Composite Index of Leading Indicators

Composite Index of Leading Indicators

An index tracking a number of economic indicators considered to be leading. A leading indicator is one that occurs before an economy has started moving in a particular direction. For example, a reduction in the average number of hours worked by manufacturing employees is considered a leading indicator because it usually precedes an economic slowdown or a recession. Among the indicators used by the Composite Index of Leading Indicators are the change in the money supply and the number of new building permits issued for residences. It is used to help predict the direction of the economy so investors and businesses can make decisions accordingly.
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That, combined with the OECD composite index of leading indicators released last week, which showed no change on the month for the fourth month running, suggests that the economy is stabilising following its lengthy adjustment to slower growth.
The composite index of leading indicators, the barometer for economic performance, also dropped for the fourth month in a row, and the index of coincident indicators slipped for the third straight month.
According to the OECD's composite index of leading indicators slowing and weak growth is set to persist in the coming quarters in most leading economies.
The composite index of leading indicators rose 3.8 points to 103.2, the biggest increase since 1980 when comparable data became available, the Cabinet Office said in a preliminary report.
This paper addresses two questions concerning the forecasting performance of the Composite Index of Leading Indicators (CLI) in predicting the cyclical turning points of the economy.
The January decline, the fourth in a row, follows on the heels of a steep decline in business executives' confidence, and a drop in the composite index of leading indicators, a broad-range measure of economic performance.
More precisely, if [P.sub.t] denotes the probability that the composite index of leading indicators is in its contraction phase at time t, then (1) [P.sub.t] = [[P.sub.t-1] + PL(1 - [P.sub.t-1])] F[d.sub.t]/{[[P.sub.t-1] + PL(1 - [P.sub.t-1])] F[d.sub.t] + (1 - [P.sub.t-1])(1 - PL) F[u.sub.t]}.
composite index of leading indicators include only 1--the deflated money supply.
In July, the composite index of leading indicators and the index of coincident indicators both dropped slightly, which underscores the weak strength of economic recovery, according to Hung.
Koenig and Emery (1991) have examined the historical performance of the composite index of leading indicators (CLI) as a predictor of cyclical turning points in economic activity.
BEA's composite index of leading indicators increased 0.2 percent in April; the contributions of the individual components to the change in the index are shown in table 1.
The composite index of leading indicators, however, advanced in May for the ninth straight month and the index of coincident indicators, after excluding the factor of long-term growth trend, also rose.

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