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BIEC: economic climate weakens in May


2011-05-30



The Leading Indicator (WWK), which provides information on future trends in the economy, shed 0.5 points in May, the Bureau for Investments and Economic Cycles (BIEC) reported. It was the second consecutive fall of the indicator, after a 0.6-point drop in April.

According to the Bureau, the performance of the index suggests a weakening economic outlook, with no clear engine of GDP growth to help the economy accelerate from last year’s rate or confidently sustain it. That is because whereas consumer demand is likely to soften in the months ahead, recovery in business investment remains elusive and export growth is flagging.

Of the eight component indicators of the WWK, three improved in May, one remained unchanged and four deteriorated. The strongest positive contributor was a rise in labour productivity, but the improvement was only temporary, reflecting a lower number of working days. At the same time, new manufacturing orders, both domestic and foreign, remained weak across most consumer goods sectors, inventory levels kept rising even though post-crisis stock rebuilding is all but complete (which might put a drag on industrial production), while assessments of the general economic situation deteriorated again.

The WWK is a prognostic instrument. It is a measure of the current state of economic activity and provides advanced information on upturns and downturns in economic activity in relation to GDP as well as data on production, retail sales, wages and household incomes. The average prognostic timeframe of the WWK index in relation to the actual state of economic affairs ranges from 3 to 12 months, depending on the phase of the economic cycle.



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