LEI vs PMI: comparing leading indicators

Why this comparison matters

Search interest in “LEI vs PMI” usually comes from one question: if both leading indicators point the same way, how confident can a forecast be? The intuitive answer treats them as independent votes that confirm each other. The data complicate that picture. Between 2022 and 2024 both leaned recessionary for an extended stretch, and no recession arrived on the timeline either implied.

What the LEI is

The Conference Board Leading Economic Index (LEI) is a single composite built from ten forward-looking series, including average weekly manufacturing hours, initial jobless claims, building permits, the S&P 500, a leading credit index, the spread between the 10-year Treasury yield and the federal funds rate, and the ISM new-orders index (Conference Board, 2024 component list). It is designed to lead turning points in the business cycle by roughly seven months. The index reached an all-time high in December 2021, then declined for its longest unbroken run since 2007-08. By the Conference Board’s own account, it did not rise again until February 2024, the first monthly increase since February 2022. Related framing: our analysis “Central Banks and Monetary Policy”.

→ The complete explanation: What are leading economic indicators and how reliable are they?

What a PMI is

A Purchasing Managers’ Index (PMI) is a diffusion survey rather than a composite. Each month purchasing managers report whether activity rose, fell, or held steady, and the index aggregates the share reporting improvement. A reading above 50 signals expansion and below 50 contraction; the Institute for Supply Management (ISM) publishes separate manufacturing and services indexes for the United States. Because it is survey-based, the PMI is available early and moves close to real time. The ISM notes that a services reading sustained above roughly 48.6 has generally aligned with an expanding overall economy. For other questions framed the same way, see our running list of comparisons.

→ Full account: How do PMI surveys predict GDP changes?

The key differences

Construction: a composite against a survey. The LEI compresses ten heterogeneous series, mixing hard data, financial prices, and one survey, into a single number, so its signal in any month reflects whatever is dragging hardest. A PMI measures one thing: the breadth of firms reporting better or worse conditions. One is an aggregate of many inputs; the other is, in effect, a vote count. The new-orders sub-index sits at the center of both, which is where the overlap begins. See what the ISM Manufacturing New Orders index signals.

Overlap: they are not independent readings. The ISM manufacturing new-orders index is itself one of the LEI’s ten components, and both instruments over-weight the goods-producing economy relative to its share of output. When the manufacturing PMI weakens, part of the LEI weakens by construction. Agreement between the two is therefore partly arithmetic rather than two separate diagnoses of the cycle.

Embedded yield curve. The LEI also carries the most-watched recession signal inside it, the 10-year-minus-fed-funds spread. Through 2022 to 2024 that spread was deeply inverted, and the Conference Board repeatedly cited the negative yield spread as a drag on the index. A large part of the LEI’s recession warning was, in practice, the inverted yield curve already tracked separately.

How they behave across regimes

Both indicators lead, but they catch different turns. In goods-led slowdowns such as 2001 and 2008, the manufacturing PMI and the LEI tend to move together and early, because manufacturing orders and inventories turn first. In services-led or supply-driven episodes the signal frays. From November 2022 to December 2024 the ISM manufacturing index stayed below 50 for 26 consecutive months, the longest contraction on record, while ISM services held in expansion and GDP kept growing. The switch parameter is the composition of the slowdown: when weakness is concentrated in goods, both fire accurately; when it sits in services or reflects a one-off shock, both can read recession while the broad economy expands. A parallel read: our analysis “Reverse-Engineering the NY Fed Recession Probability Model”.

Two indicators that share a component and a sector bias do not cross-check; they tend to err together.

→ Framework: What is the NBER recession dating methodology?

The common confusion

The frequent mistake is to treat a simultaneous LEI and PMI downturn as double confirmation. Because the two overlap by construction and both tilt toward manufacturing, a joint signal can reflect one weakness counted twice rather than two independent ones. The 2022 to 2024 episode is the clearest illustration: the Conference Board moved its recession call from late 2022 to 2023 and then to 2024 as the streak lengthened, yet the National Bureau of Economic Research has dated no recession in that window. What the record documents is that breadth of confirmation matters less than independence of confirmation, a point developed in why the Conference Board LEI sometimes gives false signals.

Practical observation

Go deeper

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Frequently asked questions

How is the LEI different from a PMI?

The LEI is a monthly composite of ten leading series published by The Conference Board, designed to lead business-cycle turning points by roughly seven months. A PMI is a diffusion survey of purchasing managers in which a reading above 50 signals expansion and below 50 contraction, available early each month and close to real time. The LEI aggregates hard data, financial prices, and one survey into a single index; the PMI measures the breadth of firms reporting better or worse conditions in a single sector. One is an aggregate of many inputs, the other a count of directional responses.

Do the LEI and a PMI confirm each other when both signal a slowdown?

Not as independently as they appear to. The ISM manufacturing new-orders index is one of the LEI’s ten components, and both instruments over-weight the goods-producing economy, so when the manufacturing PMI weakens part of the LEI weakens by construction. A joint downturn can therefore reflect the same weakness counted twice rather than two separate readings of the cycle. The LEI also embeds the 10-year-minus-fed-funds yield spread, which means a chunk of its recession warning is the inverted yield curve that analysts already track on its own. Breadth of agreement is not the same as independence of agreement.

Why did both indicators point to a recession that did not arrive in 2022 to 2024?

The slowdown of that period was concentrated in goods. The ISM manufacturing index stayed below 50 for 26 consecutive months from November 2022 to December 2024, the longest contraction on record, while ISM services remained in expansion and output kept growing. Because both the LEI and the manufacturing PMI lean toward manufacturing, both leaned recessionary even as the services-led economy expanded. The Conference Board moved its recession call across 2022, 2023, and 2024 as the LEI’s streak lengthened, but the National Bureau of Economic Research has dated no recession in that window.

Last updated — 12 July 2026