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The leading index remained unchanged in November and increased 0.3 percent in December. The coincident index increased 0.2 percent in November and remained unchanged in December. Taken together, the increases in the two composite indexes show moderate but continued growth in the U.K. economy.
LEADING INDICATORS. Three of the eight
components that make up the leading index increased in December. In December,
the most significant increases – in order from the largest positive
contributor to the smallest – are export order book volume, change in consumer
confidence, and stock prices. Four components of the leading index decreased in
December. The negative contributors – in order from the largest to smallest
– are change in inventories, new orders in engineering industries, housing
starts, and money supply. Bond yields held steady in December.
The schedule for the U.K. Leading Economic Indicators news release in 2001:
All releases are at 10:30 A.M. EST Notes: With this release, all components of the leading and coincident indexes were subjected to annual benchmark revisions ** In 2001, The Conference Board will release composite indexes a month ahead of its current schedule, because of improvements in data acquisition. 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.
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. U.K Composite Indexes: Components and Standardization Factors
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 are newly revised with this release (January 23, 2001), and all historical values for the two composite indexes are 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 1977-1999 as the sample period for measuring volatility. A separate set of factors for the 1974-1977 period, as well as the 1960-1973 period, is available upon request. The factors above for the coincident index were calculated using 1971-1999 as the sample period; a separate set of factors for 1970-1971 is available upon request. 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 their total continues to sum to 1. For additional information on the standardization factors and the index methodology visit the 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 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. |