General Info Methodology and Revisions Searchable Database For Educators Economics Home Page Conference Board Home Page
FOR WIRE TRANSMISSION: 10:30 A.M. EDT, WEDNESDAY, AUGUST 19, 2000

U.K. COMPOSITE INDEXES OF 
LEADING AND COINCIDENT INDICATORS:
June 2000

The leading index decreased 0.3 percent in June, while the coincident index increased 0.3 percent. Taken together, the two composite indexes show a continuation of the expansion in the U.K., but further declines in the leading index should be monitored in the future. 

  • The coincident indicators show that the economy continued to expand through June, posting its largest gain in over nine months.
  • The leading indicators have declined steadily over the past six months, falling 1.2 percent since December. This drop does not present any short-term threat to the expansion in the U.K., but may signal economic weakness before year-end.

LEADING INDICATORS.  Six of the eight components that make up the leading index decreased in June. The most significant decreases – in order from the largest negative contributor to the smallest - are export order book volume, change in consumer confidence and change in inventories. The two positive contributors to the leading index in June were money supply and stock prices. (For details see Data Availability and Tables).

With the decrease of 0.3, the leading index now stands at 115.5 (1990=100). This index decreased 0.3 percent in May and decreased 0.4 percent in April. During the six-month span through June, the leading index decreased 1.2 percent, and three of the eight components advanced (diffusion index, six-month span equals 31.3 percent).

COINCIDENT INDICATORS. All five of the components of the coincident index increased in June. The most significant increases in order from largest to smallest are the gross domestic product, unemployment rate (inverted), retail sales and personal disposable income. (For details see Data Availability and Tables).

With the increase of 0.3 percent in June, the coincident index stands at 114.8 (1990=100). This index increased 0.2 percent in May and 0.3 percent in April. During the six-month period through June, the coincident index increased 0.7 percent, with three of the five components making positive contributions.

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 August 15, 2000. At the time of the release, recent data for the following series are based on estimates: Changes in inventories, new orders for engineering industries, housing starts, personal disposable income, and gross domestic product.

The schedule for the U.K. Leading Economic Indicators news release in 2000:
July data ... Tuesday September 19, 2000
Aug. data ... Thursday October 19, 2000

All releases are at 10:30 A.M. EDT

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.

 
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 Frank Tortorici 1-212-339-0231
Bart Van Ark: 31-50-363-3674


Email: lei@conference-board.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 five 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

Leading Index Factor
1. Bond Yields, Percent .4589
2. Export Order Book Volume .0709
3. Change in Consumer Confidence .1144
4. Change in Inventories .0006
5. Money Supply, M0 .2218
6. Stock Prices, Ordinary Industrial Share Index .0257
7. New Orders, Engineering Industries .0643
8. Housing Starts .0434

 
Coincident Index Factors
1. Personal Disposable Income .1858
2. Gross Domestic Product .2966
3. Industrial Production .0654
4. Retail Sales .0630
5. Unemployment Rate .3974

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 June 14, 2000 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 1977-1998 as the sample period for measuring volatility. A separate set of factors for the 1973-1977 period, as well as the 1960-1973 period, is available upon request. The factors above for the coincident index were calculated using 1971-1998 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 the 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 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, 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.