Leading Economic Indicators
Quick Definition
Statistical measures that tend to change before the overall economy shifts, used to predict future economic activity.
What Is Leading Economic Indicators?
Leading economic indicators are data points that historically change direction ahead of the broader economy, making them valuable for forecasting expansions and recessions. The Conference Board publishes the Leading Economic Index (LEI), a composite of 10 indicators: average weekly hours in manufacturing, initial jobless claims, manufacturers' new orders for consumer goods, ISM new orders index, manufacturers' new orders for capital goods, building permits, S&P 500 stock index, Leading Credit Index, interest rate spread (10-year Treasury minus fed funds), and consumer expectations. When the LEI declines for several consecutive months, it signals an impending slowdown or recession. Other widely watched leading indicators include the yield curve (inversions precede recessions), purchasing managers' indices (PMI), consumer confidence surveys, housing starts, and new business formation. Leading indicators are contrasted with coincident indicators (GDP, employment, industrial production — move with the economy) and lagging indicators (unemployment rate, corporate profits, CPI — change after the economy has shifted).
Leading Economic Indicators Example
- 1The Conference Board LEI declined for 23 consecutive months from 2022-2024, one of the longest streaks on record, signaling persistent recession risk
- 2The S&P 500 is itself a leading indicator — stock markets typically peak 6-9 months before a recession begins and bottom before the recovery starts
Related Terms
PMI (Purchasing Managers' Index)
A monthly survey-based indicator measuring the economic health of the manufacturing or services sector, where readings above 50 indicate expansion.
Yield Curve Inversion
An unusual situation where short-term government bonds yield more than long-term bonds, historically a reliable predictor of economic recessions.
Consumer Confidence Index (CCI)
A survey-based economic indicator measuring consumers' optimism about the economy, personal finances, and spending intentions.
Economic Indicator
A statistical data point used to measure and assess the current state or future direction of economic activity.
Lagging Indicator
An economic metric that changes after the economy has already begun to follow a particular trend, confirming rather than predicting patterns.
GDP (Gross Domestic Product)
The total monetary value of all finished goods and services produced within a country's borders in a specific time period.
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