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The composition of the coincident economic index (CEI) for Mexico was
revised effective with the May 2008 release. The CEI for Mexico will be
comprised of three components: employment, industrial production, and
retail sales. With this revision the unemployment rate series has been
omitted from the composition of the Coincident Economic Index (CEI)
because of its lack of trend and high month to month volatility. In
addition, the industrial production component will be seasonally
adjusted by The Conference Board using the Census X-12 methodology; in
the past, the industrial production series was seasonally adjusted by
the source agency. As a result of these revisions, the CEI should
provide an improved monthly measure of current economic activity for
Mexico and better enable the measurement and analysis of the Mexican
economy’s cyclical dynamics.
The composition of the leading index has not been altered, but this
benchmark revision also implements an old and well-known trend
adjustment to the leading index, based on the average growth rate in
the CEI. This procedure does not affect the cyclical properties of the
LEI, but it offers two advantages: With this procedure, the trend in
the LEI will not vary with changes in the composition of the index or
set of indicators used to calculate it. This facilitates the
interpretation of the indexes as cyclical measures, and provides a more
consistent framework for their use. The trend adjustment also makes the
long-term growth of the LEI more similar to that of the CEI, and makes
the levels of the indexes more meaningful. While the composite indexes
are mainly used to indicate directional changes in aggregate economic
activity, many users also regard them as measures of the level of
economic activity. The trend adjustment facilitates this use. The trend
adjustment factor for the leading index is 0.0318 and it is calculated
over the 1980-2006 period and applied to the complete history of the
index.
The benchmark revisions also bring the history of the composite indexes
up-to-date with data revisions in their existing components and update
the standardization factors used in the calculations. This is a
maintenance procedure typically done once a year, which usually does
not change the cyclical properties of the indexes and has, as expected,
relatively small effects.
These changes are the result of research at The Conference Board (TCB)
and regular consultations with its Business Cycle Indicators Advisory
Panel and other experts. The Conference Board continuously monitors the
behavior and performance of the composite indexes and their components
and makes changes from time to time. This revision is consistent with
long-standing TCB policy to make changes to the indexes when research
indicates substantial improvements are possible. Similar methodological
changes were introduced into the US LEI recently and will be
incorporated into the LEIs of other countries covered by the TCB's
global indicators program. Because of these revisions, the composite
indexes and their monthly changes are no longer directly comparable
with previous releases.
For more information, please visit our website at:
http://www.conferenceboard.org/economics/bci.
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