Relational approach in forecasting is characterized by the use of leading indicators. Which option best matches this?

• A. Time Series Approach
• B. Judgemental Approach
• C. Delphi Technique
• D. Relational Approach

Answer: (D)

Leading indicators are variables that move before the thing you’re forecasting, signaling its future direction. The relational forecasting approach builds models that link the forecast variable to these predictors, capturing how changes in indicators like consumer confidence, unemployment claims, or housing starts influence the target variable. This focus on causal or correlational relationships with predictors sets it apart from methods that rely on the history of the variable itself (time series) or on expert opinion (judgemental approaches like the Delphi technique). So the method that best matches using leading indicators is the relational approach.