IS the economy heading for a slowdown in the first quarter of 2006 after registering a fourth-quarter 6.1-percent gross domestic product (GDP) growth surge?
That seems to be what the National Statistical Coordination Board is saying in its latest report on the composite leading economic indicators (LEI), an early warning of sorts designed by the government to figure out the short-term trajectory of the Philippine economy.
"After posting consecutive increases during the last two quarters, the composite leading economic indicator (LEI) decreased to 0.018 in the first quarter of 2006 from 0.115 in the fourth quarter of 2005," NSCB said in a press statement. "The LEI had earlier suffered consecutive declines beginning with the third quarter of 2004 up to the second quarter 2005."
The National Economic and Development Authority (Neda) and the NSCB jointly developed the composite LEI to enable the government to forecast the short-term macroecnomic activity in the economy using 11 economic indicators -consumer price index, electric energy consumption, exchange rate, hotel occupancy rate, money supply, number of new business corporations, stock price index, terms of trade index, total imports, tourist arrivals and wholesale price index.
The NSCB said that of the 11 indicators that make up the composite LEI, six contributed positively to the LEI for the first quarter of 2006. These are stock price index, electric energy consumption, exchange rate, hotel occupancy, imports and terms of trade. The negative contributors were money supply, wholesale price index, consumer price index, tourist arrivals and new businesses.
The LEI—the NSCB said—involves the study of the behavior of indicators that consistently move upward or downward before the actual expansion or contraction of overall economic activity.
"The system is based on an empirical observation that the cycles of many economic data series are related to the cycles of total business activity, i.e., they expand in general when business is growing and contract when business is shrinking," said the NSCB report. "The LEI was institutionalized to provide advance information on the direction of the country's economic activity/performance in the short run."
On January 30 Dennis Arroyo, the head of Neda's policy and planning division, said that higher crude prices and the increase in the rate of the value-added tax from 10 percent to 12 percent may raise inflation rates, curb domestic demand, and push down economic growth. He stressed, however, that the recovery of the farm sector; greater activities in the mining, manufacturing, and services sectors; and the continuing rise in remittances from Filipino overseas workers may "counteract" those negative factors. (Please visit Photographs and Memories for my more personal take on the world).