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Benchmark Revisions - September 2005

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Released: Tuesday, September 13, 2005

This release of The Conference Board’s Korea Leading Economic Indicators incorporates benchmark revisions to the composite indexes.

The benchmark revisions bring the history of 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 this release, the composition of the coincident index is revised. The unemployment rate (UR) is removed and real gross cash earnings (seasonally adjusted, deflated by consumer price index) is 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 are also revised. Monthly working hours is removed and the authorized building permits component is 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 0.1 percent in July.

  • Based on the benchmarked figures announced today, the leading index increased slightly in July, following two consecutive increases. The leading index has been growing at a 5.0 – 6.0 percent annual rate in recent months. In addition, since the second quarter of 2005 the strength among the leading indicators has been widespread. This is an improvement from small declines in mid-2004, but it is still below the 7.0-8.0 percent growth through the first quarter of 2005.
  • The coincident index, a measure of current economic activity, also increased slightly in July. The coincident index has been on a steady and moderately rising trend since mid-2003. 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. The growth in the leading index in recent months suggests that this moderate economic growth should continue in the near term.

Leading Indicators.Five of the seven components that make up the leading index increased in July. The positive contributors - from the largest positive contributor to the smallest – were stock prices, real exports FOB, the (inverted) index of inventories to shipment, private construction orders, and value of machinery orders. Letter of credit arrivals and the (inverted) yield of government public bonds declined in July.

With the 0.1 percent increase in July, the leading index now stands at 146.9 (1990=100). Based on revised data, this index increased 0.6 percent in June and increased 0.7 percent in May. During the six-month span through July, the leading index increased 1.2 percent, with two of the seven components advancing (diffusion index, six-month span equals 33.3 percent).

Coincident Indicators.Two of the four components that make up the coincident index increased in June. The positive contributors - from the larger positive contributor to the smaller – were industrial production and monthly cash earnings. The wholesale and retail sales component declined, and total employment was unchanged in July.

With the increase of 0.1 percent in July, the coincident index now stands at 159.6 (1990=100). Based on revised data, this index increased 0.5 percent in June and increased 0.4 percent in May. During the six-month span through July, the coincident index increased 2.2 percent, with all four components advancing (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 A.M. (ET) on September 12, 2005.

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

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

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