Leading indicators
Topic: Economic Data: Census, NSS, Surveys and Statistical Tools · NCERT: Beyond NCERT
Meaning
Leading indicators are economic variables that turn up or down before the overall economy does. They are used to spot turning points, the moments when growth starts to speed up or slow down. That gives policymakers and firms early warning.
Example
PMI new orders, stock prices, the slope of the yield curve and consumer confidence are leading indicators. If manufacturing firms report fewer new orders, factory output is likely to fall in the coming months.
Don't confuse with
- Coincident indicators: these move at the same time as the economy. Examples are IIP, the eight core industries, GST and e-way bills, and power demand.
- Lagging indicators: these turn after the economy does. Examples are unemployment, CPI inflation and bank NPAs.