Which forecasting approach uses leading economic indicators to predict trends?

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

Answer: (B)

Relational forecasting relies on the relationship between the target variable and its predictors, including leading indicators. By modeling how changes in these indicators move ahead of the variable you want to forecast, you can predict trends earlier than you would from the variable’s own history alone. For example, economists might forecast GDP growth by relating it to indicators such as new orders, consumer confidence, and stock market behavior, which tend to turn before GDP does. Time-series approaches, instead, base predictions on the past values of the target variable itself, not on external indicators. Judgemental forecasting depends on expert intuition, and the Delphi technique gathers expert opinions through structured rounds rather than building empirical indicator-based models.