The Conference Board announced that both the leading and coincident indexes for Korea declined 1.0 percent in June.



The leading index declined sharply again in June, and has been on a downward trend since the last quarter of 2007. Stock prices, the government bond yield (inverted), and real exports all made large negative contributions to the index this month. With June's decline, the six-month growth rate of the leading index continued to slow, to -2.8 percent (about a -5.4 percent annual rate) from December to June, down sharply from the most recent peak of a 10.5 percent annual rate in October 2007. Moreover, the weaknesses among the leading indicators have continued to be widespread in recent months.

The coincident index also declined sharply in June, and the weaknesses among its components have become more widespread this month. Wholesale and retail sales again made the largest negative contribution to the index. The growth rate of the coincident index over the past six months slowed to 0.1 percent (about a 0.1 percent annual rate), down from a 2.6 percent annual rate during the second half of 2007.

The leading index has been on a steep downward trend since the fourth quarter of 2007, while the coincident index has fluctuated around a flat trend during this period. At the same time, real GDP grew at a 3.3 percent average annual rate during the first half of 2008 (including a 3.4 percent annual rate in the second quarter), down from the 6.2 percent average rate of growth in the second half of last year. The weaknesses in both leading and coincident indexes in recent months suggest that economic growth is likely to remain slow in the near term.

LEADING INDICATORS

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

With the 1.0 percent decrease in June, the leading index now stands at 173.2 (1990=100). Based on revised data, this index declined 1.0 percent in May and increased 0.1 percent in April. During the six-month span through June, the leading index decreased 2.8 percent, with two of the seven components advancing (diffusion index, six-month span equals 28.6 percent).

COINCIDENT INDICATORS

Only one of the four components that make up the coincident index increased in June. The positive contributor was total employment. The wholesale and retail sales component and monthly cash earnings declined, while industrial production remained unchanged in June.

With the 1.0 percent decrease in June, the coincident index now stands at 170.6 (1990=100). Based on revised data, this index increased 0.5 percent in May and decreased 0.6 percent in April. During the six-month span through June, the coincident index increased 0.1 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).