Saturday, March 10, 2007

Composite LEI: let the good times roll!

Will the Philippine economy maintain its growth momentum? Well, the composite leading economic indicator (LEI) which serves as an early warning system for the economy released recently by the National Statistical Coordination Board (NSCB) says yes.

"The composite leading economic indicator (LEI) moves up in the first quarter of
2007, rising to 0.170 from 0.107 in the last quarter of 2006. Of the
eleven indicators that make up the composite LEI, four contributed positively to
the LEI for the first quarter of 2007. The positive contributors – beginning
with the largest positive contributor – were stock price index, exchange rate,
money supply and new businesses. The negative contributors - beginning with the
largest negative contributor – were tourist arrivals, electric energy
consumption, hotel occupancy, wholesale price index, merchandise imports,
consumer price index, and terms of trade. Positive contributors accounted for
72.1 percent of total contribution, outweighing negative contributors at 27.9
percent share."

What does it mean to have rising LEI? NSCB explains:

"The LEIS 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. The LEIS was institutionalized to provide advance information on the direction of the country’s economic activity/performance in the short run."

Encouraging signs for the economy so far. Last week, the
Philippine Institute for Development Studies (PIDS), a government think tank, predicted a 5.8 percent GDP growth rate for the Philippine economy in 2007. Let the good times roll!

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