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Benchmark Revisions - November 2006

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Released: Thursday, September 8, 2005

The Conference Board reports today that the leading index for Japan increased 0.2 percent, and the coincident index declined 0.1 percent in July.

  • The leading index increased in July, the second consecutive increase, following an essentially flat period from January to May. With this month’s gain, the growth rate of the leading index has picked up to about a 1.5 – 2.0 percent annual rate, up from the zero growth since the end of 2004, but this is still well below the peak growth rate reached in the first half of 2004. In addition, the strength among the leading indicators has become more widespread in recent months.
  • The coincident index declined slightly in July following no change in June. The coincident index has been fluctuating around a slightly rising trend since mid-2003. At the same time, real GDP growth slowed to a 1.1 percent annual rate in the second quarter of 2005 down from a 5.4 percent rate in the first quarter. The behavior of the leading index in recent months suggests that the economy will continue growing in the near term, at or slightly above the rate reported in the second quarter of 2005.

Leading Indicators. Seven of the ten components that make up the leading index increased in July. The positive contributors to the index – in order from the largest positive contributor to the smallest – include dwelling units started, stock prices, the Tankan business conditions survey, yield spread, the (inverted) business failures, real money supply, and real operating profits*. New orders for machinery and construction, the index of overtime worked, and the six month growth rate of labor productivity declined in July.

With the increase of 0.2 percent in July, the leading index now stands at 99.1 (1990=100). Based on revised data, this index increased 0.6 percent in June and was unchanged in May. During the six-month span through July, the index increased 0.9 percent, and six of the ten components advanced (diffusion index, six-month span equals 65.0 percent).

Coincident Indicators. Two of the four components that make up the coincident index increased in July. The positive contributors to the index – in order from the larger positive contributor to the smaller – include the retail, wholesale, and manufacturing sales*, and wage and salary income*. Industrial production declined, while number of employed persons remain unchanged in July.

With the decline of 0.1 percent in July, the coincident index now stands at 104.7 (1990=100). Based on revised data, this index was unchanged in June and declined 0.1 percent in May. During the six-month span through July, the index decreased 0.2 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 percent).

Data Availability. The data series used to compute the two composite indexes reported in this release are those available “as of” 5:00 P.M. ET September 7, 2005. Some series are estimated as noted below.

*The series in the leading index that are based on The Conference Board estimates are real operating profits and six month growth rate of labor productivity. The series in the coincident index that are based on The Conference Board estimates are real manufacturing sales and wage and salary income.

Notes: Starting with the July 2005 press release, The Conference Board uses Real Retail, Wholesale, and Manufacturing Sales as a component of the coincident index. This will replace the individual sales series previously used. Before the aggregation is done, the individual sales series will be deflated to adjust for changes in the price levels. Real wholesale sales and real manufacturing sales are deflated with the wholesale price for manufacturing goods. (As part of this revision an error in the price index that was used to deflate manufacturing sales was also corrected.) Real retail sales are deflated with the consumer price index. The resulting three deflated series are added together to provide new real retail, wholesale, and manufacturing sales data. The Coincident Index is now more consistent with other measures of economic activity, such as industrial production and GDP (particularly after 2001).

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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