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Benchmark Revisions - November 2006

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Released: Tuesday, September 9, 2008

The Conference Board reports today that the leading index for Japan decreased 0.5 percent and the coincident index decreased 0.2 percent in July.

  • The leading index declined again in July. Real money supply, the Tankan business conditions survey, real operating profits, and stock prices continued to contribute negatively to the leading index which fell 4.2 percent (about a -8.2 percent annual rate) from January to July 2008, the largest decline since late 2001 and about the same rate of decline seen at the end of 2007. In addition, the weaknesses among the leading indicators continued to be very widespread in recent months.
  • The coincident index also declined in July, with employment and wage and salary income components making large negative contributions to the index. With this decrease, the six-month growth rate in the coincident index continued to fall, and it is now -1.7 percent (a -3.3 percent annual rate) in the six-month period through July, well below the 1.0 percent annual rate of growth reached in the second half of 2007. In addition, the weaknesses among the coincident indicators have become far more widespread than the strengths in recent months.
  • The leading index has been on a general downtrend for more than a year now and its rate of decline has accelerated recently. During this period, weaknesses in both leading and coincident indexes have been widespread. At the same time, real GDP grew at a 0.3 percent average annual rate in the first half of 2008 (including a -2.4 percent rate in the second quarter, the largest quarterly negative growth in the past seven years), down from the 1.7 percent average annual rate during the second half of 2007. The continued widespread declines in both leading and coincident indexes suggest that the risks for further economic weakness remain elevated in the near term.

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

With the decrease of 0.5 percent in July, the leading index now stands at 80.3 (1990=100). Based on revised data, this index decreased 1.5 percent in June and decreased 0.6 percent in May. During the six-month span through July, the index decreased 4.2 percent, and two of the ten components advanced (diffusion index, six-month span equals 20.0 percent).

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

With the decrease of 0.2 percent in July, the coincident index now stands at 107.1 (1990=100). Based on revised data, this index decreased 0.8 percent in June and 0.2 percent in May. During the six-month span through July, the index decreased 1.7 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 September 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.

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

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