FOR WIRE TRANSMISSION: 9:30 A.M. EDT, THURSDAY,
SEPTEMBER 28, 2000
GERMANY COMPOSITE INDEXES OF
LEADING AND COINCIDENT INDICATORS:
The leading index decreased 0.1 percent in July, and the coincident index
increased 0.1 percent. Taken together, the two composite indexes and their
components could indicate a weakening trend in the growth of the German economy.
- The coincident indicators show that the economy
continued to expand through July, but at a slower pace than the strong
growth pattern exhibited from October of 1999 to May of this year.
- With the slight decline in July, the six-month growth rate in the
leading index dropped below zero for the first time in over a year and a
half, consistent with the slowdown in the trend in the coincident index.
LEADING INDICATORS. Five of the nine
indicators that make up the leading index decreased in July. The most
significant decreases—in order from the largest negative contributor to
the smallest—are change in inventories, consumer confidence and new
residential construction orders. The most significant positive contributors
to the leading index in July—in order from the largest positive
contributor to the smallest—are applications for unemployment insurance,
new orders for investment goods industries and gross enterprises and
properties income. (For details see data availability section and tables).
With the decrease of 0.1 percent in July, the leading index
now stands at 107.1 (1990=100). Based on revised data, this index decreased
0.4 percent in June and increased 0.4 percent in May. During the six-month
span through July, the leading index declined 0.3 percent, and five of the
nine components declined (diffusion index, six-month span equals 44.4
COINCIDENT INDICATORS. Three
of the five components of the coincident index increased in July. The most
significant increases—in order from the largest negative contributor to
the smallest—are gross domestic product, the inverted unemployment rate
and manufacturing sales. Industrial production and retail trade remained
steady in July. (For details see data availability section and
With the increase of 0.1 percent in July, the coincident
index stands at 107.8 (1990=100). Based on revised data, this index
increased 0.1 percent in June, and 0.4 percent in May. During the six-month
period through July, the coincident index increased 1.6 percent, with all
five series making positive contributions (diffusion index, six-month span
equals 100 percent).
DATA AVAILABILITY. The data series used to compute
the two composite indexes reported in the tables in this release are those
available "as of" 10 A.M. MET (Germany) on August 28, 2000. At the
time of the release, recent data for several of the series are based on
estimates. In the leading index, new orders for investment goods
industries, applications for unemployment compensation, yield spread,
consumer confidence index, change in inventories, new residential
construction orders and gross enterprises and properties income are based
on estimates. In the coincident index, recent data for gross domestic
product, industrial production, manufacturing sales and retail trade are
also based on estimates.
The schedule for the Germany Leading Economic Indicators news release in 2000:
|August data ...
||Thursday September 28, 2000|
|September data ...
||Thursday October 26, 2000
All releases are at 9:30 A.M. EDT
ABOUT THE CONFERENCE BOARD--
The Conference Board
is a worldwide research and business membership group, with more than 3,000
corporate and other members in 67 nations. One of the leading
private sources of economic and business intelligence, The
Conference Board is a not-for-profit, non-advocacy organization.
Professional Contacts at
The Conference Board:
|Bart Van Ark
THE CYCLICAL INDICATOR APPROACH.
The composite indexes are the key elements in an analytic system designed
to signal peaks and troughs in the business cycle. The leading and
coincident indexes are essentially composite averages of between five and
eight individual leading or coincident indicators. (See below for details.)
They are constructed to summarize and reveal common turning point patterns
in economic data in a clearer and more convincing manner than any
individual component—primarily because they smooth out some of the
volatility of individual components.
Historically, the cyclical turning points in
the leading index have occurred before those in aggregate economic
activity, while the cyclical turning points in the coincident index have
occurred at about the same time as those in aggregate economic activity.
A change in direction in a composite index
does not signal a cyclical turning point unless the movement is of
significant size, duration, and scope. Historical analysis with U.S. data
shows recession warnings are best determined by looking for negative growth
of at least 1 percent, coupled with declines in at least half of the
components over a six-month span. Further explanations of the cyclical
indicator approach and the composite index methodology appear in The
Conference Board’s Business Cycle Indicators page:
Methodology and Revisions.
Germany Composite Indexes:
Components and Standardization Factors
||New Orders, Investment
||Yield Spread, 10 Year
minus 3 month
||Change in Inventories
||Gross Enterprise and
||Growth Rate for
Consumer Price index for Services
||Gross Domestic Product
The component factors are inversely related to the standard deviation of the
month-to-month changes in each component. They are used to equalize the
volatility of the contribution from each component and are
"normalized" to sum to 1. These factors were last revised effective
with the June 27, 2000 release, and all historical values for the two composite
indexes were revised at that time to reflect the changes. (Under normal
circumstances, updates to the leading and coincident indexes only incorporate
revisions to data over the past six months.)
factors above were calculated using 1973-1998 as the sample period
for measuring volatility for the leading index, and 1991-1998 as the
sample period for the coincident index. There are additional sample
periods as the result of different starting dates for the component data.
When one or more components is missing, the other factors are adjusted
proportionately to ensure that the total continues to sum to 1. For
additional information on the standardization factors and the index
methodology visit the following web page: Methodology and Revisions.
address the problem of lags in available data, those leading and
coincident indicators that are not available at the time of publication
are estimated using statistical imputation. An autoregressive model is
used to estimate each component. The resulting indexes are constructed
using real and estimated data, and will be revised as the data unavailable
at the time of publication become available. Such revisions are part of
the monthly data revisions, now a regular part of the U.S. Business Cycle
Indicators program. The main advantage of this procedure is to utilize in
the leading index the data, such as stock prices, that are available
sooner than other data on real aspects of the economy, such as and new
orders and changes in inventory. Empirical research by The Conference
Board suggests there are real gains in adopting this procedure to make all
the indicator series as up-to-date as possible.