Leading Indicators

An index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. These 10 components include:

1. the average weekly hours worked by manufacturing workers
2. The average number of initial applications for unemployment insurance
3. The amount of manufacturer's new orders for consumer goods and materials
4. The speed of delivery of new merchandise to vendors from suppliers
5. The amount of new orders for capital goods unrelated to defense
6. The amount of new building permits for residential buildings
7. The S&P 500 stock index
8. The inflation-adjusted monetary supply (M2)
9. The spread between long and short interest rates
10. Consumer sentiment

The Composite Index of Leading Indicators is a number that is used by many economic participants to judge what is going to happen in the near future. By looking at the Composite Index of Leading Indicators in the light of business cycles and general economic conditions, investors and businesses can form expectations about what's ahead, and make better-informed decisions.

Lagging Indicators

An index published monthly by the Conference Board that is used to confirm the direction of the economy's movements in past months. The index is made up of the following seven economic components, whose changes tend to come after changes in the overall economy:

1. the value of outstanding commercial and industrial loans
2. The change in the consumer price index for services from the previous month
3. The change in labor cost per unit of labor output
4. The ratio of manufacturing and trade inventories to sales made
5. The ratio of consumer credit outstanding to personal income
6. The average prime rate charged by banks
7. The inverted average length of employment

As it measures the economic activities of previous months, the Composite Index of Lagging Indicators is used as an after-the-fact way to help confirm economists' assessment of current economic conditions. For this purpose the Composite Index of Lagging Indicators is best used together with the Composite Index of Coincident Indicators and Composite Index of Leading Indicators.