An attempt to predict economic turnaround using proposed ‘leading leading’ indicators

Abstract

This exploratory research attempted to devise an additional simple means to predict economic change in South Africa. It was envisaged that economic turnaround could be predicted at an earlier stage than the RMB/BER Business Confidence Index, the FNB/BER Consumer Confidence Index and the South African Reserve Bank’s Leading Indicator using calculus and existing economic indicators. This research used the inflection point of the rate of change of the South African Reserve Bank’s Leading Indicator as the possible predictor of possible economic change in South Africa. This calculation produced what was referred to as the Leading-Leading Indicators. The research also analysed, using graphical and statistical methods, the ability of the RMB/BER Business Confidence Index, the FNB/BER Consumer Confidence Index and the South African Reserve Bank’s Leading Indicator to predict economic change in South Africa. The research indicated that the proposed Leading-Leading Indicators were a poor predictor of economic change. It also indicated that whilst the RMB/BER Business Confidence Index, the FNB/BER Consumer Confidence Index and the South African Reserve Bank’s Leading Indicator appeared to have good predicting possibilities when analysed graphically, due to autocorrelation, statistically, these economic indicators are also poor predictors of economic change. Copyright