Economic indicators are statistics about economic activity. They allow us to analyze past economic performance and predict future economic performance.

Leading indicators are input oriented, difficult to measure (predict) and easy to influence.

Lagging indicators are output oriented, easy to measure (analyze) but difficult to influence.

Think about this...

The unemployment rate, for example, is a leading economic indicator. A rise in the unemployment rate might signal an economic downturn. Why is it so important for the government to give attention to something that may indicate only a potential problem - not an actual problem?

Governments can influence leading indicators by instituting policies to reverse trends. For example, if the unemployment rate is rising, the government could institute a "make work" policy that calls for an increase in employment throughout the country. This could reverse the economic downturn.