|
'''The Conference Board Leading Economic Index''' is an [[United States|American]] economic [[leading indicator]] intended to forecast future economic activity. It is calculated by [[The Conference Board]], a [[non-governmental organization]], which determines the value of the index from the values of ten key [[Variable (mathematics)|variables]]. These variables have historically turned downward before a [[recession]] and upward before an [[expansion]]. The single index value composed from these ten variables has generally proved capable of predicting recessions over the past 50 years.
One problem with the Leading Economic Index is that the time lag between the signal of a recession and the actual recession has varied widely. In January 2001 The Conference Board revised the methodologies used in constructing the Index of Leading Indicators to make the index both more timely and more useful for a full discussion of these revisions).
One of the biggest arguments regarding the accuracy of the Leading Economic Index has been the recent omission of the "Change In Consumer and Business Credit Outstanding Index" component.
Also, while this index correctly forecast each of the eight recessions during the 1959-2009 period, it also forecast recessions that did not occur. Furthermore, it does not take into account [[capacity utilization]] of the overall economy.
'''The ten components of the Leading Economic Index include:'''
# Average weekly hours worked by manufacturing workers
# Average number of initial applications for unemployment insurance
# Amount of manufacturers' new orders for consumer goods and materials
# Amount of manufacterers' new orders for capital goods unrelated to defense
# Speed of delivery of new merchandise to vendors from suppliers
# Amount of new building permits for residential buildings
# The [[S&P 500]] stock index
# Inflation-adjusted [[money supply]] (M2)
# Spread between long and short interest rates (i.e. the [[yield curve]])
# Consumer expectations
Recently other sources of leading indicators have been developed in attempts to provide even more timely data. One example which deals only with the consumer portion of the U. S. economy has been constructed by the [http://www.consumerindexes.com/index.html Consumer Metrics Institute] and includes daily indexes of consumer activities in several segments of that economy (see [[Consumer Leading Indicators]]).
| 