Economic activity seen to slow down in 2nd quarter

MANILA, Philippines - After six consecutive quarters of upswing since the fourth quarter of 2009, economic activity may slow down in the second quarter of the year.

This is according to the latest composite leading indicator (LEI) measurement used by the National Statistical Coordination Board (NSCB) to forecast economic activities in the country.

The LEI for the second quarter of 2011 slid slightly to 0.103 from a revised 0.115 in the first quarter of the year.

According to the NSCB, of the 11 indicators that make up the composite LEI, only five contributed positively. The positive contributors are total merchandise imports; wholesale price index; consumer price index; tourist arrivals and stock price index.

Overall, the combined share of positive contributors for this quarter decreased to 47.1 percent from 57.7 percent in the first quarter of this year.

On the other hand, the negative contributors, beginning with the largest negative contributor, were: Terms of trade index; number of new businesses; money supply; hotel occupancy rate; foreign exchange rate, and electric energy consumption. The negative contributors accounted for 52.9 percent of total contribution.

The contribution of each of the 11 indicators is measured through the combined effects of different factors. These include the direction - the slope or change - of the cycle component of each indicator and the correlation of their cycle components with that of the reference series.

According to the NSCB, the index provides advance information on the direction of the country’s economic activity or performance in the short run.

It 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.

They expand in general when business is growing and contract when business is shrinking.