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Benchmark Revisions - November 2006

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Released: Thursday, August 9, 2007

The Conference Board reports today that the leading index for Japan increased 1.3 percent and the coincident index remained unchanged in June.

  • The leading index increased sharply in June, but there were downward revisions to the leading index in the previous several months as the dwelling units started and six-month growth rate of labor productivity were revised. Despite the gain in June, the leading index continued to decrease, to a -1.2 percent rate from December to June (a -2.5 percent annual rate), well below the 5.0 percent annual rate reached through mid-2006. Moreover, the weaknesses among the leading indicators have been more widespread than strengths in recent months.
  • The coincident index remained unchanged in June, and May's small decline was revised up to no change. The real retail, wholesale, and manufacturing sales component was the largest negative contributor to the coincident index this month, offsetting an equally large gain in industrial production. The growth rate of the coincident index has been gradually declining since late last year, and the strengths and weaknesses among the coincident indicators have continued to be somewhat balanced in the last several months. 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 grow at a slow pace in the near term.

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

With the increase of 1.3 percent in June, the leading index now stands at 87.5 (1990=100). Based on revised data, this index decreased 0.3 percent in May and increased 0.1 percent in April. During the six-month span through June, the index decreased 1.2 percent, and three of the ten components advanced (diffusion index, six-month span equals 35.0 percent).

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

Holding steady in June, the coincident index now stands at 107.9 (1990=100). Based on revised data, this index remained unchanged in May and increased 0.6 percent in April. During the six-month span through June, the index increased 0.1 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 August 8, 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 and new orders for machinery. The series in the coincident index that are based on The Conference Board estimates are real manufacturing sales.

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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