There are three indexes of economic indicators that are constructed by the U.S. Dept. of Commerce and used to forecast the performance of the business cycle. (1) The index of leading economic indicators, (2) The index of roughly coincident indicators, and (3) The index of lagging indicators. All three indexes are applied in comparison to the GNP.

The GNP is composed of consumer spending, government spending, net exports, and investments. Gross National Product is a measurement of a country’s wealth, and is the total value of goods and services produced by the U.S. economy as a whole. There is Normal GNP and Real GNP, which the differences are comparable to the Nominal Interest Rate and the Real Interest Rate, in the sense that the Real measurements of both adjust for inflation and its economic effects. Both Real and Normal GNP are reported quarterly, and are a determinant of economic expansion and contraction.

Index of Leading Economic Indicators – 12 Components

1Average work week of production workers in manufacturing

2Average weekly initial claims for state unemployment insurance

3Index of new orders for consumer goods

4Vendor performance, percentage of companies receiving slower deliveries

5Index of new business formations

6Index of contracts and orders for plant and equipment

7Index of new building permits

8Net change in inventory

9Change in sensitive materials prices

10Stock price index of 500 stocks

11Money supply

12Change in credit outstanding – business and consumer borrowing

Index of Coincident Indicators – 4 Components

1Number of nonagricultural employees

2Index of industrial production

3Index of personal income

4Index of manufacturing and trade sales

Index of Lagging Indicators – 6 Components

1Average Duration of employment

2Manufacturing and trade inventories

3Labor cost per unit of output in manufacturing

4Commercial and industrial loans outstanding

5Ratio of consumer installment debt to personal income

6Average prime rate charged by banks

The Index of Leading Economic Indicators, anticipate economic movements as measured by the GNP. The Index of Leading Economic Indicators will reach its peaks and troughs in anticipation of future GNP measurements. The Index of Coincident Indicators, move in conjunction to the relative movements of the economy again as measured by GNP. The Index of Coincident Indicators will reach its peaks and troughs at precisely the same time as GNP. The Index of Lagging Economic Indicators, trail the other two Indicators and GNP as well. The index of Lagging Economic Indicators extends to its peaks and troughs after the economic move has occurred as measured by GNP.