Iceland Leading Indicator - Growth normalization ahead?

REYKJAVIK, Iceland, June 26, 2017 (GLOBE NEWSWIRE) -- The Analytica Composite Leading Indicator (CLI) for Iceland remains unchanged in May. However, the values for March and April are slightly revised downwards. The CLI indicates growth may be normalizing. Gross Domestic Product (GDP) may contract in Q2 on the previous quarter. Nevertheless, growth on the year may still stay above its long-term trend.

Three of the six components contract on the previous month with the largest impact being due to the fall in the number of tourist arrivals and in consumer confidence, both after adjusting for seasonality and long-term trend. However, the long-term trend of some important CLI components remains 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 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 May, three of the six underlying components contract year on year. Furthermore, three of the six components contract on the previous month.

Table 1 shows the development of the CLI during the past twelve months. The value for May remains unchanged at 100.3. This value serves as an indicator to economic activity six months into the future, i.e. November 2017. A value of 100 indicates GDP in line with its long-term trend.

Table 1. Analytica's CLI 2016-2017
		Change in %			Indication
	Index	on month	YOY		for month
2016
May	101.1	-0.1%	1.4%		Nov. 2016
June	101.0	-0.1%	1.1%		Dec.
July	101.0	-0.1%	0.7%		Jan. 2017
August	101.0	0.0%	0.5%		Feb.
September	100.9	0.0%	0.3%		March
October	100.8	-0.2%	0.0%		April
November	100.4	-0.3%	-0.5%		May
December	100.1	-0.4%	-1.1%		June
2017
January	99.9	-0.2%	-1.5%		July
February	100.0	0.1%	-1.4%		August
March	100.2	0.2%	-1.1%		Sept.
April	100.3	0.1%	-0.9%		Oct.
May	100.3	0.0%	-0.8%		Nov.

The June Composite Leading Indicator is scheduled for release on July 18, 2017.