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Benchmark Revisions - November 2006

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Released: Thursday, August 10, 2006

The Conference Board reports today that the leading index for Japan remained unchanged, while the coincident index increased 0.1 percent in June.

  • The leading index remained unchanged in June, following a small decline in May. Stock prices continued to be the main negative contributor to the leading index. With no change in June, the growth rate of the leading index continued to slow and it has been growing at about a 1.5 - 2.5 percent annual rate in recent months, down from the 4.0 - 5.0 percent rate through February. However, the weaknesses and strengths among the leading indicators have remained somewhat balanced in recent months.
  • The coincident index increased slightly in June, but May's small gain was revised down to no change. The coincident index has been on a rising trend since the beginning of 2005, although its growth rate has moderated in recent months. At the same time, real GDP grew at a 3.1 percent annual rate in the first quarter of 2006, slightly down from the 4.5 percent rate in the fourth quarter of 2005. The recent behavior of the leading index suggests that the economy is likely to continue growing, but perhaps at a slightly more moderate rate in the near term.

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

Holding steady in June, the leading index now stands at 101.6 (1990=100). Based on revised data, this index decreased 0.3 percent in May and increased 0.5 percent in April. During the six-month span through June, the index increased 0.5 percent, and six of the ten components advanced (diffusion index, six-month span equals 60.0 percent).

COINCIDENT INDICATORS. Two of the four components that make up the coincident index increased in June. 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 declined, while real retail, wholesale, and manufacturing sales component* remained unchanged in June.

With the increase of 0.1 percent in June, the coincident index now stands at 106.2 (1990=100). Based on revised data, this index remained unchanged in May and increased 0.4 percent in April. During the six-month span through June, the index increased 0.5 percent, and all four components advanced (diffusion index, six-month span equals 100.0 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 August 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: Since the July 2005 press release, Real Retail, Wholesale, and Manufacturing Sales has been used as a component of the coincident index. This series replaces the individual sales series previously used. Before the aggregation is done, the individual sales series is 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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