What are Business Cycle Indicators?

Business cycle indicators (BCI) refer to a series of measures (standards) that were created by the Conference Board. They present leading, lagging and concurrent indexes in an economy. These standards and indexes are effective metrics that predict changes in direction of an economy. Some economic analysts refer to BCI as indicators of peaks and troughs (peaks and valleys.) BCIs are used and published for countries like , France, the U.K., Japan, Australia, South Korea, the U.S, Mexico, Germany and Spain. Business cycle indicators (BCI) are also used in the business sector to forecast dynamic patterns that securities exhibit when it comes to pricing.

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How Business Cycle Indicators are Used

Business cycle indicators are statistically outline and can be interpreted from the graphs displayed. However, interpreting BCI is a daunting and complex task because it is essential to understand that the fluctuations of economic activities are summarized in BCIs. Fluctuations in production, employment and other activities can be a decline or increase. Peak describes the situation when economic activity booms and is at a high level while trough describes a significant decline in economic activities. BCIs reflect changes in direction of the overall economy of a country which are ordinarily difficult to predict. In the business sector, leading indicators reflect shifts in the business cycle or the onset of a business cycle. Examples of leading indicators include consumer expectations, average weekly work hours in manufacturing, factory orders for goods, and stock prices. The Conference Board maintains that leading indicators are essential to the understanding of the nature of an economic activity. Fluctuation in an economy are reflected by lagging indicators, this includes labor cost per unit, the average level of unemployment, consumer price index and others. Coincident indicators are however aggregate measures of an economic activity, examples of coincident indicators are industrial production, unemployment rate and personal income.

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