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What are lagging indicators?

Lagging indicators are measurements of the economy that often continue an upward trend after the peak of the economy has been signaled by other economic indicators or continue a downward trend after a rise in economic growth has taken place. Lagging indicators include business expenditures for new plants and equipment, consumers’ installment credit, short-term business loans and the overall value of manufacturing and trade inventories. For example, it is often difficult to cancel contracts at short notice, so although sales have slowed down for the retail sector businesses can not refuse supplies ordered prior to the downturn but delivered after the peak in sales. These indicators can confirm or deny the trend shown by the leading indicators, which tend to peak and trough before the overall economy (e.g. housing starts, new orders of durables and spot commodity prices).