TURNING-POINT PREDICTION FOR THE UK USING CSO LEADING INDICATORS

This paper examines the performance of the CSO's leading indicators fo r predicting turning points in the UK growth cycle. Three methods for extracting a signal are considered: a simple mechanical rule based upo n the direction of consecutive movements in the leading indicator and two probabilistic models, namely a standard Bayesian procedure and the sequential probability model. The results suggest that usefulness of the shorter leading index is limited and typically outperformed by nai ve, non-indicator methods. The longer leading index performs only slig htly better showing a lead time of between four and six months in rela tion to the reference cycle.