Hellenic Bank presented yesterday the new composite leading economic index.
The Cyprus Composite Leading Economic Index (CCLEI) based on the Aruoba, Diebold, and Scotti (ADS) (2009) model approach (CCLEI_ADS), exhibited a year-on-year decrease of 0.71% in October 2019, following decreases of 0.69% in September, and 0.66% in August, signalling downward pressures on economic growth.
The downward pressures on the CCLEI is mainly due to a reduction in the Euro Area Economic Sentiment Indicator. This reflects the deterioration of the international economic environment due to, among others, trade conflicts and the prolonged uncertainty over the Brexit process. In contrast, the decline in oil prices as well as the positive performance of domestic indicators, in particular, retail sales volume, credit card transactions and tourist arrivals, have contributed to a smoother reduction of the Index.
In summary, recent downward trends in the CCLEI are due to the deteriorating external environment. The negative developments in the external environment, however, in conjunction with the positive performance of domestic variables, are in line with the forecasts of international and domestic organizations for the Cypriot
The index that is designed to provide early signals of turning points in business cycles i.e., early evidence of the turns in economic activity. This index comprises of a number of leading economic activity variables which tend to lead changes in the overall economic activity.
The CCLEI is the combination of multiple leading indicators which have been carefully selected from a large number of international and local variables. Currently, the components are the Brent Crude Oil price, the Euro Area Economic Sentiment Indicator, the tourists’ arrivals, the value of visa card transactions, the retail trade sales turnover volume index, the volume index of electricity production, and the number of authorized building permits. The leading properties of these variables will be assessed on a regular basis.