Leading Indicator versus trailing indicator
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Leading and trailing indicators are two types of measures used in business, economics, and other fields to predict future events or to evaluate past performance. Here's a brief explanation of each:
Leading Indicators: These are predictive measures that often change before the economy as a whole changes. They are used to forecast or predict the future state of a market, economy, or a business. For example, in economics, the number of new job applications can be a leading indicator, as it may increase before the overall economy starts to improve. In a business context, customer satisfaction surveys might be a leading indicator of future sales trends.
Trailing Indicators: These are output-oriented measures that change after the economy or a business as a whole does. They are historical and confirm long-term trends and changes. For example, in economics, the unemployment rate is a trailing indicator because it increases or decreases in response to changing economic conditions. In a business context, a company's earnings report is a trailing indicator as it reflects the financial performance of the past quarter or year.
In summary, leading indicators are used to predict and prepare for future events, while trailing indicators are used to evaluate past performance and confirm trends. Both types of indicators are important for strategic planning and decision-making.