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Benchmark Revisions - November 2006

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Released: Thursday, April 5, 2007

The Conference Board reports today that the leading index for Japan decreased 0.1 percent, while the coincident index increased 0.5 percent in February.

  • The leading index fell slightly in February, and there were small downward revisions to the previous several months mainly due to data revisions in real operating profits. With February's decrease, the six-month growth rate of the leading index slowed to a 0.2 percent (almost a 0.5 percent annual rate), well below the range of 1.0 — 1.5 percent annual rate it has been fluctuating in the last several months. Moreover, the weaknesses among the leading indicators have become more widespread in the last two months.
  • The coincident index increased in February following a small decline in January, and it is still on a steady upward trend that began in early 2005. A strong pick up in number of employed persons as well as continued strength in real retail, wholesale, and manufacturing sales contributed to February's increase in the coincident index. At the same time, real GDP grew at a 2.9 percent average annual rate in the second half of 2006 (including a 5.5 percent rate in the fourth quarter), slightly up from the 2.1 percent average annual rate in the first half of the year. The current behavior of the composite indexes so far suggests that more moderate economic growth is still likely to continue in the near term.

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

With the decrease of 0.1 percent in February, the leading index now stands at 88.0 (1990=100). Based on revised data, this index decreased 0.5 percent in January and increased 0.6 percent in December. During the six-month span through February, the index increased 0.2 percent, and four of the ten components advanced (diffusion index, six-month span equals 45.0 percent).

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

With the increase of 0.5 percent in February, the coincident index now stands at 108.3 (1990=100). Based on revised data, this index decreased 0.3 percent in January and increased 0.1 percent in December. During the six-month span through February, the index increased 1.3 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 April 4, 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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