The Leading Index broadly tells us where the economy is going. The Coincident Index broadly tells us where the economy is now. The Lagging Index validates the signal of the Leading and Coincident Indices.

The leading index is comprised of 7 indicators. The coincident index is comprised of 6 indicators. A diffusion index tells us what proportion of these indicators increased. A value of 100% indicates that all indicators forming the index increased; a value of 50% indicates that only half the indicators increased; a value of 0% indicates that none of the component indicators increased. For this reason, a diffusion index is helpful in determining whether the overall trend is broad-based, or being driven by a minority of the components.