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January 2001

The Press Release in a PDF file

The leading index decreased 0.7 percent in January, and the coincident index decreased 0.1 percent. Taken together, the composite indexes point to a potential slowing in the German economy in 2001.
  • The general weakness in the leading index throughout last year continues, increasing the potential for slower growth in 2001.
  • The apparent weakness in the coincident index over the last three months is consistent with the downward trend in the leading index over most of the year 2000.
  • In January, although CPI for services made a large negative contribution, the yield spread and stock prices made small but positive contributions to the leading index, reversing their recent negative trend. These indicators should be closely watched in the coming months to determine the direction of the German economy.

LEADING INDICATORS.  Three of the nine components of the leading index decreased in January. The negative contributors to the leading index —in order from the largest negative contributor to smallest— are CPI for services, inventory change, and new residential construction orders. Three components increased in January. The positive contributors —in order from the largest to smallest— are new orders in investment goods industries, bond yields, and stock prices. Application for unemployment compensation, consumer confidence index, and gross enterprise and property income, remained steady in January. (For details see data availability section and tables). 

With the decrease of 0.7 percent in January, the leading index now stands at 104.8 (1990=100). This index decreased 0.1 percent in December and decreased 0.3 percent in November. During the six-month span through January, the leading index declined 0.9 percent, and only four of the nine components increased (diffusion index, six-month span equals 44.4 percent).

COINCIDENT INDICATORS. Two of the four components of the coincident index increased in January. The increases are in industrial production and manufacturing sales. Retail trade held steady in January. Inverted Unemployment rate made a negative contribution. (For details see data availability section and tables).

With the decrease of 0.1 percent in January, the coincident index stands at 101.5 (1990=100). This index increased 0.1 percent in December, and decreased 0.2 percent in November. During the six-month period through January, the coincident index held steady, with two of four series making positive contributions (diffusion index, six-month span equals 50 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. CET (Germany) on
February 26, 2001. At the time of the release, recent data for the following series are based on estimates. In the leading index, new orders for investment goods industries, applications for unemployment compensation, consumer confidence index, inventory change, new residential construction orders and gross enterprises and properties income were based on estimates. In the coincident index, recent data for industrial production, manufacturing sales and retail trade were also based on estimates.

The schedule for the Germany Leading Economic Indicators news release in 2001:
February 2001 data ... Tuesday March 27, 2001
March 2001 data ... Thursday April 26, 2001
April 2001 data ... Tuesday May 29, 2001
May 2001 data ... Thursday June 28, 2001

All releases are at 9:30 A.M. EST

As of January 2001, all components of the leading and coincident indexes have incorporated annual benchmark revisions.

Also, as of January 2001. Gross Domestic Product, a former component of the coincident index was removed.

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Professional Contacts at 
The Conference Board:
Media Contacts:
Ataman Ozyildirim: 1-212-339-0399 Randy Poe: 1-212-339-0234
Michael Fort: 1-212-339-0402 Sandra Lester 32-2-675-5405
Bart Van Ark 31-50-363-3674 Frank Tortorici 1-212-339-0231


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 four 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

Leading Index Factor
1. New Orders, Investment Goods .0604
2. Applications for Unemployment Compensation .0283
3. Yield Spread, 10 Year minus 3 month .3379
4. Change in Inventories .0993
5. Gross Enterprise and Property Income .0835
6. Stock Prices .0302
7. New Orders, Residential Construction .0415
8. Growth Rate for Consumer Price index for Services .2067
9. Consumer Confidence Index .1122


Coincident Index Factor
1. Manufacturing Sales .0591
3. Industrial Production .1018
4. Retail Sales .0963
5 Unemployment Rate .7428


As of January 2001, all components of the leading and coincident indexes
have incorporated annual benchmark revisions.

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 revised effective with January 30, 2001 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.)

The factors above were calculated using 1973-1999 as the sample period for measuring volatility for the leading index, and 1960-1999 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.

To 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.