The Composite Leading Indicator (CLI) is a tool composed of a combination of various economic indicators, such as business sentiment, consumer confidence, and industrial production, which are used to forecast future economic activity. The CLI is normalized to fluctuate around its long-term average of 100.
The CLI is designed to provide early signals of turning points in business cycles. Its relationship with recessions is that a decline in the CLI is often seen as a warning of a potential downturn in the economy and can signal that a recession may be on the horizon. It is worth noting that CLI alone is not enough to predict a recession and other indicators should be consulted to confirm the recession. However, it can provide valuable insight into the direction of the economy and help anticipate changes in economic activity. Video by Benjamin Cowen.
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