What is a 'Coincident Indicator'

A coincident indicator is a metric which shows the current state of economic activity within a particular area. Coincident indicators are important because it shows 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 as a whole 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. Business Cycle Indicators (BCI)

    Business cycle indicators are a composite of leading, lagging ...
  2. Economic Indicator

    An economic indicator is a piece of economic data, usually of ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy ...
  4. Lagging Indicator

    1. A measurable economic factor that changes after the economy ...
  5. Hybrid Indicator

    A technical indicator that combines core elements of chart analysis ...
  6. Market Indicators

    Market indicators are a subset of technical indicators used to ...
Related Articles
  1. 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.
  2. Trading

    Trading Around Key Options Indicators

    Learn the key economic indicators to help predict market movement.
  3. 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.
  4. 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.
  5. Insights

    Economic Indicators To Know

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

    Why You Need To Know About S&P Dow Jones Indices

    This Article introduces the S&P Dow Jones Indices (SPDJI), available variant categories and index trading advantages
  7. Insights

    Where To Find Economic Indicator Data For Brazil

    Once an emerging economic powerhouse, the Brazilian economy is now struggling. Here is the list of primary economic indicators and sources to get Brazil's economic indicators.
  8. Insights

    The Canadian Economy, At A Glance

    The 12 economic indicators described here together provide a comprehensive picture of the state of the Canadian economy.
RELATED FAQS
  1. What is a common strategy traders implement when using the Money Flow indicator?

    Learn a common trading strategy traders implement with the money flow indicator to identify profitable trade entry and exit ... Read Answer >>
  2. What impact does a higher non-farm payroll have on the forex market?

    The employment report, released by the Bureau of Labor Statistics, is an economic indicator that contains data on the employment ... Read Answer >>
  3. What are the most common market indicators to follow the European stock market and ...

    See which market indicators and major market indexes are used most frequently by traders and analysts to measure the European ... Read Answer >>
  4. What are some advantages of a market economy over other types of economies?

    Learn what a market economy is, the main assumption behind a market economy and some important advantages it has over other ... Read Answer >>
  5. What are the most common market indicators to follow the Mexican stock market and ...

    Learn the primary stock market indicators for the Mexican stock market and the leading economic indicators analysts use to ... Read Answer >>
  6. What economic indicators are especially important to oil traders?

    Economic indicators such as crude inventories and production levels are used by oil traders and investors to understand the ... Read Answer >>
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center