What is a 'Coincident Indicator'

A coincident indicator is a metric that shows the current state of economic activity within a particular area. Coincident indicators are important because they show economists and policymakers the current state of the economy. Coincident indicators include employment, real earnings, average weekly hours worked in manufacturing and the unemployment rate.

BREAKING DOWN 'Coincident Indicator'

Economic indicators can be classified into three groups based on the time period that is being measured. Lagging indicators change after the economy collectively changes, coincident indicators show the current state of the economy, and leading indicators show where the economy is going. Coincident indicators are often used in conjunction with leading and trailing indicators to get a full view of where the economy has been and how it is expected to change in the future.

The Federal Reserve publishes coincident economic indexes compiled from a variety of coincident indicators. By compiling several indicators into an index, some of the short-term noise associated with individual indicators can be eliminated, giving a more reliable measure.

What Coincident Indicators Reveal About the Economy

Value of using coincident indicators stems from a nearly real-time assessment of how the economy is performing. The metrics that fall in this category, such as turnover rates and real earnings, help to give a snapshot perspective of what is happening and how markets and economies are responding to the factors that affect their direction.

By their nature, coincident indicators will change in parallel with the cycles of industry, commerce and the economy. Taking an assessment of coincident indicators is a way to realize what effect policies and trends are actually having. For example, if an upsurge in solar panel manufacturing is reported, it may show the effect that incentive programs for alternative energy sources are having. Payroll data can show the kind of current demand companies have for employees and their present levels of productivity. If salaries have increased from a comparable period, it may indicate that companies are engaging in more business, are seeing increased revenue, and can afford to pay higher salaries to attract skilled workers.

Referring to current payroll data as a coincident indicator can also show the capacity that employees have to spend money back into the economy. Increases in salary could allow for flexible expenses to increase, as well as create the potential for luxury expenditures. This would show that the economy is robust at the present moment and what segments of it are expressing the most strength and stability.

RELATED TERMS
  1. Composite Index Of Lagging Indicators

    The Composite Index of Lagging Indicators is an index published ...
  2. Indicator

    Indicators are statistics used to measure current conditions ...
  3. Building Activity Indicators

    Building activity indicators are economic reports that provide ...
  4. Market Indicators

    Market indicators are a subset of technical indicators used to ...
  5. Advanced Economies

    Advanced economies, as described by the International Monetary ...
  6. Commodity Selection Index (CSI)

    A Commodity Selection Index (CSI) acts as a technical indicator ...
Related Articles
  1. Trading

    Trading Around Key Options Indicators

    Learn the key economic indicators to help predict market movement.
  2. Investing

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  3. Trading

    The Fundamentals Of Forex Fundamentals

    There are many economic indicators that can be used to evaluate forex fundamentals. These indicators can be an invaluable resource for any currency trader.
  4. 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?
  5. Investing

    How Negative Interest Rates Can Affect Currencies

    Analyze the relationship between interest rates and currency devaluation. Examine the impact of negative rates and how further declines could affect currencies.
  6. Trading

    How to Build a Trading Indicator

    Wondering how Ralph Nelson Elliott and W.D. Gann built their trading tools? Here are the basics of constructing an indicator.
RELATED FAQS
  1. What Economic Indicators are Especially Important to Oil Traders?

    Learn how economic indicators, such as crude inventories and production levels, are used by oil traders and investors to ... Read Answer >>
  2. What are the top technical indicators used for range-bound trading strategies?

    Learn how to identify when a market is range-bound and what some of the technical indicators are that work best for trading ... Read Answer >>
  3. What is GDP and Why Is It So Important To Investors?

    The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. What does ... Read Answer >>
  4. What do the bracketed numbers following a technical indicator mean?

    In technical analysis, it is common to see a series of numbers following a given technical indicator, usually in brackets. ... Read Answer >>
  5. What economic indicators do oil and gas investors need to watch?

    Leading indicators for oil and gas investments are centered on the levels of production, consumer demand and inventory levels ... Read Answer >>
Trading Center