Lagging indicator

1. A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.

2. A technical indicator that trails the price action of an underlying asset and is used by traders to generate transaction signals or to confirm the strength of a given trend. Since these indicators lag the price of the asset, a significant move will generally occur before the indicator is able to provide a signal.

Investopedia Says:
1. Lagging indicators confirm long-term trends, but they do not predict them. Some examples are unemployment, corporate profits and labor cost per unit of output. Interest rates are another good lagging indicator; rates change after severe market changes.

2. An example of a lagging indicator is a moving average crossover, because it occurs after a certain price move has already happened. Technical traders use a short-term average crossing above a long-term average as confirmation when placing buy orders since it suggests an increase in momentum. The drawback of using this method is that a significant move may have already occurred, resulting in the trader entering a position too late.

Related Links:
The economy has a large impact on the market, so investors should know how to interpret these eleven indicators. Economic Indicators to Know
Find out why economists are torn about how to calculate inflation. The Consumer Price Index Controversy
This reversal pattern can make sense of the seeming randomness of market movements and improve your trading. Make The Fractal Your Friend
Don't be confused about whether a long-term trend will continue, stall or reverse. Finding The Trend With Aroon

Economic indicators that lag behind the overall pace of economic activity. The Conference Board publishes the Index of Lagging Indicators monthly along with the index of Leading Indicators and the index of Coincident Indicators. The six components of the lagging indicators are the unemployment rate, business spending, unit labor costs, bank loans outstanding, bank interest rates, and the book value of manufacturing and trade inventories.

Economic indicator that trails or lags behind the business cycle. For example, factory inventories of finished goods, interest rates, and consumer prices all tend to follow advances and declines in the business cycle, rather than move in advance of the economy, as a Leading Indicator does. The Conference Board, a business research organization, tracks a number of lagging indicators, including the bank prime rate, outstanding consumer loans, and outstanding commercial and industrial loans.

This article may need to be wikified to meet Wikipedia's quality standards. Please help by adding relevant internal links, or by improving the article's layout. (August 2008)

A lagging indicator is an economic indicator or indicator in finance that summarizes past events rather than explicitly predicting futures ones.

For example, in a performance measuring system, profit earned by a business is a lagging indicator as it reflects a historical performance; similarly, improved customer satisfaction is the result of initiatives taken in the past.

In economics

The Index of Lagging Indicators is published monthly by The Conference Board, a non-governmental organization, which determines the value of the index from seven economic variables. These components tend to follow changes in the overall economy.

The components are:

1. The average duration of unemployment (inverted)

2. The value of outstanding commercial and industrial loans

3. The change in the Consumer Price Index for services

4. The change in labor cost per unit of output

5. The ratio of manufacturing and trade inventories to sales

6. The ratio of consumer credit outstanding to personal income

7. The average prime rate charged by banks

Economists' use the Index of Lagging Indicators to validate assessments of current economic conditions.

See also

Business and economics portal

• Economic indicator
• Leading indicators

This economics or finance-related article is a stub. You can help Wikipedia by expanding it. v • d • e

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)