WHAT ARE THE DIFFERENT TYPES OF ECONOMIC INDICATORS?

Most investors, traders, and economists constantly watching for the indications or signs for what’s ahead for the economy and its financial markets. In doing so, they look up for different types of economic indicators that are tracked from month to month and week to week. There are different types of economic indicators such as Gross Domestic Product (GDP), Interest Rates, Consumer Price Index (CPI), Wholesale Price Index, Trade Balance, Unemployment Data, and Core Retail Sales among others. All these indicators play a different role in indicating the signs of the economy thus, classified into three different categories on the basis of their nature: 1. Leading Indicators 2. Lagging Indicators 3 . Coincident Indicators LEADING INDICATORS: Leading indicators are economic indicators that help economists and investors who are looking to anticipate future market trends and where the economy is heading? These indicators point towards possible future events. For instance, ‘stock market’ is a leading economic indicator that indicates the future direction of the market. If the earnings estimate is up then it means the market is going to thrive, vice-versa. LAGGING INDICATORS: Unlike leading economic indicators, the lagging indicators help in confirming the direction of the ongoing trend. It also helps in identifying long-term trends. Gross Domestic Product (GDP) is the lagging economic indicator that measures the total production of goods and services within the country. The GDP output tells where the market is moving ahead? COINCIDENT INDICATORS: Coincident indicators are quite simple. They are analyzed as they occur. Coincident indicators are the numbers that have a substantial impact on the economy of a country. Personal income is an example of a coincident indicator. Even the Gross Domestic Product (GDP) is also a coincident indicator.

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