Taipei, June 6, 2012 (CENS)--The business composite indexes
of the manufacturing and service industries issued by the Taiwan Institute of Economic Research (TIER) declined in April, the first drops in 2012 to halt the consecutive uptrend in the first three months of the year, according to David Hong, president of the TIER, who added that the downtrend differed from the original forecast that had predicted a rebound.
The change is largely attributable to a downward revision of some composite indexes
including industrial production data due to seasonal adjustments.
All three of the Conference Board's composite indexes
the leading, coincident, and lagging indicators of economic activity--rose in October.
The Bureau of Economic Analysis (BEA) is revising its composite indexes of leading, coincident, and lagging indicators, the key indexes in its analytic system designed to help predict peaks and troughs in the business cycle.
The improved methodology for calculating the composite indexes is derived from the "modified" methodology, described in an article in the June 1992 Survey of Current Business, that has been used to calculate the alternative coincident index presented each month in the Survey on page C-21.(1) The improved methodology corrects a flaw in the current index formula that tends to distort the cyclical pattern of the composite indexes in periods of slow growth, such as the current expansion.
Each of the composite indexes measures the average behavior of a group of economic time series that show similar timing at business cycle turns but that represent widely differing activities or sectors of the economy.
This study of cyclical indicators found: (1) the composite indexes contain more reliable turning point information than most of the individual indicators; (2) the Commerce Department's composite index would benefit by some component substitutions; (3) the ratio of the coincident to lagging indicators is more reliable in calling business cycle turning points than the composite of leading indicators, but that ratio has a poor track record in calling growth cycles; and (4) most of the individual components of the composite index of leading indicators signal growth cycle turning points better than business cycles turning points.
Additionally, the actual turning point accuracy for both composite indexes was similar to the preselected 90 percent theoretical level of statistical confidence.
Composite Indexes of Leading, Coincident, and Lagging Indicators Recent Data and Percent Changes 1988 1989 Index Feb.
NOTE--Composite indexes have been revised; see "Business Cycle Indicators: Revised Composite Indexes," SURVEY OF CURRENT BUSINESS 69 (January 1989): 23-28.
At the forefront of BEA's cyclical indicators system are the composite indexes of leading, coincident, and lagging indicators.
Because the combination of prompt availability and reasonable accuracy is an especially important requirement of composite indexes, only monthly series that are available on a timely basis and are not subject to large revisions are considered when selecting components of the three composites.