An OECD Composite Leading Indicator, as the name suggests, is constructed from a small number of economic time series that have similar cyclical fluctuations to those of the business cycle, and moreover have a tendency to turn earlier than the business cycle. The business cycle is typically represented by movements in GDP around its long term trend.

Up till March 2012, the OECD system of composite leading indicators has used the index of industrial production (IIP) as a reference series, which is available on a monthly basis and has also, historically at least, displayed strong co-movements with GDP.

In 2011 however the OECD has investigated whether methods could be applied to generate monthly estimates of GDP based on the official quarterly estimates.  This investigation has demonstrated that it is feasible to do so, whilst also continuing to provide high quality results. From April 2012 therefore the OECD has switched to using GDP as the reference, ceasing to rely on the IIP as an intermediate target.  The change means that the timeliness of the reference series decreases by approximately two months but the timeliness of the CLI is not affected and the change brings improved clarity and interpretability of the CLIs; as the CLI-based projections are directly readable as GDP projections. More detailed information explaining the changeover from the IIP to GDP as the reference series is available at: http://www.oecd.org/dataoecd/35/27/49985449.pdf

The GDP index derived from chained volume estimates in US dollars converted using 2005 Purchasing Power Parities (PPPs) of GDP and are linearly interpolated and smoothed.