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  • Writer's pictureKen Holman

What Are Leading and Lagging Economic Indicators?


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Economic indicators are statistics released by the government, by non-profit organizations, and by private companies that share information about the economy. These indicators are broadly classified based on their timing. Leading indicators provide an idea of what economic conditions are coming in the near future. Lagging indications show what has happened in the economy in the recent past. 


Leading economic indicators are statistics that give insights into economic health, business cycle stages, and status of consumers within the economy. They indicate changes in the economy before the economy shows any signs of change. Leading indicators are used by investors to help predict the direction of the economy and to make investment predictions. 

Leading indications include:


  • Unemployment claims

  • Average earnings

  • Consumer confidence

  • Measures of consumer expectations 

  • Consumer goods and materials spending

  • Manufacturer shipments

  • Inventories

  • Factory orders

  • Spending on non-defense capital goods, which includes manufacturer shipments, inventories, and orders

  • Building permits

  • New private housing

  • Interest rates, including the federal funds rate and spreads

  • Changes in the money supply, M2, by the Fed

  • Inventory changes

  • ISM manufacturing index, including supplier deliveries, imports, production, inventories, new orders, new export orders, order backlogs, prices and employment

  • Stock prices

  • The S&P 500 index


Changes in these numbers reflect what near-term changes are likely to occur in the broader economy. For example, the Consumer Confidence Index (CCI) is based on the Consumer Confidence Survey by the Conference Board, which reflects business conditions and potential future developments. The report highlights consumer attitudes, spending intentions, and expectations for stock prices, inflation, and interest rates. 


Leading economic indicators show signs of change before the economy begins to show any material changes in their corresponding lagging indicators. Leading indicators can signal major changes. If these indicators fail to meet expectations, it can reflect either a bearish trend or a bullish trend ahead. These indicators are used by the Federal Reserve to make monetary policy decisions. 


Leading indicators can be used individually or in tandem to give a broader picture of the U.S. economy. 


Lagging economic indicators are measurable factors that change after the economic conditions or financial trends have already started to shift. They are used to confirm patterns or trends in the market after the fact. Commonly used lagging indicators include:


  • Net sales

  • Operating income

  • Return on investment

  • Real GDP growth

  • Unemployment rate

  • Corporate profits

  • Labor cost per unit of output

  • Retail sales

  • Average duration of unemployment

  • Average prime rate charged by banks

  • Consumer Price Index for Services


The U.S. Conference Board publishes a monthly index of lagging indicators along with its index of leading indicators. Leading indicators look forward. Lagging indicators look backwards.

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