Leading Indicator

Leading indicators are indicators that pick up trend changes which precede changes in the broader economy.

In other words, they are predictive to a certain degree because they register some change in a wider trend before that change is felt elsewhere. A great example of a leading indicator in fundamental analysis is the purchasing manager’s index (PMI).

Purchasing managers have access to information on capital flows that ultimately increase a nation’s productivity and are later felt as either rises or drops in GDP.