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What is a Coincident Indicator?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 September 2016
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    Conjecture Corporation
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Coincident indicators are one example of an economic factor that can help an investor to understand the current status of a given economic climate. What sets this type of economic indicator apart from other from other factors is that the coincident indicator tends to vary directly with current trends in the economy. Along with following the same general trend of the market, the coincident indicator tends to occur more or less simultaneously with the market conditions.

Many economists understand that a coincident indicator is generally based on three different aspects of the economy. Employment within the country or nation is one of the primary components. While full time employment across the board may be used as an adequate measurement, many experts tend to focus in on employment markets that are not associated with agriculture.

A second example of a coincident indicator is the rate of demand for goods and services produced within the nation. When considering the total production among the various industries, both the domestic and international demand will be included in the evaluation. This coincident indicator helps to assess the overall productivity of the country, and can indicate either an increase or decrease when compared to previous periods.

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The third common coincident indicator is the personal income level generated by the overall population of the country. There is also some variance in how this indicator is applied as well. One approach is to consider the total gross income generated by all citizens of the nation. Other approaches call for using only income generated from full-time work, with full time employment understood to be any salaried position or hourly positions that require a minimum of 32 worked hours per calendar week.

The important thing to remember is that a coincident indicator provides real time information about the current status of the economic health of a given economy. Investors can use a combination of these three main economic indicators along with a few secondary factors to make informed decisions about buying and selling commodities. As a result, the investor can get into a good thing at the ground level, or unload stocks and other securities before the market begins to shift downward.

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