What are the leading indicators? Introduction to Leading Indicators

2023-06-05
Summary:

Anticipate economic shifts with leading indicators, essential for informed decisions. Explore their types and significance to empower decision-making.

Leading indicatorIndicator is an economic indicator commonly used to predict future trends in economic activity. Leading indicators are usually economic variables or data whose changes can provide an indication of overall economic activity changes in the coming months or quarters.


Leading indicators usually include stock market index, money supply, number of construction permits, employer confidence index, etc. These indicators are considered more sensitive than lagging indicators because they can provide signals before changes in economic activity occur.


The use of leading indicators can help decision-makers and investors better understand future economic trends and make more informed decisions. However, leading indicators are not perfect predictive tools, and economic activity is influenced by multiple factors, so it is necessary to consider multiple indicators and factors simultaneously.

What are the leading indicators? Introduction to Leading Indicators

meaning

The internal connection between various economic phenomena in society is very close, manifested in economic indicators, which are reflected in the sequential relationship in time series. For example, changes in raw material prices precede changes in finished product prices; The development of education precedes the development of science and technology; The development of science and technology precedes the development of production and construction.


The leading indicator method is to use the time difference between economic indicators to divide various economic time series into three types: leading indicator type; Synchronous indicator type; Lagging indicator type. According to this classification, leading indicators can be used to predict synchronous or lagging indicators. By using the leading indicator method, not only can economic development trends be predicted, but also turning points can be predicted. The leading indicator method can be used for both microeconomics forecasting and macroeconomic economic forecasting.


Concept definition

1. Leading indicator: It refers to the occurrence of peaks or valleys earlier than the predicted object in terms of change time.

2. Synchronization indicator: The change time is completely synchronized with the predicted object, that is, the time when the trough and peak appear is consistent with the predicted object.

3. Lag indicator: lagging behind the predicted object in terms of change time.


Prediction steps

1. Identify leading indicators based on predicted goals and requirements;

2. Draw a time series diagram of leading indicators, synchronous indicators, and lagging indicators;

3. Make predictions.


【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.

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