What is the definition of a leading economic indicator?

A leading economic indicator is defined as an indicator that predicts future economic trends. These indicators provide insights into where the economy is headed and can help forecast economic activity before it occurs. Examples of leading indicators include stock market performance, new business permits, and consumer confidence indexes. By analyzing these indicators, economists and policymakers can make informed decisions and preparations for anticipated economic changes.

The focus on future predictions is crucial, as leading indicators allow stakeholders to gauge potential growth or contraction in the economy and to adjust their strategies accordingly, ultimately providing a proactive approach to economic planning.