Leading, Coincident And Lagging Indicators

The Conference Board releases monthly composite economic indexes that it says are the "key elements ... designed to signal peaks and troughs in the business cycle." The firm puts out three separate indexes—leading, coincident and lagging indicators—that are "constructed to summarise and reveal common turning point patterns in economic data."[1]

The Board, which was founded in 1916, is a global "independent, non-partisan, and non-profit" company whose mission is to "help leaders navigate the biggest issues impacting business."[2]

The indicators are not put out by government agencies, which means that investors, business leaders and others interested in the data can probably rely on the indexes being impartial, neutral and free of bias.

Although most of the individual and underlying data points the Board uses to calculate its indexes do come from the relevant government, the indexes are designed to "smooth out some of the volatility of individual components."[1]

In addition to global indexes, the Board releases monthly indexes for the following major economies around the world:

  • Australia
  • Brazil
  • China
  • Euro Area
  • France
  • Germany
  • India
  • Japan
  • Korea
  • Mexico
  • Spain
  • U.K.
  • U.S.[3]

Leading Indicators

As the name implies, the index of leading economic indicators is designed to be predictive of the next phase of the business cycle. As the Board puts it, "historically, the cyclical turning points have occurred before those in aggregate economic activity." This is especially important at the beginning or end of a recession or economic boom.

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To use the U.S. index as an example, the Board looks at the following 10 factors, each of which carries a different weight in the index. Each item is listed in descending order of relative weighting:

  1. Average weekly hours in manufacturing
  2. Average weekly initial claims for unemployment insurance
  3. Manufacturers' new orders for consumer goods and materials
  4. Institute for Supply Management's new orders index
  5. Durable goods orders for nondefense capital goods, excluding aircraft orders
  6. Building permits for new private housing units
  7. Stock prices for 500 common stocks
  8. Leading credit index
  9. The interest rate spread between 10-year Treasury bonds and the federal funds rate
  10. Average consumer expectations for business conditions[4]

Coincident Indicators

Coincident indicators measure the "cyclical turning points" that "have occurred at about the same time as those in aggregate economic activity."[4] This index takes into account four factors, again listed by relative weighting, with the first factor accounting for more than half of the weight:

  1. Nonfarm payrolls
  2. Personal income excluding transfer payments
  3. Industrial production
  4. Manufacturing and trade sales

Lagging Indicators

Lagging indicators "generally have occurred after those in aggregate economic activity," the Board explains. Basically, lagging indicators confirm what's already happened in the business cycle. They consist of the following seven items:

  1. Inventories to sales ratio for manufacturing and trade
  2. Average duration of unemployment
  3. Ratio of consumer installment credit outstanding to personal income
  4. Commercial and industrial loans
  5. Average prime lending rate
  6. Labor cost per unit of output for manufacturing
  7. Consumer price index for services[4]


The Conference Board is an independent, nonprofit company that puts together three monthly indexes that are designed to spot the ups and downs and turning points in the business cycle. The Board produces indexes for 13 separate major economies in the world, plus a global index.

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