The composite leading economic indicator (LEI) rose for the fifth consecutive quarter but the upswing in the fourth quarter of 2010 continued the slowdown that started in the third quarter. The fourth quarter 2010 LEI increased to 0.026 from a revised 0.022 in the third quarter of 2010, the slimmest rise in the composite LEI since the fourth quarter of 2009 when the index started to shift direction after five quarters of a downward streak(Figure 1). 

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 2010

The number of positive contributors as concurrently estimated totaled only to six, compared to ten in Q3 2010, eleven in Q2 2010, and nine in Q1 2010. The combined share of positive contributors for this quarter consequently dropped to only 51.5 percent from the 79.0 percent and 100 percent in the third and second quarters, respectively.

The positive contributors, starting with the largest positive contributor, were: tourist arrivals, number of new businesses, foreign exchange rate, stock price index, hotel occupancy rate, and electric energy consumption. On the other hand, the negative contributors, beginning with the largest negative contributor, were: wholesale price index, terms of trade index, consumer price index, money supply, and total merchandise imports. The negative contributors accounted for 48.5 percent 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 2010.

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

LINA V. CASTRO
Officer-in-Charge
Office of the Secretary General

Contact Persons:

Regina S. Reyes / 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