Financial Education

Economic indicators can be leading, lagging or coincident with changes in economic growth. Diffusion indexes can combine multiple indicators.

Advantages to leading indicator approaches to economic forecasting include:

• Intuitive, simple-to-construct models
• Availability from third parties
• Can be tailored to fit individual needs
• Effective use is well documented in economic literature

Disadvantages include:

• They have not historically worked consistently because the relationships between inputs are not static
• They can provide false signals

For more information, see all articles on: Economic Analysis

See also:

Econometric Modeling

Approaches to Forecasting Exchange Rates

Are Cover Stories Effective Contrarian Indicators?

Components of Economic Growth Trends

Adjusting Net Income to Reflect Economic Pension Expense