Economic Fundamentals - Economic Indicators

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. Professionals

    Series 99

    FINRA/NASAA Series 99 Exam Guide
  2. Professionals

    Series 24

    FINRA/NASAA Series 24 Exam Guide
  3. Professionals

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  4. Investing Basics

    How To Handle A Serious Dispute With Your Broker

    Find out what to do if you have a dispute with your broker.
  5. Professionals

    Hedge Funds and the Law

    Learn how hedge funds have gotten in trouble for illegal insider trading. Read about questionable high-frequency trading (HFT) strategies.
  6. Professionals

    Career Advice: Financial Analyst Vs. Investment Banker

    Read an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
  7. Professionals

    Who Needs to Take the Series 65?

    Most states require individuals to pass the Series 65 exam in order to act as investment advisors.
  8. Investing Basics

    How to Vet Financial Advisors Via BrokerCheck

    Many people research restaurants or movies, but few select brokers or financial advisors with much research. Here's how BrokerCheck can help.
  9. Professionals

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  10. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Series 79

    A examination to ensure a candidate is qualified to become a ...
  6. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  1. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Full Answer >>
  2. How can I find out if my employer is a member of FINRA?

    To find out if your employer is a member of the Financial Industry Regulatory Authority or FINRA (previously the National ... Read Full Answer >>
  3. I have a CFA designation. Do I qualify for any exemptions from FINRA licensing exams?

    Unfortunately, a CFA charter does not qualify you for any FINRA exam exemptions. Read Full Answer >>
  4. Am I qualified once I complete my FINRA certification exam?

    Even if you have completed your Financial Industry Regulatory Authority or FINRA (previously the National Association of ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. How are variable annuities regulated?

    The sale of a variable annuity is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory ... Read Full Answer >>
Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center