Economic data points that tend to change before the broader economy changes — providing advance warning of turning points in the economic cycle.
Deeper Explanation
Leading indicators signal future economic direction. Key examples: new orders (PMI manufacturing surveys), building permits, consumer expectations surveys, stock market performance, yield curve slope, and credit conditions. Ray Dalio's approach integrates multiple leading indicators to build a probability-weighted view of where the economy is heading. No single indicator is reliable in isolation — the skill is in reading the weight of evidence. A yield curve inversion, falling PMI new orders, declining building permits, and tightening credit conditions together form a compelling signal of coming slowdown, even if GDP is still growing strongly.
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