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Benchmark Revisions - November 2006

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Released: Thursday, June 7, 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 April.

  • The leading index rose slightly in April, following three consecutive declines. From October to April, the leading index was unchanged. The strengths and weaknesses among the leading indicators have been roughly balanced in recent months, but April's gain was widespread. In April, large positive contributions from business failures (inverted), stock prices, yield spread, and index of overtime worked more than offset a large negative contribution from new orders for machinery and construction.
  • The coincident index also rose slightly in April, and the index has been revised downward slightly in recent months due to the incorporation of newly available manufacturing sales data. April's increase was largely driven by positive contributions from number of employed persons as well as real retail, wholesale, and manufacturing sales. From October to April, the coincident index fell 0.3 percent and the weaknesses among coincident indicators became more widespread than strengths.
  • The leading index has been fluctuating around a flat trend since mid-2006, and the growth of the coincident index has gradually declined since November. At the same time, real GDP grew at a (revised) 2.4 percent average annual rate in the first quarter of 2007, up from a 1.0 percent average annual rate in the second half of 2006. The current behavior of the leading index so far still suggests that economic growth should continue, albeit at a moderate to slow rate, in the near term.

LEADING INDICATORS. Seven of the ten components that make up the leading index increased in April. The positive contributors to the index — in order from the largest positive contributor to the smallest — include the (inverted) business failures*, interest rate spread, stock prices, the index of overtime worked, dwelling units started, real money supply, 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* and real operating profits*. The Tankan business conditions survey remained unchanged in April.

With the increase of 0.2 percent in April, the leading index now stands at 87.9 (1990=100). Based on revised data, this index decreased 0.2 percent in March and decreased 0.2 percent in February. During the six-month span through April, the index increased 0.0 percent, and six of the ten components advanced (diffusion index, six-month span equals 60.0 percent).

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

With the increase of 0.2 percent in April, the coincident index now stands at 107.4 (1990=100). Based on revised data, this index decreased 0.5 percent in March and 0.4 percent in February. During the six-month span through April, the index decreased 0.3 percent, and one of the four components advanced (diffusion index, six-month span equals 25.0 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 June 6, 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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