Trusted Insights for Business Worldwide
Decision Making and Business Cycle Indicators
International Seminar on Timeliness, Methodology, and
Comparability of Rapid Estimates of Economic Trends
Ottawa
May 27, 2009
Ataman Ozyildirim
Associate Director, U.S. and Global Indicators Program
a.ozyildirim@conference-board.org
www.conference-board.org
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Overview:
 What is The Conference Board and what does it do?
 Economic indicator programs
 Global business cycle indicators program
 Real time indicators
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Economic Indicators at The Conference Board
 Long tradition of economic measurement work
 Wide-range of indicators




Help-wanted
Consumer confidence
U.S. composite coincident and leading index
Productivity and per capita income levels
and growth rates globally
 Business confidence
 Employment Trends Index
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U.S. Business Cycle Indicators Program
 Transfer from BEA 1996
 Advisory board
 Evaluation and updating composite indicators, 1996
 “Real” time analytic and production goals
 Introduction of statistical imputation
 Introduction of indexes for 10 countries and regions
 www.conference-board.org/economics/bci
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Global Business Cycle Indicators
 Modeled after U.S. system of monthly
indicators
 Economic theory informs selection of indicators
but country specific features influence choice
 Objectivity, consistency, and reliability
 Composite indexes bring cycles and turning
points into focus
 Used in defining business cycles and
anticipating turning points in business cycles
 Help in forecasting and economic outlook
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Coincident Economic Index helps
define business cycles; Leading
Economic Index helps predict turning
points
Peak:
Trough:
Employment
60:4
61:2
73:11
75:3
80:1 81:7
80:7 82:11
01:3
01:11
90:7
91:3
07:12
120
US Leading Economic Index (right scale)
US Coincident Economic Index (left scale)
120
Personal Income
69:12
70:11
100
100
80
80
60
60
40
Manufacturing and Trade Sales
40
Industrial Production
20
1960
1965
1970
1975
1980
1985
1990
1995
2000
Note: Shaded areas represent recessions as determined by the NBER Business Cycle Dating Committee.
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2005
2010
Producing Global Indicators
 Monthly releases for each country follow pre-
announced release schedules
 Data revisions incorporated only for last six
months of data
 Annual benchmark revisions bring history of
indexes up to date with revisions in the history
of indicator series
 Occasional comprehensive revisions
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Data Needs and Timeliness Issues
 Historical data required for construction
 Monthly, seasonally adjusted and deflated
 Timely data required for real time monitoring
 Dealing with publication lags
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Statistical Imputations, “Real Time”
Dealing with publication lags
 New procedure uses available data more efficiently
 Combines forecasts and actual observations
 U.S. LEI released at least two weeks earlier
 Procedure makes monthly indexes possible outside U.S
 Euro Area LEI schedule can be made similar to the U.S.
LEI schedule
 But, not possible elsewhere due to lack of high frequency
data
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New procedure uses available data
New
more efficiently
Old
March release: March release:
January February
(t-2)
Average Weekly Hours, Mfg.
(t-1)
Yes
Yes
Yes
Yes
Yes
No
Interest rate spread
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Index of Consumer Expectations
Yes
Yes
Initial Claims, Unemp. Insurance (Inverted)
Manufacturers' new orders, consumer goods &
materials*
Suppliers’ Deliveries Index
Manufacturers' new orders, nondefense capital goods*
Building Permits, Private Housing
Stock Prices, 500 Common Stocks
Money Supply, M2 in 2000 Dollars*
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How Does the New Procedure Work?
 LEI adds forecast value
 But, historical versus real time differences are small
and random for similar forecast periods
 Timelier procedure improves forecast ability in out-
of-sample tests
 Compared to an autoregressive benchmark:
 Out-of-sample forecast improvement of up to 12 % with the
more timely U.S. LEI (McGuckin, Ozyildirim, and
Zarnowitz, 2007)
 Up to 8 % out-of-sample forecast improvement with the
more timely Euro Area LEI (Ozyildirim, Schaitkin, and
Zarnowitz, 2009)
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Decline in global Leading Economic Indexes begin to
moderate, but prospects on timing of recovery differ
6-month percent change (annual rate)
20
Mar '09
10
0
-10
-20
-30
-40
-50
The Conference Board Leading Economic Index™ (LEI) for Mexico (Feb '09)
The Conference Board Leading Economic Index™ (LEI) for Euro Area
The Conference Board Leading Economic Index™ (LEI) for Japan
The Conference Board Experimental Leading Economic Index™ (LEI) for China
The Conference Board Leading Economic Index™ (LEI) for South Korea (Feb '09)
-60
06
07
Source: The Conference Board
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08
09
APPENDIX
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ECONOMISTS’ VIEW OF TIMELINESS
 Real time data, forecasting, and policy making
 Data revisions: news vs. noise
 Testing predictive ability: model selection and
inference in the presence of revisions in data
…
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U.S.: Leading Economic Index Vs. Real GDP (1959 – Present))
Peak:
Trough:
60:2
61:1
69:4
70:4
73:4
75:1
80:1 81:3
80:3 82:4
90:3
91:1
01:1
01:4
07:4
120
US Leading Economic Index (right scale)
GDP* (left scale)
12,000
100
80
10,000
8,000
60
6,000
40
4,000
20
2,000
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Note: Shaded areas represent recessions as determined by the NBER Business Cycle Dating Committee.
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