NSCB: Indicators point to Q4 slowdown

The National Statistical Coordination Board (NSCB) on Monday reported that economic indicators hinted at a possible slowdown in economic growth by yearend.

The composite leading economic indicator (LEI) for the fourth quarter of 2012 dropped to 0.016 from a revised figure of 0.131 in the third quarter, the NSCB said.

“This signifies a possible deceleration in the country’s economic performance [in the fourth quarter],” the NSCB said.

LEI is a mix of indicators experts used in short-term economic forecasting.

But the mix of indicators should be taken with a grain of salt, NSCB experts cautioned.

After all, they added, recent economic growth seems to have defied gloomy trends.

The NSCB reported that of the 11 indicators coonstituting the composite LEI, only four showed positive outlook for the fourth quarter of 2012. The positive contributors were the terms of trade index, consumer price index, foreign exchange rate and stock price index.

The combined share of positive contributors accounted for 15.4 percent of total contribution, which the NSCB said decreased from 27.8 percent in the third quarter of 2012.

The statistics agency also identified the negative contributors: visitor arrivals, hotel occupancy rate, wholesale price index, number of new businesses, electric energy consumption, money supply, and total merchandise imports.

The negative contributors accounted for 84.6 percent of total contribution.

Businesses should study and address specific factors such as oil prices and treat the LEI as a predictor of general economic trends, Cid L. Terosa of the University of Asia and the Pacific said in a text message.

“Industries should give more emphasis on specific variables that affect their operations, such as interest rates, oil and power costs, exchange rates, and the like,” Terosa said.

Benjamin E. Diokno of the UP School of Economics said that the predictive accuracy of the LEI appeared “limited” in recent years, particularly in times of expansion.

In 2001, 2002, 2003, and late in 2009, the LEI came out negative, which indicated that the economy was on or below its growth potential.

But there were years when the LEIs per quarter suggested economic slowdown, when actual growth in gross domestic product (GDP) proved to be the opposite.

In 2004, the LEI was negative for four quarters (0.126,-0.070, -0.026 and -0.005) yet the economy grew robustly at 6.7 percent.

In 2010, the LEI was also negative for four quarters (-0.273, -0.130, -0.079 and -0.072), yet the country’s GDP surged by 7.6 percent.