1. MALAYSIAN ECONOMIC INDICATORS (MEI): LEADING, COINCIDENT & LAGGING INDEXES WORKSHOP ON SHORT-TERM ECONOMIC STATISTICS 8 th OCTOBER 2014 HANGZHOU, CHINA JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

2. OUTLINE Introduction Objective The Development of MEI The Components of Composite Index Analysis Limitation Current Development JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

3. The initial development of Business Cycle Indicators (BCI) was started in September 1993. In 1995, the 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). INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

4. It was used internally before it was published to the public in January 2001. Consists of Leading, Coincident and Lagging for Composite Indexes. INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

5. While the Diffusion Indexes consists of Diffusion Indexes for Leading and Coincident. The Leading Index (LI) measures anticipations of the overall economic activity in the months ahead. INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

6. The Coincident Index (CI) is a comprehensive measure of the overall current economic performance. Study shows that there is strong relationship between CI and GDP (r = 0.86). The CI is also used to date the business cycles reference periods recession and recovery) in Malaysia. INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

7. r = 0.86 INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

8. The Lagging Index is to validate the signal of the Leading and Coincident Indexes. The Diffusion Index is a complement to the Composite Index and used to assist in making a decision especially in determining turning point of economic cycle. INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

9. Coincident Diffusion Index and Business Cycle INTRODUCTION JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

10. To identify the cyclical phase and the direction of near term economy. To monitor Malaysian economic performance on a monthly basis. To assist the policy makers, investors, researchers and public to assess the economic performance. OBJECTIVE JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

11. THE DEVELOPMENT OF MEI JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

12. The selection is based on the guideline by the Business Cycle Indicators Handbook, namely: –Conformity to business cycle –Consistent timing –Economic significance THE COMPONENTS OF COMPOSITE INDEX JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

13. –Statistical adequacy –Smoothness –Promptness JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA THE COMPONENTS OF COMPOSITE INDEX

14. The selected time series then are tested using Lead/Lag Table. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA THE COMPONENTS OF COMPOSITE INDEX

15. Lead-Lag Table for Peak and Trough - Bursa Malaysia Industrial Index JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA THE COMPONENTS OF COMPOSITE INDEX

16. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA THE COMPONENTS OF COMPOSITE INDEX

17. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

18. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

19. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

20. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

21. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

22. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

23. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA COMPOSITE LEADING INDEX

24. The growth cycle is a fluctuation of the aggregated economic activity along its long term trend. The growth is generated through the deviation of index from its long term trend. Business cycle is a fluctuation of the aggregated economic activity. There are two main phases namely expansion and recession phases. 24 JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

25. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

26. Determination of Peaks and Troughs for Growth Cycle 26 JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

27. Malaysian Growth Cycles Reference Periods JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

28. 28 Determination of Peaks and Troughs for Business Cycle JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

29. Malaysian Business Cycles Reference Periods JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA ANALYSIS

30. The LI is unable to measure or predict the magnitude of any changes of economic activity. The index shows the direction of the economy in advance. The CI does not represent the level of the current economic situation. Thus it should not be interpreted as the level of current monthly Gross Domestic Product (GDP). JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA LIMITATION

31. The economic indicators unable to take into account the internal or/and external shock to the economy. JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA LIMITATION

32. Review the existing components. Identify and evaluate new potential time series data. Develop Malaysian Business Cycle Clock (MBCC). JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA CURRENT DEVELOPMENT

33. WAN SITI ZALEHA BINTI WAN ZAKARIA DEPARTMENT OF STATISTICS, MALAYSIA ECONOMIC INDICATORS DIVISION wszwz@stats.gov.my http://www.statistics.gov.my wszwz@stats.gov.my http://www.statistics.gov.my wszwz@stats.gov.my http://www.statistics.gov.my JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA

34. THANK YOU JABATAN PERANGKAAN MALAYSIA DEPARTMENT OF STATISTICS, MALAYSIA