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Benchmark Revisions - September 2005

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Released: Monday, November 12, 2007

This release incorporates benchmark revisions into the composite indexes for Korea. 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. Starting with this release, a trend adjustment procedure has been added to the LEI methodology. The benchmark revisions also bring the history of the composite indexes up-to-date with data revisions in their existing components and update the standardization factors used in the calculations. In addition, the seasonal adjustment of the monthly cash earnings series used in the coincident index has been improved to adjust for the Korean Lunar New Year holiday, in addition to regular seasonality. This new seasonal adjustment procedure does not affect the overall growth rate and the trend of the series, but makes it smoother and more appropriate as a cyclical indicator.

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 TCB 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. The details of these changes can be found on page 3.

The Conference Board announced today that the leading index for Korea increased 0.6 percent, while the coincident index remained unchanged in September.

  • The leading index increased sharply in September, the fifth consecutive gain. Value of machinery orders, private construction orders, and stock prices were the largest contributors to this month's increase in the leading index, more than offsetting large negative contributions from real exports, and index of inventories to shipments (inverted). With the increase in September, the six-month growth rate of the leading index continued to pick up, and the index grew 2.9 percent (a 5.8 percent annual rate) from March to September, up from the -0.3 percent (a -0.6 percent annual rate) in March. The strengths and weaknesses among the leading indicators have been somewhat balanced during the last several months.
  • The coincident index was unchanged in September, but its six-month growth rate has picked up to a 1.5 — 2.5 percent range in recent months (4.0 to 5.0 percent annual rate), up from 0.3 percent in March (0.6 percent annual rate). Moreover, the strengths in the index continued to be more widespread than the weaknesses in recent months, with industrial production being the only negative contributor in September.
  • The leading index has improved gradually since April and its current growth rate is slightly above its long-term average growth rate of about 5.3 percent (annual rate) over the 1970-2007 period. At the same time, real GDP grew at a 5.7 percent annualized growth rate in the third quarter of 2007, slightly above the 5.5 percent average rate in the first half of 2007 and above the 4.4 percent average rate in the second half of 2006. The behavior in both the leading and coincident indexes in recent months suggests that moderate economic growth is likely to continue in the near term.

LEADING INDICATORS. Four of the seven components that make up the leading index increased in September. The positive contributors — from the largest positive contributor to the smallest — were value of machinery orders, private construction orders, stock prices, and letter of credit arrivals. Negative contributors — from the largest negative contributor to the smallest — were real exports FOB, the (inverted) index of inventories to shipments, and the (inverted) yield of government public bonds.

With the 0.6 percent increase in September, the leading index now stands at 176.7 (1990=100). Based on revised data, this index increased 0.3 percent in August and increased 0.5 percent in July. During the six-month span through September, the leading index increased 2.9 percent, with five of the seven components advancing (diffusion index, six-month span equals 71.4 percent).

COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in September. The positive contributors to the leading index — in order from the largest positive contributor to the smallest — were the wholesale and retail sales component, monthly cash earnings, and total employment. Industrial production declined in September.

Holding steady in September, the coincident index now stands at 169.9 (1990=100). Based on revised data, this index increased 0.5 percent in both August and July. During the six-month span through September, 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 November 9, 2007.

* 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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