Said Jean-Claude Manini, The Conference Board Senior Economist for Europe: "The massive and unprecedented measures taken by the authorities have yet to make their full impact felt across the whole economy. For the time being, The Conference Board Leading Economic Index™ (LEI) for the United Kingdom does not provide any recovery signal. Including its decrease of 0.6 percent in February 2009, the index has dropped more than 11.5 percent since its most recent peak in June 2007, which is more severe than its downturns in 2000 and 1998."
The Conference Board LEI for the U.K. aggregates seven economic indicators that measure activity in the U.K., each of which has proven accurate on its own. Aggregating individual indicators into a composite index filters out so-called "noise" to show underlying trends more clearly.
- The Conference Board LEI for the U.K. declined for the sixteenth consecutive month in February as negative contributions from order book volume, stock prices and consumer confidence more than offset a positive contribution from the yield spread. Between August 2008 and February 2009, the leading economic index declined by 6.3 percent (about a -12.2 percent annual rate), below the 4.1 percent decrease (about a -8.0 percent annual rate) between February 2008 and August 2008. In addition, the weaknesses among the leading indicators have remained widespread in recent months.
- The Conference Board CEI for the U.K., a measure of current economic activity, declined in February as a result of decreases in retail sales and industrial production. However, the index was revised modestly upwards between September 2008 and January 2009 as fourth quarter data for real household disposable income became available. During the past six months, the coincident economic index increased by 0.1 percent (about a 0.2 percent annual rate), slightly below the 0.2 percent increase (about a 0.4 percent annual rate) for the previous six months. Additionally, the strengths among the coincident indicators have become slightly more widespread than the weaknesses in recent months. Meanwhile, real GDP fell at a 4.4 percent average annual rate during the second half of 2008 (contracting at a 5.9 percent annual rate during the fourth quarter), the lowest two-quarter growth rate since 1980.
- The Conference Board LEI for the U.K. has been on a sharp downtrend since its peak in June 2007, amid widespread weakness among its components. The combination of the duration, depth and diffusion of the decline in the leading economic index has not been this severe since the recession in the beginning of the 1980s. The Conference Board CEI for the U.K. has remained essentially flat since the second quarter of 2008. Taken together, the behavior of the composite economic indexes suggests that economic activity will continue to contract in the near term.
LEADING INDICATORS
Two of the seven components that make up The Conference Board LEI for the U.K. increased in February. The positive contributors – from the largest positive contributor to the smallest - were the yield spread, and operating surplus of corporations. The negative contributors – from the largest negative contributor to the smallest – were order book volume, stock prices, consumer confidence, productivity for the whole economy, and volume of expected output.
With the 0.6 percent decrease in February, The Conference Board LEI for the U.K. now stands at 92.1 (2004=100). Based on revised data, this index declined 0.5 percent in January and declined 0.7 percent in December. During the six-month span through February, the leading economic index decreased 6.3 percent, with two of the seven components advancing (diffusion index, six-month span equals 28.6 percent).
COINCIDENT INDICATORS
Two of the four components that make up The Conference Board CEI for the U.K. increased in February. The positive contributors - from the largest positive contributor to the smallest – were real household disposable income and employment. Retail sales and industrial production declined in February.
With the decrease of 0.1 percent in February, The Conference Board CEI for the U.K. now stands at 104.1 (2004=100). Based on revised data, this index remained unchanged in January and increased 0.2 percent in December. During the six-month period through February, the coincident economic index increased 0.1 percent, with two of the four components advancing (diffusion index, six-month span equals 62.5 percent).
