LEADING INDICATOR

A leading indicator is any indicator that predicts an event that hasn’t yet occurred. For example, a significant increase in the number of new construction permits issued for single family homes generally predicts an increase in new home sales. A drop in crude oil supply generally predicts a price increase when that supply shortage reaches the market. Leading indicators are not always accurate. By way of contrast, an indicator that reports on events after they have happened is called a lagging indicator.