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A Conceptual Framework for Computing U.S. Non‐manufacturing PMI Indexes
Author(s) -
Cho Danny I.,
Ogwang Tomson
Publication year - 2007
Publication title -
journal of supply chain management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.75
H-Index - 92
eISSN - 1745-493X
pISSN - 1523-2409
DOI - 10.1111/j.1745-493x.2007.00034.x
Subject(s) - principal component analysis , index (typography) , diffusion , set (abstract data type) , conceptual framework , manufacturing sector , computer science , composite index , composite indicator , key (lock) , econometrics , operations management , operations research , industrial organization , mathematics , statistics , business , economics , macroeconomics , philosophy , physics , computer security , epistemology , world wide web , thermodynamics , programming language
SUMMARY This research develops a conceptual framework for computing new weighted composite indexes for the U.S. non‐manufacturing sector using a two‐step sequential approach — a correlation analysis, followed by a principal components analysis. The results suggest that different weights (i.e., the highest weight to New orders and the lowest weight to Supply deliveries) be assigned if all diffusion indexes in the initial set of six are retained. It also turns out that a simpler index based on two (New orders and Supply deliveries) of the six diffusion indexes, with equal weights, can be computed with little information loss. The new indexes are shown to correlate highly with many key business/economic indicators.