KEPE’s composite leading indicator of Greek economic activity (CLI-GR)

The monthly Composite Leading Indicator (CLI) of KEPE (see Discussion Paper, No. 114, KEPE) is constructed on the basis of a dynamic factor model, using selected monthly indicators assumed to have leading properties. It provides early evidence of turns in Greek economic activity ahead of the corresponding turns in aggregate measures. According to the most recent observation for October 2017, the CLI records a modest decrease, interrupting the increasing trend recorded on the basis of the most recent observations, which could, however, be interpreted as a single and temporary reversal justified by the variability characteristic of the CLI. As a result, given the leading feature of the Indicator, it is not accurate to drop the argument that its recent course signals an improvement in economic conditions in the country and, potentially, reflect that the Greek economy is eventually recovering. Clearly, any assessment on a stable strengthening of the domestic economic activity should rely on the further evaluation of the course of the CLI. To that end, it is important to conduct new estimations, as soon as new data become available and an overall accurate evaluation of the observed indications and trends will become feasible.