A lagging indicator is an observable or measurable factor that changes sometime after the economic, financial, or business variable with which it is correlated changes. Lagging indicators confirm trends and changes in trends.
Typical lagging indicators include the duration of unemployment, the ratio of manufacturing and trade inventories to sales, debt ratios, consumer price indices, and several others.
Why it Matters to You
Lagging indicators are the proof in the pudding. If you or your team was unsure of the direction that an economy was taking, these indicators will provide irrefutable evidence. Durable organizations will leverage lagging indicators to substantiate early strategic decisions, while other organizations will employ them to justify shortfalls. Decide now where your team will find itself.