Certified Supply Chain Professional (CSCP) Practice Exam

Which of the following is an example of a lagging indicator?

1. New housing starts

2. Building permits issued

3. Unemployment rates after economic growth

4. Consumer confidence index

The correct answer is: Unemployment rates after economic growth

A lagging indicator is a measure that reflects the state of an economy after changes have occurred, typically following a period of economic growth or decline. Unemployment rates serve as a prime example of a lagging indicator because they tend to improve only after an economy has already shown signs of recovery or growth. This means that unemployment figures often do not provide an indication of the current economic situation until after a substantial amount of time has passed; they confirm trends rather than predict them. In contrast, new housing starts and building permits are considered leading indicators because they provide insights into future economic activity in the housing sector. The consumer confidence index also tends to indicate future spending behavior rather than the current state of the economy, placing it in the realm of leading indicators as well. Therefore, the mention of unemployment rates aligns perfectly with the definition of lagging indicators, making it the correct answer.