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Benchmark Revisions - November 2006

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Released: Monday, July 9, 2007

The Conference Board reports today that the leading index for Japan decreased 0.7 percent and the coincident index decreased 0.1 percent in May.

  • The leading index fell sharply in May following a slight increase in April, and the weakness in the leading index was widespread in May. As a result, the leading index decreased -0.9 percent from November to May (a -1.8 percent annual rate). Business failures and index of overtime worked made the largest negative contributions to the leading index in May, but the weaknesses among the leading indicators have been more widespread than strengths in recent months.
  • The coincident index also fell in May and it has been down in four of the last six months. The growth rate of the coincident index has been gradually declining since late last year, and strengths and weaknesses among the coincident indicators have become balanced in the last two months. Number of employed persons and industrial production were the main negative contributors to the coincident index in May. At the same time, real GDP grew at a (revised) 3.3 percent annual rate in the first quarter of 2007, down from a 5.4 percent annual rate in the last quarter of 2006. The weaknesses in both the leading and coincident indexes in recent months suggest that the economy is likely to continue growing, but perhaps at a slow pace, in the near term.

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

With the decrease of 0.8 percent in May, the leading index now stands at 87.2 (1990=100). Based on revised data, this index increased 0.1 percent in April and decreased 0.6 percent in March. During the six-month span through May, the index decreased 0.9 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 decreased in May. The positive contributors to the index — in order from the larger positive contributor to the smaller — include the retail, wholesale, and manufacturing sales* component and wage and salary income*. Number of employed persons and industrial production declined in May.

With the decrease of 0.1 percent in May, the coincident index now stands at 107.8 (1990=100). Based on revised data, this index increased 0.6 percent in April and decreased 0.3 percent in March. During the six-month span through May, the index decreased -0.2 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 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 July 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.

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

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