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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References in periodicals archive ?
The Conference Board reported that its index of leading indicators posted a 0.1 percent rise in August following no change in July and a 0.6 percent jump in June.
The index of leading indicators, which predicts developments in the coming few months, fell to 106.5 from 107.9.
The Organisation for Economic Cooperation and Development grouping 34 advanced countries, said its index of leading indicators pointed "to moderate improvements in growth in most major OECD economies but in large emerging economies the composite leading indicators point towards stabilising or slowing momentum." The picture for the eurozone as a whole "continues to indicate a gain in growth momentum" with German growth getting back to trend levels and the outlook for Italy turning positive.
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.
In this connection, note that the Conference Board, which added the yield curve spread to its index of leading indicators in 1996, announced in June 2005 that it will adjust its procedures so as to focus on the level and not on the change.
The Bank of Scotland's Index of Leading Indicators has risen for the seventh month in a row, leading experts to predict the Scottish economy will see at least two - if not three - quarters of growth.
The index of leading indicators increased 1.0% in May, the largest monthly gain since December 1992, which was the onset of the '90s long business expansion.
The index of leading indicators, a measure of economic growth six to nine months down the road, was also revised upward to 16.7% from 14.3% in the preliminary report released earlier this month, it said.
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.
The index, which has not gone over 50% in the past year, is based on spread in the yield curve, adjusted bank reserve growth and the Commerce department's index of leading indicators.
The most popular approach for forecasting business cycle turning points is to look at the Commerce Department's composite index of leading indicators. Various "rules of thumb" have been devised, for example, three months of consecutive declines in the leading indicator composite, to alert one to an upcoming recession.

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