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. 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.
  2. 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.
  3. Trading

    How to Build a Trading Indicator

    Wondering how Ralph Nelson Elliott and W.D. Gann built their trading tools? The basics of constructing an indicator.
  4. Insights

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  5. Insights

    A Look At China's Growing Influence On The World

    With the second-largest economy in the world, China has significant (and growing) influence on the global economy. But how is that impact figured?
  6. Insights

    Top Ten US Economic Indicators

    We explain the most important economic indicators for the US economy.
  7. Insights

    Eyeing China? Consider These Economic Indicators

    If you're considering investing in China and want to know when to buy, sell, hold or stay away, consider these economic indicators.
Frequently Asked Questions
  1. What is a trade deficit and what effect will it have on the stock market?

    Learn what is a trade deficit is, also known as net exports, and what effect they have on the stock market.
  2. What are soft dollars?

    The term 'soft dollars' refers to mutual funds making in-kind payments to their service providers; for instance, by passing ...
  3. How often do exchange rates fluctuate?

    Learn how exchange rates fluctuate. Exchange rates float freely against one another, which means they are in constant fluctuation. ...
  4. What is the formula for calculating earnings per share?

    Learn how to calculate earnings per share and why it's an important gauge in determining a stock’s value and a company's ...
Trading Center