Composite Index of Leading Indicators

 
 

What is the Composite Index of Leading Indicators?

Published by the Conference Board, the Composite Index of Leading Indicators is composed of 10 economic components whose movements tend to precede changes in the overall economy. It is used to predict the direction of the global economy. The 10 components included are average weekly hours worked by manufacturing workers, average number of unemployment insurance applications, volume of manufacturers’ new orders, the new orders index, volume of new orders for capital goods, number of new building permits, the S&P 500 stock index, inflation adjusted monetary supply, the spread between long and short interest rates, and average consumer expectations for business conditions.

 

Why is the Composite Index of Leading Indicators Valuable?

Each component of the Composite Index of Leading Indicators tells investors and other economic participants something different. For example, the number of unemployment insurance applications reflects possible changes in unemployment. This can highlight business activity levels and potential impacts to consumer income. When each of these components are looked at as a whole it provides a well-round group of data to make predictions about what will happen in the economy’s near future.

 

What should you do?

Understanding the Composite Index of Leading Indicators can provide greater clarity into future economic conditions and help businesses make more informed decisions. Majestic’s CORE Report follows the Composite Index of Leading Indicators; along with other indicators every week to see where the market stands.

Source: Investopedia.com