Biz Indicators Point to V-shaped Economy Recovery

The leading composite index, which forecasts economic conditions six to seven months from now, has reached a record high in 39 years.

The coincident composite index, which shows the current state of the economy, has also reached a 31-year high.

These positive signs are raising expectations that Korea’s economy will achieve a V-shape recovery.

Data released by the Strategic and Finance Ministry yesterday said the leading composite index was 120.8 in June, up 2.8 percent from May. This is the largest gain since the government began compiling this statistic in January 1970.

The coincident composite index rose two percent, its steepest jump since a 2.1-percent rise in January 1978.

The leading composite index swung back to the black in January and had risen for six consecutive months. The coincident composite index began rising in March and had grown for four consecutive months.

All eight components of the coincident composite index, including mining and manufacturing production and wholesale and retail sales, turned positive in June for the first time in 18 months.

The improvement is better than that after the financial crisis of 1997-98. The leading composite index had declined for three straight months and the coincident composite index eight straight months through December 1997.

Since then, the leading composite index had inched up between 0.1 and 1.6 percent and the coincident composite index between 0.8 and 1.6 percent over the past year.

A Strategic and Finance Ministry official urged caution, however, saying, "Despite positive improvements, it’s too early to expect a V-shaped recovery," adding, "Given the uncertainty in the global economy, we should wait at least six months before making an exact judgment."

lovesong@donga.com