As the name "Economic Indicators" depict, these are the bits and pieces of financial data which is regularly published by both the private sector as well as the government agencies. This financial data or statistics assist the market observers in monitoring the pulse of the economy. There are a number of indicators and they do not count or contribute equally towards the change in the economy. The two major types of Economic Indicators are Leading Indicators and Lagging Indicators:
Leading Indicators are the computable part of economy, BEFORE the economy of a country commences to pursue a particular inclination. These indicators are employed for prediction of the alteration in the economy. It is not a must that they are always precise. An example of the leading indicators is the bond yields, which are considered to be a good leading indicator. After studying these bond yields thoroughly, the traders can predict and speculate rising or declining trends in the economy. The leading indicators give a signal for buying before a fresh trend starts to take place or a reversal begins to occur. If caught correctly – at the correct time, the entire trend can be made use of to make money and get rich. If a trader uses the leading indicators for trading, he is likely to come across a lot of phony drifts. Leading indicators are famous for their fake signals.
Lagging Indicators are the measurable factor of economy AFTER the economy of a country already initiates to follow a particular tendency. Normally, the lagging indicators confirm the long-term drifts in the economy. They do not predict the trends but just confirm them. Unemployment, interest rates and labor cost per unit of output are some of the chief examples of such indicators. Lagging indicators give less false signals as they provide the signals only after the change in price is evidently shaping a trend.