What does the term "leading indicators" refer to in forecasting techniques?

The term "leading indicators" refers to economic measures or data points that signal future events or trends. When used in forecasting techniques, leading indicators provide insights into what is likely to happen in the economy or a specific sector before it occurs. These indicators can encompass various factors, such as consumer confidence indexes, stock market performance, and manufacturing activity, which tend to change before the broader economic situation begins to move.

By focusing on current events and trends, leading indicators help analysts and policymakers make informed predictions and decisions about future economic conditions. This proactive approach allows for timely responses to potential changes in the economic landscape. Therefore, identifying leading indicators is crucial for effective forecasting, as they help anticipate movements rather than react to them after the fact.