Cogito

Leading Indicators

Posted in Uncategorized by qmarks on January 20, 2010

1) Average Workweek, Production Workers, Manufacturing

This indicator points out the length of average number of hours worked per week in manufacturing. An increase indicates heightened economic activity in production.

2) Average Weekly Initial Claims for State Unemployment Insurance

That indicates the number of new claims being made each week for unemployment insurance. That shows the turning points in unemployment levels

3) Manufacturer’s New Orders, Consumer Goods and Materials Industries

This is a very significant indicator. An increase is quite bullish. An increase in activity in the consumer goods and materials industries has a future multiplier effect on the total economy and vice versa.

4) Vendor Performance, Percent of Companies Receiving Slower Deliveries

With an increase in business activity orders and backlogs will increase that will result in  slower deliveries by suppliers. In a downturn, vendors will be able to fill orders more promptly

5)Index of Net Business Formation

An increase obviously is a symptom of  improved profit opportunities and indication of heightened business activity in the future.

6) Contracts and Orders for Plant and Equipment

An increase in plant and equipment ordering indicates optimism concerning the future. Also that might have a multiplier effect on the economy

7)New Private Housing Units  Authorized by Local Building Permits

An increase should result in increased building activity in the future. A lag between new building permits and new housing starts is generally several months.That might be distorted by weather conditions or supply shortages.

8)Change in Manufacturing and Trade Inventories on Hand and on Order (Inventories-to-Sales)

That indicator should be adjusted by inflation. That measures the month-to-month change in manufacturing and trade inventories. In a period of rising economic activity, inventories should be increasing, but that does not always hold. In a declining environment, inventories could increase just because of waiting idle in the warehouses. So better indicator is Inventories/Sales

9)Change in Sensitive Materials Prices

In a period of rising economic activity, sensitive materials prices should rise because of increased demand.

10) Stock Prices, 500 common stocks

If stock market anticipates economic activity, that index holds the positive relation. However the stock market influenced by outlook for inflation, profits and interest rates.

11) Money supply M2

An expanding money supply may reflect a desire by the Central Banks to stimulate future business activity. A tightening generally signals an attempt to reduce inflationary pressure and business expansion.

12) Change in Business and Consumer Credit Outstanding

This indicator highlights purchases by consumers of durable goods such as automobiles, refrigerators, washing machines and other heavy appliances. Similarly, businesses will increase borrowing for inventories and capital spending if they anticipate a future increase in business activity.

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