The actual measures used as lagging economic indicators are collected by several different government agencies and private groups, including the Bureau of Labor Statistics and the Federal Reserve System. These measures are then compiled by economists and number crunchers at The Conference Board.

Seven Measures

Each of these seven individual indicators is useful in its own right, but when combined as a composite measure, even greater insight into the business-cycle activity is achieved.

How They Track

Lagging Indicators

First, take note of the somewhat jagged red line displayed in the exhibit. It provides a hypothetical tracking of real gross domestic product over several months. Two peaks are evident, labeled with P. One trough is displayed as well, marked by T.

A click of the [Lagging] button reveals a thin purple that rises and falls a few months after real GDP rises and falls. The purple lagging indicator line parallels movements of the red real GDP line, but it does so after the fact.

Looking Back

Practical and Theoretical

The Consumer Price Index, for example, is a lagging indicator that captures a late cause-and-effect connection. Consumer prices are slow to change in response to aggregate economic activity. These prices change as a result of other events occurring. Consumer prices, for example, are likely to rise only after the economy has passed a business-cycle trough and moved headlong into a robust expansion. Alternatively, consumer prices are likely to fall only several months after the economy has reached a business-cycle peak and dropped into a contraction.

The state of the economy will inevitably have an impact on consumer prices, just not immediately. It takes time for the complex series of cause-and-effect links to show up in the Consumer Price Index.

The Other Two

• Leading: These are ten measures that generally indicate business-cycle peaks and troughs three to twelve months before they actually occur. Leading economic indicators predict where the economy is headed in the near future, providing enormous assistance to consumers, business leaders, and policy makers who need to anticipate and plan for future economic conditions.


• Coincident: These are four measures that indicate the incidence of business-cycle peaks and troughs at the time they actually occur. Coincident economic indicators are a primary source of information used to document "official" business-cycle turning points.