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.
The OECD's leading indicator for the euro area rose to 100.
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.
The outline of the paper is as follows: we shall explain the P-star model of inflation indicator, discuss methodology to measure potential output and trend velocity and data used to estimate the model in Section 2; leading indicator of inflation in Pakistan is estimated in Section 3, the regression results and causality analysis are presented in Section 4.
9 in June, suggesting the upturn began during the second and third quarters of the year, slightly earlier than the leading indicator had predicted.
Logic dictates that these leading indicators foreshadow a slowdown.
A leading indicator can then be chosen to predict movements in this cyclical variable.
We concluded that several of the existing components of the leading indicator contain little useful cyclical information for real-time forecasting while some measures not included provide more insight into the future direction of the business cycle.
For example, if no data are available for a prime mover, then it cannot be used as a leading indicator, short of the lengthy process of developing new data that cover a substantial time period.
The layoff rate in manufacturing was initially selected as a leading indicator of business cycles in 1960.