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Benchmark Revisions - November 2006

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Released: Tuesday, August 5, 2008

The Conference Board reports today that the leading index for Japan decreased 1.3 percent and the coincident index decreased 0.9 percent in June.

  • The leading index declined sharply in June for the seventh consecutive month, due mainly to sharp drops in new orders for machinery and construction, stock prices, and the Tankan business conditions survey. The leading index fell 4.2 percent (about a -8.1 percent annual rate) from December to June, almost identical to the rate of decline during the second half of last year. In addition, the weaknesses among the leading indicators continued to be widespread.
  • The coincident index also declined in June following a smaller decrease in May. All components declined, and wage and salary income and industrial production made the largest negative contributions to the coincident index in June. With this decline, the six-month change in the coincident index has now dropped to a -1.6 percent rate (a -3.3 percent annual rate) in the six-month period through June, down from a 0.7 percent annual rate in the second half of 2007. Moreover, the weaknesses among the coincident indicators have become far more widespread than the strengths in recent months.
  • Since the middle of 2007, the leading index has been on a downtrend and its rate of decline has picked up in recent months. The leading index is now 8.8 percent lower than its most recent highest level in December 2006. Meanwhile, the coincident index has decreased moderately since November 2007. Real GDP grew at a 4.0 percent annual rate in the first quarter of 2008, up from the 1.9 percent average annual rate during the second half of 2007 and a 1.0 percent average annual rate in the first half of the year. The weaknesses in both leading and coincident indexes in recent months suggest that economic growth is likely to slow in the near term and that risks for economic weakness are increasing.

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

With the decrease of 1.3 percent in June, the leading index now stands at 80.8 (1990=100). Based on revised data, this index decreased 0.6 percent in May and decreased 0.5 percent in April. During the six-month span through June, the index decreased 4.2 percent, and two of the ten components advanced (diffusion index, six-month span equals 25.0 percent).

COINCIDENT INDICATORS. All four components that make up the coincident index decreased in June. The negative contributors to the index — in order from the largest negative contributor to the smallest — include wage and salary income*, industrial production, number of employed persons, and the retail, wholesale, and manufacturing sales* component.

With the decrease of 0.9 percent in June, the coincident index now stands at 107.3 (1990=100). Based on revised data, this index decreased 0.1 percent in May and increased 0.4 percent in April. During the six-month span through June, the index decreased -1.6 percent, and none of the four components advanced (diffusion index, six-month span equals 0.0 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 August 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.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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