What This Chart Shows
This chart overlays the ISM Manufacturing PMI with the FRED series DRTSCILM — the net percentage of domestic banks tightening lending standards for commercial and industrial (C&I) loans to large and middle-market firms. This is the closest proxy for "US Bank Lending Standards: All Sectors" from the Senior Loan Officer Opinion Survey (SLOOS).
Lending standards are a powerful leading indicator. When banks tighten (positive values), credit becomes harder to get, investment slows, and manufacturing activity typically follows lower. The ISM overlay shows this transmission in real time. Grey shaded regions mark NBER recession periods.
How to Read It
The lending standards axis is inverted — tightening (positive, red zone) is plotted downward to align visually with ISM declines. When lending standards spike upward (banks tightening aggressively) and ISM drops below 50, the economy is under significant stress. Historically, every recession has been preceded by a sharp tightening cycle. The key signal is the rate of change — rapid tightening is more concerning than the absolute level.