• The leading index declined modestly in December, after gaining momentum last month and registering a strong gain amidst early signs that growth may begin to accelerate in the Korean economy.
• With the December increase, the coincident index, a measure of current economic activity, is approaching its historical peak achieved in September 2001. After a period of sluggish growth, the Korean economy looks more likely to strengthen during the first half of 2002.

LEADING INDICATORS. Four of the eight components that make up the leading index decreased in December. The negative contributors - in order from the largest negative contributor to the smallest - are authorized building permits, inverted yield of government public bonds, inverted index of inventories to shipments for manufacturing, and real exports. The positive contributors - from the largest positive contributor to the smallest- are stock prices, value of machinery orders in manufacturing, and monthly hours worked*. Letter of credit arrivals in manufacturing* remained unchanged during December. With the decrease of 0.2 percent in December, the leading index now stands at 110.8 (1990=100). This index increased 0.6 percent in November and increased 1.0 percent in October, based on revised data. During the six-month span through December, the index increased 0.9 percent, and four of the eight components advanced (diffusion index, six-month span equals 56.3 percent).

COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in December. The positive contributors - in order from the largest positive contributor to the smallest - are the inverted unemployment rate, wholesale and retail sales, and employment, excluding agriculture and forestry*. Industrial production was the only negative contributor to the index in December.

With the increase of 0.1 percent in December, the coincident index now stands at 113.8 (1990=100). This index increased 0.2 percent in November and increased 0.4 percent in October, based on revised data. During the six-month span through December, the index increased 0.4 percent, and all four of its components advanced (diffusion index, six-month span equals 100.0 percent).

The next release is scheduled for March 13, 2002 at 9:00 P.M (ET)
In Korea - March 14, 2002 at 10:00 A.M. (GMT+9)

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in this release are those available "as of" 10 A.M. (EST) on February 13, 2001.

Professional Contacts at The Conference Board:
Ataman Ozyildirim: 1-212-339-0399
Michael Fort: 1-212-339-0402

Media Contacts:
Randy Poe: 1-212-339-0234
Frank Tortorici: 1-212-339-0231

Website: http://www.globalindicators.org

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 seven individual leading or coincident indicators. 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 3.5 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 report and Web site: www.globalindicators.org.

Korea Composite Indexes: Components and Standardization Factors

	Leading Index	Factor
1.	Stock Prices	0.0447
2.	Hours Worked	0.2146
3.	Value of Machinery Orders	0.0253
4.	Letter of Credit Arrivals	0.0761
5.	Index of Shipments to Inventories	0.0731
6.	Export FOB	0.0836
7.	Yield of Government Public Bonds	0.4546
8.	Authorized Building Permits	0.0279

Coincident Index

1.	Industrial Production	0.0428
2.	Wholesale and Retail Trade	0.0534
3.	Employment	0.1966
4.	Unemployment Rate	0.7072

Notes:
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 this 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 for the leading index were calculated using 1993-1999 as the sample period for measuring volatility. A separate set of factors for the 1982-1993, 1980 - 1982, 1975 - 1980 and 1972-1975 periods, are available upon request. The factors above for the coincident index were calculated using 1995-1999 and 1970-1995 as the sample periods. These multiple sample periods are 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 our Web site: www.globalindicators.org.

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 bond yields and stock prices that are available sooner than other data on real aspects of the economy such as monthly hours worked. 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.

NOTICES

The 2002 schedule for the Korea "Leading Economic Indicators" news release is:
January 2002 Data............................................................ March 13, 2002
February 2002 Data.......................................................... April 19, 2002

All releases are at 10:00 A.M. in Korea (GMT+9), 9:00 P.M. ET (previous day)

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. The Conference Board has become a global leader in helping executives build strong professional relationships, expand their business knowledge and find solutions to a wide range of business challenges. The Board's Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, economic analysis and objective indicators such as the Leading Economic Indicators and the Consumer Confidence Index.

This role is part of a long tradition of research and education that stretches back to the compilation of the first continuous measure of the cost of living in the United States in 1919. In 1995, The Conference Board assumed responsibility for computing the composite indexes from the U.S. Department of Commerce. The Conference Board now produces business cycle indexes for the U.S., Australia, France, Germany, Korea, Japan, Mexico, Spain and the U.K. To subscribe to any of these indexes, please visit www.globalindicators.org, contact the Global Indicators Research Institute at 212-339-0312, or email indicators@conference-board.org.

AVAILABLE FROM THE CONFERENCE BOARD

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Business Cycle Indicators for Australia, France, Germany, Japan, Korea, Mexico, Spain and the U.K. are available at $500 per country per year (1 user). Discounts are available to Associates of The Conference Board and accredited academic institutions.