growth cycles in industrial production (iip)

April 2011

OECD Composite Leading Indicators

Chile

The reference series

The reference series used for constructing OECD Composite Leading Indicator (CLI) for Chile is the index of production in total manufacturing, which is a proxy for the monthly index of industrial production (IIP). The IIP series starts in 1991, it is timely (t-2, able to meet the MEI publication deadline) and accessible from the MEI database. Furthermore, the IIP series is seasonally adjusted with the X12 method and has year 2005 as a base year.

Growth cycles in Industrial production

* For additional information on the de-trending method please refer to the OECD CLI methodological note.

Over the period 1991 - 2010, industrial production registered four growth cycles measured from peak to peak. The length of the cycles varies, as the duration of the shortest cycle was 26 months, while the longest cycle from 2000 to 2005 lasted for 69 months. The average duration of the cycles is 46 months with an average duration of the expansion phase of 28 months and an average duration of the contraction phase of 18 months.

The Composite Leading Indicator

The table below presents the turning point dates of the CLI and the reference series:

Sep-92

Sep-94

Nov-97

Jan-00

Oct-05

Dec-01

Mar-99

Feb-08

May-09

Aug-06

96

98

100

102

104

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Growth cycles in Industrial production (IIP)(percentage deviation from trend*, seasonally adjusted)

http://www.oecd.org/dataoecd/26/39/41629509.pdf

April 2011


The CLI performs well in predicting the turning points of the reference series since it is calculated (i.e. 1990). While the CLI for Chile only misses one and flags one extra turning points, it has a mean lead of 7 months with a standard deviation of 4 months and a median lead of 6 months. The general fit of the CLI with the reference series measured by the peak-correlation coefficient (0.8) is also considered to be good.

Shaded areas represent observed growth cycle downswings (measured from peak to trough) in the reference series, the industrial production.

The components of the composite leading indicator The CLI for Chile contains six monthly leading indicators, including two tendency surveys, two financial indicators and one indicator each from the domain of production and international trade.

Turning point dates

as predicted by CLI

Turning point

dates in IIP

Lead

(months)

Peak 1992 - 09

Trough 1994 - 09

Peak 1997 - 06 1997 - 11 5

Trough 1998 - 09 1999 - 03 6

Peak 1999 - 12 2000 - 01 1

Trough 2001 - 12 Missed

Trough 2002 - 07 Extra

Peak 2004 - 10 2005 - 10 12

Trough 2005 - 07 2006 - 08 13

Peak 2007 - 04 2008 - 02 10

Trough 2008 - 12 2009 - 05 5

94

96

98

100

102

104

106

1996 1998 2000 2002 2004 2006 2008 2010

Growth cycles in the CLI and Industrial production (IIP)(percentage deviation from trend, seasonally adjusted)

IIP CLI

April 2011


The two business tendency surveys are, Retail trade confidence indicator and Manufacturing production tendency. Although both of these series are relatively short, as they are only available from 2003, they have excellent leading properties with no missing or extra turning points, low standard deviation from the mean lead time and strong cross correlation with respect to IIP. The two financial indicators incorporated in the CLI are Monetary aggregate: M1 and Share price index. Whereas Monetary aggregate: M1 has a relatively short lead, it does not miss or flag any extra turning points, and it has strong cyclical conformity with IIP measured by the peak value of the cross correlation function and the standard deviation from the mean lead time. Although Share price index misses 4 and finds 2 extra turning points out of the 10 targeted, it has a stable lead time with high peak cross correlation value. The real indicator, Production of copper, is included in the CLI for Chile, since it improves the overall performance of the CLI with its strong lead over IIP. Moreover, production of copper is one of the most significant element of the Chiliean industrial sector, and copper is one of the main export goods of the country. The external indicator of Net trade (export - import) is a suitable component indicator as it only misses one and flags one extra turning point, while it has a strong and steady lead over IIP.

Targeted Missed Extra Lead (+) Coef.

Composite

Leading Indicator1996 t-2 8 1 1 7 4 6 6 0.8

Retail trade -

Confidence

indicator

2003 t-2 4 0 0 6 3 6 8 0.7

Manufacturing -

Production:

tendency

2003 t-2 4 0 0 4 2 4 9 0.7

Monetary

aggregate M11986 t-1 10 0 0 3 4 2 3 0.8

Share price

index1990 t-1 10 4 2 4 3 4 7 0.7

Production of

copper1990 t-2 10 3 2 8 6 10 10 0.2

Net trade (f.o.b. -

c.i.f .)1996 t-2 8 1 1 12 5 14 10 0.6

Cross correlationSt. Dev.Indicator

Median

Lead (+)

Starting

dateTimeliness

Turning points Mean

Lead (+)

April 2011


Estonia


The reference series used for constructing OECD composite leading indicators (CLI) for Estonia is the monthly index of industrial production (IIP) excluding construction. The IIP series starts in 1994, it is timely (t-2, able to meet the MEI publication deadline) and accessible from the MEI database. Furthermore, the IIP series is seasonally adjusted by Eurostat and has year 2005 as a base year.



Industrial production registered three growth cycles measured from trough to trough over the period 1994-2010. The length of the first two cycles was a duration of 36 and 39 months respectively. The third cycle is longer with a duration of 84 months. The average duration of a cycle is 53 months with an average duration of the expansion phase of 38 months and an average duration in the contraction phase of 15 months.


The table below presents the turning points dates of the CLI and the reference series:

1996-05

1998-02

1999-04

2001-01

2002-06

2008-04

2009-05

94

96

98

100

102

104

1994 1996 1998 2000 2002 2004 2006 2008 2010

Growth cycles in Industrial production (IIP) (percentage deviation from trend*, seasonally adjusted)

IIP TP_Date


April 2011


Turning point dates as

predicted by CLI

Turning point dates in IIP

Lead (months)

trough May-96 missed

peak Sep-97 Feb-98 5

trough Aug-98 Apr-99 8

peak Apr-00 Jan-01 9

trough Oct-01 Jun-02 8

peak Oct-02 extra

trough Jul-04 extra

peak May-07 Apr-08 11

trough Feb-09 May-09 3

The CLI seems to be appropriate for predicting the turning points of the reference series since 1996, date from which it is calculated. While there is a mean lead of 7 months and with a standard deviation of 2.6 months, the general fit of the CLI with the reference series, measured by the peak-correlation coefficient (0.84), is also really good. The CLI did not miss any turning points but have two extra turning points.

Shaded areas represent observed growth cycle downswings (measured from peak to trough) in the reference series , the industrial production.

94

96

98

100

102

104

1994 1996 1998 2000 2002 2004 2006 2008 2010

Growth cycles in CLI and Industrial production (IIP) (percentage deviation from trend, seasonally adjusted)

IIP CLI

April 2011


The components of the composite leading indicator

Six leading indicators are used to calculate the CLI for Estonia, of which two are financial indicators, one monitors business surveys, one refers to external relations and finally two are representing real indicators. All series are monthly. Three series are showing a lead greater or equal to 8 months at all turning points according to the mean measure. Even if retail sales component shows a lag, it increases the performance of the CLI itself in decreasing its standard deviation and increasing the correlation at peak.

Indicator Starting

date Timeliness

Turning points Mean Lead (+)

St. Dev. Median Lead (+)

Cross correlation


Composite Leading Indicator

1996 t-2 6 0 2 7 2.6 8.0 4 0.84

Manufacturing - Export order books: level sa

2003 t-2 2 0 0 8 6.5 8.0 3 0.95

Total retail trade (Value) sa 1995 t-2 6 2 2 -2 2.9 0.0 -4 0.75

Passenger car registrations sa

2003 t-2 2 0 0 3 4.0 3.0 -1 0.86

CPI Food excl. Restaurants (inverted)

1994 t-2 7 1 1 9 5.3 12.0 12 0.58

Share prices: OMX Tallin index

1996 t-2 6 1 1 6 2.8 5.0 3 0.81

ITS Net trade (f.o.b. - c.i.f.) sa

1993 t-2 7 5 3 15 2.5 14.0 24 0.62

April 2011


Israel


The reference series used for constructing OECD composite leading indicators (CLI) for Israel is the monthly index of industrial production (IIP) excluding construction. The IIP series starts in 1990, it is timely (t-2, able to meet the MEI publication deadline) and accessible from the MEI database. Furthermore, the IIP series is seasonally adjusted by source and has year 2005 as a base year.



Industrial production registered four complete growth cycles measured from trough to trough over the period 1990-2010. The length of the cycle varies from 26 months to 99 months. The average duration of a cycle is 56 months with an average duration of the expansion phase of 31 months and an average duration in the contraction phase of 25 months.



1991-01

1996-01

2000-08

1999-03

2008-04

2003-07

2004-10

2009-06

2005-09

2010-05

94

96

98

100

102

104

106

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010


IIP TP_Date


April 2011



predicted by CLI


Lead (months)

trough Jan-91

peak Dec-95 Jan-96 1

trough Aug-98 Mar-99 7

peak Mar-00 Aug-00 5

trough Mar-03 Jul-03 4

peak Jun-04 Oct-04 4

trough Aug-05 Sep-05 1

peak Nov-07 Apr-08 5

trough Mar-09 Jun-09 3

peak Apr-10 May-10 1

The CLI performs well in predicting the turning points of the reference series since 1995, date from which it is calculated. The mean lead of 3 months is relatively short. The standard deviation of lead times is 2 months. The general fit of the CLI with the reference series measured by the peak-correlation coefficient (0.88) is y good. The CLI did not miss any turning points and did not have any extra turning points.


94

96

98

100

102

104

106

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010


IIP CLI

April 2011



Six leading indicators are used to calculate the best performing CLI for Israel, of which one is a financial indicator, one monitors business surveys, two refer to external relations and finally two represent real indicators. All components are monthly. Four series show a lead greater or equal to 4 months at all turning points according to the mean measure. All series show a good fit at peak correlation with the reference.

Indicator Starting

date Timeliness


St. Dev.

Median Lead (+)

Cross correlation

Targeted Missed Extra Lead (+)

Coef.

Composite Leading Indicator 1995 t-2 9 0 0 3 2.0 4.0 4 0.88

Business confidence - all businesses - Expected net

balance sa 1983 t-2 10 3 4 2 2.0 3.0 4 0.78

Total retail trade (Volume) 1995 t-2 9 3 0 3 2.5 4.0 2 0.69

Domestic PPI Manufacturing 1995 t-2 8 4 4 4 5.1 6.0 1 0.56

Share prices: TA composite 1984 t-2 10 4 3 5 2.2 4.0 6 0.59

Tourism - Total Departures of Israelis sa

1998 t-2 8 2 2 4 2.5 4.0 3 0.72

Exports in manufacturing - diamonds

1975 t-2 10 1 4 4 4.4 4.0 6 0.54

April 2011


Slovenia


The reference series used for constructing OECD composite leading indicators (CLI) for Slovenia is the monthly index of industrial production (IIP) excluding construction. The IIP series starts in 1992, it is timely (t-2, able to meet the MEI publication deadline) and accessible from the MEI database. Furthermore, the IIP series is seasonally adjusted by Eurostat and has year 2005 as a base year.



Industrial production registered four growth cycles measured from trough to trough over the period 1994-2010. The length of the cycle varies from 24 months to 69 months. The average duration of a cycle is 49 months with an average duration of the expansion phase of 32 months and an average duration in the contraction phase of 16 months.



1993-05

1995-02

1995-12

1998-02 2001-02

1999-04

2008-05

2004-12

2009-05

94

96

98

100

102

104

106

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010


IIP TP_Date


April 2011



predicted by CLI


Lead (months)

trough May-93 missed

peak Feb-95 missed

trough Oct-95 Dec-95 2

peak Mar-97 Feb-98 11

trough Jan-99 Apr-99 3

peak Jun-00 Feb-01 8

trough Feb-04 Dec-04 10

peak Mar-07 May-08 14

trough Mar-09 May-09 2

The CLI performs well in predicting the turning points of the reference series since 1995, date from which it is calculated. The mean lead is 7 months with a standard deviation of 4.5 months. The general fit of the CLI with the reference series measured by the peak-correlation coefficient (0.83) is also good. The CLI did not miss any turning points and did not have any extra turning points.


94

96

98

100

102

104

106

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010


IIP CLI

April 2011



Six leading indicators are used to calculate the best performing CLI for Slovenia, of which one is a financial indicator, three monitor business surveys, one refers to external relations and finally one represents real indicators. All components are monthly. Three series show a lead greater or equal to 7 months in average. With the exception of the CPI and the exchange rate the series show good fit at peak correlation with the reference.

Indicator Starting

date Timeliness


St. Dev.

Median Lead (+)

Cross correlation


Composite Leading Indicator 1995 t-2 7 0 0 7 4.5 8.0 6 0.83

Manufacture Basic Metals SA 1998 t-2 5 0 2 4 5.3 1.0 4 0.78

Manufacturing - Order books: level sa

1995 t-2 7 0 2 2 5.8 1.0 3 0.85

Production: tendency mfg. sa 1995 t-2 7 1 3 7 5.2 6.0 5 0.75

CPI All items (inverted) 1980 t-2 9 4 2 13 2.8 12.0 10 0.37

EUR/USD exchange rate monthly average

1995 t-2 8 2 2 5 4.5 5.0 14 0.22

Expected economic situation sa

1996 t-2 6 1 3 7 5.4 5.0 7 0.64

growth cycles in industrial production (iip)

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