There are various economic activities that one can look at to try to identify where the economy is in the business cycle. An individual can also use these economic indicators as a way to try and predict the direction of the economy in the future. The 3 types of economic indicators are:

  • Leading indicators
  • Coincident indicators
  • Lagging indicators

Leading Indicators

Leading indicators are business conditions that change prior to a change in the overall economy. These indicators can be used as a gauge for the future direction of the economy. Leading indicators include:

  • Building permits
  • Stock market prices
  • Money supply (M2)
  • New orders for consumer goods
  • Average weekly initial claims in unemployment
  • Changes in raw material prices
  • Changes in consumer or business borrowing
  • Average work week for manufacturing
  • Changes in inventories of durable goods

Coincident Indicators

Changes in the economy cause an immediate change in the activity level of coincident indicators. As the business cycle changes, the level of activity in coincident indicators can confirm where the economy is. Coincident indicators include:

  • GDP
  • Industrial production
  • Personal income
  • Employment
  • Average number of hours worked
  • Manufacturing and trade sales
  • Non agricultural employment

Lagging Indicators

Lagging indicators will only change after the state of the economy has changed direction. Lagging indicators can be used to confirm the new direction of the economy. Lagging indicators include:

  • Average Duration of Unemployment
  • Corporate profits
  • Labor costs
  • Consumer debt levels
  • Commercial and industrial loans
  • Business loans
Economic Policy And The Federal Reserve

Related Articles
  1. Insights

    What is a Leading Indicator?

    A leading indicator is a measurable economic factor that tends to change right before the economy starts to change.
  2. Trading

    Trading Around Key Options Indicators

    Learn the key economic indicators to help predict market movement.
  3. Insights

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  4. Investing

    CPI, Beige Book and Other Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  5. Trading

    4 Key Indicators That Move The Markets

    Find out what reports to watch in order to anticipate and react to market movements.
  6. Insights

    Explaining Economic Indicators

    Investors use economic indicators to gauge investment opportunities and judge the overall health of an economy.
  7. Trading

    The Fundamentals Of Forex Fundamentals

    Charting is not the only way to analyze the foreign-exchange market. Learn how to apply fundamental analysis to the economic indicators.
  8. Trading

    What is an Indicator?

    Investors use indicators to measure economic conditions and forecast financial and economic trends.
Frequently Asked Questions
  1. When are Beneficiaries of a Will Notified?

    Learn when the beneficiaries of a will must be notified, and understand how this requirement varies depending on whether ...
  2. Why Does Larry Page Pay Himself a $1 Salary?

    Google co-founder Larry Page continues to take an annual salary of only $1 as chief executive officer.
  3. What is Common Stock and Preferred Stock?

    Learn about the differences between common and preferred shares. Explore situations where preferred shares have more favorable ...
  4. Can CareCredit be Used for Family Members?

    Learn more about the available options that CareCredit offers to pay for out-of-pocket medical procedures with little to ...
Trading Center