The Conference Board announced today that the leading index for Korea declined by 1.0 percent, while the coincident index declined 0.1 percent in May.

The leading index declined substantially in May, after remaining essentially flat between February and April. Letter of credit arrivals, yield of government bonds (inverted), real exports, index of inventories to shipments (inverted) and value of machinery orders all made substantial negative contributions to the index, while the stock price index made the only positive contribution. Since November 2007, the leading index has declined by 2.9 percent (about a -5.8 percent annual rate), down sharply from an 8.2 percent annual rate of increase for the previous six months. In addition, the weaknesses among the leading indicators have been widespread in recent months.

The coincident index, a measure of current economic activity, declined slightly in May after increasing for five consecutive months. Wholesale and retail sales made the largest negative contribution to the index. During the past six months, the coincident index has increased by 1.1 percent (about a 2.2 annual rate), slightly below the 2.6 percent annual rate of growth for the second half of 2007. Additionally, the strengths among the coincident indicators have remained widespread.

Since October 2007, the leading index has been on a fairly steep downward trend, while the coincident index continued to grow steadily, though at a slower pace than during the second and third quarters of last year. At the same time, real GDP growth has slowed from a 6.5 percent average annual rate for the second and third quarters of 2007, to a 4.8 percent average annual rate during the final quarter of 2007 and the first quarter of 2008 (including a 3.3 percent annual rate during the first quarter of 2008). The recent behavior of the leading and coincident indexes continues to suggest that the economy is likely to grow at a slow to moderate pace in the near term.

LEADING INDICATORS. One of the seven components that make up the leading index increased in May. The only positive contributor was stock prices. Negative contributors — from the largest negative contributor to the smallest — were letter of credit arrivals, the (inverted) yield of government public bonds, real exports FOB, the (inverted) index of inventories to shipments, value of machinery orders, and private construction orders.

With the 1.0 percent decrease in May, the leading index now stands at 174.9 (1990=100). Based on revised data, this index increased 0.1 percent in April and declined 0.1 percent in March. During the six-month span through May, the leading index decreased 2.9 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 coincident index increased in May. The positive contributors to the leading index — in order from the largest positive contributor to the smallest — were total employment, and monthly cash earnings. The wholesale and retail sales component, and industrial production declined.

With the 0.1 percent decrease in May, the coincident index now stands at 171.9 (1990=100). Based on revised data, this index increased 0.3 percent in April and increased 0.3 percent in March. During the six-month span through May, the coincident index increased 1.1 percent, with all four components advancing (diffusion index, six-month span equals 100.0 percent).