Coincidental indicators occur at the same time as economic changes while lagging indicators work inversely with economic changes. Leading economic indicators change before the actual effects occur on the economy. Unlike the other two indicators, leading economic indicators are the most reliable predictors of future changes in the market. This is why these indicators are primarily used in the stock market as investors are able to make quick decisions about their stocks.
Leading economic indicators follow a similar direction as current economic patterns and processes. They imitate and reflect the general flow of the economic ups and downs in a country and globally. If a certain economic process is forward moving or increasing, then these indicators will increase. The Gross Domestic Product (GDP) is a good example because it increases if the economic performance of a country increases and vice-versa.
Although none of the three economic indicators is absolutely accurate, leading indicators offer relative accuracy as compared to the rest. This is because they are forward looking and not retrospective. They indicate loss or growth, and stakeholders are able to act on these figures beforehand. Lagging economic indicators only respond after the process has already taken place and may not be immediately valuable.
Macroeconomic indicators describe overall economic development and fluctuations. They are also used to indicate the prices of exports, imports and other consumer goods in a country and globally. Due to their indication of these important economic factors, leading indicators are also used to set macroeconomic indexes, such the interest rates for borrowing from banking institutions.