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Benchmark Revisions - November 2006

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Released: Tuesday, October 9, 2007

The Conference Board reports today that the leading index for Japan decreased 0.7 percent, while the coincident index increased 0.3 percent in August.

  • The leading index declined sharply in August again, but there were slight upward revisions to the leading index in the last several months as the data for real operating profits for the second quarter became available. The dwelling units started, stock price index, real money supply, and new orders for machinery and construction components continued to contribute to this month's decline in the leading index. With August's decline, the leading index continued to fall, to a -0.9 percent growth rate from February to August (a -1.8 percent annual rate), well below the rapid growth of about 5.0 percent (annual rate) reached in the first half of 2006. Moreover, the strengths in the leading index have been less widespread in recent months.
  • The coincident index increased in August, and the strengths and weaknesses among its components were somewhat balanced this month. With this month's increase, the six-month growth rate of the coincident index continued to pick up, to 1.2 percent from February to August (about a 2.4 percent annual rate). At the same time, real GDP growth slowed to a 0.9 percent average annual rate in the first half of 2007 (including a revised -1.2 percent annual rate in the second quarter), down from a 1.3 percent average annual rate in the second half of 2006. The continued weaknesses among the leading indicators in recent months suggest that the economy will continue to grow, but perhaps at a slow pace in the near term.

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

With the decrease of 0.7 percent in August, the leading index now stands at 86.7 (1990=100). Based on revised data, this index decreased 0.9 percent in July and increased 1.4 percent in June. During the six-month span through August, the index decreased 0.9 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 August. The positive contributors to the index — in order from the larger positive contributor to the smaller — include industrial production and the retail, wholesale, and manufacturing sales* component. Wage and salary income* and number of employed persons declined in August.

With the increase of 0.3 percent in August, the coincident index now stands at 108.9 (1990=100). Based on revised data, this index decreased 0.1 percent in July and increased 0.1 percent in June. During the six-month span through August, the index increased 1.2 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 October 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.

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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