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FOR RELEASE: 8:00 P.M. ET, MONDAY, DECEMBER 15, 2003

KOREA LEADING ECONOMIC INDICATORS

The Press Release in a PDF file
English Version     Korean Version

The Conference Board announced today that the leading index for Korea increased 0.5 percent and the coincident index increased 0.3 percent in October.

  • The leading index increased by 0.5 percent in October and September's previously reported 0.8 percent decline has been revised to a 0.3 percent decline, as actual data for several components became available. The strength in the leading index reflects export demand and other components related to the manufacturing sector.
  • As mentioned last month, one component of the leading index -- building permits -- has become extremely volatile since early this year. Excluding this component, the leading index has been even stronger than reported in recent months, and the strength has become very widespread.
  • Real GDP picked up to a 3.5 percent growth rate in the third quarter following small declines in the previous two quarters. The current widespread strength of the leading index is signaling that stronger real GDP growth should persist in the near term.

LEADING INDICATORS. Six of the eight components that make up the leading index increased in October. The positive contributors - from the largest positive contributor to the smallest - were value of machinery orders, the (inverted) index of inventories to shipments, real exports*, stock prices, letter of credit arrivals*, and monthly hours worked*. Authorized building permits and (inverted) yield of government public bonds decreased in October.

With the 0.5 percent increase in October, the leading index now stands at 118.9 (1990=100). Based on revised data, this index decreased 0.3 percent in September and increased 0.2 percent in August. During the six-month span through October, the index increased 2.2 percent, with six of its eight components advancing (diffusion index, six-month span equals 75.0 percent).

COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in October. The positive contributors - from the largest positive contributor to the smallest - were wholesale and retail sales, total employment, and industrial production. The (inverted) unemployment rate remained unchanged in October.

With the increase of 0.3 percent in October, the coincident index now stands at 111.2 (1990=100). This index decreased 0.2 percent in September and increased 0.3 percent in August. During the six-month span through October, the coincident index remained unchanged, with three of its four components advancing (diffusion index, six-month span equals 62.5 percent).

*See notes under data availability.

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in this release are those available "as of" 10 A.M. (ET) on December 11, 2003.

Notes: The series in the leading index based on The Conference Board's estimates are monthly hours worked, letter of credit arrivals in manufacturing, and real exports FOB. There is no forecasted series in the coincident index.

Professional Contacts at The Conference Board:
Indicator Program: 1-212-339-0336

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 eight individual leading or coincident indicators. (See page 6 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.

Korea Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1.Stock Prices0.0447
2.Hours Worked0.2146
3.Value of Machinery Orders0.0253
4.Letter of Credit Arrivals0.0761
5.Index of Shipments to Inventories0.0731
6.Export FOB0.0836
7.Yield of Government Public Bonds0.4546
8.Authorized Building Permits0.0279
 
Coincident Index
 
1.Industrial Production0.0428
2.Wholesale and Retail Trade0.0534
3.Employment0.1966
4.Unemployment Rate0.7072

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 the January 29, 2002 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 2003 schedule for the Korea "Leading Economic Indicators" press release is:

October 2003 Data.......... Monday, December 15, 2003

All releases are at 9:00 P.M. ET and 10:00 A.M. GMT+9 (following 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

Korea Business Cycle Indicators Internet Subscription $ 500 per year (1 user)
(Includes monthly release, data, charts and commentary)
Individual Data Series $ 15 per series downloaded
Monthly BCI Report $ 130 per year
(Sample available on request)
Monthly News Release (fax or email) $ 45 per year
BCI Handbook (published 2001) $ 20
Corporate Site License $2,600 per year

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.