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Benchmark Revisions - November 2006

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Released: Tuesday, December 5, 2006

The Conference Board reports today that the leading index for Japan increased 0.5 percent and the coincident index increased 0.6 percent in October.

  • The leading index picked up sharply in October after three consecutive months of decline and October's large gain was widespread among the leading indicators. However, despite the increase in October, the leading index has decreased 0.5 percent from April to October (a 1.0 percent annual rate). The growth of the leading index has been slowing gradually in the second half of the year, down from its most recent peak growth of about 4.5 to 5.5 percent annual rate reached in the first quarter of 2006.
  • The coincident index also increased sharply in October, and the strengths among its components were widespread this month. At the same time, real GDP grew at a 2.0 percent annual rate in the third quarter of 2006, slightly down from the 2.4 percent average annual rate in the first half of 2006 and the 3.1 percent average rate in the second half of 2005. Despite short-term volatility, the current behavior in the leading index still suggests that slow economic growth is likely to continue in the near term.

LEADING INDICATORS. Seven 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 the new orders for machinery and construction component*, interest rate spread, dwelling units started, stock prices, real money supply, real operating profits*, and the (inverted) business failures*. The negative contributors — in order from the larger negative contributor to the smaller — include the index of overtime worked and the six month growth rate of labor productivity. The Tankan business conditions survey remained unchanged in October.

With the increase of 0.5 percent in October, the leading index now stands at 87.4 (1990=100). Based on revised data, this index decreased 0.2 percent in September and decreased 0.5 percent in August. During the six-month span through October, the index decreased 0.5 percent, and three of the ten components advanced (diffusion index, six-month span equals 40.0 percent).

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

With the increase of 0.6 percent in October, the coincident index now stands at 107.3 (1990=100). Based on revised data, this index decreased 0.1 percent in September and increased 0.2 percent in August. During the six-month span through October, the index increased 0.8 percent, and three of the four components advanced (diffusion index, six-month span equals 75.0 percent).

FOR TABLES AND CHARTS, SEE BELOW

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 December 4, 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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