CFA Practice Question

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CFA Practice Question

Building permits for new private housing units is a ______ economic indicator.

A. leading
B. coincident
C. lagging
Correct Answer: A

New construction, including new home construction, is a procyclical leading indicator which is watched closely by investors. A slowdown in the housing market during a boom often indicates that a recession is coming, whereas a rise in the new housing market during a recession usually means that there are better times ahead.

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