BIEC: economic climate improves in January

2010-01-29



The Leading Indicator (WWK), which provides information on future trends in the economy, improved by more than one point in January, the Bureau for Investments and Economic Cycles (BIEC) reported. The index thus maintained its upward trend from previous months.
According to the Bureau, the index’s performance in recent months suggests that the economic recovery is assuming a V shape. The only risk factor is that inflation may rebound faster than anticipated.
Of the eight components of the index, six improved in January while two showed a (modest) decline. New manufacturing orders (both domestic and export) kept rising at an accelerating pace; at the same time, the level of inventories increased again. According to the Bureau, this indicates that companies are rebuilding their stocks after slashing them at the low point of the downturn, which should support industrial output going forward. Meanwhile, labour productivity in the enterprise sector improved for the third straight month, accompanied by a relatively moderate drop in employment and positive real wage growth. Furthermore, managers’ assessments of the financial situation of their companies and (especially) of the general economic outlook were also better in January.
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.