Economic indicators are a range of reports, indices and statistics, regularly published by government and private sectors. The analysis of these indicators allows traders to better understand economic performance and predict future trends.
Economic indicators can be classified into three categories according to their usual timing in relation to the business cycle: leading indicators, lagging indicators and coincident indicators.
Leading indicators usually change before the economy as a whole and are useful as short-term predictors of the economy. Lagging indicators usually change after the economy and typically lag a few quarters of the year. A coincident index changes at approximately the same time as the whole economy and may be used to retrospectively identify the dates of peaks and troughs in the economic cycle.
Although economic indicators can be used to identify the health of a given currency it is important to recognise that the relative importance of certain indicators varies from country to country. Developments in one country can also have an effect on other economies and their currencies.