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Economic Indicators

40 cards · 🇺🇸 English

Leading, lagging and coincident indicators used to read the economy.

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Economic indicator

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  1. 1Economic indicator
    A statistic about economic activity that allows analysis of economic performance and predictions of future performance
  2. 2Leading indicators
    Indicators that usually change before the economy as a whole changes, making them useful as short-term predictors of the economy
  3. 3Lagging indicators
    Indicators that usually change after the economy as a whole does, typically with a lag of a few quarters of a year
  4. 4Coincident indicators
    Indicators that change at approximately the same time as the whole economy, providing information about the current state of the economy
  5. 5Leading Economic Index (LEI)
    A composite index published by The Conference Board consisting of ten indicators designed to predict activity in the U.S. economy six to nine months in the future
  6. 6Why are average weekly hours (manufacturing) a leading indicator?
    Adjustments to working hours of existing employees are usually made in advance of new hires or layoffs, so they predict changes in unemployment
  7. 7Why are initial jobless claims a leading indicator?
    Initial jobless-claims data is more sensitive to business conditions than other unemployment measures and leads the monthly unemployment data
  8. 8Why are manufacturers' new orders a leading indicator?
    Increases in new orders usually mean positive changes in actual production; new orders decrease inventory and contribute to unfilled orders, precursors to future revenue
  9. 9What does vendor performance measure as a leading indicator?
    The time it takes to deliver orders to industrial companies; an increase in delivery time can indicate rising demand for manufacturing supplies
  10. 10Why are stock prices considered a leading indicator?
    Changes in stock prices reflect investors' expectations for the future of the economy and interest rates
  11. 11Why is the interest rate spread (10-year Treasury vs. Federal Funds) a leading indicator?
    It's one of the most accurate predictors of economic downturns, especially when the yield curve becomes inverted (longer-term returns less than short rates)
  12. 12Index of Consumer Expectations
    The only LEI component based solely on expectations; it leads the business cycle because consumer expectations can indicate future consumer spending or tightening
  13. 13Why is the unemployment rate a lagging indicator?
    Employment tends to increase two or three quarters after an upturn in the general economy
  14. 14Seven components of the Index of Lagging Indicators
    Average duration of unemployment (inverted), value of commercial/industrial loans, change in CPI for services, change in labor cost per output unit, inventory-to-sales ratio, consumer credit-to-income ratio, average prime rate
  15. 15Gross Domestic Product (GDP)
    A coincident and procyclical indicator that measures the total value of goods and services produced in an economy
  16. 16Four components of the Index of Coincident Economic Indicators
    Number of employees on non-agricultural payrolls, personal income less transfer payments, industrial production, manufacturing and trade sales
  17. 17Procyclical indicator
    An indicator that moves in the same direction as the general economy: increasing when the economy is doing well and decreasing when it's doing badly
  18. 18Countercyclical indicator
    An indicator that moves in the opposite direction to the general economy, such as the unemployment rate which rises when the economy is deteriorating
  19. 19Acyclical indicator
    An indicator with little or no correlation to the business cycle; it may rise or fall regardless of how the general economy is performing
  20. 20Consumer Price Index (CPI)
    A measure of inflation that tracks changes in prices paid by consumers for goods and services
  21. 21Inverted yield curve
    When longer-term bond returns are expected to be less than short-term rates; historically one of the most accurate predictors of economic downturns
  22. 22Consumer leverage ratio
    An economic indicator measuring the ratio of consumer debt to income or other financial metrics
  23. 23Housing starts
    The number of new residential construction projects that have begun during a particular period, used as an economic indicator
  24. 24Industrial production
    A coincident indicator measuring the output of factories, mines, and utilities in an economy
  25. 25Why are building permits a leading indicator?
    Building permits for new private housing units indicate future construction activity and economic growth
  26. 26Leading Credit Index
    A composite index developed by The Conference Board consisting of six financial indicators such as yield spreads, loan survey information, and investor sentiment
  27. 27Retail sales as an economic indicator
    A coincident indicator measuring consumer spending at retail establishments, reflecting current economic activity
  28. 28The wage share
    A countercyclical and lagging indicator showing the proportion of GDP going to labor compensation; it rises when the economy is deteriorating
  29. 29Producer Price Index (PPI)
    A leading indicator that measures the average change in selling prices received by domestic producers for their output
  30. 30Personal income as an economic indicator
    A coincident indicator measuring the total income received by individuals; used in the coincident index as 'personal income less transfer payments'

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