A monthly survey of purchasing managers across manufacturing and services, measuring new orders, production, employment, and supplier deliveries — readings above 50 indicate expansion, below 50 indicate contraction.
Deeper Explanation
PMI is one of the most timely and reliable leading indicators of economic activity because purchasing managers have first-hand knowledge of current business conditions and order flows. The ISM Manufacturing PMI (US) has historically led economic turning points by 3–6 months. A PMI falling from 58 to 52 (still above 50 but declining) is more informative than the absolute level — the direction and rate of change signal whether economic momentum is building or fading. Dalio's template weights the PMI alongside the yield curve and credit spreads as the three primary indicators for cycle phase identification.
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