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Benchmark Revisions - November 2006

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Released: Tuesday, July 8, 2008

The Conference Board reports today that the leading index for Japan decreased 1.2 percent and the coincident index decreased 0.3 percent in May.

  • The leading index declined for the sixth consecutive month in May. Positive contributions from stock prices, dwelling units started, and the yield spread were more than offset by large negative contributions from new orders for machinery and construction, business failures (inverted), and the Tankan business conditions survey. The six-month change in the leading index stands at -3.5 percent (about a -6.9 percent annual rate) during the six-month span through May, down from -2.3 percent (about a - 4.6 percent annual rate) between May 2007 to November 2007. In addition, the weaknesses among the leading indicators have remained widespread in recent months.
  • The coincident index, a measure of current economic activity, declined in May, after a moderate increase in April. Except for industrial production, all the coincident indicators contributed negatively to the index this month. With this decline, the coincident index has now fallen by 1.1 percent (a -2.2 percent annual rate) in the six-month period through May, down from a 0.6 percent increase (a 1.3 percent annual rate) from May 2007 to November 2007. Moreover, the weaknesses among the coincident indicators have become more widespread than strengths in recent months.
  • The leading index remains on a downtrend that began in the middle of 2007, and it has fallen 7.6 percent from its recent highest level in December 2006. Meanwhile, the coincident index began to decrease in December 2007, with its rate of decline having picked up in recent months. Real GDP expanded at a 3.1 percent annual rate in the first quarter of 2008, moderately faster than the 1.9 percent average annual rate of growth in the second half of 2007 and the 1.0 percent average annual rate in the first half of 2007. The current behavior of the composite indexes suggests that economic growth will likely be slow in the near term.

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

With the decrease of 1.2 percent in May, the leading index now stands at 81.9 (1990=100). Based on revised data, this index decreased 0.7 percent in April and decreased 0.2 percent in March. During the six-month span through May, the index decreased 3.5 percent, and three of the ten components advanced (diffusion index, six-month span equals 35.0 percent).

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

With the decrease of 0.3 percent in May, the coincident index now stands at 108.1 (1990=100). Based on revised data, this index increased 0.4 percent in April and decreased 0.8 percent in March. During the six-month span through May, the index decreased -1.1 percent, and one of the four components advanced (diffusion index, six-month span equals 25.0 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 July 7, 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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