Answer:
Leading economic indicators:
- Manufacturers' orders for durable goods
- Housing starts
- Average duration of unemployment
- Building permits
- Interest rates spread
- Stock prices
Non leading economic indicators:
- The unemployment rate
- The trade deficit
Explanation:
Certain variables provide a clue into the direction the economy is moving. If the economy is expanding, construction picks up, resulting in increases in building permits and housing starts.
Factories begin to produce more, and producers need to install or replace tools and machines. They also need more workers, so unemployed workers spend less time finding jobs.
Profits begin to rise, and investors begin to view shares of stocks more attractively.
Long-term interest rates are typically higher than short-term rates. If the economy is expected to grow robustly, longer-term rates will rise relative to short-term rates.
The unemployment rate is considered a coincident indicator, moving along with but opposite to the business cycle. One complicating factor is the tendency of the unemployment rate to rise as an expansion begins, or fall at the start of a recession. This is due to discouraged workers entering or leaving the workforce.
The trade deficit reflects the relative magnitudes of imports and exports. Imports are in large part a function of personal income, which will move along with but not prior to changes in the business cycle.
