An
indicator that occurs before an
economy has started moving in a particular direction and is therefore used to predict the economy's movement. 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. Leading economic indicators are used to help predict the direction of the economy;
investors and businesses can use them to make their decisions accordingly.