Download Iceland Leading Indicator – Growth outlook still strong

News release no. 3/2017
2017.03.17
Iceland Leading Indicator – Growth outlook still strong
The Iceland Composite Leading Indicator (CLI) rose by 0.1 per cent in February. However,
there were some downward revisions for the last three months. The CLI still indicates growth
above long term trend.
Three of the six components rise on the previous month with the largest impact being due to
the increase of the value of fish catches and the increase in tourist arrivals. All components
are adjusted for seasonality and long term trend. The long-term trend of some important CLI
components is still strong. The main risk factors continue to include some external factors
mainly in relation to the geopolitical situation.
Turning points of the CLI tend to precede turning points in economic activity relative to trend
by approximately six months. Economic activity is measured by Gross Domestic Product
(GDP) published by the Statistical Bureau of Iceland. The calculation of Analytica’s CLI is
based on methodology adopted by the OECD.
Chart 1. GDP and Analytica’s CLI – Trend Adjusted
Long term trend = 100
108
106
104
102
Analytica's
CLI
100
GDP
98
96
94
92
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Chart 1 depicts Analytica’s CLI together with trend adjusted GDP. The chart shows that the
CLI leads GDP by around six months.
A hollow triangle has been placed on Chart 1 for the month of March 2016 indicating a
tentative CLI turning point to the downside. Other things unchanged, it is likely that the CLI
will change course to the upside in the next few months as fish catches increase following
the resolution of the fishermen strike on February 19.
As seen in Chart 2 rapid growth is still forecast into 2017. The forecast is based on the
Iceland CLI and its components after shifting forward by six months.
The purpose of Chart 2 is to put GDP in context with the leading indicator depicted on Chart
1. A turning point to the upside corresponding to the one in Chart 1 is placed in February
2015. GDP growth in Q3 and Q4 was somewhat above the CLI based projection.
Furthermore, the long term upward trend remains strong.
Chart 2. GDP and Analytica‘s forecast into year 2017
ISK 000m per month - 2005 Prices
117
Q4
115
113
111
109
107
GDP
105
Analytica's
CLI based
Forecast
103
101
99
97
95
93
91
89
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Note: GDP figures for 2014, 2015 and 2016 are preliminary estimates by the Statistical Bureau of Iceland.
The GDP figures presented in Chart 2 are based on the official quarterly estimates of the
Statistical Bureau of Iceland. The quarterly GDP numbers have been distributed over
individual months. The figures are seasonally adjusted and smoothed and are in amounts of
thousands of million ISK at fixed 2005 prices.
There are six components of Analytica’s CLI. These are: Fish catches, inflation adjusted
debit card turnover, number of tourists visiting Iceland, the MSCI World equities index,
inflation adjusted imports and the Gallup Index of Consumer Confidence. For February, two
of the six underlying components are strengthening year on year. However, three of the six
components rise on the previous month. See Appendix, Charts A1 and A2.
Some revisions to the index values have taken place. This is a result of component revisions
and in part a result of the methodology employed, including the long-term trend estimate.
Table 1 shows the development of the CLI during the past twelve months. The value for
February rises by 0.1 per cent to 100.4. This value serves as an indicator to economic
activity six months into the future, i.e. August 2017. A value of 100 indicates GDP in line with
its long-term trend.
Table 1. Analytica's CLI 2016-2017
2016
February
March
April
May
June
July
August
September
October
November
December
2017
January
February
Change in %
Index on month
YOY
Indication
for month
101.8
101.7
101.6
101.5
101.5
101.4
101.5
101.5
101.3
100.9
100.5
0.1%
-0.1%
-0.1%
-0.1%
0.0%
0.0%
0.0%
0.0%
-0.2%
-0.3%
-0.4%
2.0%
1.8%
1.8%
1.6%
1.4%
1.0%
0.7%
0.5%
0.2%
-0.4%
-1.0%
August 2016
Sept.
Oct.
Nov.
Dec.
Jan. 2017
Feb.
March
April
May
June
100.3
100.4
-0.3%
0.1%
-1.4%
-1.3%
July
August
The March Composite Leading Indicator is scheduled for release on April 19, 2017.
Further information is provided by Analytica’s CEO, Mr. Yngvi Hardarson
Tel. +354 5278890 - email: [email protected]
Iceland Composite Leading Indicator - Appendix
Chart A1 - Analytica's Leading Indicator - Individual Components
Per cent Change Year on Year *
Debit Cards
10
Consumer
Confidence
Cons. Confidence
125
100
5
75
0
50
-5
25
0
-10
-25
-15
-50
-20
-75
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Fish Catches
15
2007
2008
2009
2010
30
5
20
2012
2013
2014
2015
2016
2013
2014
2015
2016
2013
2014
2015
2016
MSCI World
40
10
2011
10
0
0
-5
-10
-10
-20
-15
-30
-20
-40
-25
-50
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Imports
20
2007
2008
2009
2010
2011
2012
No. of Tourists
50
40
10
30
0
20
-10
10
0
-20
-10
-30
-20
-40
-30
-50
-40
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2007
2008
2009
2010
2011
2012
* Not Trend Adjusted
Notes:
Debit Cards: Domestic debit card turnover, inflation adj. – Fish Catches: Chain linked volume index. – Imports: Inflation adjusted imports.
Cons. Confidence: Gallup Index of Consumer Confidence. – MSCI World: MSCI World equities index. – No. of Tourists: No. of passenger arrivals at Keflavik Airport.
All figures are seasonally adjusted and smoothed. – Shadow on charts covers latest six months data.
Sources:
Gallup Iceland, Statistical Bureau of Iceland, Central Bank of Iceland, Thomson Reuters, Analytica‘s calculations.
Iceland Composite Leading Indicator - Appendix
Chart A2 - Analytica's Leading Indicator - Individual Components
Trend Adjusted - Trend=1.0
Debit Cards
1.100
Consumer
Confidence
Cons. Confidence
1.50
1.075
1.25
1.050
1.025
1.00
1.000
0.75
0.975
0.950
0.50
0.925
0.900
0.25
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Fish Catches
1.10
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2013
2014
2015
2016
2013
2014
2015
2016
MSCI World
1.3
1.2
1.05
1.1
1.00
1.0
0.95
0.9
0.90
0.8
0.85
0.7
0.80
0.6
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Imports
1.3
2007
2008
2009
2010
2011
2012
No. of Tourists
1.30
1.25
1.2
1.20
1.1
1.15
1.0
1.10
0.9
1.05
1.00
0.8
0.95
0.7
0.90
0.6
0.85
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2007
2008
2009
2010
2011
2012
Notes:
Debit Cards: Domestic debit card turnover, inflation adj. – Fish Catches: Chain linked volume index. – Imports: Inflation adjusted imports.
Cons. Confidence: Gallup Index of Consumer Confidence. – MSCI World: MSCI World equities index. – No. of Tourists: No. of passenger arrivals at Keflavik Airport.
All figures are seasonally adjusted and smoothed. – Shadow on charts covers latest six months data.
Sources:
Gallup Iceland, Statistical Bureau of Iceland, Central Bank of Iceland, Thomson Reuters, Analytica‘s calculations.
About Analytica
Analytica provides independent and value added financial advisory services. The company
specializes in treasury and risk management services provided to qualifying investors. The
company's position is based on decades of experience and expertise.
The CEO and founder of Analytica is Mr. Yngvi Hardarson.
Mr. Hardarson was born in 1960 and holds an MA degree in Economics from Queen's
University of Kingston Canada, with specialization in Econometrics and Monetary
Economics. In addition, he holds a certificate in international trade and resource allocation
from the Yrjö Jahnsson Foundation in Helsinki, Finland and a CMT designation by the Market
Technicians Association in NY.
Mr. Hardarson started his career as an economist at the National Economic Institute in 1988.
In 1990 he became the Chief Economist at the Federation of Icelandic Industries. In 1993 he
co-founded Economic Consulting and Forecasting Ltd. In 2007 and until the summer of 2010
Mr. Hardarson was employed as a Managing Director at Askar Capital hf. Investment Bank.
In the period 1993-2008 Mr. Hardarson also served as the editor of Gjaldeyrismál (FX-mail),
a daily and subsequently weekly newsletter on FX, money markets and global economics.
Further information is provided on Analytica’s web page http://www.analytica.is