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Benchmark Revisions - November 2006

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Released: Wednesday, January 9, 2008

The Conference Board reports today that the leading index for Japan remained unchanged, while the coincident index increased 0.3 percent in November.

  • The leading index was unchanged in November following four consecutive declines, and there were downward revisions to the previous several months, as data for the real operating profits for the third quarter of 2007 became available. Dwelling units started made the largest positive contribution to the leading index this month, but this was offset by large declines in the stock price index and the six-month growth rate of labor productivity in manufacturing. The six-month growth rate of the leading index continued to slow, to a -2.2 percent rate from May to November (a -4.3 percent annual rate), well below the 5.0 percent annual rate reached in the first half of 2006. However, the strengths and weaknesses among the leading indicators have continued to be somewhat balanced over the past six months.
  • The coincident index increased again in November, and the strength in the coincident index continued to be widespread among its components. Moreover, its six-month growth rate has remained within the 0.5 to 1.5 percent range (about a 1.5 - 2.5 percent annual rate) since early 2006. At the same time, real GDP growth picked up to a 1.5 percent annual rate in the third quarter of 2007, from the 0.7 percent average annual rate in the first half of the year. The continued weakness in the leading index so far suggests that the economy is likely to grow at a sluggish pace in the near term.

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

Holding steady in November, the leading index now stands at 85.0 (1990=100). Based on revised data, this index decreased 0.2 percent in October and decreased 1.4 percent in September. During the six-month span through November, the index decreased 2.2 percent, and five of the ten components advanced (diffusion index, six-month span equals 50.0 percent).

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

With the increase of 0.3 percent in November, the coincident index now stands at 109.2 (1990=100). Based on revised data, this index increased 0.5 percent in October and decreased 0.3 percent in September. During the six-month span through November, the index increased 0.6 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 January 8, 2008. 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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