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World Economics - Measuring the World Economy

The Sales Managers Index: United States

Released: June 17, 2016

U.S. Economy continues rebound in May

  • Sales Growth Index continues to register gains from Q1 doldrums
  • Market growth index posts sharp gains in May
  • Employment and profit levels still registering year-on-year falls

The Headline Sales Managers’ Index rose for the third consecutive month to reach 52.5 in May. This shows that US economic activity is continuing to recover from the slump in the first quarter of 2016.

The Sales Growth Index (SMI), which is closely correlated with GDP, increased in May, the third successive monthly rise. This provides strong evidence that GDP growth in Q2 will likely rebound after the weakness experienced in Q1. The Market Growth Index also rose for the third month in May backing the evidence that demand is recovering.

This recovery is not yet reflected in Business Confidence: the Index registered a fourth successive monthly slowdown. This measure suggests that panellists do not necessarily see the recovery extending much further than Q2 at the moment, but may change rapidly if market growth continues.

The Prices Charged Index rose by 1.5 index points in May, the third consecutive monthly increase and the second month it has been above the 50.0 no change level. This suggests that prices are rising in the US economy despite the fall in energy costs. It is too early to assess whether or not the rise in the Index signals the return of inflationary pressures.

The conflicting signals from sales and confidence provided by panellists about the nature and strength of the US recovery in Q2 are also evident in the data from the Staffing Index. This fell in value in in May for the tenth successive month to report a sub 50 reading. This implies falling payrolls year-on-year and it is the fourth consecutive month that the index has been below the crucial 50.0 level signalling no growth.


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About the Sales Managers’ Indexes
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. 

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.

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 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 the Purchasing Managers Indexes in Europe and Asia (now owned by Markit), 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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