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Benchmark Revisions - September 2005

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Released: Thursday, August 11, 2005

The next release of The Conference Board’s Korea Leading Economic Indicators in September 2005 will incorporate benchmark revisions to the composite indexes.

The benchmark revisions bring the composite indexes up-to-date with data revisions in their existing 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.

Also, beginning with the September 2005 release, the composition of the Korean indexes will be revised. The unemployment rate (UR) will be removed and real gross cash earnings (seasonally adjusted, deflated by consumer price index) will be used as a component of the coincident index instead. This is because UR tends to lead at peaks and lag at troughs rather than have a really coincident cyclical timing. Earnings is a better coincident indicator.

The components of the leading index will also be revised. Monthly working hours will be removed and the authorized building permits component will be replaced with real construction orders from the private sector. These revisions reduce excessive volatility and improve the cyclical timing of the leading index.

These changes are made possible because of new research at The Conference Board (TCB). The Conference Board monitors the behavior and performance of the composite indexes and their components and periodically makes changes to keep the indexes timely and accurate. The revision in the composite indexes is consistent with long-standing TCB policy to make changes to the indexes when research indicates that substantial improvements are possible.

For more information on these revisions, visit our web site at www.conference-board.org/economics/bci/.

The Conference Board announced today that both the leading and the coincident indexes for Korea increased 0.2 percent in June.

  • The leading index increased slightly in June and May’s small increase was revised up to a large gain as actual data for monthly hours worked became available. With this month’s increase, the leading index has been growing at a 1.5-2.5 percent annual rate in recent months, and the strength among the leading indicators continues to be widespread. This is an improvement from the small declines in mid 2004, but it is still well below the 5.0 percent growth through the first quarter of 2005.
  • At the same time, real GDP growth picked up to a 5.0 percent annual rate in the second quarter of 2005, up from the 1.6 percent annual rate in the first quarter and the 3.6 percent average growth over the previous four quarters. Although the strength in the leading index has moderated slightly since the beginning of the year, it suggests that this stronger economic growth should continue in the near term.

Leading Indicators.Four of the eight components that make up the leading index increased in June. The positive contributors - from the largest positive contributor to the smallest – were the (inverted) index of inventories to shipment, stock prices, value of machinery orders, and real exports FOB. Monthly hours worked*, authorized building permits, the (inverted) yield of government public bonds, and letter of credit arrivals declined in June.

With the 0.2 percent increase in June, the leading index now stands at 125.5 (1990=100). Based on revised data, this index increased 1.0 percent in May and decreased 0.1 percent in April. During the six-month span through June, the leading index increased 1.5 percent, with five of the eight components advancing (diffusion index, six-month span equals 62.5 percent).

Coincident Indicators.Three of the four components that make up the coincident index increased in June. The positive contributors - from the largest positive contributor to smallest – were the wholesale and retail sales component, industrial production, and total employment. The (inverted) unemployment rate was unchanged in June.

With the increase of 0.2 percent in June, the coincident index now stands at 112.8 (1990=100). Based on revised data, this index increased 0.2 percent in May and decreased 0.1 percent in April. During the six-month span through June, the coincident index increased 0.4 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).

DATA AVAILABILITY.The data series used to compute the two composite indexes reported in this release are those available “as of” 10 A.M. (ET) on August 10, 2005.

Notes: The series in the leading index based on The Conference Board’s estimates is monthly hours worked. There is no forecasted series in the coincident index.

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

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