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Benchmark Revisions - November 2006

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Released: Tuesday, February 6, 2007

The Conference Board reports today that the leading index for Japan increased 0.7 percent, while the coincident index decreased 0.1 percent in December.

  • The leading index increased again in December, the third consecutive gain, following three consecutive declines from July to September. The level of the leading index in previous months was revised up slightly due to data revisions in new orders for machinery and construction. With this month's increase, the growth of the leading index has picked up to a 1.0 percent annual rate in the last six months (a 0.5 percent change), still well below the range of 4.5 to 5.5 percent (annual rate) in the first half of 2006. In addition, the strengths among the leading indicators have become somewhat more widespread in the last two months.
  • The coincident index fell slightly in December as a result of a large decline in the number of employed persons offsetting smaller increases in the other components. Despite December's decrease, the strengths among the coincident indicators have become very widespread in recent months. At the same time, real GDP grew at a 0.8 percent annual rate in the third quarter of 2006, down from the 1.9 percent average annual rate in the first half of 2006. The current behavior of the leading index suggests that slow to moderate economic growth is likely to persist in the near term.

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

With the increase of 0.7 percent in December, the leading index now stands at 89.0 (1990=100). Based on revised data, this index increased 0.2 percent in November and increased 0.6 percent in October. During the six-month span through December, the index increased 0.5 percent, and six of the ten components advanced (diffusion index, six-month span equals 60.0 percent).

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

With the decrease of 0.1 percent in December, the coincident index now stands at 107.4 (1990=100). Based on revised data, this index increased 0.1 percent in November and increased 0.6 percent in October. During the six-month span through December, the index increased 0.6 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 February 5, 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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