Current period performance of OECD composite leading indicators (CLIs) : revision analysis of CLIs for OECD Member countries

This paper presents a comprehensive analysis of the current period performance of the OECD composite leading indicators (CLIs) for 21 OECD Member countries and three zone aggregates (OECD area, Euro area and Major Seven countries) for which CLIs are available for a longer time period. The revisions analysis of OECD CLIs is similar to those recently undertaken by the Organisation for a range of quantitative short-term economic indicators. The aim of the current analysis on CLIs is to further evaluate the quality of the indicator in order to: identify areas where their reliability could be improved; and provide further information to users on their use for economic analyses. The results show that first estimates of CLIs are revised frequently but the size of revisions is rather small for most countries and almost neglectable for zone aggregates and there is no evidence of bias. They also indicate that there is an improvement in the reliability of the second estimates. The OECD CLI is, however, designed to provide early signals of turning points (peaks and troughs) between expansions and slowdowns of economic activity. It provides qualitative information on short-term economic movements rather than quantitative measures. Therefore, the main message of CLI movements over time is the direction up or down rather than levels. A simple measure which considers the direction is the sign of the movements. The results show that for almost all the countries, around 90% of the time the sign of the initial estimates of year-on-year growth rates and the 6 month rate of change are the same as the ones published one month later. So the initial estimate can be considered as a good indicator of whether economic activity will move up or down in the near term future...