Legal Definitions - lagging economic indicator

Definition: A lagging economic indicator is a statistical measure that describes the state of the economy or predicts its direction. It responds to the direction of the economy, meaning it changes after the economy has already started moving in a particular direction.

Example: New-home sales are a lagging economic indicator. When the economy is doing well, people have more money to spend, and they may choose to buy new homes. However, it takes time for new homes to be built and sold, so the increase in new-home sales will only be seen after the economy has already started to improve.

Explanation: The example illustrates how new-home sales are a lagging economic indicator because they respond to the direction of the economy. When the economy is doing well, people have more money to spend, and they may choose to buy new homes. However, it takes time for new homes to be built and sold, so the increase in new-home sales will only be seen after the economy has already started to improve. This means that new-home sales are not a good predictor of the future direction of the economy, but rather a reflection of its past performance.