Nowcasting US GDP: The role of ISM business surveys

We study the role of the well-known monthly diffusion indices produced by the Institute for Supply Management (ISM) in nowcasting current quarter US GDP growth. In contrast to the existing literature on ISM surveys, we investigate their marginal impact on these nowcasts when large unbalanced (jagged edge) macroeconomic data sets are used to generate them in real time. We find evidence that these ISM indices are helpful in improving the nowcasts when new ISM information becomes available at the beginning of the month, ahead of other monthly indicators. Furthermore, while the existing literature has focused almost exclusively on manufacturing information, here we establish the increasingly significant role of the recently created non-manufacturing ISM diffusion indices in such nowcasting contexts.