The Conference Board announced that the leading index for Korea declined 1.3 percent, while the coincident index increased 0.4 percent in February.



The leading index declined sharply in February, but January's decline was revised up due to large upward data revisions to value of machinery orders and the (inverted) index of inventories to shipments in the manufacturing sector. Moreover, the weaknesses among the leading indicators have become more widespread this month and the only positive contributions came from its financial components: stock prices and yield on government public bonds. With February's decrease, the growth rate of the leading index has slowed, to a 0.9 percent rate (a 1.7 percent annual rate) between August 2007 to February 2008, well below the 5.1 percent rate (about a 10.5 percent annual rate) reached between April to October 2007.

The coincident index increased in February following a small decline in January, and the strengths among the coincident indicators have been widespread in recent months. However, the six-month growth rate for the index continued to slow, to 1.1 percent (a 2.1 percent annual rate) from August 2007 to February 2008, down from the most recent peak of 2.6 percent (about a 5.3 percent annual rate) in mid- 2007.

The leading index peaked in October 2007, and it has been on a downward trend in the past four months as a result of widespread weakness among its components. In addition, the growth of the coincident index also moderated somewhat in recent months. At the same time, real GDP grew at about a 6.2 percent average annual rate during the second half of 2007 (revised), slightly above the 5.5 percent average annual rate over the previous two quarters. The recent behavior of both the leading and coincident indexes so far still suggests that economic activity should continue growing, but probably at a more moderate rate, in the near term.

LEADING INDICATORS

Two of the seven components that make up the leading index increased in February. The positive contributors - from the larger positive contributor to the smaller - were the (inverted) yield of government public bonds and stock prices. Negative contributors - from the largest negative contributor to the smallest - were value of machinery orders, the (inverted) index of inventories to shipments, private construction orders, letter of credit arrivals, and real exports FOB.

With the 1.3 percent decrease in February, the leading index now stands at 176.5 (1990=100). Based on revised data, this index increased 0.5 percent in January and declined 1.2 percent in December. During the six-month span through February, the leading index increased 0.9 percent, with five of the seven components advancing (diffusion index, six-month span equals 71.4 percent).

COINCIDENT INDICATORS

Three of the four components that make up the coincident index increased in February. The positive contributors to the leading index - in order from the largest positive contributor to the smallest - were monthly cash earnings, industrial production, and the wholesale and retail sales component. Total employment remained unchanged in February.

With the 0.4 percent increase in February, the coincident index now stands at 171.7 (1990=100). Based on revised data, this index decreased 0.2 percent in January and increased 0.9 percent in December. During the six-month span through February, the coincident index increased 1.1 percent, with all four components advancing (diffusion index, six-month span equals 100.0 percent).