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Benchmark Revisions - November 2006

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Released: Thursday, June 5, 2008

The Conference Board reports today that the leading index for Japan decreased 0.2 percent and the coincident index increased 0.3 percent in April.

  • The leading index declined slightly in April, after remaining unchanged during the past two months. Large declines in the index of overtime worked, the six-month growth rate of labor productivity, and new orders for machinery and construction more than offset positive contributions from financial components of the index. With the small decline in April, the leading index continued to fall, at about a -1.1 percent rate between October 2007 to April 2008 (a -2.1 percent annual rate), well above the -4.8 percent annual rate which prevailed during the previous six months. Moreover, the weaknesses among the leading indicators continued to be more widespread than the strengths.
  • The coincident index increased in April, but there were large downward revisions to this index of current economic conditions in the last four months as actual data for manufacturing sales for the first quarter of 2008 became available. Despite fairly balanced strengths and weaknesses among the coincident components, it continued to fall at about a -0.7 percent rate from October 2007 to April 2008 (about a -1.5 percent annual rate), well below the 1.3 percent annual rate for the period between April 2007 and October 2007.
  • Although the rate of decline in the leading index has moderated slightly in recent months, it has declined for eight of the last twelve months and it is now 5.2 percent below its recent highest level in December 2006. At the same time, real GDP growth picked up to a 3.3 percent annual rate in the first quarter of 2008, up from the (revised) 1.9 percent average annual rate in the second half of 2007 and the 1.0 percent rate in the first half of the year. Despite stabilizing somewhat in recent months, the weaknesses in the composite indexes suggest that economic growth is likely to be slow in the near term.

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

With the decrease of 0.2 percent in April, the leading index now stands at 84 (1990=100). Based on revised data, this index remained unchanged in both March and February. During the six-month span through April, the index decreased 1.1 percent, and three of the ten components advanced (diffusion index, six-month span equals 30.0 percent).

COINCIDENT INDICATORS. Three of the four components that make up the coincident index increased in April. The positive contributors to the index — in order from the largest positive contributor to the smallest — include the retail, wholesale, and manufacturing sales* component, number of employed persons, and wage and salary income*. Industrial production declined in April.

With the increase of 0.3 percent in April, the coincident index now stands at 108.3 (1990=100). Based on revised data, this index decreased 0.8 percent in March and remained unchanged in February. During the six-month span through April, the index decreased -0.7 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 June 4, 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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