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Benchmark Revisions - July 2007

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Released: Friday, July 13, 2007

July 13, 2007 release of the UK LEADING ECONOMIC INDICATORS AND RELATED COMPOSITE INDEXES, incorporates benchmark revisions to the composite indexes bringing them up-to-date with revisions in the source data and updating the standardization factors used in their calculation. This is a maintenance procedure typically done once a year, which usually does not change the cyclical properties of the indexes and has, as expected, relatively small effects.

This release also implements major revisions to the composite index of leading economic indicators (LEI): 1) a new component, interest rate spread, will be used in the composition of the LEI and will replace the discontinued fixed income price index series, 2) the LEI methodology will incorporate a trend adjustment, and 3) another discontinued component, new orders for engineering industries, will be omitted from the LEI. The new measure of the yield spread improves the performance of the LEI by better reflecting the way the yield spread anticipates cyclical economic turning points. The trend adjustment facilitates interpretation and use of the LEI.

For more details, please see page 3. For more information visit us here at http://www.conference-board.org/economics/bci/.

The Conference Board announced today that the leading index for the U.K increased 0.1 percent and the coincident index increased 0.2 percent in May.

  • The leading index increased slightly in May, following strong gains in previous months. The six-month growth rate of the leading index picked up to a 2.1 percent rate (a 4.2 percent annual rate), from the 1.0 - 1.5 percent rate (about a 2.5 percent annual rate) at the end of 2006. In addition, only the yield spread component has been making consistently small negative contributions to the leading index recently, and the strengths among the leading indicators have become more widespread than the weaknesses in recent months.
  • The coincident index also increased slightly in May, the third consecutive gain. This index of current economic activity has been on a flat to moderately rising trend since mid-2006, but its growth has picked up since January, and the strengths among the coincident indicators have become somewhat more widespread in the last three months.
  • After reaching almost a 4.5 percent annual rate in mid-2006, the six-month growth rate of the leading index gradually slowed through January, but it has since rebounded and the index is again growing at about the same rate as in mid-2006. At the same time, real GDP growth has been fluctuating in the range of 2.5-3.5 percent annual rate in the last six quarters, including 2.6 percent in the first quarter of 2007. The recent behavior in the leading and coincident indexes suggests that the economy should continue growing and may even pick up somewhat in the near term.

LEADING INDICATORS. Five of the seven components that make up the leading index increased in May. The positive contributors — from the largest positive contributor to the smallest — were consumer confidence, productivity for the whole economy*, stock prices, order book volume, and operating surplus of corporations*. The negative contributors — from the larger contributor to the smaller — were volume of expected output and yield spread.

With the 0.1 percent increase in May, the leading index now stands at 129.1 (1990=100). Based on revised data, this index increased 0.5 percent in April and increased 0.4 percent in March. During the six-month span through May, the leading index increased 2.1 percent, with all seven components advancing (diffusion index, six-month span equals 100.0 percent).

COINCIDENT INDICATORS. All of the four components that make up the coincident index increased in May. The positive contributors — from the largest positive contributor to the smallest — were employment *, industrial production, retail sales, and real household disposable income*.

With the increase of 0.2 percent in May, the coincident index now stands at 118.2 (1990=100). Based on revised data, this index increased 0.1 percent in both April and March. During the six-month period through May, the coincident index increased 0.2 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).

DATA AVAILABILITY: The data series used by The Conference Board to compute the two composite indexes reported in the tables in this release are those available "as of" 10 A.M. ET on July 12, 2007. Some series are estimated as noted below.

Series in the leading index that are based on The Conference Board estimates are productivity of the whole economy, and operating surplus of corporations. Series in the coincident index that are based on The Conference Board estimates are employment and real household disposable income.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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