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Benchmark Revisions - November 2006

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Released: Tuesday, May 6, 2008

The Conference Board reports today that the leading index for Japan increased 0.1 percent, and the coincident index decreased 0.8 percent in March.

  • The leading index increased slightly in March following eight consecutive declines. Business failures (inverted), stock prices, the six-month growth rate of labor productivity, and the Tankan Business Conditions survey made large negative contributions to the leading index, but they were more than offset by a large positive contribution from new orders for machinery and construction*. Despite the small gain in the leading index in March, the leading index continued to fall, at about a -1.3 percent rate between September 2007 to March 2008 (a -2.6 percent annual rate). The rate of decline in the leading index has moderated slightly, but it is still well below its 0.7 percent decline during the first half of 2007 (about a -1. 4 percent annual rate), and the weaknesses among the leading indicators continued to be more widespread than the strengths.
  • The coincident index fell sharply in March, but the small decline in February was revised up due to upward revisions to industrial production and the real retail, wholesale, and manufacturing sales component. With this month's large decrease, the growth rate of the coincident index has slowed to a 0.2 percent rate from September 2007 to March 2008 (about a 0.4 percent annual rate), but the strengths and weaknesses among the coincident components remained fairly balanced over the past six months.
  • In March, the leading index, with widespread weakness among its components, was 5.0 percent below its most recent high level in December 2006, and the growth of the coincident index continued to moderate despite a brief pick up in mid 2007. At the same time, real GDP grew 1.1 percent average annual rate in the first half of the year and picked up to an average rate of 2.3 percent (annualized) over the last two quarters of 2007. The current behavior of both leading and coincident indexes suggests that elevated risks for economic weakness continue and economic activity is likely to slow down in the near term.

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

With the increase of 0.1 percent in March, the leading index now stands at 84.2 (1990=100). Based on revised data, this index decreased 0.1 percent in February and decreased 0.2 percent in January. During the six-month span through March, the index decreased 1.3 percent, and four of the ten components advanced (diffusion index, six-month span equals 40.0 percent).

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

With the decrease of 0.8 percent in March, the coincident index now stands at 108.7 (1990=100). Based on revised data, this index increased 0.3 percent in February and remained unchanged in January. During the six-month span through March, the index increased 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 May 3, 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, and new orders for machinery. 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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