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Benchmark Revisions - November 2006

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Released: Thursday, December 8, 2005

The Conference Board reports today that the leading index for Japan increased 0.4 percent, while the coincident index decreased 0.1 percent in December.

  • The leading index increased again in October for the fifth consecutive month. With October’s gain, the leading index has been growing at about a 3.0 – 3.5 percent annual rate in recent months, up from the zero to slightly negative growth at the end of 2004, but still well below the most recent peak growth rate reached in the first half of 2004. In addition, the strength among the leading indicators continued to be widespread in recent months.
  • The coincident index, a measure of current economic activity, fell slightly in October, but it is still on a slightly rising trend which began in the end of 2004. The strengths and weaknesses have been well balanced among the coincident indicators in recent months.
  • At the same time, real GDP growth slowed to a 1.7 percent annual rate in the third quarter of 2005, down from the 4.8 percent average rate in the first half of 2005, but it is stronger than the 0.9 percent average rate over 2004. The recent improvement in the leading index suggests that the slowdown in economic growth in 2004 has ended, and economic growth is likely to continue in the near term.

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

With the increase of 0.4 percent in October, the leading index now stands at 100.1 (1990=100). Based on revised data, this index increased 0.3 percent in both September and August. During the six-month span through October, the index increased 1.8 percent, and nine of the ten components advanced (diffusion index, six-month span equals 90.0 percent).

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

With the decrease of 0.1 percent in October, the coincident index now stands at 105.2 (1990=100). Based on revised data, this index increased 0.3 percent in September and increased 0.2 percent in August. During the six-month span through October, the index increased 0.3 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 December 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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