|
Related Topics |
|
We take a look at the latest business cycle indicators (BCI) for March 2020, released by the South African Reserve Bank (SARB). While we are not the greatest fans of the these indicators we still enjoy reading it. How has the Covid-19 pandemic affected the business cycle indicators and its compilation
" Due to the 35-day national lockdown restrictions, temporary distortions to some of the component time series have occurred. The supply and demand shocks caused by the COVID-19 pandemic resulted in unusual behaviour in some component time series and because of the exogenous nature of the pandemic " |
South African Reserve Bank
|
The South African Reserve Bank Business Cycle Indicators for March 2020 (published in May 2020)
- The composite leading business cycle indicator increased by 0.7% on a month-to-month basis in March 2020, as increases in five of the eight available component time series outweighed decreases in the other three. The largest positive contributions to the movement in the composite leading business cycle indicator in March resulted from a marked widening in the interest rate spread and an acceleration in the twelve-month percentage change in job advertisement space. The largest negative contributions resulted from a decrease in the US dollar-denominated South African export commodity price index and a deceleration in the twelve-month percentage change in the number of new passenger vehicles sold. In March 2020, COVID-19 related global and domestic risk aversion caused distortions to some of the component series of the leading indicator.
- Due to the 35-day national lockdown restrictions, temporary distortions to some of the component time series have occurred. The supply and demand shocks caused by the COVID-19 pandemic resulted in unusual behaviour in some component time series and because of the exogenous nature of the pandemic, it is therefore not possible for the composite leading business cycle indicator to have predicted its impact in advance.
- The composite coincident business cycle indicator decreased by 0.5% on a month-to-month basis in February 2020, extending its sharp downward trend since May 2019.
- The composite lagging business cycle indicator decreased by 0.2% on a month-to-month basis in February 2020.
Advertisement
While the summary from the South African Reserve Bank is all fine and dandy, it doesn't really discuss what makes up each of these indicators or what exactly they aim to measure or explain or forecast. So we will cover it in a bit more detail as well as provide a chart for each of these indicators to provide an overview of how the various indicators have performed over time.
Leading Indicator
Leading Indicator
The leading indicator is calculated with the aim of looking to provide a forward looking view (forecast) of the future movement of the South African economy and business activity. Over time we have mapped the leading indicator against actual economic activity as measured by South Africa's GDP
Coincident Indicator
Coincident Indicator
The coincident indicator is calculated with the aim of providing a feel for what the economy and business conditions are like as and when it happens. So this is less forward looking than the leading indicator and more focused on the here and now. And readers will notice that the charts for the leading indicator and the coincident indicators are totally different, this is due to the different aims as well as data sources.
Lagging Indicator
Lagging Indicator
The lagging indicator looks to track the economy and business activity after the fact, or after its happened. And this indicator is based on a more complete data set that has been updated and or revised. In theory this indicator should be the closest in terms of its behaviour to that of the GDP data published for Statistics South Africa.
Again the chart for the lagging indicator is different to that of the coincident and leading indicators, which essentially says these three indicators cannot be compared with one another in order to determine whether the leading indicator is a good indicator for where the coincident or lagging indicator is heading or whether the coincident indicator is a good indicator of where the actual economy or lagging indicator is heading.
Again the chart for the lagging indicator is different to that of the coincident and leading indicators, which essentially says these three indicators cannot be compared with one another in order to determine whether the leading indicator is a good indicator for where the coincident or lagging indicator is heading or whether the coincident indicator is a good indicator of where the actual economy or lagging indicator is heading.