leading indicator


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Related to leading indicator: Lagging indicator

Leading indicator

A change in a measurable economic factor that is evident before the economy starts to follow a specific trend.

Leading Economic Indicator

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.

leading indicator

a run of statistical data that past experience has shown tends to reflect later changes in some related areas of the economy and thus can be used to forecast these changes because they precede the changes in a consistent manner and by a relatively constant time interval. For example, current birth statistics would provide a firm basis for predicting primary school admissions five or six years ahead. Leading indicators, like orders for new machine tools, overtime/short-time working in manufacturing and housebuilding starts, are frequently used to forecast cyclical changes in macroeconomic variables like GNP. See FORECASTING, TIME-SERIES ANALYSIS, LAGGING INDICATOR.
References in periodicals archive ?
The composite New Hampshire index of state leading indicators, which is produced jointly by e-forecasting.
Third, it is easier to see the time period between changes in the leading indicator and the data point you want to forecast.
During the Bloomberg interview, its CEO highlighted several aspects which convince him and his team that their leading indicators are correct in calling a recession.
Leading indicators are basically business measurements," says Donna Rhodes, a principal researcher for the Lean Aerospace Initiative (LAI) at MIT and co-head of the leading indicators project.
9 in June, suggesting the upturn began during the second and third quarters of the year, slightly earlier than the leading indicator had predicted.
A leading indicator can then be chosen to predict movements in this cyclical variable.
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.
If a prime mover is itself influenced by economic activity, then it may not make a good leading indicator.
Recently, we observed that a better leading indicator could be obtained from data on recent "job losers on layoff,' rather than all workers on layoff.
eLEI is released the first business day of each month providing results of the previous month and historically forecasts one quarter ahead GDP more accurately than the Conference Board and OECD's leading indicators.
Whether or not a specific measure is a leading indicator of strategic performance depends on the role it plays in strategy.
However, the composite index of leading indicators, the barometer for economic development, rose for the fifth month in a row, underscoring a solid upward trend, which may enable the business signal to turn into a yellow-blue light in February.

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