Composition of leading indicators

The composite index of leading indicators is composed of several indicators that can reflect the changes in the economy in advance, and is used to predict the short-term future changes in the economy. In a sense, the peak and trough of leading indicators will appear earlier than the stage of the economic cycle, so it is an important forecasting and planning tool. At the same time, the composite index of indicators is composed of indicators that can reflect the economic conditions at that time to judge the economic conditions at that time.

In the past, when the economy turns, the composite index of leading indicators will first move in the same direction for three consecutive months. For example, when the leading indicator moves in the same direction of -0.2%, -0.2% and -0.1% in the past three months, it is a signal that the economy is "likely" to enter a recession; and when the economy enters a recession, the leading economic indicator will "necessarily" decline for three consecutive months.

In Taiwan, on the 27th of each month, the Executive Yuan's Economic Development Council publishes the "previous month" leading and simultaneous composite indicator values; in the United States, the Conference Board publishes the "current month" leading and simultaneous economic indicator values at the end of each month.

For our country, there are seven factors that make up the leading indicators, including:

The change rate of new orders received by the manufacturing industry, the change rate of stock price, the change rate of money supply M1B, the change rate of wholesale prices, and the four domestic demand indicators of housing construction application area, as well as the change rate of new orders received by the manufacturing industry, the change rate of customs export value, and the three export-oriented indicators of the average monthly working hours of the manufacturing industry.

In the case of the United States, there are ten factors that make up the leading indicator, namely:

Average weekly hours worked by manufacturing employees, initial claims for unemployment benefits, new manufacturing orders for'Consumer Goods and Related Materials', new manufacturing orders for'Non-Defense Durable Goods', seller performance (as measured by'seller performance 'in the Purchasing Managers' Index (NAPM)), building permits, S & P 500 index levels, real M2 money supply, ten-year treasury securities and federal funds interest rate differential, University of Michigan Consumer Confidence Index'Consumer Expectations'.