Composite Index Of Lagging Indicators

Investors, analysts, pundits, and all varieties of economic lookie-loos use a host of statistics to try to figure out what will happen. They digest the data and make predictions about the direction of the stock market, the future of interest rates, and prospects for the economy in general.

Not all stats tell the same story, though. Some show movement first, starting to rise before the general economy starts to rise, or starting to fall before the general economy starts to tank. These are called leading indicators.

Meanwhile, some stats follow the overall economy, showing movement only after the general trend has been established. These are called lagging indicators.

Helpfully, a research organization called the Conference Board has put these indicators together into combined indices. On one side, they've got the Composite Index of Leading Indicators. It combines items that tend to move before general moves in the economy.

On the other end of the spectrum, they produce the Composite Index of Lagging Economic Indicators, a collection of stats that tend to move after the economy has already laid down its cards.

Leading economic indicators include such stats as average weekly hours for manufacturing laborers, new orders for manufactured goods, the number of new applications for unemployment help, the number of new building permits issued for construction on residential buildings, the movement of the S&P 500 (a measure of the stock market), a measure of interest rates (specifically the difference between long-term and short-term rates), money supply, new orders for capital goods (excluding defense), consumer sentiment, and how quickly stuff gets from suppliers to vendors.

Lagging economic indicators include consumer inflation for services (as measured by the CPI), the cost of labor, the length of employment (specifically, the measure includes the inverse of the average length of employment), the average prime interest rate that banks are charging, the total value of industrial and commercial loans, the size of consumer credit (as compared to personal income), and the ratio of inventories to sales.