Short-term Economic Indicators

Malaysia Business Cycle Indicators

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 1
 Outline

•First Day
• Overview of BCI
• Malaysia BCI
•Time series Decomposition
• Seasonal Adjustment

• Second Day
• Indicators selection
• The Composite Index
• The Diffusion Index

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012
2
 Outline

• Malaysia BCI Initial Development

A

• First Improvement of BCI

B

• Further Improvement of BCI

C

• Recent Improvement
D

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 3
 4
1. Malaysia BCI: Initial Development

• The project of BCI was started in September 1993.

•With technical Assistance of Center for International

Business Cycle Research (CIBCR), Columbia University,
New York (late Prof Geoferry Moore and late Prof Victor
Zarnowitz)

•The Project is funded by United Nation Development

Programme (UNDP).

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 4
 1. Malaysia BCI: Initial Development

• Review more than 60 monthly and quarterly time series

In 1995 first set of BCI was developed comprises of two composite

indexes: the Coincident Index and the Leading Index using the
methodology known as Moore-Shiskin (with trend adjustment)

•It was used internally: Department of Statistics and shared with

Economic Planning Unit (EPU) for comments

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 5
 A. Malaysia BCI: Initial Development

• Composite Coincident Index (Five components)

• Industrial Production Index

• Real Gross Imports
• Real Salaries and Wages (Manufacturing)
• Total Employment (Manufacturing)
• Real Sales (Manufacturing)

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 6
 A. Malaysia BCI: Initial Development

• Composite Coincident Index (Five components)

Percent
15

10

r = 86
5

0
Coincident Index

-5
GDP

-10

-15
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Year

Growth rate is obtained by averaging the index’s six-month smoothed growth rates for three months.

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012 7
 A. Malaysia BCI: Initial Development

• Composite Leading Index (Seven Components)

• Real Money Supply M1

• Kuala Lumpur Industrial Share Price Index
• CIBCR’s Eleven Countries Leading Index
• CPI for services (inverted), Growth rate
• Industrial Material Price Index, Growth rate
• Ratio, Price to unit Labour cost, Manufacturing
• Housing Permits, Residential

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 8
Pakistan Bureau of Statistics, 5-7 Nov 2012
 A. Malaysia BCI: Initial Development

• During the Asian Financial Crises, EPU noticed the

useful of the BCI especially to create public awareness
(to avoid public panic)

•DOSM was asked to improve the BCI performance

before made to public

• Review the existing components

• Generate the lagging indexes

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 9
Pakistan Bureau of Statistics, 5-7 Nov 2012
 B. Malaysia BCI: First Improvement

• Three set of composite indexes were developed with

reviewed components

The Coincident Index (Six components)

The Leading Index (Eight components)
The Lagging Index (Five components)

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 10
Pakistan Bureau of Statistics, 5-7 Nov 2012
 B. Malaysia BCI: First Improvement

• Composite Coincident Index (Six components)

• Industrial Production Index

• Real Gross Imports
• Real Salaries and Wages (Manufacturing)
• Total Employment (Manufacturing)
• Real Sales (Manufacturing)
• Real Contribution, Employment Provident Fund
(EPF)

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 11
Pakistan Bureau of Statistics, 5-7 Nov 2012
 B. Malaysia BCI: First Improvement

• Composite Leading Index (Seven Components)

• Real Money Supply M1

• Kuala Lumpur Industrial Share Price Index
• CIBCR’s Eleven Countries Leading Index
• Real Total Tradeed, Eight Major trading partners (USA,
Singapore, Japan, China, Thailand, Korea, Taiwan, HK)
• CPI for services (inverted), Growth rate
• Industrial Material Price Index, Growth rate
• Ratio, Price to unit Labour cost, Manufacturing
• Housing Permits, Residential
• New Companies Registered

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 12
Pakistan Bureau of Statistics, 5-7 Nov 2012
 B. Malaysia BCI: First Improvement

• Composite Lagging Index (Five Components)

• 7-day call money, rate (inverted)

• Real Excess Lending to private
• Investment project approved, number
• Number of Defaulters, EPF (inverted)
• New vehicles registered

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 13
Pakistan Bureau of Statistics, 5-7 Nov 2012
 C. Malaysia BCI: Further Improvement

• In 2008, DOSM started to review the overall performance

of BCI

A. The Methodology
B. Components
C. Supplements Indexes

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 14
Pakistan Bureau of Statistics, 5-7 Nov 2012
 C. Malaysia BCI: Further Improvement

A. The Methodology

• Used the methodology recommended as in

Conference Board
•without trend adjustment
•Standardized weight

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 15
Pakistan Bureau of Statistics, 5-7 Nov 2012
 C. Malaysia BCI: Further Improvement

B. Review the whole components of CI and LI Establish the reference cycle

Business Cycle reference period

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 16
Pakistan Bureau of Statistics, 5-7 Nov 2012
 C. Malaysia BCI: Further Improvement

B. Review the whole components of CI and LI

Establish the reference cycle

Growth Cycle reference periods

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 17
Pakistan Bureau of Statistics, 5-7 Nov 2012
 C. Malaysia BCI: Further Improvement

C. Supplements Indexes

• Diffusion Indexes
• Leading Diffusion Index
• Coincident Diffusion Index

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 18
Pakistan Bureau of Statistics, 5-7 Nov 2012
 D. Malaysia BCI: Recent Improvement

Business Cycle Clock

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 19
Pakistan Bureau of Statistics, 5-7 Nov 2012
 Downturn Expansion MALAYSIA BUSINESS CYCLE CLOCK
HP IB
MAY 2008

BM
COINCIDENT INDEX
EM
LEADING INDEX
IP RS Retail Sales Index
CR
CU
SW
M1
IP Industrial Production Index
EM Employment, Mfg
RS
IS SW Real Salaries & Wages, Mfg
CU Capacity Utilization, Mfg
M1 Real Money Supply, M1
HP Housing Permits, Approved

IS Real Imports, Semiconductors

CR New Company Registered

IB Real Imports of Basic Precious

BM Bursa Malaysia, Industrial

Recession ES Recovery ES Expected Sales, Mfg

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia
Pakistan Bureau of Statistics, 5-7 Nov 2012
 THANK YOU

Abd Latib Talib

latib@stats.gov.my
Economic Indicators Division
Department of Statistics Malaysia

Training Course on Short -term Business Statistics, Abd. Latib Talib - Department of Statistics Malaysia 21
Pakistan Bureau of Statistics, 5-7 Nov 2012