Coincident Indicators

What Are Coincident Indicators?

Coincident indicators are economic metrics that move in tandem with the overall economy, providing a real-time picture of current economic conditions. Unlike leading indicators (which forecast) or lagging indicators (which confirm after the fact), coincident indicators tell you what the economy is doing right now.

The Conference Board publishes a Coincident Economic Index (CEI) comprising four components: nonfarm payroll employment, personal income less transfer payments, industrial production, and manufacturing and trade sales. The NBER uses these and similar measures to officially determine recession dates.

Why It Matters for Markets

Coincident indicators serve as the benchmark against which leading and lagging indicators are calibrated. They provide the ground truth about economic conditions that helps validate forward-looking signals from markets and survey data.

When coincident indicators are diverging from leading indicators, it creates analytical tension. For example, if the Leading Economic Index is declining but employment and industrial production remain strong, the economy is currently healthy but may be headed for trouble. Conversely, if leading indicators are improving but coincident data remains weak, the recovery may be approaching but has not yet materialized.

For the NBER's Business Cycle Dating Committee, coincident indicators are the primary evidence used to determine when recessions begin and end. The committee defines a recession as "a significant decline in economic activity that is spread across the economy and lasts more than a few months," assessed using coincident indicators. Because this determination often comes with a significant lag (sometimes 6-12 months after the fact), real-time monitoring of coincident data is essential for traders and policymakers.

Practical Application

The most useful approach is to monitor coincident indicators alongside leading and lagging indicators for a complete picture. A "healthy economy" shows rising leading, coincident, and lagging indicators. A "late-cycle" economy shows declining leading indicators with still-rising coincident indicators. A "recession" shows declining coincident indicators following earlier weakness in leading indicators.

Tracking the breadth of coincident indicator movement is also informative. When all four CEI components are growing, the expansion is broad-based and likely to persist. When some are growing while others are declining, the economy may be transitioning toward a turning point.