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Benchmark Revisions - November 2006

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Released: Thursday, September 6, 2007

The Conference Board reports today that the leading index for Japan decreased 1.1 percent and the coincident index decreased 0.1 percent in July.

  • The leading index declined sharply in July, offsetting a large gain in June. The leading index has decreased in four of the last six months. Large decreases in dwelling units started, stock price index, new orders for machinery and construction*, and index of overtime worked in July led to this month's decline in the leading index. With July's decline, the leading index fell -1.6 percent from January to July (a -3.2 percent annual rate), well below the rapid growth of about 5.0 percent (annual rate) reached in the first half of 2006. Moreover, the weaknesses among the leading indicators have been more widespread than strengths in recent months.
  • The coincident index declined slightly in July as three components, including number of employed persons, wages and salaries, and industrial production all decreased. But, there were upward revisions to the previous several months as actual data for second quarter manufacturing sales became available. Despite this month's small decline, the six-month growth rate of the coincident index picked up slightly in recent months, to 1.3 percent from January to July (about a 2.6 percent annual rate) and the strengths among the coincident indicators have been widespread in the last several months. At the same time, real GDP growth slowed to a 1.9 percent average annual rate in the first half of 2007 (including a 0.5 percent annual rate in the second quarter), down from a 2.8 percent average annual rate in the second half of 2006. Despite the continued weaknesses among the leading indicators in recent months, the current behavior of the composite indexes still suggests that economic growth should continue, but it is not likely to pick up strongly in the near term.

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

With the decrease of 1.1 percent in July, the leading index now stands at 86.6 (1990=100). Based on revised data, this index increased 1.3 percent in June and decreased 0.2 percent in May. During the six-month span through July, the index decreased 1.6 percent, and three of the ten components advanced (diffusion index, six-month span equals 35.0 percent).

COINCIDENT INDICATORS. Only one of the four components that make up the coincident index increased in July. The positive contributor to the index was the retail, wholesale, and manufacturing sales* component. Number of employed persons, wage and salary income*, and industrial production declined in July.

With the decrease of 0.1 percent in July, the coincident index now stands at 108.6 (1990=100). Based on revised data, this index increased 0.1 percent in June and 0.2 percent in May. During the six-month span through July, 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 September 5, 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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