The Conference Board announced that both the leading and coincident indexes for Korea increased 0.9 percent in July.

The leading index increased in July following declines in both June and May. There was a downward revision to the leading index in June as actual data for value of machinery orders and index of inventories to shipments became available. After dropping substantially for the past several months, these two components, along with letter of credit arrivals, increased sharply in July. Despite this month's increase, the six-month change in the leading index stands at -3.0 percent rate (about a -5.9 percent annual rate) from January to July, well below the most recent peak of a 10.5 percent annual rate in October 2007. During this period, the weaknesses among the leading indicators have been very widespread as indicated by the six-month diffusion index.

The coincident index also increased in July. Wholesale and retail sales, monthly cash earnings, and total employment all made positive contributions to the index this month. Despite somewhat widespread strengths among the coincident indicators over the past six months, the growth rate of the index continued to decline, and the index actually fell slightly by -0.3 percent (about a -0.6 percent annual rate) from January to July, down from a 2.6 percent annual rate during the second half of 2007.

Despite the gain in July, the leading index is still on a downward trend which started in the fourth quarter of 2007. Meanwhile, the coincident index has been fluctuating around a flat trend since the start of the year. 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. All in all, the decline and widespread weakness in the leading index over the past six months suggest that economic growth is likely to remain slow in the near term.

LEADING INDICATORS

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

With the 0.9 percent increase in July, the leading index now stands at 173.7 (1990=100). Based on revised data, this index declined 1.7 percent in June and declined 1.0 percent in May. During the six-month span through July, the leading index decreased 3.0 percent, with none of the seven components advancing (diffusion index, six-month span equals 0.0 percent).

COINCIDENT INDICATORS

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

With the 0.9 percent increase in July, the coincident index now stands at 172.0 (1990=100). Based on revised data, this index decreased 0.8 percent in June and increased 0.2 percent in May. During the six-month span through July, the coincident index decreased 0.3 percent, with three of the four components advancing (diffusion index, six-month span equals 75.0 percent).