What is a Lagging Indicator?

Lagging indicators are indicators that show their effect only after economic fluctuations occur. They are a confirmation of peaks and valleys that have appeared in the overall economic operation. They can verify the signals displayed by the leading indicators. ^[1]

Lag indicator

A lagging indicator also refers to the time lag of the indicator relative to fluctuations in the national economic cycle. For example, the peak or trough of an indicator is several months behind the peak or trough of the national economic cycle. This indicator is called a lagging indicator. Changes in such indicators generally lag behind changes in the national economy, such as unemployment rates, inventory levels, and the size of banks' uncollected loans. In an economic sense, this indicator has a positive lag relationship with its benchmark cycle; compared with the benchmark cycle peak, the peak lags more than 3 months. Such as urban and rural residents' savings, commodity inventory, total wages and other indicators.

China's lagging indicators include six items: national fixed asset investment, commercial loans, fiscal revenue and expenditure, total retail price index, consumer product price index, and market trade price index. Lagging indicators help verify whether the economic trends represented by leading indicators are real.