Iceland Leading Indicator - Tentative Signs of Slower Growth

| Source: Analytica

REYKJAVIK, Iceland, Aug. 20, 2014 (GLOBE NEWSWIRE) -- The Iceland Composite Leading Indicator (CLI) fell again in July and there were some downward revisions to prior figures. The indicator published by independent advisory company Analytica, is designed to anticipate turning-points in economic activity relative to trend. The CLI now tentatively indicates that growth may be temporarily losing momentum.

The reasons behind the tentative signal are mainly twofold: Primarily there are delayed effects of the collapse in capelin catches. Also, seasonally adjusted figures indicate a somewhat slower growth in tourism. Both of these reasons need some qualifications. Firstly, fish catches already seem to have bottomed. Secondly, the seasonality is changing in the tourism business and tourism is still growing at a brisk pace. Likely the CLI underestimates the significance of tourism growth. Moreover, it is not clear to what extent the current data reflects planned projects in the power intensive industry.

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 July five of the six underlying components are strengthening year on year. However, four 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 July falls by 0.2 percent on the month to 101.1. This value serves as an indicator to economic activity six months into the future, i.e. January 2015. A value of 100 indicates GDP in line with its long term trend.

Table 1. Analytica's CLI 2013-2014    
    Change in %   Indication
  Index on month YOY   for month
July 101.6 0.1% -0.3%   Jan. 2014
August 101.8 0.2% -0.1%   Feb.
September 102.0 0.2% 0.3%   March
October 102.1 0.1% 0.7%   April
November 102.0 -0.1% 1.0%   May
December 101.8 -0.2% 1.0%   June
January 101.7 -0.1% 0.8%   July
February 101.7 0.0% 0.6%   August
March 101.7 0.1% 0.4%   Sept.
April 101.7 -0.1% 0.2%   Oct.
May 101.5 -0.2% 0.0%   Nov.
June 101.2 -0.2% -0.2%   Dec.
July 101.1 -0.2% -0.5%   Jan. 2015

The August Composite Leading Indicator is scheduled for release on September 23, 2014.

Further information is provided by Analytica's CEO, Mr. Yngvi Hardarson

Tel. +354 5278890 - email: