Business Cycle

Indicators of the Business Cycle

Leading Indicators

Leading indicators are used to predict future trends of economic activity. Some leading indicators that can be used are:

  • Share market movements

  • Building approvals

  • Loan approvals

  • Household confidence surveys 

  • Business confidence surveys

  • Purchasing Managers Index

Co-Incident Indicators

Co-incident indicators are used to show current trends in economic activity. Some co-incident indicators that can be used are:

  • Retail sales

  • Unemployment rate

  • Participation rate

  • Cash Rate

Lagging Indicators

Lagging indicators are used to confirm past trends of economic activity. They are usually more reliable in nature. Some lagging indicators include:

  • Gross Domestic Product

  • Inflation rate

  • Average Weekly Earnings

  • Balance on the Current Account

Was the GFC a Trough?

We can use leading, co-incident, and lagging indicators to confirm the GFC was a trough. Indicators provide evidence of past phases of the business cycle and predicts future phases.

The GFC was a trough phase of the business cycle, evident by the following indicators:

  • Share market crash (leading)

  • Building approvals fell from 11.2% (Nov 2007) to -31.7% (Jan 2009)

  • Cash rate eased from a peak of 7.25% to a low of 3% (Co-Incident)

  • Annual GDP growth fell from 4.3% (Sep. 2007) to 0.3% (Dec 2008) - Lagging

  • Inflation rate fell from 5% (Sep 2008) to 1.3% (Sep 2009) - Lagging

 

From these indicators it can be shown that a trough occurred during 2009. 

Email: christian.bien@atarsurvivalguide.com

ABN: 87 574 760 103

  • Facebook - Black Circle
  • YouTube - Black Circle

"ATAR" is a registered trademark of Monash University as a Trustee For The Victorian Tertiary Admission Centre .The School Curriculum and Standards Authority (SCSA) have no involvement in or responsibility for any material appearing on this site. Nor does SCSA endorse or make any warranties regarding the study resources, current and past WACE exams available on this site or sold by Christian Bien. 

Copyright © 2020 Christian Bien at the ATAR Survival Guide