The following table presents data on three leading indicators for a three-month period. Construct the composite index (with each indicator assigned equal weight) and the diffusion index.
Month Leading Indicator A Leading Indicator B Leading Indicator C
1 100 200 30
2 110 230 27
3 120 240 33
Just construct the diffusion index from month 2 to 3. In this problem, we have three leading indicators. The diffusion index from month 1 to 2 is 66.7 (=2/3) because two indicators move up and one moves down.