Index of Leading Economic Indicators

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Index of Leading Economic Indicators

An index of indicators that have, in the past, predicted market downturns. It is published monthly by The Conference Board and is considered an important index of future movements. When the index rises, analysts expect the markets to continue to rise, and when it falls, they anticipate a fall in the markets. The components of the index change from time to time, but they generally include interest rates, price movements on the S&P 500, and the change in money supply. It is important to note that the index is not entirely accurate: it has, in the past, indicated downturns that never actually happened.
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index of leading economic indicators

An index that is compiled by the Conference Board, a private-sector consulting firm. The index is designed to indicate the future direction of economic activity. A rising index signals that economic activity can be expected to increase in the near future. Although variations in this index are of interest to stock analysts, stock market price movements are also considered as a separate leading indicator; therefore, the series is not particularly useful in forecasting stock price changes.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Index of Leading Economic Indicators.

This monthly composite of ten economic measurements was developed to track and help forecast changing patterns in the economy. It is compiled by The Conference Board, a business research group.

The components are adjusted from time to time to help improve the accuracy of the index. In the past, it has successfully predicted major downturns, although it has also warned of some that did not materialize.

Consumer-related components include the number of building permits issued, manufacturers' new orders for consumer goods, and the index of consumer expectations.

Financial components include the S&P 500 Index of widely held stocks, the real money supply, and the interest rate spread.

Business-related components include the average work week in the manufacturing sector, average initial claims for unemployment benefits, nondefense plant and equipment orders, and vendor performance, which reflects how quickly companies receive deliveries from suppliers.

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