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Benchmark Revisions - November 2006

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Released: Tuesday, January 9, 2007

The Conference Board reports today that the leading index for Japan increased 0.2 percent and the coincident index increased 0.2 percent in November.

  • The leading index increased again in November, and the level of the leading index in previous months was revised up due to data revisions in real operating profits. Despite this month's increase, the growth of the leading index has slowed to a 0.4 percent annual rate from May to November (a 0.2 percent change), well below the range of 4.5 to 5.5 percent (annual rate) in the first half of 2006. Moreover, the weaknesses among the leading indicators have been more widespread in recent months.
  • The coincident index also increased slightly in November, continuing to grow on its upward trend. At the same time, real GDP grew at a 0.8 percent annual rate in the third quarter of 2006 (revised down from the 2.0 percent rate previously reported), down from the 1.9 percent average annual rate in the first half of 2006. The current behavior of the leading index continues to suggest that economic growth is likely to persist, but at a slow pace in the near term.

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

With the increase of 0.2 percent in November, the leading index now stands at 88.1 (1990=100). Based on revised data, this index increased 0.6 percent in October and remained unchanged in September. During the six-month span through November, the index increased 0.2 percent, and four of the ten components advanced (diffusion index, six-month span equals 45.0 percent).

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

With the increase of 0.2 percent in November, the coincident index now stands at 107.6 (1990=100). Based on revised data, this index increased 0.6 percent in October and 0.1 percent in September. During the six-month span through November, the index increased 0.9 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 January 8, 2007. 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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