Definition of Economic Development Indicators

Industrial production is an example of an economic indicator.

Economic development indicators are crucial for determining the current state of the economy in a country and for predicting future economic developments. Four distinctive indicators are recognized by economists --- leading, lagging, coincident and local indicators are crucial for deriving a conclusion on the current state of economic stability in a state and for establishing short-term economic predictions.

Leading Indicators

Leading indicators are the elements that change before the economy and have great economic influence. Since they are usually variables, they are quite useful for determining economic and financial stability in short-term economic predictions. Such factors are money income from the stock markets and index of consumer expectations. The Conference Board of the U.S., for example, emphasizes that the higher consumer confidence is, the higher the standard of living is, which is essential for a stable economy.

Lagging Indicators

Lagging indicators are the indicators that change after the economy. If the economy has gone weaker, lagging indicators would also weaken with time. Such indicators are the duration of employment in different private and public sectors, the change in labor costs and the average prime rate charged by banks. If the banks request higher interest when lending money, this means that the public needs financing that it could not obtain through employment, which indicates a weakened economy. The National Bureau of Economic Research concludes in its report that such indicators are most efficient in determining the current state of economic activity in a country.

Coincident Indicators

Coincident indicators are the indicators that change in rhythm with the economy. These indicators are measured in order for a conclusion on current changes of the economy to be established. Such indicators are the gross domestic product (GDP), industrial production and retail prices. For example, data from Bloomberg Magazine shows that retail prices in the UK have risen significantly after the increase in the value added tax (VAT) in the country in the beginning of 2011. This brought negative economic development to the state as a deeper financial recession was inflicted.

Local Indicators

Local indicators are indicators that are used for making predictions about the economic development of a particular area. Many local indicators can be used for such conclusions --- average pay-rates in the area in question and average rent prices, for instance. For example, data from the National Public Radio shows that among the most commonly used local indicators in the San Francisco area is the rent of a one-bedroom flat on Craigslist.

References

• "The Conference Board": Business Cycle Indicators Handbook;
• "The Conference Board": A More Timely and Useful Index of Leading Indicators; Robert H. McGuckin et al.;
• "The Conference Board": US Economic Indicators; September 2008
• "National Public Radio": A Fresh Approach To Measuring The Economy;
• "Center for Colorado Policy Studies"; Local Indicators of Quality of Life; Daphne Greenwood