Leading Economic Indicator (LEI) resumes upward trajectory
in the third quarter 2011
(PR-20110914-ES4-01, Posted 15 September 2011)
The composite leading economic indicator (LEI) improved in the third quarter of 2011 to 0.084 from a revised 0.066 in the second quarter of 2011. The third quarter performance brought the trajectory of the LEI back to an increasing trend that started in the fourth quarter of 2009 but was disrupted in the second quarter this year.
Figure 1 below shows the direction of the composite LEI vis-à-vis the movement of the cycle component of the reference series - the Non-Agriculture gross value added (GVA).
Figure 1. Composite leading economic indicator (LEI) versus
the Non-Agriculture GVA cycle: Q3 1988 to Q3 2011
Of the eleven indicators that make up the composite LEI, six contributed positively. The positive contributors include, starting with the largest positive contributor: (1) wholesale price index, (2) consumer price index, (3) stock price index, (4) foreign exchange rate, (5) hotel occupancy rate, and (6) electric energy consumption. The combined share of positive contributors for this quarter increased to 55.6 percent from 48.2 percent in Q2 2011.
On the other hand, the negative contributors, beginning with the largest negative contributor, were: (1) total merchandise imports, (2) money supply, (3) terms of trade index, (4) number of new businesses, and (5) tourist arrivals. The negative contributors accounted for 44.4 percent of total contribution.
From the revised second quarter to the third quarter LEI, there were two shifts in the direction of contribution: hotel occupancy rate, from negative to positive, and merchandise imports from positive to negative.
The contribution of each of the eleven (11) indicators is measured through the combined effects of (1) the direction (the slope or change) of the cycle component of each indicator; and (2) the correlation of their cycle components with that of the reference series.
Table 1 below shows the composite LEI estimates and the corresponding slopes for the period first quarter 2001 to third quarter 2011.
Table 1: Composite Leading Economic Indicator (LEI)
First Quarter 2001 to Third Quarter 2011
Details of the LEI computation procedure, information about the component leading indicators, and limitations on the methodology and latest data are available at http://www.nscb.gov.ph/lei under the Technical Notes section
ROMULO A. VIROLA