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BIEC: economic climate back to pre-crisis levels in December


2010-12-28



The Leading Indicator (WWK), which provides information on future trends in the economy, gained 2.8 points in December and stood at 141.6 points, i.e. higher than its level in 2007, before the downturn began, the Bureau for Investments and Economic Cycles (BIEC) reported. According to the Bureau, this suggests that the economy is now back to its long-term growth path.

All the eight component indicators of the WWK improved in comparison with November. There rate of growth in new manufacturing orders – both domestic and foreign – accelerated markedly in December, reflecting a combination of solid domestic demand helped by labour market improvements and moderate wage growth, as well as robust export sales driven in large part by the strength of the German economy. As a result, inventories of finished goods declined during the month, which should have a stabilising effect on output in case of any short-term dips in new orders going forward. At the same time, managers’ perceptions of the situation of their companies became more optimistic in December, with nearly 20% reporting an improvement, against 13% who thought it had deteriorated. Importantly, assessments were most upbeat among makers of intermediate goods, including machinery and equipment, which is another sign of a recovery in investments. And companies’ views about the general economic situation also improved, regardless of their own situation.

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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