A NEW LEADING INDICATOR OF UK QUARTERLY GDP GROWTH
N° 2004-10
Septembre 2004
Françoise CHARPIN
Catherine MATHIEU
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A NEW LEADING INDICATOR OF UK QUARTERLY GDP GROWTH*
N° 2004-10
Septembre 2004
Françoise CHARPIN**
Catherine MATHIEU***
* This paper was prepared for the 27th CIRET Conference, Warsaw, September 2004.
** OFCE, Analysis and Forecasting Department and University of Paris II; E-mail: charpin@ofce.sciences-po.fr
*** OFCE, Analysis and Forecasting Department – 69, quai d’Orsay – 75340 Paris Cedex 07 – France;
E-mail:catherine.mathieu@ofce.sciences-po.fr.
A New Leading Indicator of UK Quarterly GDP Growth
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Abstract
This paper presents a new leading indicator of UK output growth. The aim of the indicator is to
forecast quarterly real GDP growth over a two-quarter horizon, using latest available information,
mainly on a monthly basis, such as survey data, or on a daily basis, such as financial data
(interest rates and exchange rates) and raw materials prices. We adopt a model where GDP
growth relies on the Index of Production, the Retail Sales Index, survey data in the manufacturing
sector, retail and wholesale trade, financial services and short-term interest rates. The indicator is
built on a two-step regression-based approach. First, we estimate an equation for the quarterly
GDP growth rate based on coincident and leading series. Second, we estimate monthly and/or
quarterly equations which will be used to forecast the coincident and leading series showing a
lead of less than six months. This enables us to forecast GDP growth for the current and coming
quarters. We check that the indicator would have produced a satisfactory outcome over the last
four years.
Keywords: Leading indicator, GDP, short-term forecasting
JEL classification: E37
Résumé
Cet article présente un indicateur de croissance à court terme de l’économie brit