The leading, lagging and coincident economic indicators are types of the timing attribute of economic indicators. This is because they indicate the timing of their relative changes with the changes on the entire economy. Economic indicators can be defined as the statistics indicating how well the economy of a given nation is performing and future projections on the performance of this economy (Hirschey, p. 212). These statistics include GDP, unemployment rates, and inflation rates among others. Leading, lagging and coincident economic indicators are as defined below:
Leading – These economic indicators change prior to economy changes thereby signaling future changes in the economy. Examples include bond yields in the stock market, money supply and index of consumer expectations (Madura, p. 98).
Lagging – these economic indicators do not change until the economy experiences a change. The economic indicates that trail economic changes include unemployment trends, improved customer satisfaction, and profits earned by businesses.
Coincident – these indicators provide the current state of an economy since they change concurrently with the change in the whole economy. Examples include Gross Domestic Product, retail sales and income of individuals.
Considering the statistics provided in the table, Gross Domestic Product is a coincident economic indicator, which implies that it changes with the changes in the entire economy. Therefore, considering that the annual Gross Domestic Product greatly reduces from 2.8 to 1.6 in 2013, it implies that the U.S. economy is performing poorly than it did in the previous year (The Conference Board). However, economists have projected that the annual GDP would increase to 2.6 in 2014, which is 0.2 less than 2012. This indicates that the economy would be going through a recession and I would further predict that the GDP would increase to 3.0 in 2015. Real Consumer Spending is a lagging economic indicator. According to the statistics presented in the table, the consumer spending reduced in 2013 following the reduced GDP. Therefore, the projections of a 0.3 in 2014 give the same implications as those earlier presented by the GDP. The other indicators provided in this table present the same trend as the above-mentioned economic indicators. Therefore, this implies that the economy of the United States was performing better in 2012 than it currently does. However, these economic indicators show that there would be a recession in 2014 and a possible stability in the following year.
Currently, economic changes have implications on the social conditions of any nation. I have chosen the automotive industry because I am interested in working in this industry. The statistics presented in table indicate that the U.S. economy has been going through a set of fluctuations characterized by the economic indicators. These fluctuations lead to the booms and slumps that in turn affect the automotive industry. When indicators such as GDP, consumer spending and exports are projected to increase in the following year, it implies that the automotive industry would also produce increased profits. Therefore, this implies that the automotive industry, which majorly depends on real consumer spending, presents a potential investment opportunity for potential investors that are uncertain of the industry to invest their money in them. However, it is important to note that according to the statistics in the table, the industry probably recorded higher profits in 2012 than it has done this year. Nevertheless, even though the exports do not show encouraging trends, the local markets are reliable for this industry.
Works Cited:
The Conference Board. The U.S. Economic Forecast. Web. September 11, 2013
Mark Hirschey. Managerial Economics, revised edition. Stamford, Connecticut: Cengage Learning, 2008
Jeff Madura. Financial Markets and Institutions, revised edition. Stamford, Connecticut: Cengage Learning, 2012
