KEPE Composite Leading Indicator

Published in KEPE INDICES

February 2020 estimations


The KEPE monthly Composite Leading Indicator (CLI) is constructed based on a dynamic factor model, using six selected monthly economic series assumed to have leading properties (see also Tsouma, E. [2016], Constructing a Composite Leading Indicator of Economic Activity in Greece, Applied Economics Quarterly, 62 [2], 85-105). It provides early evidence on the course of and any turns in Greek economic activity, ahead of the developments in major economic aggregates. According to the most recent observation for November 2019, the CLI recorded an increase, albeit a marginal one, for the eleventh consecutive period. Remaining on a rising course, it has clearly surpassed the highest level recorded during the most recent period, in particular since the onset of the economic crisis, namely in the month of August 2018. In addition, it has reached the levels recorded in mid-2008, whereby at that time it was already recording a downward course, as a leading indicator. The observed steady rising path of the CLI provides strong evidence in favor of the argument that the related increase more definitely signals the reversal of the downward-adjusting course that began in September 2018. As a result, the observed recovery of the CLI constitutes an early indication of a future enhancement of the stabilizing and improving trends in economic activity in the country, at least in the short run. For a better and more accurate assessment regarding the continuation or interruption of the prevailing trends, it is necessary to re-estimate the CLI with all the new information, as soon as more recent data become available.


Notes: The lag in the data is associated with the non-availability of more recent data for building activity. Note that the incorporated data refer to the period before the outbreak of the coronavirus in Greece.