Leads and Lags

Leads and lags are economic indicators that move in opposite directions from each other. A leading indicator is a variable that changes before the economy as a whole does, while a lagging indicator is a variable that changes after the economy as a whole does.

Leading indicators are used to predict future economic conditions, while lagging indicators are used to confirm that the economy is already in a particular phase.

There are many different leading and lagging indicators, but some of the most common include:

• Leading indicators:
• The Conference Board Leading Economic Index (LEI)
• The Institute for Supply Management (ISM) Manufacturing Index
• The New York Stock Exchange Composite Index
• Lagging indicators:
• The unemployment rate
• Personal income
• Industrial production

It is important to note that leading and lagging indicators are not perfect. They can sometimes give false signals, and they may not always be accurate in predicting future economic conditions. However, they can be a useful tool for economists and investors to try to understand the economy and make informed decisions.

In the first paragraph, we define leads and lags as economic indicators that move in opposite directions from each other. We also provide some examples of leading and lagging indicators.

In the second paragraph, we discuss how leading indicators are used to predict future economic conditions. We also discuss the importance of understanding that leading indicators are not perfect and can sometimes give false signals.

In the third paragraph, we discuss how lagging indicators are used to confirm that the economy is already in a particular phase. We also discuss the importance of understanding that lagging indicators are not perfect and can sometimes give false signals.