The diffusion index of coincident economic indicators, a key government-devised measure to assess the state of the economy, pointed in May to an expansion for the 13th consecutive month, the Economic Planning Agency said in a preliminary report released Wednesday.
The index registered a preliminary 62.5 percent in May. A reading above 50 percent is thought to indicate an economic expansion, while a reading below that level is considered to indicate a contraction.
The diffusion index of leading indicators, which is considered to forecast activity several months ahead, was at 57.1 percent in May, moving back above the 50 percent mark after dropping below it in April for the first time in 14 months.
On the basis of the results, the agency repeated the assessment it has made for several months: “The economy is moving toward an improvement,” said Yoshihiko Senoo, head of the agency’s Business Statistics Research Division.
In the coincident series, of the eight indicators available for preliminary computation, production-linked data such as industrial production pointed to an expansion, while consumption-related data such as department store sales indicated a contraction.
The leading series, though having risen above 50 percent, could drop after more data are made available. , since material inventory data and machinery order data, both unavailable for the latest computation, are likely to show a contraction, Senoo said.
But he downplayed the significance of the leading index falling below 50 percent, saying there have been occasions in the past when the index had temporarily dipped below 50 percent despite the economy being in an expansionary phase.
The EPA calculates the diffusion indexes by converting the number of indicators showing an improvement in the reporting month three months before into a percentage of the total.
The diffusion index of lagging indicators, used to confirm economic peaks and troughs in the recent past, registered 40 percent in May, the EPA said.
The lagging index remained below 50 percent for 28 straight months until January, but stayed at 50 percent in February and March. It rose above 50 percent in April to 57.1 percent after a data revision.