Conference Board Indicators and Their Use

Conference Board is non-profit organization that holds the status of tax exempt in the US. There are three distinct indicators leading, lagging along with coincident indicators which are based on corresponding release data, the type of data that they cover. Leading indicators offer information about future economic events.

Through analysis of data the information is arrived at. Leading indicators can provide you an idea about the economic development in the near future. There are various types of leading indicators that are dealt with. The lending surveys that are conducted through central banks are very authentic. Credit available gives an idea of the economy and the growth performance can also be judged.

The rate of federal fund impacts the willingness of consumers and firms to borrow. In short lagging indicators describes an anterior condition of the release date. The past GDP report has little or no relation to the future economic activity. It is helpful for it provides an idea about the situation of the economy. Unemployment rate provides the idea about future consumption.

Then there are coincident indicators that provide a timely economic snapshot. All three leading, lagging and coincident indicators are produced by the US.

The components of leading indicators

They are a group of information that are published by a foundation on monthly basis for predicting the future economic conditions. This information is combined to form composite leading indicators. There are mainly 10 components that make up the composite leading indicators.

1. The averaging of hours worked by workers in a week. Weekly hours are adjusted in order to make the demand potential suitable that is expected to be generated by the economy. This is used as an important component of the leading indicators.

2. Averaging of the unemployment insurance application.

3. New orders of the manufacturer for consumer materials and sales.

4. The delivery speed of new merchandise and goods to the vendors from the supplier.

5. New orders amount for the capital goods.

6. New building amount permits for the residential buildings.

7. The S&P 500 index for stock is an excellent indicator.

8. The growth in money supply.

9. The gap between the long term and short term interest rates.

10. The sentiment of the consumer holds an important significance. Economic activities slow down greatly as a result of the frightfulness of the consumer for future who saves upon in order to prepare for difficulties.

The significance of the leading indicators

As such, leading indicators do not have much significance in the context of short term trading. You cannot predict the market if you are trading short term. The leading release becomes too abstract for generating strong reactions. But for long term trading leading indicators are immensely useful.

Lagging indicators provide insight on the financial developments of the past.

There are mainly 7 lagging indicators that are used for constructing the composite lagging indicators.

1. The tenure of unemployment. Averaging the weeks of unemployment gives an idea about the difficulty of the labor market.

2. Stocking, liquidation of the inventories.

3. Prime rate average, which is the interest charged to high-rated customers by the banks. It reflects the FED Funds Rate.

4. Outstanding commercial and industrial loans.

5. Per unit change of labor cost every unit.

6. Consumer Installment credit ratio to personal income ratio.

7. The price index of consumer. 

An effective picture of the industrial activity can be obtained by combining leading, coincident and lagging indicators. There is a close relation between the indicator and the economic activity.