Characterizing manufacturing activity in the United States of America : composite index of leading indicators

Abstract

The purpose of this work is to demonstrate that is possible to characterize the US manufacturing activity utilizing public data. Analysis of the state of the art in manufacturing metrics showed that our approach is unique since exploits a niche that is not covered by any existent report or indicator. A Composite Index of Leading Indicators (MCI) was created for the domestic manufacturing activity, exclusively based in official data from the US Census Bureau and the US Bureau of Labor Statistics. The MCI was benchmarked against the US Manufacturing Gross Domestic Product (GDP). As a result, evidence was found that MCI anticipates in 5 - 9 months to the GDP economic fluctuations, as measured through cross-correlation analysis. Additionally, the developed framework was satisfactorily applied to Canada as a second source of validation. In practice, other feature of MCI that stands out respect the existent metrics is that provides insight at the level of subsectors according to the North American Industrial Classification System (NAICS). The MCI behaves properly in 18 of the 20 subsectors analyzed, being of especial interest the subsectors like Primary Metals and Petroleum and Coal Products, which have a larger lead and correlation. Conclusions of our work show that the manufacturing sector can be effectively described using the MCI, providing managers and decision makers with a novel perspective of the upcoming manufacturing scenario.