Leading Economic Indicator (LEI) slides
in third quarter 2012
(PR-20120823-ES4-01, Posted 23 August 2012)
After four quarters in a row of upward direction that started in third quarter 2011, the composite leading economic indicator (LEI) slid slightly in third quarter 2012, posting 0.146 from a revised 0.206 in the second quarter of the same year. This indicates a possible slowdown of economic activity in the country for the quarter.
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 2012
Of the 11 indicators that make up the composite LEI, only four indicators contributed positively. The positive contributors include, starting with the largest positive contributor: (1) terms of trade index, (2) electric energy consumption, (3) stock price index, and (4) foreign exchange rate. The combined share of positive contributors for this quarter largely decreased to 27.8 percent from 78.9 percent in Q2 2012.
On the other hand, the negative contributors, beginning with the largest negative contributor, were: (1) money supply, (2) total merchandise imports, (3) wholesale price index, (4) visitor arrivals, (5) hotel occupancy rate, (6) number of new businesses, and (7) consumer price index. The negative contributors accounted for 72.2 percent of the total contribution.
For the Q3 2012 LEI, seven indicators shifted direction in contribution from the second quarter of 2012, namely: hotel occupancy rate, money supply, number of new businesses, visitor arrivals, and total merchandise imports, from positive to negative, and electric energy consumption and foreign exchange rate, from negative to positive.
The contribution of each of the 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 2012.
Table 1. Composite Leading Economic Indicator (LEI)
Q1 2001 to Q3 2012
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
and Assistant Secretary General