LONGER LEADING INDICATOR DROPS SLIGHTLY IN UK

LONGER LEADING INDICATOR DROPS SLIGHTLY IN UK

The composite longer UK leading indicator, which charts movements in the UK economy over the business cycle, fell 0.1 percent in October from September, following a revised fall of 0.4 percent in September from August, originally reported as a fall of 0.6 percent.

The Central Statistical Office said the longer leading indicator index was 106.5 in October, compared with a revised 106.6 in September, originally reported as 106.5.The longer indicator forecasts turning points in the economy 13 months before they occur, the CSO said.

The composite shorter leading indicator, which shows turning points around 5 months in advance, was up in October from September at 108.7, a

revision of last month's reported October figure of 109.1.

The other two indices published by the CSO were both higher. They are the coincident indicator, which broadly shows the current state of the economy, and the lagging index, which shows changes in the economy 12 months after they have happened.

The coincident indicator rose to 102.9 in October, compared with a revised 102.3 in September, originally reported as 102.6. The lagging indicator rose to 96.3 in September from a revised 96.0 in August, originally reported as 94.9.

Since June 1989, the indices have been set at 100, at which point they are equal to their long-term trend.

The CSO says that cyclical indicators are supposed to give an early warning that economic growth is reaching a maximum or a "peak" and so about to enter a downswing, or that economic growth is reaching a minimum or a ''trough" and so about to enter an upswing. They do not measure the absolute level of output or actual rates of growth.

Figures above 100 indicate a stronger-than-average growth in the economy and figures below that level show weaker-than-average growth.

The longer leading index is composed of the change in business optimism in the CBI's quarterly survey of manufacturing; the rate of interest on three- month prime bank bills; total dwellings started in Great Britain in the month; UK industrial and commercial companies' total financial balances divided by the GDP deflator.

The shorter leading index is made up of the change in total consumer borrowing; the Financial Times-Actuaries 500-share index; new car registrations; the EC/Gallup consumer confidence survey and the change in new orders from the CBI survey.