Understanding Economic Indicators: How to Interpret and Use Them to Make Trading Decisions
Types of Economic Indicators
- Leading indicators predict the future direction of the economy, such as the stock market, consumer confidence, and housing permits.
- Lagging indicators follow the trends in the economy and are useful for confirming trends, such as unemployment rates and GDP.
- Co-incident indicators provide a real-time snapshot of the economy and are useful for evaluating the current state, such as retail sales and industrial production.
- Sentiment indicators show market participants’ emotions and beliefs, such as surveys of consumer confidence or business sentiment.