Economics
World Economics is an organisation dedicated to producing analysis, insight and data relating to questions of importance in understanding the world economy. Its parent company Information Sciences Ltd has a long history of the development of key business information today used throughout the world, including the origination of indexes using purchasing managers as a panel base in Europe and Asia, and the development of WARC a global information provider for major corporations..

Currently our primary research objective is to encourage and assist the development of better and faster measures of economic activity. In cases where we believe we can contribute directly, as opposed to through highlighting the work of others, we are producing our own measures of economic activity.

Our work is mainly of interest to investors, organisations and individuals in the financial sector and to significant corporations with global operations, as well as governments and academic economists.

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