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Benchmark Revisions - November 2006

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Released: Thursday, March 9, 2006

The Conference Board reports today that both leading and coincident indexes for Japan increased 0.4 percent in January.

  • The leading index increased again in January. With January’s gain, the leading index has continued to grow at about a 4.5 –5.5 percent annual rate in recent months, up from zero to slightly negative growth at the end of 2004, and only slightly below the most recent high growth of 7.0 percent 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 also increased again in January, and it has been on an upward trend since early 2005. At the same time, real GDP growth picked up to a 5.5 percent annual rate in the fourth quarter of 2005, up from the 1.4 percent rate in the third quarter. The continued widespread strength in the leading index suggests that economic growth is likely to remain strong in the near term.

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

With the increase of 0.4 percent in January, the leading index now stands at 101.6 (1990=100). Based on revised data, this index increased 0.5 percent in both December and November. During the six-month span through January, the index increased 2.5 percent, and nine of the ten components advanced (diffusion index, six-month span equals 90.0 percent).

Coincident Indicators. All four components that make up the coincident index increased in January. The positive contributors to the index – in order from the largest positive contributor to the smallest – include number of employed persons, the retail, wholesale, and manufacturing sales* component, industrial production, and wage and salary income*.

With the increase of 0.4 percent in January, the coincident index now stands at 106.1 (1990=100). Based on revised data, this index increased 0.2 percent in December and increased 0.1 percent in November. During the six-month span through January, the index increased 1.1 percent, and three of the four components advanced (diffusion index, six-month span equals 87.5 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 March 8, 2006. 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 the 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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