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Benchmark Revisions - November 2006

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Released: Thursday, September 7, 2006

The Conference Board reports today that the leading index for Japan decreased 0.5 percent and the coincident index decreased 0.1 percent in July.

  • The leading index fell sharply in July following no change in June, and eight out of ten components in the leading index declined. The leading index fell or remained unchanged in four of the last six months. The growth rate of the leading index has been slowing gradually in the first half of the year, and with July's decline, the leading index is now 0.3 percent below its level in January. In addition, the strengths among the leading indicators have gradually become less widespread in recent months.
  • The coincident index declined slightly in July after being essentially flat since the beginning of 2006. The real retail, wholesale, and manufacturing sales and employment components were the main contributors to the weakness in the coincident index in the first half of the year. At the same time, real GDP growth slowed to a 0.8 percent annual rate in the second quarter of 2006, down from the 2.7 percent rate in the first quarter and the 2.6 percent average rate in the previous two quarters. The behavior of the leading index so far still suggests that economic growth should continue, but it's likely to be slow to moderate in the near term.

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

With the decrease of 0.5 percent in July, the leading index now stands at 101.1 (1990=100). Based on revised data, this index remained unchanged in June and decreased 0.3 percent in May. During the six-month span through July, the index decreased 0.3 percent, and five of the ten components advanced (diffusion index, six-month span equals 50.0 percent).

COINCIDENT INDICATORS. Two of the four components that make up the coincident index decreased 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* component and wage and salary income*. Industrial production and number of employed persons declined in July.

With the decrease of 0.1 percent in July, the coincident index now stands at 105.9 (1990=100). Based on revised data, this index remained unchanged in June and decreased 0.1 percent in May. During the six-month span through July, the index increased 0.1 percent, and two of the four components advanced (diffusion index, six-month span equals 62.5 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 September 6, 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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