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FOR RELEASE: 10:30 A.M. ET, THURSDAY, MARCH 11, 2004

U.K. COMPOSITE INDEXES FOR JANUARY 2004


The Conference Board announced today that the leading index for the U.K. increased 1.2 percent and the coincident index increased 0.1 percent in January.

  • The leading index increased significantly again in January, the sixth consecutive gain, with large contributions from the industrial sector. The leading index has now increased at a 4.7 percent annual rate from its most recent low in March 2003, and it has increased even more rapidly in recent months. The small increase in the coincident index in January keeps it on a moderately but steady rising trend.
  • Real GDP increased at a 3.6 percent average annual rate in the second half of 2003, up from 1.9 percent in the first half of the year, and this pick up is consistent with the upturn in the leading index since March. The continued widespread strength in the leading index suggests some further improvement in economic growth during the first half of 2004.

LEADING INDICATORS. Six of the eight components that make up the leading index increased in January. The positive contributors - from the largest positive contributor to the smallest - were order book volume, volume of expected output, stock prices, the fixed interest price index, productivity for the whole economy*, and operating surplus of corporations*. New orders for engineering industries* declined in January, while consumer confidence was unchanged.

With the 1.2 percent increase in January, the leading index now stands at 131.6 (1990=100). Based on revised data, this index increased 0.5 percent in December and increased 0.5 percent again in November. During the six-month span through January, the leading index increased 3.0 percent with seven of the eight components advancing (diffusion index, six-month span equals 81.3 percent).

COINCIDENT INDICATORS. All four components that make up the coincident index increased in January. Employment* was the largest positive contributor, followed by real household disposable income*, retail sales, and industrial production.

With the 0.1 percent increase in January, the coincident index now stands at 113.8 (1990=100). Based on revised data, this index increased 0.2 percent in December and remained unchanged in November. During the six-month period through January, the coincident index increased 0.6 percent, with three of the four components advancing (diffusion index, six-month span equals 75 percent).

The next release is scheduled for April 14, 2004 at 10:30 A.M. ET In the U.K. - April 14, 2004 at 3:30 P.M. (GMT)

DATA AVAILABILITY: The data series used by The Conference Board to compute the two composite indexes reported in the tables in this release are those available "as of" 10 A.M. ET on March 10, 2004. Some series are estimated as noted below.

NOTES: Series in the leading index that are based on The Conference Board estimates are new orders in engineering industries, productivity of the whole economy, and operating surplus of corporations. Series in the coincident index that are based on The Conference Board estimates are employment and real household disposable income.

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

Media Contacts:
Randy Poe: 1-212-339-0234
Sandra Lester: 32-2-675-5405
Frank Tortorici: 1-212-339-0231

Email: indicators@conference-board.org
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 four and nine individual leading or coincident indicators. (See page 3 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.

U.K. Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1Order Book Volume0.0746
2Expected Output Volume0.0584
3Consumer Confidence0.1158
4Fixed Interest Price Index0.1283
5All Share Price Index0.0397
6New Orders, Engineering Industries0.0829
7Productivity, Whole Economy0.3865
8Operating Surplus, Corporations0.1138
 
Coincident Index
 
1Industrial Production0.0652
2Retail Sales0.0634
3Employment0.6984
4Real Household Disposable Income0.1730

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 revised with the December 15, 2003 release, and all historical values for the two composite indexes were revised at this 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 1977-2002 as the sample period for measuring volatility. Separate sets of factors for the 1975-1977 period, the 1974-1975 period, as well as the 1970-1974 period, are available upon request. The factors above for the coincident index were calculated using 1992-2002 as the sample period; separate sets of factors for the 1978-1992 period and the 1970-1978 period are available upon request. These multiple sample periods are the result of different starting dates for the component data. When one or more components are missing, the other factors are adjusted proportionately to ensure that their 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 monthly data revisions are now a regular part of the U.S. Business Cycle and Global Indicators program. The main advantage of this procedure is to utilize in the leading index the data such as bond yields, stock prices, and change in consumer confidence that are available sooner than other data on "real" aspects of the economy such as housing starts and new orders. 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 next release for the "U.K. Leading Economic Indicators" is:

February 2004 Data Wednesday, April 14, 2004
March 2004 Data Wednesday, May 12, 2004
April 2004 Data Thursday, June 10, 2004

All releases are at 10:30 A.M. (ET), 3:30 P.M. (GMT)

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. It 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, economy 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, German, Korea, Japan, Mexico and the U.K. To subscribe to any of these indexes, please visit www.globalindicators.org or contact the Global Indicators Research Institute at 212-339-0312 or email indicators@conference-board.org.

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