TNO-FCI: predicting the ISM Manufacturing PMI 10 months ahead

A financial conditions index built from five monthly market and policy series.

TNO-FCI is one number per month, built from the Fed funds rate, the US dollar index, gold, oil and silver. A linear model combines features made from those five series, weighted so that this month's value tracks the ISM Manufacturing PMI 10 months later. The ISM PMI is a monthly survey of US factory activity; above 50 means expansion.

Inspired by the financial conditions index of Raoul Pal's Global Macro Investor (GMI), which GMI uses to look about nine months ahead of the ISM PMI (The GMI Top 5 Weekly Charts That Make You Go Hmmm..., August 2023).

The July 2025 prediction, and what followed

On 26 July 2025 the model, fitted on data through June 2025, predicted the ISM PMI for July 2025 to April 2026. The prediction had the ISM PMI back above 50 from July 2025; the ISM PMI itself crossed 50 in January 2026.

The ISM PMI and the July 2025 prediction predicted in July 2025 40 45 50 55 60 2023 2024 2025 2026
Black line (white in dark mode): the ISM PMI. Orange: TNO-FCI 10 months ahead.
MonthPredicted ISM PMI
July 202552.7
August 202552.4
September 202558.0
October 202552.5
November 202550.4
December 202552.8
January 202654.3
February 202655.5
March 202654.1
April 202654.9

The October 2026 prediction

Refitted on data through September 2026, the model predicts the ISM PMI for October 2026 to July 2027.

The ISM PMI and the October 2026 prediction 45 50 55 60 2023 2024 2025 2026 2027 inputs end Sep 2026 Prediction
Black line (white in dark mode): the ISM PMI. Orange: TNO-FCI 10 months ahead.
MonthPredicted ISM PMI
October 202657.1
November 202656.7
December 202658.1
January 202753.1
February 202750.3
March 202754.6
April 202756.4
May 202756.3
June 202753.3
July 202751.8

How it tracks since 1972

The ISM PMI since 1972 and TNO-FCI 10 months ahead 20 30 40 50 60 70 80 1980 1990 2000 2010 2020 TNO-FCI
Black line (white in dark mode): the ISM PMI. Orange: TNO-FCI 10 months ahead.
TNO-FCI against the ISM PMI 10 months later 20 30 40 50 60 70 80 -10 -7.5 -5 -2.5 0 2.5 5 7.5 TNO-FCI R-squared 0.46
Each dot is one month's TNO-FCI against the ISM PMI 10 months later. Orange line: the straight line that maps TNO-FCI to ISM PMI points. Highlighted dots, black in light mode and white in dark mode: the 12 most recent months whose ISM PMI 10 months later is known. They show how far real months land from the line.

In-sample, the fit has an R² of 0.46 (0.43 in July 2025), so read the prediction as a direction rather than a precise numerical forecast.

Method

Alongside the five series, the model uses features built from them: their values 3, 6 and 12 months back, momentum, moving averages, volatility, ratios such as gold to silver, and a few interaction, squared and seasonal terms. The model tests every lead from 3 to 18 months and keeps the one where a weighted sum of the five series correlates best with the ISM PMI that many months later. A straight line then maps TNO-FCI to ISM PMI points.

Data and code

Monthly series, mostly exported from TradingView: TVC:DXY, TVC:GOLD, TVC:USOIL and TVC:SILVER, plus ECONOMICS:USBCOI (ISM PMI) and ECONOMICS:USINTR (Fed funds rate) through June 2025. From July 2025 the ISM PMI comes from ISM's monthly releases and the Fed funds rate (upper bound of the target range) from FOMC statements. The data isn't redistributed; the code runs on demo data it generates, or on your own copies.