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Description of Components

The composite indexes of leading, coincident, and lagging indicators produced by The Conference Board are summary statistics for the U.S. economy. They are constructed by averaging their individual components in order to smooth out a good part of the volatility of the individual series.  Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity, and cyclical turning points in the lagging index generally have occurred after those in aggregate economic activity.

Click on an item in the table below to read a short description of the component series.

  Leading Index (April 2008)
Standardization Factor*
1. BCI-01 Average weekly hours, manufacturing 0.2781
2. BCI-05 Average weekly initial claims for unemployment insurance 0.0334
3. BCI-08 Manufacturers' new orders, consumer goods and materials 0.0811
4.  BCI-130 ISM new order index 0.1651
5.  BCI-33 Manufacturers' new orders, non-defense capital goods excl. aircraft 0.0356
6. BCI-29 Building permits, new private housing units 0.0272
7.  BCI-19 Stock prices, 500 common stocks 0.0381
8. BCI-107 Leading Credit Index 0.0794
9. BCI-129 Interest rate spread, 10-year Treasury bonds less federal funds 0.1069
10. BCI-125 Avg. consumer expectations for business and economic conditions 0.1551
  Coincident Index  
1.  BCI-41 Employees on nonagricultural payrolls 0.2597
2.  BCI-51 Personal income less transfer payments 0.1357
3.  BCI-47 Industrial production 0.0728
4.  BCI-57 Manufacturing and trade sales 0.5318
  Lagging Index  
1. BCI-91 Average duration of unemployment 0.0361
2. BCI-77 Inventories to sales ratio, manufacturing and trade 0.1211
3. BCI-62 Labor cost per unit of output, manufacturing 0.0587
4. BCI-109 Average prime rate 0.2815
5. BCI-101 Commercial and industrial loans 0.0970
6. BCI-95 Consumer installment credit to personal income ratio 0.2101
7. BCI-120 Consumer price index for services 0.1955

*Please refer to the most recent technical notes here for the current set of standardization factors.


The component factors are inversely related to the standard deviation of the month-to-month changes in each component (or the monthly level of the component as in the case of interest rate spread ). They are used to equalize the volatility of the contribution from each component and are "normalized" to sum to 1. If one or more components are missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1.

The factors above were revised effective on the release for January 2012, and all historical values for the three composite indexes were revised at this time to reflect the changes. (Under normal circumstances, updates to the leading, coincident, and lagging indexes only incorporate revisions to data over the past six months.) The factors for the leading index were calculated using 1984-2011 as the sample period for measuring volatility. A separate set of factors for the 1959-1983 period is available upon request. The primary sample period for the coincident and lagging indexes was 1959-2010. For additional information on the standardization factors and the index methodology see: "Benchmark Revisions in the Composite Indexes," Business Cycle Indicators December 1997 and "Technical Appendix: Calculating the Composite Indexes" Business Cycle Indicators December 1996, or the Web site:

The trend adjustment factor for the leading index is -0.0321, and the trend adjustment factor for the lagging index is 0.1786.

To address the problem of lags in available data, those leading, coincident and lagging indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each unavailable component. The resulting indexes are therefore constructed using real and estimated data, and will be revised as the unavailable data during the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program. The main advantage of this procedure is to utilize in the leading index data such as stock prices, interest rate spread, and manufacturing hours that are available sooner than other data on real aspects of the economy such as manufacturers’ new orders. Empirical research by The Conference Board suggests that there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.

Related Information

Description of how the standardization factors in this table are used, please refer to updating the composite indexes.


Leading Index Components

BCI-01 Average weekly hours, manufacturing
The average hours worked per week by production workers in manufacturing industries tend to lead the business cycle because employers usually adjust work hours before increasing or decreasing their workforce.

BCI-05 Average weekly initial claims for unemployment insurance
The number of new claims filed for unemployment insurance are typically more sensitive than either total employment or unemployment to overall business conditions, and this series tends to lead the business cycle. It is inverted when included in the leading index; the signs of the month-to-month changes are reversed, because initial claims increase when employment conditions worsen (i.e., layoffs rise and new hirings fall).

BCI-08 Manufacturers' new orders, consumer goods and materials (in 1982 $)
These goods are primarily used by consumers. The inflation-adjusted value of new orders leads actual production because new orders directly affect the level of both unfilled orders and inventories that firms monitor when making production decisions. The Conference Board deflates the current dollar orders data using price indexes constructed from various sources at the industry level and a chain-weighted aggregate price index formula.

BCI-130 ISM new order index
This index reflects the levels of new orders from customers. As a diffusion index, its value reflects the number of participants reporting increased orders during the previous month compared to the number reporting decreased orders, and this series tends to lead the business cycle. When the index has a reading of greater than 50 it is an indication that orders have increased during the past month. This index, therefore, tends to lead the business cycle. ISM new orders is based on a monthly survey conducted by Institution for Supply Management (formerly known as National Association of Purchasing Management). The Conference Board takes normalized value of this index as a measure of its contribution to LEI.

BCI-33 Manufacturers' new orders, non-defense capital goods excl. aircraft (in 1982 $)
 This index, combing with orders from aircraft (in inflation-adjusted dollars) are the producers' counterpart to BCI-08.

BCI-29 Building permits, new private housing units
The number of residential building permits issued is an indicator of construction activity, which typically leads most other types of economic production.

BCI-19 Stock prices, 500 common stocks
The Standard & Poor's 500 stock index reflects the price movements of a broad selection of common stocks traded on the New York Stock Exchange. Increases (decreases) of the stock index can reflect both the general sentiments of investors and the movements of interest rates, which is usually another good indicator for future economic activity.

BCI-107 Leading Credit Index™

This index is consisted of six financial indicators: 2-years Swap Spread (real time), LIBOR 3 month less 3 month Treasury-Bill yield spread (real time), Debit balances at margin account at broker dealer (monthly),  AAII Investors Sentiment Bullish (%) less Bearish (%) (weekly), Senior Loan Officers C&I loan survey – Bank tightening Credit to Large and Medium Firms (quarterly), and Security Repurchases (quarterly) from the Total Finance-Liabilities section of Federal Reserve’s flow of fund report. Because of these financial indicators' forward looking content, LCI leads economic activities.

BCI-129 Interest rate spread, 10-year Treasury bonds less federal funds
The spread or difference between long and short rates is often called the yield curve. This series is constructed using the 10-year Treasury bond rate and the federal funds rate, an overnight interbank borrowing rate. It is felt to be an indicator of the stance of monetary policy and general financial conditions because it rises (falls) when short rates are relatively low (high). When it becomes negative (i.e., short rates are higher than long rates and the yield curve inverts) its record as an indicator of recessions is particularly strong.

BCI-125 Avg. Consumer Expectations for Business and Economic Conditions 
This index reflects changes in consumer attitudes concerning future economic conditions and, therefore, is the only indicator in the leading index that is completely expectations-based. It is an equally weighted average of consumer expectations of business and economic conditions using two questions, Consumer Expectations for Economic Conditions 12-months ahead from Surveys of Consumers conducted by Reuters/University of Michigan, and Consumer Expectations for Business Conditions 6-months ahead from Consumer Confidence Survey by The Conference Board. Responses to the questions concerning various business and economic conditions are classified as positive, negative, or unchanged.

Coincident Index Components

BCI-41 Employees on nonagricultural payrolls
This series from the Bureau of Labor Statistics is often referred to as "payroll employment." It includes full-time and part-time workers and does not distinguish between permanent and temporary employees. Because the changes in this series reflect the actual net hiring and firing of all but agricultural establishments and the smallest businesses in the nation, it is one of the most closely watched series for gauging the health of the economy.

BCI-51 Personal income less transfer payments (in 1996 $)
The value of the income received from all sources is stated in inflation-adjusted dollars to measure the real salaries and other earnings of all persons. This series excludes government transfers such as Social Security payments and includes an adjustment for wage accruals less disbursements (WALD) that smooth bonus payments (to more accurately reflect the level of income that wage earners would use to base their consumption decisions upon). Income levels are important because they help determine both aggregate spending the general health of the economy.

BCI-47 Index of industrial production
This index is based on value-added concepts and covers the physical output of all stages of production in the manufacturing, mining, and gas and electric utility industries. It is constructed from numerous sources that measure physical product counts, values of shipments, and employment levels. Although the value-added of the industrial sector is only a fraction of the total economy, this index has historically captured a majority of the fluctuations in total output.

BCI-57 Manufacturing and trade sales (in 1996 $)
Sales at the manufacturing, wholesale, and retail levels are invariably procyclical. This series is inflation-adjusted to represent real total spending. The data for this series are collected as part of the National Income and Product Account calculations, and the level of aggregate sales is always larger than GDP when annualized because some products and services are counted more than once (e.g. as intermediate goods or temporary additions to wholesale inventories and a retail sale).

Lagging Index Components

BCI-91 Average duration of unemployment
This series measures the average duration (in weeks) that individuals counted as unemployed have been out of work. Because this series tends to be higher during recessions and lower during expansions, it is inverted when it is included in the lagging index (i.e., the signs of the month-to-month changes are reversed). Decreases in the average duration of unemployment invariably occur after an expansion gains strength and the sharpest increases tend to occur after a recession has begun.

BCI-77 Ratio, manufacturing and trade inventories to sales (in 1996 $)
The ratio of inventories to sales is a popular gauge of business conditions for individual firms, entire industries, and the whole economy. This series is calculated by the Bureau of Economic Analysis using inventory and sales data for manufacturing, wholesale, and retail businesses (in inflation- and seasonally-adjusted form) based on data collected by the Bureau of the Census. Because inventories tend to increase when the economy slows and sales fail to meet projections, the ratio typically reaches its cyclical peaks in the middle of a recession. It also tends to decline at the beginning of an expansion as firms meet their sales demand from excess inventories.

BCI- 62 Change in labor cost per unit of output, manufacturing
This series measures the rate of change in an index that rises when labor costs for manufacturing firms rise faster than their production (and vice-versa). The index is constructed by The Conference Board from various components, including seasonally adjusted data on employee compensation in manufacturing (wages and salaries plus supplements) from the BEA, and seasonally adjusted data on industrial production in manufacturing from the Board of Governors of the Federal Reserve System. Because monthly percent changes in this series are extremely erratic, percent changes in labor costs are calculated over a six-month span. Cyclical peaks in the six-month annualized rate of change typically occur during recessions, as output declines faster than labor costs despite layoffs of production workers. Troughs in the series are much more difficult to determine and characterize.

BCI-109 Average prime rate charged by banks
Although the prime rate is considered the benchmark that banks use to establish their interest rates for different types of loans, changes tend to lag behind the movements of general economic activities. The monthly data are compiled by the Board of Governors of the Federal Reserve System.

BCI-101 Commercial and industrial loans outstanding (in 1996 $)
This series measures the volume of business loans held by banks and commercial paper issued by nonfinancial companies. The underlying data are compiled by the Board of Governors of the Federal Reserve System. The Conference Board makes price level adjustments using the same deflator (based on Personal Consumption Expenditures data) used to deflate the money supply series in the leading index. The series tends to peak after an expansion peaks because declining profits usually increase the demand for loans. Troughs are typically seen more than a year after the recession ends. (Users should note that there is a major discontinuity in January 1988, due to a change in the source data; the composite index calculations are adjusted for this fact.)

BCI-95 Ratio, consumer installment credit outstanding to personal income
This series measures the relationship between consumer debt and income. Consumer installment credit outstanding is compiled by the Board of Governors of the Federal Reserve System and personal income data is from the Bureau of Economic Analysis. Because consumers tend to hold off personal borrowing until months after a recession ends, this ratio typically shows a trough after personal income has risen for a year or longer. Lags between peaks in the ratio and peaks in the general economy are much more variable.

BCI-120 Change in Consumer Price Index for services.
This series is compiled by the Bureau of Labor Statistics, and it measures the rates of change in the services component of the Consumer Price Index. It is probable that because of recognition lags and other market rigidities, service sector inflation tends to increase in the initial months of a recession and to decrease in the initial months of an expansion.

Revised February 6, 2012