Iceland leading indicator – growth outlook positive
The Iceland Composite Leading Indicator (CLI) rose by 0.4% in January. This is the fifth consecutive rise. The CLI continues to hint at growth picking up in early 2015.
As before, tourism growth along with increasing fish catches continue to serve as the main drivers behind the CLI rise. However, there appears less optimism among consumers. There are several external risk factors mainly in relation to the geopolitical situation, the developments in Ukraine and Greece and the economic outlook for Russia.
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.
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 January all of the six underlying components are strengthening year on year. However, five of the six components rise on the previous month.
Table 1 shows the development of the CLI during the past twelve months. The value for January rises by 0.4% on the month to 102.1. This value serves as an indicator to economic activity six months into the future, i.e. July 2015. A value of 100 indicates GDP in line with its long term trend.