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Benchmark Revisions - November 2006

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Released: Tuesday, May 8, 2007

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

  • The leading index fell slightly in March, the third consecutive decrease. In March, large positive contributions from stock prices and the yield spread were offset by large negative contributions from rising business failures and falling labor productivity growth in manufacturing. From September to March, the leading index grew at a 0.3 percent rate (a 0.7 percent annual rate), and the weaknesses among the leading indicators have become more widespread in recent months.
  • The coincident index also decreased in March following a small increase in February. Negative contributions from industrial production and real retail, wholesale, and manufacturing sales contributed to the decline in the coincident index in March. But, the strengths among the coincident indicators have been very widespread in recent months.
  • The six-month growth rate of the leading index was fluctuating around a 5.0 percent annual rate in early 2006, but it gradually fell in the second half of 2006 to slightly below zero by December. At the same time, real GDP grew at a (revised) 1.4 percent average annual rate in the second half of 2006 (including a 5.5 percent rate in the fourth quarter), down from the 2.1 percent average annual rate in the first half of the year. Despite the recent slight pick up in its growth rate, the current behavior of the leading index so far suggests that moderate to slow economic growth is likely to continue in the near term.

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

With the decrease of 0.2 percent in March, the leading index now stands at 87.8 (1990=100). Based on revised data, this index decreased 0.1 percent in February and decreased 0.5 percent in January. During the six-month span through March, the index increased 0.3 percent, and four of the ten components advanced (diffusion index, six-month span equals 40.0 percent).

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

With the decrease of 0.2 percent in March, the coincident index now stands at 108.1 (1990=100). Based on revised data, this index increased 0.6 percent in February and declined 0.3 percent in January. During the six-month span through March, the index increased 1.1 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 May 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.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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