The composite leading economic indicator (LEI) slid further to negative 0.640 in the fourth quarter of 2009 from a revised negative 0.570 in the third quarter. However, the descent of the index continued to decelerate confirming earlier signs of the gradual recovery of the economy from the global crisis. Not to be forgotten though are the damages brought by typhoons Ondoy and Pepeng in the last quarter of 2009, which have not been reflected in the latest LEI.

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 1986 to Q4 2009

The number of positive contributors as concurrently estimated in this period climbed to seven, from three in Q1 2009 and Q2 2009, and four in Q3 2009. The positive contributors, starting with the largest positive contributor, were: consumer price index, money supply, electric energy consumption, tourist arrivals, total merchandise imports, number of new businesses, and wholesale price index. Despite the increase in the number of positive contributors, their contribution remains low at 34.1 percent from 32.0 percent in the third quarter.

The negative contributors, beginning with the largest negative contributor, were: stock price index, terms of trade index, hotel occupancy rate, and foreign exchange rate, and terms of trade index. The negative contributors still outweigh the positive contributors, accounting for 65.9 percent share of total contribution.

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 highlights the composite LEI estimates and the corresponding slopes for first quarter 2001 to fourth quarter 2009.

Table 1: Composite Leading Economic Indicator (LEI)
First Quarter 2001 to Fourth Quarter 2009

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
Secretary General

Contact Persons:

Regina S. Reyes and Josephine P. Ferre
Tel. No.: (+6 32) 895-5002; (+6 32) 896-7981
E-mail: rs.reyes@nscb.gov.ph; jr.penaflor@nscb.gov.ph