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BUS 101: Leading Economic Indicators

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#1

In sections 1.2 it refers us to a book in pdf form. On page 82 of the book it’s discussing examples of leading economic indicators and one indicator is “Manufactures’ new orders, consumer goods/materials”. My question is, How does the value of new orders affect the level of unfilled orders and inventory? If the value of the new orders is on the rise does that suggest that orders are being fulfilled and inventory is running low, indicating an increased consumer demand for said goods/materials?


#2

Yes, I think that “value of new orders” is a way of measuring and expressing that new orders have increased in number or scale, i.e. there is an increased demand on production, which will immediately increase unfilled orders and decrease inventory.

Wikipedia (article “Economic Indicator”) expresses it a little bit more clearly than in the book:

Manufacturers’ new orders for consumer goods/materials — This component is considered a leading indicator because increases in new orders for consumer goods and materials usually mean positive changes in actual production. The new orders decrease inventory and contribute to unfilled orders, a precursor to future revenue.