An indicator is any business or economic metric (variable) believed to be informative about another metric of interest to the decision-maker.

A leading indicator is a metric whose outcome is known in advance of the metric the decision-maker wants to forecast.

Building Blocs Data: Maintenance and real time availability of a global data warehouse containing all relevant indicators that capture decision tools available to market participants.  

Target: Leading indicators are selected after the metric to be forecasted - the target - is properly identified and quantified.  Targets of interest to decision-makers are either macro-centric such as GDP, industrial, regional and statewide metrics or, more desirably, company-specific metrics such as sales of a product line.

Mining: Detection through an efficient mining process, which implements criteria selection for target metrics from the data warehouse by using a modern and advanced statistical framework. Real time availability, high lead-time length and historical consistency are cornerstones of selection criteria.

Assembling: The collected set is then filtered, systemized and synthesized by sophisticated algorithms to a “composite” leading indicator to be ultimately used in business forecasting.
 

A composite forward-looking indicator is built to drive company metrics, thus providing predictive intelligence of the current and future state of the environment surrounding a market of interest.

The future influence of the composite indicator on target metrics is known in advance, an advantage over other forecasting techniques where it is necessary to first generate forecasts for the drivers of the target.  Forecast accuracy with this technique is not based on forecast accuracy of drivers. 

Barometric forecasting will only provide reasonably accurate short-term forecasts. The forecast horizon is limited to the length of the composite indicator’s leading time.

Indicator based forecasting is the best available forecasting technique to identify future “turning-points” in the behavior of a target metric. Leading indicators are uniquely qualified to provide in advance the timing of changes in the direction of business activity in any market from growth to recession to recovery and back to growth.