Indicators
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a. Why are manufacturers new orders, nondefense capital goods, an appropriate leading indicator?
b.Why is the index of industrial production an appropriate coincident indicator?
c. Why is the average prime rate charged by banks an appropriate lagging indicator?
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a. Why are manufacturers' new orders, nondefense capital goods, an appropriate leading indicator?
The manufacturers' new orders is an appropriate leading indicator because increasing in new orders usually herald positive change in actual production. The new orders mean that the manufacturers' inventory shrinks and unfulfilled orders jump up. Usually, unfulfilled orders drive the manufacturers to pump up production by using their capacity to the full or even pushing up their production capacity. This is a precursor to economic upturn. It is a leading indicator.
Similarly, manufacturers' non defense capital goods orders mean positive ...
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