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Benchmark Revisions - March 2007

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Released: Tuesday, February 20, 2007

This release incorporates benchmark revisions into the composite indexes for Germany. The composition of the leading index for Germany has been revised. The details of these changes can be found on page 3 of the attached pdf. (The benchmark revisions also bring the composite indexes up-to-date with data revisions in the components and update 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, very small effects.)

This release also incorporates three major revisions to the composite index of leading economic indicators (LEI) for Germany: 1) a new method for calculating the contribution of the yield spread in the LEI, 2) a trend adjustment to the LEI, and 3) the growth rate of the CPI for services component will be omitted. 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. The growth rate of the CPI for services is omitted because of its poor cyclical timing and conformity record, and its excessive volatility.

These changes are the result of research at The Conference Board (TCB) and regular consultations with its Business Cycle Indicators Advisory Panel and other experts. The Conference Board continuously monitors the behavior and performance of the composite indexes and their components and makes changes from time to time. This revision is consistent with long-standing Conference Board policy to make changes to the indexes when research indicates substantial improvements are possible. Because of these revisions, the composite indexes and their monthly changes are no longer directly comparable with previous releases. Similar methodological changes were introduced into the US LEI in 2005 and will be incorporated into the LEIs of other countries covered by The Conference Board global indicators program.

For more information please look here on our web site (www.conference-board.org/economics/bci).

The Conference Board announced today that the leading index for Germany increased 0.1 percent and the coincident index increased 0.2 percent in December.

  • The leading index increased slightly in December, following two consecutive decreases. In December, consumer confidence and stock prices continued to make the largest positive contributions to the index. The leading index grew 0.6 percent from June to December (about a 1.2 percent annual rate), down from a very rapid rate of 5.0 to 6.0 percent (annual rate) in the first quarter of 2006. Still, the strengths among the leading indicators have been somewhat more widespread than weaknesses in recent months.
  • The coincident index increased in December, following two consecutive increases. In December, retail sales made a very large positive contribution followed by employment, but industrial production made a negative contribution. However, the strengths among the coincident indicators have been very widespread in recent months.
  • Following a steep rise throughout 2005, the leading index moderated slightly through the end of 2006. At the same time, real GDP grew at a 4.7 percent annual rate in the fourth quarter of 2006, up from the 2.6 percent annual rate in the third quarter and 3.8 percent average annual rate in the first half of 2006. The behavior of the leading and coincident composite indexes suggests that moderate economic growth is likely to continue in the near term.

LEADING INDICATORS. Five of the eight components in the leading index increased in December. The positive contributors to the leading index — in order from the largest positive contributor to the smallest — are consumer confidence, stock prices, inventory change series*, gross enterprises and properties income*, and yield spread. Negative contributors — in order from largest to smallest — are new residential construction orders and new orders in investment goods industries.

With the 0.1 percent increase in December, the leading index now stands at 97.8 (1990=100). Based on revised data, this index declined 0.4 percent in November and declined 0.4 percent in October. During the six-month span through December, the leading index increased 0.6 percent, with five of the eight components increasing (diffusion index, six-month span equals 71.4 percent).

COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in December. The positive contributors to the coincident index were retail trade, employed persons, and manufacturing sales. Industrial production declined in December.

With the 0.2 percent increase in December, the coincident index now stands at 108.1 (1990=100). Based on revised data, this index increased 0.3 percent in November and increased 0.1 percent in October. During the six-month period through December, the coincident index increased 0.8 percent, with all of the four components increasing (diffusion index, six-month span equals 100.0 percent).

DATA AVAILABILITY The data series used to compute the two composite indexes reported in this release are those available "as of" 10:00 A.M. ET February 16, 2007. Some series are estimated as noted below.

NOTES: Series in the leading index for Germany that are based on The Conference Board estimates are inventory change, new residential construction orders, and gross enterprises and properties income. There are no series in the coincident index for Germany that are based on The Conference Board estimates.

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

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