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Learning Objectives

■ Discuss the historical timing of indexes relative to cyclical turning points.

■ List and describe the four components of the Conference Board's coincident index including: number of employees on nonagricultural payrolls; personal income less transfer payments; industrial production index; and manufacturing and trade sales.

■ List and describe the 10 components of the leading index including: average workweek, production workers, and manufacturing; average weekly initial claims for unemployment insurance; manufacturers' new orders for consumer goods and materials; ISM new orders index; manufacturers' new orders for nondefense capital goods, excluding aircraft; monthly building permits for new private housing; stock prices; leading Credit Index, M2 money supply prior to 1990; the interest rate spread between the 10-year Treasury bond and the federal funds rate; and the average consumer expectations for economic conditions.

■ List and describe the seven components of the lagging index including: average duration of unemployment; ratio of manufacturing and trade inventories to sales; manufacturing labor cost per unit of output; average prime rate; commercial and industrial loans outstanding; ratio of consumer installment credit to personal income; and change in the consumer price index for services.

■ Explain how each set of indicators are used to analyze the economy and discuss how each may be used by investment advisors and consultants to manage portfolios more effectively.