Analytical framework for industry-oriented leading cyclical indicators: Empirical investigation of EU economic cycles

Abstract

This research developed an analytical framework for industry-oriented leading cyclical indicators (CII), focusing on monitoring and forecasting economic cycles within the European Union (EU). Various methodologies for constructing these indicators were examined through an exhaustive sector analysis. A salient conclusion drawn is the non-feasibility of a one-size-fits-all composite leading indicator for all EU members. It underscores the imperative to tailor these indicators in congruence with the unique industrial characteristics of each country. The study provides empirical evidence that countries like Denmark, Germany, Austria, Estonia, Lithuania, Latvia, Finland and Sweden can benefit from high-caliber composite leading indicators tailored to their economies. Our analysis suggests that GDP is a more robust metric than the Industrial Production Index for predicting economic cycles for the EU countries.