Recent evidence from Diebold and Rudebusch (1991a, b) suggests that such revisions may be important, the predictive performance of leading indicators
apparently deteriorating when analysed within a real time forecasting framework.
Societies, like economies, have "leading indicators
" that give great insight into the future.
These five are nonfarm employment, which counts most wage and salary earners; industrial production, which measures the production of goods and services by manufacturing, mining and utilities companies; retail sales, which measures consumer spending; the leading indicators
index, which can predict major economic shifts; and the consumer price index, which gauges inflation.
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.
BLS diffusion indexes measure the breadth of employment change across industries, which is helpful in assessing the overall state of the economy, while also serving as a potential leading indicator
of manufacturing employment levels
In fact, indexes of leading indicators
use very few prime movers.
The black lines connecting the data points indicate that the data point in the preceding box is a primary leading indicator
for the data point in the following box.
Looking at its six-month growth rate, a signal of turning points, the NHBR/e-forecasting.com Leading Indicator
's six-month growth rate stood at 3.2 percent in April.
Looking ahead, the business climate is expected to improve over the next six months as the local leading indicator
gained 8.4 index points due to strong growth in building plans passed and commercial vehicle imports.
In January, the composite index of leading indicators
stood at 130.4, up one point from last December.
In "Beyond Test Scores: Leading Indicators
for Education," Foley and colleagues (2008) define leading indicators
as those that "provide early signals of progress toward academic achievement" (p.
They're also concerned with assessing future performance by using "leading indicators
" and past performance (lagging indicators).