WP/20/13

A Monthly Indicator of Economic Growth

for Low Income Countries

by Michael Stanger

IMF Working Papers describe research in progress by the author(s) and are published
to elicit comments and to encourage debate. The views expressed in IMF Working
Papers are those of the author(s) and do not necessarily represent the views of the IMF, its
Executive Board, or IMF management.
© 2020 International Monetary Fund WP/20/13

IMF Working Paper

Statistics Department
A Monthly Indicator of Economic Growth for Low Income Countries
Prepared by Michael Stanger
Authorized for distribution by James Tebrake
January 2020

IMF Working Papers describe research in progress by the author(s) and are published to
elicit comments and to encourage debate. The views expressed in IMF Working Papers are
those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board,
or IMF management.

Abstract
Monthly economic indicators support policy analysis of current economic developments
and forecasting. This paper presents an overview of the data and statistical requirements to
develop those indicators taking into account resource constraints that LIC typically face.
We review statistical procedures for developing these indicators under the System of
National Accounts and propose a general procedure to derive a monthly composite
indicator of economic growth in low income economies.
JEL Classification Numbers: E01, E23
Keywords: Economic activity, System of National Accounts, GDP
Author’s E-Mail Address: [email protected]
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Contents
Abstract ..................................................................................................................................... 2
I. Introduction .......................................................................................................................... 4
II. MIEGs and related activity indicators ............................................................................... 5
III. Measuring economic activity under the SNA framework .............................................. 7
IV. IMF’s MIEG capacity development ................................................................................... 9
V. Developing a Monthly Indicator of Economic Growth ................................................... 12
A. Stock take of source data ............................................................................................................. 13
B. Assessment and selection of indicators ................................................................................. 14
C. Index compilation .......................................................................................................................... 15
D. Index dissemination ...................................................................................................................... 17
VI. Conclusions....................................................................................................................... 17
Appendix 1: Available indicators by country (to be completed) ............................................ 19
Appendix 2: Detailed data sources and indicators by type of industry................................... 20
Appendix 3: Availability of statistics by geographical area ................................................... 22
Appendix 4: Other High Frequency Indicators of Activity .................................................... 23
References ............................................................................................................................... 25
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I. Introduction

Monitoring economic activity is a key policy task. The state at which an economy
is producing and using its resources is fundamental to determine its health. Measuring
economic activity is thus essential to support policy decision making, and timely
policies or corrective measures require timely measures. Given the deep economic
transformations of many economies in the world in the last decades, traditional partial
indicators seem to no longer work as good proxies for economic activity.
The International Monetary Fund (IMF) in its supervisory role has introduced
the Data Standards Initiatives (DSI) to promote transparency of economic and
financial statistics and to facilitate surveillance. The Special Data Dissemination
Standard (SDDS, and SDDS Plus) prescribes a set of statistics that are required for
surveillance, including GDP and prices. It also prescribes monthly production indexes
intended for short term analysis and as an early estimate of the target variable –
Quarterly GDP. Although not prescriptive, the Enhanced General Data Dissemination
System e-GDDS also recommends this monthly index.
International standards provide very comprehensive and standardized set or
recommendations for measuring economic activity as the action of production in
which inputs are used to produce output. However, depending on data availability and
resources, countries may only compile and thus relay on annual or quarterly estimates
of economic activity to conduct policies.
This paper focuses on the data and statistical requisites of indicators aimed at
producing timely comprehensive measures of economic growth, these are referred
to as monthly indicators of economic growth (MIEG). Although not called monthly GDP,
several countries produce and disseminate comprehensive measures of economic
activity. These indicators are largely based on quantitative source data, including
related high frequency indicators, and based on the statistical framework of the
national accounts.
MIEGs are a very specific type of high frequency indicator that aims at
providing a timely signal of economic growth on a monthly basis. They differ from
business conditions or consumer confidence indexes, or from business-cycle indicators
such as those published by the Conference Board1 and the composite indicators by

1
https://www.conference-board.org/about/index.cfm?id=1980

(continued…)
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published by the OECD2 in that they are almost exclusively derived from quantitative
source data, largely comply with international methodological standards, and are
targeted to concurrent measures of activity –as opposed to anticipating changes in the
business cycle exclusively. Moreover, MIEGs are broader in coverage, facilitate
comparability among countries, and enable contribution analyses.
Countries where these indicators are available show that these timely
comprehensive measures of economic growth serve various purposes. First and
foremost, they provide a very up to date signal of the economy from which policy and
business cycle analysis can be drown. They also support forecast of activity since they
are disseminated ahead of more structural measures of activity. Given their
contemporaneousness, they are also used to assess the effect of previous policy
measures and to analyze public budgetary programs that are based on assumptions
about economic growth (or forecasts). Finally, depending on the detail at which these
indicators are disseminated, they can provide more granular information about the
drivers of the changes in growth.
Following this introduction, the paper will briefly describe MIEGs and other
known activity indicators, and further describe economic activity measurements under
the SNA framework. Next, it will note some of the IMF’s capacity development
involvement on MIEGs. To finalize, a short section on how to develop a MIEG precedes
the final conclusions.

II. MIEGs and related activity indicators

Some economic indicators have historically been broadly used to track the
current status of the economy or to grasp signals about the business cycle. For
instance, most countries compile monthly CPIs and use it extensively for assessing
inflation, monetary policy, and as GDP deflator. This indicator is reported by about 95
percent of the IMF member countries. However, for economic activity, most countries
rely on quarterly or annual estimates of “real”3 GDP, or on partial related indicators.
Traditionally, the industrial production index (IPI) has been used as a proxy of
economic activity, however has progressively lost its capacity to represent the
economy as a whole in most industrialized countries. The rise of service activities and

2
Prominent examples of composite indicators that are based on both quantitative and qualitative data are those
compiled by the US Conference Broad and the Organisation for Economic Cooperation and Development
(OECD) (Appendix 1).

3
The term real is used as a substitute of constant prices or chained volume.
 6

the increased volatility of commodity prices have led to more frequent shifts in the
economic structure of economies and this has limited the usefulness of this indicators
since the reflect a smaller and smaller portion of overall economic activity. Only about
60 percent of the IMF member countries report such an index. Other activity-specific
indicators serving as proxies include subsets of the IPI (e.g. electricity production),
agricultural products production, or retail sales.
Countries with more sophisticated statistical systems have overcome this gap
by developing business cycle indicators as a way of having a more complete view of
the economy as a whole (more detail in Appendix 4). The objective of these indicators is
to represent one of the components of the economic activity, the cycle4, or the changes
thereof. Some of these cycle-tracking indicators aim at anticipating the changes in the
cycle (leading5) while other aim at a concurrent detection of changes. There are also,
indicators intended to confirm cycle changes (lagging).
As complementary data to anticipate changes in the cycle, counties started
developing expectations and sentiments indicators. These are designed to
represent the average “feeling” about the near future, which in turn are expected to
trigger behavioral relationships that will affect economic activity. These data, along
with other related quantitative indicators such as interest rates, stock prices, money
supply, production orders (to mention some) are also used as input data in some of the
cyclical indicators.
MIEG is intended to measure economic activity and thus relies more heavily
on records of transactions that are directly related to the activity under question
and are generally aggregated using well established statistical frameworks.6 For
instance, actual sales (record) are more directly related to activity than pervious
expected consumption (behavioral expectation). Quantitative measures of activity, like
production, sales, exports, or employment are key inputs into the development of
MIEGs. These source data are generally obtained from surveys or administrative
records.

4
The cycle is one of the components of a time series. It is broadly agreed that time series are composed of
a trend, a cycle, a seasonal (including calendar) and an irregular component.
5
Leading indicators are increasingly popular as complements to econometric models which generally fail to
detect turning points.
6
A prominent example of a composite measure of economic activity based on quantitative data is the quarterly
GDP.
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Table 1: Examples of Activity indicators according to source data and aggregation

methods
Source data
Qualitative Mixed Quantitative
Structured Data-driven
Aggregation Method

Business Conditions
Conference Board
Consumer Confidence
CLI (OECD)
Purchasing Managers’ Index

MIEG
QNA (IMF)
IPI (UN)
ISP7 (OECD)

Business cycle indicators start playing a relevant complementary role in

countries with well-established statistical systems. These indicators generally
require the management of administrative records, more sophisticated modeling
procedures, and a higher level of statistical infrastructure. Countries with this capacity
will generally have good systems to track the economic activity, either by means of a set
of several indicators related to activity or by some few robust macro indicators.
However, for countries with less developed systems of data management, the initial
step should be developing monthly or quarterly economic activity indicators that reflect
as close as possible actual developments.
For some LIC improving the capacity to track the latest activity developments
will imply developing monthly or quarterly activity indicators that represent the
most significant parts of the economy -as an intermediate step prior developing more
comprehensive QNA-, improving the quality of already existing indicators, and
expanding the coverage of the indicators (go beyond the IPI) up to implementing a
MIEG. Only then the predictive power of forward looking indicators can be assessed.

III. Measuring economic activity under the SNA framework

MIEGs are based on the SNA methodology and such are as consistent as
possible with other macroeconomic statistics such as the quarterly and annual
national accounts aggregates. This methodology follows a bottom-up approach and
promotes the use of well-established classification systems under which all the
components of an aggregate are compiled and are based on consistent available data
sources. For instance, GDP requires the estimation of each of its component (industries

7
The Index of Services Production measures short-term production activities of the services industry.
(continued…)
 8

or expenditure components).8 The level of detail at which components are estimated

depends on input and structural data availability. For instance, it is expected that
quarterly GDP is less detailed than annual GDP. Also, as the focus is the economic
activity real growth, data in nominal value terms need to be deflated (prices effects
removed) so that the estimated components are in volume terms.
The compilation of these aggregate indicators starts with the collection or
development of detailed quantitative source data that are directly related to the
intended variables. Granular source data is then processed and aggregated to develop
elementary indicators. These elementary components are then combined using some
index-type formulation to derive the aggregates. Input data is obtained either directly
from surveys or as by-product of administrative records. It can be collected directly in
volume terms or as values. Data in values have to be deflated with appropriate prices
and methods before any further aggregation. The aggregation is carried out using
weights that are derived from consistent structural figures such as the national
accounts, annual economic surveys, or economic censuses. Additional sophistication
can be incorporated to the compilation to improve the statistical quality of the
estimates by applying enhancements similar to those used in QNA estimation.9
The bottom-up approach requires estimated measures of all components of
the aggregates. Most countries have high-frequency direct information available for
some components of the economy (such as the IPI). Other components need to be built
from available sources notwithstanding the need to deviate from the intended concept
to measured. For instance, for activities strongly engaged in exports, the related
information to measure production could be the exports from customs records as
opposed as the output measure. However, inventories can have a significant role in
explaining divergences between production and exports in these activities. Whether
related indicators are directly available or need to be compiled, their quality must be
tested against the target variable.
Statistical procedures, informed assumptions, and modeling are largely
required to overcome potential weakness of source data. High frequency data for
certain components can either be unavailable or be of poor quality. It can also be the
case that multiple sources with various quality degrees are available for the same
component. Data gaps can be filled by estimates based on related information and using
diverse methods and statistical procedures such as econometric modeling (time series

8
For the production approach, indicators should represent each economic activity. For instance, to measure
retail sales margins in volume terms, it would be necessary to have total retail sales and their related deflators.
For the expenditure approach, indicators should cover the expenditure components, such as exports and imports
and as their respective prices. The income approach to measuring GDP has been omitted since it is not intended
for volume estimates.
9
Benchmarking technics to reconcile high frequency information with the lower frequency counterparts is one
example. In addition, Benchmarking allows an update weights over time.
 9

regressions). Multiple sources could be combined using statistical procedures (e.g.

principal components). Even when actual transaction records may be available
(including survey data), deriving elementary indicators could require outlier detection
and validation procedures. The timeliness of source data is a key decision factor
regarding the usage of alternative elementary components and methods.
MIEGs provide the grounds for timely monthly business cycle analysis.
Observed quantitative data assembled using international statistical standards will
broadly generate a consistent indicator that mirrors actual economic developments on
a monthly basis. With some additional processing, users will be enabled to derive trend-
cycle estimates or to apply usual filters to smooth-out desired signals. Moreover, trend-
cycle estimates derived from MIEGs can serve as benchmark for (leading) business-
cycle estimates.

IV. IMF’s MIEG capacity development

Most of the countries that report production indexes to the IMF (about 125)
do it on a monthly basis. However, only a small set of these compile and disseminate a
comprehensive MIEG (see Appendix 1 to see a non-exhaustive list of countries currently
disseminating a MIEG).10 The large majority of reporting countries compile an IPI, a
reduced version of it, or another activity-specific indicator. By definition, the IPI covers
manufacturing, mining, and electricity, gas, water and waste management as shown in
Table 2. Other activity-specific indicators include construction, retail sales, tourism, and
agriculture products. These partial indicators represent a good starting point to
enhance the coverage and quality of monthly activity indicators.
Even though the number of countries compiling high-frequency production
indices may seem relatively high, quality issues and low significance in the
current economic stance may be affecting their relevance and usefulness. About
35 percent of the IMF member countries do not have a high-frequency indicator of
activity. And from the 65 percent of countries that do produce at least one, most are
only partial, are often outdated, lack timelines, or do not necessarily track economic
activity as reflected in GDP. To enhance good and timely policy development in LIC as
well as own countries capacity to assess the economy and inform policy, the IMF started

10
A significant number of countries produce some type of economic growth indicator but are not publicly
disseminated.

(continued…)
 10

supporting countries to improve, update, and develop high-frequency indicators of

economic activity.
Capacity development (CD) in the form of technical assistance (TA) missions
and training courses11 on MIEG are part of the IMF Statistics Department (STA)
program since 2013. TA has focused on supporting countries improve indicators that
are already available, develop experimental additional indicators with available source
data, and in compiling a comprehensive MIEG whose coverage includes broad activity
components as shown in Table 2 (12 activities).12 A number of countries have made
progress in developing MIEG. For example, Colombia released a comprehensive
monthly indicator of the economic activity, the Economic Tracking Index for the first
time, in 2014.
Table 2: Inputs to a Monthly Indicator of Economic Activity
Activitya Commonly available informationb
Agriculture, forestry and fishing Commodity production – Exports
Manufacturing and Mining Index of industrial production
Electricity, gas, water and waste management. Index of industrial production
Construction Construction index – Imports
Trade, Transportation and Accommodation and Retail and Wholesale index – Tourism index
food. – Imports
Information and communication Index of services production
Financial and insurance activities Financial statistics
Real estate, Professional and Supporting services. Index of services production
Public administration and defense; compulsory
Government statistics
social security
Education Government statistics
Human health and social work activities Government statistics
Other service activities Employment statistics
a: Reduced form of economic activities by sections according to the ISIC rev. 4
b: Examples of already existing HFI for specific activities

A notable example of improvement in the compilation and use of MIEG is

Guatemala. Although the country had historically relied on a composite index of
economic activity for short-term analyses, especially when quarterly GDP was not

11
With the support of the Regional Technical Assistance Centers, the Statistics Department (STA) has provided
training to more than 75 countries between 2014 and 2019. Training activities have covered most regions in the
world yet focusing on less developed countries where these indicators are absent or are of lower quality so that
the impact and contribution are more significant. In 2018, STA started implementing the multi-annual STA
Data for Decisions (D4D) trust fund project which includes an HFI workstream. This workstream is aligned
with the objectives set for the MIEG.

12
A more detailed list of sources and indicators by economic activity is available in the Appendix 3.
 11

available, it presented some deterioration as the economic structure of the economy

changed more dynamically. By mid-2013, the Guatemalan Central Bank re launched the
new MIEG which was compliant with the SNA framework. The index is now presented
to the board of the Bank and disseminated publicly with a lag of about 30 days from the
reference month.

Guatemala–Update to the MIEG

As shown in Chart 4, Guatemala’s new Monthly Indicator of Economic Activity

(MIEG) is more in line with the economic activity as reflected in the quarterly GDP.

Chart 4. Guatemala: Comparing old and new MIEG with the QNA.

Most countries strive to follow international standards when compiling

activity indexes. However, the coverage of such indicators may be restricted to
activities that do not represent significant parts of the whole economy and, on the other
hand, they are often built independently from the main macroeconomic frameworks
sometimes resulting in contradicting signals when compared to more structural
measures of the same variable. In addition, metadata for some indices sometimes
highlight important deviations from international standards.
The progressive loss of relevance of the industrial activity in many economies
combined with the increased amount of available timely and detailed available
high frequency source data, have encouraged statistical users and policy makers to
demand for additional, better, and timelier indicators. Enabling stakeholders’ analyses,
supporting informed policy making and prompt policy assessments without neglecting
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international comparability requires methodological standards and classifications. The

flexibility of SNA adapts to any country’s reality and to any data frequency thus a MIEG
is intended to be conceptually comparable among countries regardless their economic
development and structure.

V. Developing a Monthly Indicator of Economic Growth

The level of detail at which the elementary and activity aggregates are
compiled, are bounded by the detail of annual benchmarks available (from which
the weighting structure is derived), and by the availability of related high frequency
data sources to assemble them. Ideally, the same level of detail is available for both
datasets, that is there are as many indicators available as the detail breakdown of the
economy, however, in most cases some compromises are required and then some
components have to be derived indirectly from related information, have to be
estimated using some statistical methods to fill data gaps, or the breakdown be reduced
to match the available indicators. Even for cases where components are readily
available, they can suffer from various shortcomings. Quality assurance and data gap in-
filling requires a variety and flexible set of statistical procedures (including time series
techniques).
An essential step towards the development of any activity measure is an
exhaustive search of available sources and close collaboration with other data
producing agencies. Furthermore, continuous efforts to finding new or improve
sources will guarantee the quality sustainability of and further enhancements to the
indicators and its components. Exploiting source data to maximize the use of available
information will also require the use of statistical procedures (validation, depuration,
imputation, etc.).
Elementary indicators are directly related to source data and are aimed to
represent specific components of the activity and are built from a variety of sources
such as survey-based indexes, administrative data, corporation’s reports, price indices,
labor statistics, government data, international trade statistical, and even big data.
These elementary indicators are expected to track the evolution of and be more
frequent and timelier than the target variables.
The SNA approach for compiling a MIEG can be seen as an extension of the
quarterly GDP compilation on a monthly basis using the Quarterly National
Accounts methodology. The index embodies both the short-term evolution of available
high frequency industry related indicators and the structural framework of reliable low
frequency statistics. Even when economic activity can be measured by both production
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and expenditure, this paper focuses on the production approach as it is more frequently
available. A notable example of this practice is the Canadian monthly GDP program
(1971), whose monthly GDP series are available from the mid 90’s.
Four main steps must be undertaken when developing or updating a MIEG: i) a
comprehensive stocktaking of available source data and its timeliness; ii) assessment
and selection of indicators; iii) compilation, and; iv) dissemination.

A. Stock take of source data

The SNA approach requires information for each of the component series (e.g.
industries in Table 2). Source data must be available on a monthly basis, with sufficient
timeliness, and be as close as possible to the target component in terms of definition
and coverage. To support harmonization and international comparison, classifications
among all statistical products within the same framework need to be aligned, ideally
using the Central Product Classification (CPC) Ver.2.1 and the International Standard
Industrial Classification of all Economic Activities (ISIC) Rev.4 for products and activities
respectively.
Source data can be grouped into: direct and related data. Direct data are those
series that are broadly consistent to the definition of the target component, value added
(either output or sales by activity). Related data represent variables that conceptually
do not match the target component but are closely related (employment indicators as
opposed to output).
Source data series can be available either in quantities or in values. Quantity
data contain information on the number of products produced/sold by certain
establishment, enterprise or economic activity (e.g. tons of sugar). Value data in turn
show the monetary value of the quantities produced/sold, and i.e. include the price
dimension (e.g. sales of sugar).
Most common related data are those representing either production inputs or
to the destination of output. Among the most common production inputs there are
employment indicators or intermediate raw material inputs from other industries or
from imports (e.g. imports of wheat for the flour production). Regarding the destination
of output, intermediate inputs used by another industry or exports (e.g. exports of fish).
Possible data sources include monthly trade statistics, monthly survey data,
administrative records, tax records, monthly labor statistics, big data, and other
economic indicators such as the industrial production index, retail trade statistics, and
agricultural production. Moreover, when quarterly or annual targets are derived using
models or certain assumptions, it may be necessary to apply such procedures on a
monthly basis to derive related indicators.
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Given the multiple interrelations within an economy, the different quality

properties of the data, and the timeliness requirements of the various possible
sources it becomes essential to consider all possible sources of information even
when there appear to be no direct connection with the measurements. Related
information and indirect relationships may result useful when the need for filling in
data gaps.
Data collected during the CD activities to low and lower-middle income
countries show that most countries compile and disseminate industrial
production indices and prices statistics. About ¾ have access to monthly
international trade statistics, and about ½ have access to VAT data. On average, ¼
compile and disseminate other activity indicators, however, the dispersion is large. It
has also been stated that most countries have unused data available.

B. Assessment and selection of indicators

As a first quality assurance measure, the concepts and definitions of both the
input data and the target variable must coincide, that is, input data must be
conceptually related to the intended variable. Spurious relationships have to be
avoided. Given that the MIEG is intended as a volume indicator, all elementary and
component series have to be derived excluding price effects. Quality changes must be
accounted for as volume effects.
For certain products or activities, quantity or volume series can be readily
observed. For others however, only current values may be available. Value series must
be deflated with an appropriate price index to obtain volume series. Deflation should be
carried out at the most detailed level feasible (micro-deflation) so as to derive
individual elementary volume measures prior deriving aggregates. This way, quality
mixes are more likely accounted for as volume effects. As a general rule, the higher the
detail in the level of compilation the more accurate the volume estimate.
Therefore, price statistics would be needed under the same requirements as
the activity data. When dealing with rather aggregate series or heterogeneous groups
of products, deflated values with plausible prices indexes are preferred to direct volume
data. Nevertheless, in the absence of adequate price statistics direct quantity variables
are to be preferred.
Volume elementary indicators, either directly collected or derived from
deflating values, will be used as inputs to derive the components of the MIEG.
These elementary indicators can be subject to additional processing, directly
aggregated, or could be adjusted to more reliable benchmarks prior aggregation.
 15

Whether the derived volume series are directly related to the target variable
or are indirectly correlated, the most important selection criteria will be their
ability to show short and long term tends that are as close as possible to the
target variable. The ideal benchmark values to assess these properties against are the
quarterly/annual GDP and component series in volume terms. The selection and
assessment of data and elementary indicators should be conducted according to
economic relevance of the components. This will lead to having specific focuses on data
sources depending on countries’ economic structures.

C. Index compilation
Economic transaction expressed in values (e.g. total dollars) can be directly
summed up since they are expressed in the same unit of measure. Quantities may
either be expressed in different units of measurement or be expressed in the same units
but representing different qualities, and then are not directly additive. For example, it
would be meaningless to compare over time the sum of barrels of crude oil with the
megawatts generated by a hydro-plant. Similarly, it would be wrong to assume that the
total production in volume terms of a refinery equals the sum of barrels of motor oil,
barrels of diesel, and the barrels of gasoline. Therefore, to derive aggregate measures of
different components expressed in quantities or volume terms, 13 index numbers must
be generated and subsequently aggregated using appropriate weights as to arrive at an
overall measure of activity, e.g. a MIEG.
Volume indexes are intended to provide a comparison between two measures
in a single figure. These comparisons include not only single transactions but multiple
ones, so by using an index number we solve the issue of aggregating different volume
measures. In the case of time series, indexes will be constructed as the ratio of values of
the same variable but in different periods of time.
The relationship between individual indexes and the aggregate depends on
the weight structure and the period in which the weights are applied. There are
different index formulas for compiling volume estimates. The most often used is the
Laspeyres formulation. For the purpose of consistency, the MIEG should apply the same
formulation as that used in the QNA, however, for its simplicity and relatively less data
dependency it would be recommendable to follow the Laspeyres formulation even if the
QNA does not. The Laspeyres formula is as follows:

13
Quantities represent the countable number of units of a single product, e.g. kilograms of red seedless grapes
of certain size and origin. Volumes represent more generally an equalized figure that group several products
(group of products), e.g. total amount (kilogram equivalent, or dollars of a fixed base period) of grapes. The
volume value will include green, red, black and yellow grapes from different origins and sizes. Thus, quantities
are volumes, but volumes are not necessarily quantities.
 16


n
pi0 qitn
 qt 
LQ = i =1
   i0  * wi0

n
p 0 q 0 i =1  qi 
i =1 i i

where LQ is the aggregate volume index, p represents prices, q quantities, i identifies the
different component of the index (n is the total number of components), t is the current
period of time, 0 is the initial observation (addressed as the base or reference period), w
represents the weights (proportions) used to aggregate the quantity (or volume)
relatives.14 Both definitions of LQ are identical. However, the left-hand formulation
requires detailed information on quantities and prices, while the right-hand
formulation only requires quantities or volumes and their respective weights.
The weights (w) to aggregate the volume ratios represent the relative
significance of each of the components in the total. When measuring economic
activity, the weights should be derived as the proportion of each economic activity to
the total final production. In the case of a MIEG, the weights are derived from the
proportion of value added of each economic activity to the total GDP. To avoid
distortions derived from seasonal patterns of unusual events, weights should be
derived from the annual figures.
All elementary volume indicators can be directly aggregated using the value
added weights, when available, to derive the respective activity indicator. However,
when additional information (annual trends, quarterly patterns) on value added is
available, it is possible to improve the indicator series by performing benchmarking on
each of the component series to integrate such additional information prior the final
aggregation.
Benchmarking methods align two measures of the same variable which are
available in different frequencies. Its advantage relies on its ability to integrate the
short-term dynamics embedded in the indicators series with the more reliable long
term trends present in the quarterly/annual benchmarks. As a result, performing the
method will produce consistent estimates that reflect both, the underlying long-term
trend of the lower frequency references (benchmarks) and the high frequency
dynamics from the indicator.
Additional statistics can be derived if seasonal and calendar adjustment is
performed to the original results. This process transforms the series in a way such
that contiguous observations (current to previous month) are more comparable.
Calendar effects can be quite significant on a monthly basis, so its estimation is crucial
and requires specific and proper estimation techniques. Given the conjunctural nature

14
Although the original formulation is presented assuming individual product prices and quantities, it can be
extended to volumes and deflators. Then the right-hand side can represent volume instead of quantity relatives.
 17

of short-term indicators, seasonal adjustment should be an integral part of the

compilation process of a MIEG and it needs to be carefully performed.

D. Index dissemination
The MIEG is intended to give an overview of the economic activity as a whole.
However, depending on the quality of the source data and on country’s preferences, its
dissemination can cover some detailed information on top of the headline aggregate,
e.g. by major economic activity. If the index is disseminated in an aggregated from,
descriptive text should provide more detailed information regarding the main drivers
of the changes in the headline number.
The main advantages of an indicator of this nature are its timeliness and
frequency. Therefore, to maximize its usefulness its dissemination should precede
other comprehensive measures of activity such as the quarterly GDP.
Unadjusted as well as seasonally and calendar adjusted versions of the index
should be made available. Considering users demands, the trend-cycle component
could also be included. Analytical descriptive notes should accompany the data –
including revision analysis when appropriate. Sources and compilation methods should
be available for users, including an advanced publication calendar. The revision policy,
if any, should be consistent with the overarching policy.

VI. Conclusions
High frequency –and timely– information is required to assess the current
status of the economy. In particular, macroeconomic policy making requires monthly
indicators of prices to assess inflation and activity measures to assess output gaps. Most
countries compile monthly price statistics but lack monthly activity measures.
Central banks often develop business cycle indicators to approach the activity
measures when statistical agencies do not have quality HFI. A business cycle
approach can supplement more robust indicators of activity such as those compiled
under the SNA approach. In fact, leading indicators are better suited to provide an
anticipated signal of the cycle, while the current situation is usually better assessed
based on actual measures, such as the QNA.
The SNA approach to measuring economic activity is broadly consistent with
the annual and quarterly GDP compilation process; therefore, statistical agencies
that compile annual and quarterly estimates are well placed to undertake this exercise.
Nevertheless, inter-institutional efforts are usually required as a starting point to
develop reliable activity indicators.
 18

The development of a MIEG will depend on available source data and on

current national accounts resources. Exploiting new sources of information is an
essential initial investment to carry out and whose benefits impact on other official
statistics such as the QNA and some relevant HFI.
The relative greater methodological flexibility to compile a MIEG as compared
to other macroeconomic statistics, together with its ability to include multiple and
varied source data make of this indicator a good candidate for countries to develop
regardless their level of statistical development. These indicators can be initially
produced experimentally, and subsequently expanded and refined.
The experience in countries where these indicators are available shows that not
only MIEGs have a place as one of the most relevant macroeconomic indicators, but also
generates significant dynamic synergies with other macroeconomic statistics driving
continued quality improvements and enhancements.
Strengthening high frequency economic activity measures contributes with
surveillance and policy decision makings and supports the development and quality
improvement of other key macroeconomic statistics. STA will continue providing
assistance to develop new and enhance current MIEGs to IMF member countries,
especially to low income countries.
 19

APPENDIX 1: AVAILABLE INDICATORS BY COUNTRY (TO BE COMPLETED)

Compiled and disseminated by
Centrally compiled and disseminated
individual countries
Conference Board OECD Accounting Approach
(sample of countries)
Australia Australia Argentina (EMAE)
Brazil Austria Armenia (IEA)
China Belgium Bolivia(IBC-Br)
Brazil (IMAEB)
Euro Area Canada Canada (GDP)
France Chile Chile (IMACEC)
Germany Czech Republic Colombia (ISE)
India Denmark Costa Rica (IMAE)
Japan Estonia Ecuador (IDEAC)
Korea Finland Egypt (IPM)
Mexico France El Salvador (IMAE)
Spain Germany Guatemala (IMAE)
U.K. Greece Honduras (IMAE)
U.S. Hungary México (IGAE)
Ireland Nicaragua (IMAE)
Israel Panamá (IMAE)
Italy Paraguay (IMAEP)
Japan Uganda (MCIEA)
Korea
Mexico
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Brazil
China (People's Republic of)
India
Indonesia
Russia
South Africa
 20

APPENDIX 2: DETAILED DATA SOURCES AND INDICATORS BY TYPE OF INDUSTRY

Industry Source Indicators
Ministry of Agriculture Effective sowing, harvest projections,
product exports, output of specific
Farmer associations
products, related activities (sawmills,
Agriculture, forestry and
Administrative records food processing industries -
fishing
intermediate consumption), fishing
Customs quotas, imports (specific input
products).
Statistical office
Industrial production index (IPI),
Manufacturing and Direct information from large specific product outputs, related
Mining enterprises activities (suppliers of relevant inputs),
and exports.
Business associations
Statistical office Industrial production index (IPI),
Ministry of Finance administrative records on electricity
Electricity, gas, water, gas and water distribution, and
and waste management Direct information from large administrative record on waste
enterprises collection (though government
Customs charges).

Ministry of Finance Building permits, government

investment, supply of construction
Construction chamber
inputs, surveys of construction works
Construction
put in place, imports of specific inputs,
Customs private investment reports of large
projects, records of public tenders.
Ministry of Transport
Ministry of Truism
Wholesale and retail trade indexes,
Statistical office
Trade, Transportation, tourist arrival and usage of hotels,
and Accommodation Industry associations administrative records on cargo,
and food international passenger register, toll
Balance of payments
records, related industries.
Customs
Commerce chamber
Postal services records, administrative
records on telecommunications (phone
Information and usage, land line subscription, internet
Ministry of telecommunications
communication connections, cable TV subscriptions,
etc), and parcel service records
(national and international).
Superintendence of Banks
 21

Central Bank Loan and deposits by institution;

Financial and insurance
premiums, claims and maturity by type
activities Superintendence of Insurance of insurance contract.
Employment, register of realtors,
Real estate, administrative records on changes of
Professional, and Statistical office ownerships, legal cases, register of
supporting services veterinaries, travel and employment
agencies, related industries.
Public administration
Wages and salaries, employment by
and defense;
Ministry of finance level and public entity, social security
compulsory social
contributions.
security
Enrolment by type of institution,
Education Ministry of Education employment by type of institution,
wages and salaries.
Use of services by type of care, usage
of hospital beds, health insurance
Human health and social
Ministry of health companies, related industries, register
work activities
of rest-homes (licenses), direct
subsidies.
Ministry of finance Employment, direct subsidies (from
Other service activities government, private entities and from
Statistical office abroad).
 22

APPENDIX 3: AVAILABILITY OF STATISTICS BY GEOGRAPHICAL AREA

Number of countries by IMF area department and percent

Index of Industrial Production (IIP)

EUR 40 (87%) 6
WHD 22 (61.1%) 14
APD 18 (51.4%) 17
AFR 20 (45.5%) 24
MCD 13 (40.6%) 19

- 10 20 30 40 50
Yes No

Forward Looking Indicator Production Index

EUR 14 (30.4%) 32 EUR 42 (91.3%) 4
WHD 4 (11.1%) 32 WHD 26 (72.2%) 10
APD 2 (5.7%) 33 AFR 27 (61.4%) 17
AFR 1 (2.3%) 43 MCD 18 (56.3%) 14
MCD 0 (0%) 32 APD 18 (51.4%) 17

- 10 20 30 40 50 - 10 20 30 40 50
Yes No Yes No

Sources: IFS, UNData, DSBB.

 23

APPENDIX 4: OTHER HIGH FREQUENCY INDICATORS OF ACTIVITY

Business cycle indicators are compiled to support decision making. These types of
indicators are compiled by domestic public or private institutions and also by third
parties. The US conference board for instance compiles three types of indicators for its
member countries: Leading, concurrent and lagging indicators. Depending on the ability
of each of the component series to anticipate, concurrently estimate, or confirm past
turning points, such components are grouped to provide a single cyclical indicator.
Currently the US Conference Board disseminates indicators for 12 of its members and
for the Euro Area.
For example, the component series (9) of the leading indicator for the US are:
Average weekly hours, manufacturing; Average weekly initial claims for unemployment
insurance; Manufacturers' new orders, consumer goods and materials; ISM new order
index; Building permits, new private housing units; Stock prices, 500 common stocks;
Leading Credit Index; Interest rate spread, 10-year Treasury bonds less federal funds;
and Average consumer expectations for business and economic conditions. In turn, the
components series (4) of the coincident indicator are: Employees on nonagricultural
payrolls; Personal income less transfer payments; Industrial production; and the
Manufacturing and trade sales.
Among the Main Economic Indicators (MEI), the OECD compiles and disseminates
Composite Leading Indicators (CLI) for 33 member countries (Iceland is not included),
6 non-member economies and 8 zone aggregates.
The CLI is a monthly times series, formed by aggregating a variety of country
specific component indicators which show a reasonably consistent relationship with a
reference series15 (e.g. industrial production IPI) at turning points. The OECD CLI is
designed to provide qualitative information on short-term economic movements,
especially at the turning points, rather than quantitative measures. As a means of
example, the component series (7) for the US CLI are: Permits issued: dwellings; Net
new orders for durable goods; Share prices: NYSE composite; Consumer sentiment
indicator; Weekly hours of work: manufacturing; Purchasing managers index; and the
Spread of interest rates.
The term high frequency indicators is used in IMF publications to describe a range of
high frequency statistics (such as indicators to assess systemic financial risk; bank
stress; inflation targeting). In addition, Fund staff have developed indicators of

15
True estimates of the business cycle can be derived from the quarterly GDP estimates. But quarterly figures
can shift turning points, so a more precise estimate of the trend cycle should be derived from monthly figures of
activity.
(continued…)
 24

economic activity for surveillance. For example, Matheson (2011) uses a dynamic factor
model to derive indicators for 32 advanced and emerging market economies. Dynamic
factor models utilize a large number of economic time series and produce reliable
short-term forecasts of the cycle.16
Opoku-Afari and Dixit (2012) uses a composite index of economic activities as an
input to interpolating quarterly GDP series.17 The method is a modified version of the
US Conference Board methodology to estimate coincident indicators. It is applied to a
selected number of sub-Saharan countries and attempts to work around the data
constraints faced by low income countries.
The 2013 Article IV Consultation for Suriname presents a “parsimonious model
including credit and a proxy for global conditions” to derive a monthly indicator of GDP.
The report notes fittingly, that the more complex econometric methods as used by
Matheson, cannot be applied due, in part, to data constraints.18
The Eastern Africa Regional Technical Assistance Centers is developing composite
indexes of economic activity. Their approach is broadly based on the US Conference
Board methodology but includes mostly output figures as input data. In this sense,
cyclical movements are derived from directly related activity data as supposed to the
original approach that derives the cyclical movements from behaviorally related series.
The IMF’s efforts on deriving monthly activity composite indicators have relied on
either the statistic or econometric approaches. In general terms, regardless of the
approach used to estimate the cyclical component of the economic activity, it requires a
comparative “true” cyclical movement. Thus, a prerequisite to assess cycle-tracker
indicators is to have a well-established statistical system to derive reliable business
cycle analysis. If no robust benchmarks are available, estimated indicators are not
directly assessable and therefore, not reliable in terms of the signals they produce.

16
Matheson, T, 2011, “New Indicators for Tracking Growth in Real Time” IMF Working Paper 11/43
17
Opoku-Afari, M and Dixit, S, 2012 “Tracking Short-Term Dynamics of Economic Activity in Low-Income
Countries in the Absence of High-Frequency GDP Data” IMF Working Paper 12/110
18
IMF, 2013 “Suriname: 2013 Article IV Consultation”, IMF Country Report No. 13/341
 25

REFERENCES

International Standard Industrial Classification of All Economic Activities, Rev.4

(http://unstats.un.org/unsd/cr/registry/isic-4.asp)
Business Cycle Indicators Handbook, The Conference Board (https://www.conference-
board.org/pdf_free/economics/bci/BCI-Handbook.pdf)
Central Product Classification (CPC) Ver.2.1 (http://unstats.un.org/unsd/cr/registry/cpc-
21.asp)
Compilation Manual for an index of Services Production (http://www.oecd.org/std/business-
stats/37799074.pdf)
Handbook on Constructing Composite Indicators (http://www.oecd.org/std/42495745.pdf)
IMF, 2013 “Suriname: 2013 Article IV Consultation”, IMF Country Report No. 13/341
(http://www.imf.org/external/pubs/ft/scr/2013/cr13341.pdf)
International Recommendations for the Index of Industrial Production 2010
(http://unstats.un.org/unsd/statcom/doc10/BG-IndustrialStats.pdf)
Matheson, T, 2011, “New Indicators for Tracking Growth in Real Time” IMF Working Paper
11/43 (https://www.imf.org/external/pubs/ft/wp/2011/wp1143.pdf)
OECD System of Composite Leading Indicators (http://www.oecd.org/std/leading-
indicators/41629509.pdf)
Opoku-Afari, M and Dixit, S, 2012 “Tracking Short-Term Dynamics of Economic Activity
in Low-Income Countries in the Absence of High-Frequency GDP Data” IMF Working
Paper 12/110 (https://www.imf.org/external/pubs/ft/wp/2012/wp12119.pdf)
Quarterly National Accounts Manual Concepts, Data Sources, and Compilation
(https://www.imf.org/external/pubs/ft/qna/)