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Lagging Indicator

A lagging indicator is a financial or economic metric that trails behind changes in the overall economy, reflecting historical data and confirming trends after they have occurred.

What is a lagging indicator?

Lagging indicators are statistics that reflect changes after the economy has already moved in a particular direction, used to anticipate future economic conditions. They are typically less volatile than leading indicators and serve to confirm or support leading indicators.

How to calculate a lagging indicator?

A lagging indicator assesses historical performance, providing insights into whether a trend is continuing or reversing, indicating the economy's current status. Common lagging indicators include the unemployment rate, inflation rate, and GDP, calculated by using historical data to compute averages or medians.

Examples of lagging indicators

Lagging indicators, such as moving averages, money flow indicators, MACD, and RSI, help identify trends after they have commenced. They validate or forecast future movements in securities or markets.

Examples of leading indicators

Leading indicators, like the unemployment rate, Consumer Price Index (CPI), Producer Price Index (PPI), and Purchasing Managers Index (PMI), forecast future economic activity, offering insights into the economy's future performance.

The difference between a lagging indicator and a leading indicator

Lagging indicators measure past economic or company performance, while leading indicators predict future performance.