General Economic Factors

Every country measures its economy using specific factors, or "indicators," each of which gives a snapshot of a sector of the economy. These factors, like the U.S. indicators listed below, help diagnose the country's economic health.

Leading Indicators

Ten figures make up the Leading Indicator Index (LEI): real money supply, interest rates, building permits, stock prices, weekly unemployment claims, average manufacturing hours, new orders for consumer goods and materials, new orders for nondefense capital goods, vendor performance (index of supplier deliveries) and index of consumer expectations.

Coincident Indicators

Certain factors, like personal income, manufacturing and trade sales, and nonagricultural and industrial employment, are used in the Coincident Economic Index (CEI).

Lagging Indicators

Factors that have a negative impact on the economy comprise the Lagging Indicator Index (LAG). They are commercial and industrial loans outstanding, average length of unemployment, change in labor cost per unit of production, Consumer Price Index change (inflation), ratio of inventory to sales and ratio of consumer installment credit load to personal income.

Indexes

Change in each factor is entered into a formula to determine the LEI, CEI or LAG that is expressed in a positive or negative number.

Variables

Some factors, like employment, recover from recession or fall in prosperity more slowly than others. These "trailing" indicators can affect the accuracy of indexes.

Cycles

Economists use indexes and their relative trends to determine the position of the economy between prosperity and recession.

References

• Conference Board Economic Indexes

Resources

• New York Federal Reserve--Economic Indicators
• Business Cycle Indicators
• Economic Indicators

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