What do leading coincident and lagging economic indicators have to do with manufacturing?

What do leading coincident and lagging economic indicators have to do with manufacturing? Well manufacturing companies need to know these statistics in order to make better decisions for their business.

In manufacturing and in the economy there are several different statistics that are used to measure economical changes and effects. These are usually tracked monthly and are then measured to view the movement that occurs up and down in the patterns.

In those statistics you will find that there is a measurement of lagging economic indicators. This is part of the economic cycle that is tracked to see the business cycle activity. Along with this you will find the leading coincident economic indicators and the leading economic indicators.

Lets take a look at what each of these indicators are and how they work.

Starting with the lagging economic indicators. They give the business leaders, the consumer and the people who make necessary policies the monthly tracking statistics for the monthly business cycle.

The way the lagging economic indicators usually work is when the economy declines in one month, then the lagging indicators are likely to decline in three to twelve months.

There are seven parts of the lagging economic indicators that are pulled together to give the needed information.

1. Labor costs. These are costs that are per unit that is the output in manufacturing
2. Average prime interest rate. This is an average of the best rates.
3. Commercial and industrial debt that is outstanding
4. Consumer price index for services
5. Consumer credit. Thus the percentage of personal income
6. Unemployment averages
7. Ratios of inventory to actual sales

There has been some question about how tracking something that gives results several months later is useful. The most recent final contraction is one important function of the lagging economic indicator. In the world of economic numbers this really has a very important function.

The lagging indicator will mark the trough of the previous contraction before leading indicators. This is so that the leading contraction can show when the next recession will start. This is because it cannot start until the last one is over.

Next lets take a look at the leading economic indicators. This is the indicator that has ten parts. These ten parts will indicate the business cycles peaks and troughs. This is usually three to twelve months before it actually happens.

The leading economic indicators let us know where the economy is going. This actually helps us to know where the economy is heading so that the people, the consumer, the decision makers, that the business leaders can make decisions based on that information.

Finally we will look at the coincident economic indicators. These are based on the four measurements that that will indicate the incidents of the business cycle, through the peaks and the troughs. This is at the actual time they occur. This is one of the primary sources of information used to document the official business cycle turn points.

This is what leading coincident and lagging economic indicators have to do with manufacturing. Also what they help the economy with. Thus informing the manufacturing companies know where they need to make adjustments for the overall production changes.

Manufacturing companies need to know what the economy will be like, in order to project the needed production and sales of those products. Therefore, the understanding of these statistics make it much easier for them to know what ramping up, or minimizing they will need to do, in order to meet the financial needs they have.