Uses and Limitations of Economic Indicators

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Different economic indicators are used in different stages of assessing the business cycle of an economy. There are three broad categories of indicators, namely, leading indicators, lagging indicators, and coincident indicators.

Leading indicators tend to change direction before the cycle goes into expansion at the trough or before contraction at the peak. They can be used to make predictions about events in economy and tend to change ahead of that event. The housing market, retail activity, inventory levels and sales are some examples of leading indicators.

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