See: Lagging Indicator.
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Finance: What is a Coincident Indicator?0 Views
Finance Allah Shmoop what is a coincident indicator It's our
coincident indicator Zahra Siri's of measures taken from different sectors
or areas of a system that taken as a whole
show What's currently going on in that system Like what's
coincidence What's happening at the same time I think of
them as displays on your fitbit that air telling you
your heart rate respiration blood pressure and oxygen level right
now like when you're ten minutes into your thirty minute
run or painting So let's say that as you're walking
into the living room from the kitchen you just realize
your sock is suddenly wet and cold and that there's
a strange smell that vaguely resembles cat food but could
be something way worse And you see the cats linking
behind the couch as if she did something wrong You
know we're looking at you Todd These air all coincident
indicators Riel Time up to the minute information from a
variety of sources that point to an increased trend in
the cat you know blowing chunks In the world of
finance there are three different sets of indicators that economists
look at to get different perspectives on the economy and
to help understand the ebbs and flows of doe Lagging
indicators are measures that on ly change after something has
shifted in the economy There like the pain message our
brain sends when we grab a hot pan We've already
grabbed the pan and gotten the burn and our brain
is now a second later Just letting us know it's
not pleased Outside of the business world a batting average
for a baseball player is an example of a lagging
indicator as it can only be calculated after the player
has completed an at bat But it may reveal a
pattern in his overall performance at the plate that leads
to future salary negotiations Right Well unemployment rates are commonly
used Lagging indicator Typically unemployment rates shift after something like
a multinational corporation undergoing massive downsizing profits or another after
the fact type of measure often cited as a lagging
indicator leading indicators or measures that we hope will predict
an upcoming pattern or change in the economy Something like
the Consumer Confidence index Yeah how about that Well the
CC I measures how confident we consumers feel about buying
stuff and the data can be used to help predict
where and how our money might be spent but more
simply the performance of the stock market One portion of
the economy tends to lead or predict the performance of
the economy Overall when the stock market swells the economy
tends to follow that trend just a little later than
the stock market swell And then we have coincident indicators
like our fitbit on the current state of the economy
Yeah or a live security feed showing us what's going
on in the break room right this instant and we
see you can't So what kinds of measures Air considered
coincident indicators While the gross domestic product numbers or GDP
is a big one the GDP is the sum of
the value of all goods and services produced in a
country over a set time period like quarterly or yearly
or the big to Canada You know that huge country
north of the U S Had a GDP of one
point six five trillion dollars in two thousand seventeen and
a GDP of one point five four trillion in two
thousand sixteen As a snapshot of where Aki Canada is
right now in terms of producing stuff and offering services
we can see that their GDP went up a tad
over And what is that About one hundred billion dollars
in a year on a smaller scale Production figures by
week month year etcetera for various industries like Steal tech
agriculture and so on again how much are they producing
right now Retail sales for the week month year even
day Yet those tell us what's going on right now
like Amazon tracks all that stuff to the hour So
yeah coincident indicators All for sure There are scads of
other coincident indicators like personal income data payroll data revenue
data unemployment rates and average hours worked in different sectors
And housing starts stuff like that Some agencies like Federal
Reserve We'll pop a whole mess of coincident indicators together
into an index to given even larger snapshot of what's
happening right now around the world In the economy personal
income data could be things like average income based on
a family size or average income of workers in different
industries like manufacturing are mining or services Payroll data could
include a company publishing its total payroll for all its
employees as a whole as well as its pay two
different sectors like workers on the front lines middle management
and upper tie wearing management Knowing how much companies are
paying their workers lets us peek at how many people
are making a living or non living wage Well unemployment
race which are also considered lagging indicators can offer a
real time assessment of how many people are actually working
right now compared to some other time right So if
the unemployment rate is something insane like twenty two percent
like hello Spain Portugal we're looking at you We know
there's a massive problem with the economy right now in
addition to knowing that something must have happened in the
past to lead to such a bad crisis Well think
of this Is your fitbit also displaying a real time
caloric intake vitamin level body temp hunger level and thirst
level in addition to all the stuff it already does
Yeah well there's also that composite index of coincident indicators
published by the Conference Board The number of employees on
nonagricultural Hey rolls measures well the number of employees not
working in agriculture manufacturing service and so on Basically it's
how many people are employed making stuff and helping people
but not growing stuff Index of industrial production measures Well
you guessed it Stuff produced in manufacturing mining and utilities
and yes level of sales in manufacturing in trade is
the total sales of stuff that gets sold crazy right
Right Zip it ken And aggregate personal income is the
total amount of money people make Taken together these four
coincident indicators provide a pretty comprehensive snapshot of where the
economy is at any given moment Well the big takeaway
is that the data are supposed to be real time
right now this very minute day week month or year
They're supposed to tell us what's happening right now They're
coincident Coincident indicators are nothing more than a fitbit for
the economy to tell us when the heart rate is
too high or too low Or uh you know when
Ken tries to sneak out early on a Friday Oh
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