Rajaram
An economic indicator is data that can suggest whether the economy is expanding or
contracting. A leading indicator can be an index, stock, report or other measurement that signals
the economy or market‘s direction in advance. Leading economic indicators are statistics that
precede an economic event. They are very useful in predicting what will happen in the economy
because leading indicators have the potential to forecast where an economy is headed. It allows
fiscal policymakers and governments to make use of them to implement or alter programs in
order to ward off a recession or other negative economic events. Leading economic
indicators reveal which aspects of the economy are showing relative strength. For example,
if multiple variables such as payrolls, exports, and the purchasing managers survey are all rising,
investors can expect economic growth to remain steady or even rise in coming quarters — which
is always a good thing for stocks. That’s a trend that individual traders can support.
