Looking Back, Looking Forward

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing the indicators economists rely on to understand the past, present, and potential future direction of the economy:

The just completed month of January is named after the Roman god Janus, who was imagined as having two faces: one looking toward the past, the other looking toward the future. In a similar manner, economists look in both directions to better understand economic trends.

But instead of two faces, they use economic measures called indicators.  The most commonly studied indicators are tracked by The Conference Board, which publishes composite indexes of leading, lagging, and coincident indicators.

Gauging the Future

Not surprisingly, leading indicators garner the most attention, because they may forecast the future direction of the economy. The Conference Board Leading Economic Index® includes 10 components: weekly hours for manufacturing workers, initial unemployment insurance claims, consumer expectations for business conditions, stock prices, credit activity, interest-rate spread between 10-year Treasury bonds and the federal funds rate, building permits, and three separate measures of manufacturers’ new orders.

These all tend to signal potential shifts in the broader economy. For example, when manufacturers’ orders increase, the economy may be growing. Conversely…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 24 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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