Leading indicator - Financial definition
Concise definition of the term leading indicator
A leading indicator in finance is a measurable economic factor that changes before the economy starts to follow a particular pattern or trend, providing insight into future economic activity.
Comprehensive definition of the term leading indicator
Leading indicators are key metrics or data points used by investors and analysts to anticipate changes in economic conditions before they occur. These indicators typically precede shifts in economic activity, making them valuable tools for forecasting trends in financial markets, such as changes in GDP growth, employment levels, or consumer spending.
Common examples of leading indicators include stock market indices, consumer confidence surveys, manufacturing orders, and housing starts. By analyzing leading indicators, investors can gain a competitive edge in making informed decisions about asset allocation, investment strategies, and risk management.