What Are
Economic Indicators?

Economic indicators are statistics that provide insight into the overall health and direction of an economy. They form the foundation of fundamental analysis, since nearly all other areas of this discipline — from interest rates to employment data — are built on interpreting these indicators.

This guide introduces what economic indicators are, the general categories they fall into, and how they're typically used.

What Is an Economic Indicator?

An economic indicator is a piece of statistical data, usually released on a regular schedule by a government agency or institution, that reflects some aspect of economic activity. Indicators can cover areas such as production, consumption, trade, prices, and employment.

Because economies are complex, no single indicator provides a complete picture on its own. Analysts and traders typically look at a range of indicators together to form a broader view of economic conditions.

Leading, Lagging and Coincident Indicators

Economic indicators are often categorized by their timing relative to the broader economic cycle. Leading indicators tend to change before the economy as a whole shifts direction, and are sometimes used to anticipate future trends. Lagging indicators change after the economy has already shifted, confirming trends that have already begun. Coincident indicators move at roughly the same time as the overall economy, reflecting current conditions.

Common Types of Economic Indicators

Economic indicators cover a wide range of categories, including growth measures (such as GDP), price measures (such as inflation indices), labor market measures (such as employment and unemployment data), trade measures (such as import/export balances), and confidence measures (such as consumer or business sentiment surveys).

Several of these — inflation and employment data specifically — are explored in their own dedicated lessons later in this unit.

Using Economic Indicators in Context

Because indicators are interconnected, it's generally more useful to consider several together rather than relying on any single figure in isolation. A strong GDP reading alongside weakening employment data, for example, tells a different story than strong readings across both categories.

As covered in the earlier lesson on reading an economic calendar, market reaction to any single indicator release often depends more on how the actual figure compares to the forecast than on the raw number itself.