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Benchmark Revisions - November 2006

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Released: Tuesday, May 9, 2006

The Conference Board reports today that the leading index for Japan decreased 0.2 percent and the coincident index decreased 0.3 percent in March.

  • The leading index fell slightly in March, the first decline in the last ten months. The leading index has been growing at about a 3.5 -4.5 percent annual rate in recent months, up from zero to slightly negative growth at the end of 2004. But its growth in 2005 and through the first quarter of 2006 has not been as rapid as in the first half of 2004. In addition, the strengths and weaknesses among the leading indicators have been somewhat balanced in recent months.
  • The coincident index also fell in March, with employment and the real retail, wholesale, and manufacturing sales components being the major contributors to this month's decline. In addition, the growth rate of the coincident index moderated somewhat in early 2006, after picking up in the second half of 2005. At the same time, real GDP grew at a 3.1 percent average annual rate in the second half of 2005 (including a 5.4 percent rate in the fourth quarter), down slightly from the 5.6 percent average rate in the first half of the year. The behavior in the leading index in recent months suggests that the economy is likely to grow at a moderate to strong rate in the near term.

LEADING INDICATORS. Five of the ten components that make up the leading index increased in March. The positive contributors to the index - in order from the largest positive contributor to the smallest - include interest rate spread, dwelling units started, the Tankan business conditions survey, real money supply, and stock prices. The negative contributors - in order from the largest negative contributor to the smallest - include the (inverted) business failures*, the new orders for machinery and construction component*, the six month growth rate of labor productivity, the index of overtime worked, and real operating profits*.

With the decrease of 0.2 percent in March, the leading index now stands at 101.6 (1990=100). Based on revised data, this index increased 0.3 percent in February and increased 0.3 percent in January. During the six-month span through March, the index increased 1.8 percent, and seven of the ten components advanced (diffusion index, six-month span equals 70.0 percent).

COINCIDENT INDICATORS. Two of the four components that make up the coincident index decreased in March. The positive contributors to the index - in order from the largest positive contributor to the smallest - include industrial production and wage and salary income*. The number of employed persons and the retail, wholesale, and manufacturing sales* components declined in March.

With the decrease of 0.3 percent in March, the coincident index now stands at 105.7 (1990=100). Based on revised data, this index increased 0.1 percent in February and 0.1 percent in January. During the six-month span through March, the index increased 0.3 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 percent).

DATA AVAILABILITY AND NOTES. The data series used to compute the two composite indexes reported in this release are those available "as of" 5:00 P.M. ET May 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, new orders for machinery, 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.

NOTE: 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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