After a six-quarter downward streak, which started with the global financial crisis in the third quarter of 2008, the composite leading economic indicator (LEI) shifted direction in the first quarter of 2010, slightly improving to negative 0.470 from a revised negative 0.473 in the fourth quarter of 2009. While the descent of the index began to slow down as early as Q3 2009, its directional shift in Q1 2010 confirms the definitive recovery of the Philippine economy from the global crisis.

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 Q1 2010

The number of positive contributors as concurrently estimated in this period remained at seven, similar to Q4 2009 from only four in Q3 2009. The positive contributors, starting with the largest positive contributor, were: consumer price index, total merchandise imports, wholesale price index, foreign exchange rate, hotel occupancy rate, number of new businesses, and electric energy consumption. Although the number of positive contributors remained the same, their combined share increased to 51.0 percent from only 34.1 percent in Q4 2009. The last time positive contributors outweighed their negative counterparts was in Q2 2008 with a 76.9 percent share.

The negative contributors, beginning with the largest negative contributor, were: stock price index, tourist arrivals, terms of trade index, and money supply. The negative contributors accounted for 49.0 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 first quarter 2010.

Table 1: Composite Leading Economic Indicator (LEI)
First Quarter 2001 to First Quarter 2010

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 Florande S. Polistico
Tel. No.: (+6 32) 895-5002; (+6 32) 896-7981
E-mail: rs.reyes@nscb.gov.ph; fs.polistico@nscb.gov.ph