Economic Indicator
A statistic that measures the state of the economy, classified as leading, lagging, or coincident to signal future, past, or current conditions.
What is Economic Indicator?
An economic indicator is any measurable statistic that provides information about the current state or future direction of an economy. They are classified into three types: leading indicators change before the economy changes (predicting future trends), such as the yield curve, building permits, and the stock market; lagging indicators change after the economy changes (confirming established trends), such as unemployment rate and corporate profits; and coincident indicators change simultaneously with the economy, such as GDP and industrial production. Economic indicators are released by government agencies (BLS, BEA, Census Bureau), central banks, and private organizations. Investors, businesses, and policymakers use them to anticipate business cycle shifts, adjust portfolios, set monetary policy, and plan corporate strategy.
Example
The Conference Board's Leading Economic Index (LEI) combines 10 leading indicators — including average weekly manufacturing hours, jobless claims, new orders for consumer goods, stock prices, and the yield spread — into a single composite index. In 2022–2023, the LEI declined for 24 consecutive months, its longest streak since the Great Recession, signaling a recession that ultimately did not materialize on schedule — illustrating both the value and the limitations of leading economic indicators as forecasting tools.