What are the 10 Leading Economic Indicators?
1. Interest rate spread between 10-year Treasury notes and the federal funds rate. Known as the steepening of the yield curve, a rise in this indicator may forecast future economic growth as investors signal their expectations of economic expansion and possibly inflation by demanding higher rates of return for longer maturities.
2. Inflation-adjusted, M2 measure of the money supply. M2 is the money supply in the economy which consists of currency, checking and savings accounts, traveler checks, and retail money market accounts. When the M2 supply rises there is more money available in financial institutions to lend to businesses for startup ventures that drive economic expansions.
3. The average manufacturing workweek. The average workweek (also known as hours worked) is included in the monthly employment report published by the Bureau of Labor Statistics and is considered an early wake up call for job seekers because employers first address increases in consumer demand by boosting the working hours of current employees.
4. Manufacturers' new orders for consumer goods and materials. Published by the Census Bureau, a rise in this indicator portends positive changes in actual production because new orders decrease inventory and contribute to unfilled orders, a precursor to future growth.
5. S&P 500 measure of stock prices. The S&P 500 is an index comprised of 500 diversified large and mid-cap United States companies and reflects the broad-based health of the economy.
6. Vendor performance component of the NAPM index. Complied by the National Association of Purchasing Managers (NAPM), vendor performance tracks the delivery time of orders to industrial companies with longer delivery times signaling a positive unanticipated rise in demand for manufacturing supplies.
Continue reading on the next page for more on the leading economic indicators and some investing strategies in following their signals.