What Is a Lagging Indicator?

A laggi🧜ng ind🌟icator is an observable or measurable factor that changes sometime after the economic, financial, or business variable with which it is correlated changes. Lagging indicators confirm trends and changes in trends.

Lagging indicators can be useful for gauging the trend of the general economy, as tools in business operations and strategy, or as signals to buy or sell assets in finan💮cial markets.

Understanding Lagging Indicators

A lagging indicator is a financial sign that becomes apparent only after a large shift has taken place. Therefore, lagging indicators confirm long-term trends, but they do not predict them. This is useful because oftentimes, many leading indicators are volatile, and short-term f🐲luctuations in them can obscure turning points or lead to false signals.

Looking at lagging indicators is one way to confirm whethꦬer a shift in the economy has actually occurred.

Economic Lagging Indicators

The U.S. Conference Board a monthly index of lagging indicators along with its index of 澳洲幸运5官方开奖结果体彩网:leading indicators. These include lag🍨🥂ging indicators such as the average duration of unemployment, the average prime rate charged by banks, and the change in the Consumer Price Index for Services.

Some general examples of lagging indicators include the unemployment rate, corporate profits, and labor cost per unit of output. Interest rates can also be good lagging indicators since rates change as a reaction to severe movements in the market. Other lagging indicators are economic measurements, such as 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP), the 澳洲幸运5官方开奖结果体彩网:consumer price index (CPI), and the 澳洲幸运5官方开奖结果体彩网:balance of trade (BOT).

These indicators differ from leading indicator꧒s, such as retail sales and the stock market, which are used to forecastꦦ and make predictions.

Business Lagging Indicators

Lagging indicators in business are a kind of 澳洲幸运5官方开奖结果体彩网:key performance indicator (KPI) which measure business performance after the fact, such as sales, customer satisfaction, or revenue churn. They can🌠 be difficult or impossible to influence directly.

Because they are at least partially the outcome of business decisions and operations, they provide insight into the results achieved by how a business is being run. Businesses can also track leading indicat💜ors that measure internal performance, such as customer eng𒊎agement or employee satisfaction, which can be influenced more directly and lead to changes in lagging indicators. 

Businesses can use business intelligence tools such as dashboards to measไur꧟e, track, and compare various leading and lagging indicators of performance.

Technical Lagging Indicators

Another type of lagging indicator is a technical indicator that lags the current price of an asset, which occurs after a certain price move has already happened. One example of a lagging 澳洲幸运5官方开奖结果体彩网:technical indicator is a 澳洲幸运5官方开奖结果体彩网:moving average crossover.

Unlike other lagging indicators that compare different economic variables to each other, a technical indicator compares the value of a given variable to its own moving average over a given interval or other historical characteristics. 澳洲幸运5官方开奖结果体彩网:Technical traders use a short-term average crossing above 💯a long-term average as confirmation when placing buy o▨rders since it suggests an increase in momentum.

The drawback of using this method in asset trading is that a significant move may have already occurred, resulting in the trader entering a position too late. Note tha⛎t similar technical approaches can be applied to economic indicators such as GDP or other measures of economic performance, as lagging indicators to confirm a change in trend.

The Bottom Line

Lagging indicators are correlated to economic, financial, or business inputs. They are based on historical datꦚa, which means they change afꩵter a change has already happened in those inputs. This is different from leading indicators, which provide information about likely future changes.

Economic lagging indicators, such as the unemployment rate or inflation, provide information about past economic changes. Business lagging indicators usually provide information about how a change in management or strategy has impacted performance. Technical indicators are used in investing. They provide information about market trends, momentum,🃏 and the prices of securities.