Korea’s leading indicator down 20th mo, longest since crisis-hit 90s: OECD

2019.01.15 16:03:16 | 2019.01.15 16:03:41

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The 20-straight-month slide in the leading indices for Korea under the scale of the Organization for Economic Cooperation and Development (OECD) suggests the economy has entered contraction.

According to data released by OECD on Monday, local time, Korea’s composite leading indicator (CLI), which is used to predict turning points in economic activity six to nine months ahead, fell for the 20th month in November.

The CLI that had pointed to south since March last year slipped to 99.19 in November from 99.22 in October. The last time the leading indicator for Korea fell for so long was from September 1999 after the country endured recession following the near-default crisis in 1997.

A reading above 100 implies economic conditions are likely to improve six to nine months ahead while vice versa for below 100.

The downtrend implies Korea’s economy will worsen in the first half of this year given that CLI is a gauge that anticipates turning points in economic activity. Six leading indicators are used to calculate CLI for Korea, which includes inventory circulation indicator for manufacturing released by Bank of Korea and Statistics Korea, short- and long-term interest rate spread, net barter terms of trade, business survey index for manufacturing, stocks of total investment manufactured goods, and Korea Composite Stock Price Index (Kospi).

The latest number for Korea comes after the state-run think tank Korea Development Institute (KDI) on Sunday warned of slowdown trend in the Korean economy, citing poor domestic demand and weakening exports. The KDI has raised alarm about the Korean economy since November.

The OECD, meanwhile, confirmed signs of easing growth momentum in most major economies. The average CLI for 33 OECD member countries fell 0.13 points to 99.32 in November versus October, falling for an 11th straight month since December, 2017.

The OECD, in particular, noted that “in the United States and Germany, the tentative signs of easing growth momentum, that were flagged in last month’s assessment, have been confirmed with easing growth momentum remaining the assessment for Canada, the United Kingdom, and the euro area as a whole, including France and Italy.”

By Lim Sung-hyun and Lee Eun-joo

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