Leading Indicators for the Service Sector

Abstract

Since the service sector currently accounts for a large and growing share of U.S. economic activity, we have undertaken to develop indicators that throw light on its current status and future prospects. A composite coincident index of aggregate economic activity in the service sector is constructed, and a growth-cycle chronology is identified based on growth rates in this index and in its components. Then several macroeconomic leading indicators of service are identified, and from them a composite leading index is constructed. The growth rate in this index is found to give advance warnings of major swings in the growth of the service sector.