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Released: Thursday, May 5, 2011

The Conference Board Leading Economic Index®  (LEI) for Japan decreased 0.8 percent and The Conference Board Coincident Economic Index®  (CEI) decreased 2.6 percent in March.

  • The Conference Board LEI for Japan fell sharply in March, following three consecutive gains. The six-month growth rate of productivity, index of overtime worked, stock prices, and dwelling units started all declined substantially this month. Despite the decrease in March, the leading economic index grew by 0.6 percent (a 1.3 percent annual rate) between September 2010 and March 2011, up from the 2.6 percent decline (a -5.2 percent annual rate) for the previous six months. Moreover, the strengths among the leading indicators remained more widespread than the weaknesses over the six months through March. 
  • The Conference Board CEI for Japan, a measure of current economic activity, also declined sharply in March. Industrial production fell substantially due to the economic impact of the March 11th earthquake, and the rest of the coincident indicators also declined this month.  With the decrease in March, the six-month change of the coincident economic index has returned to negative territory – to -1.9 percent (a -3.8 percent annual rate) in the period through March 2011, down from -0.3 percent (a -0.6 percent annual rate) for the previous six months. Meanwhile, real GDP declined at a 1.3 percent annual rate in the fourth quarter of 2010, down from growth of 3.3 percent annual rate in the third quarter. 
  • Much like in the aftermath of the 1995 Kobe Earthquake, the upward trend in both The Conference Board LEI and The Conference Board CEI for Japan was interrupted by the March 11th Tohoku earthquake, tsunami, and nuclear disasters. (The LEI and the CEI both declined by 0.4 percent in January 1995, the month when the Kobe earthquake struck.) As a result, the six-month growth rate of the leading economic index has moderated from last month, and the six-month change in the coincident index has turned negative. Although it is still too early to determine the full economic impact of the disasters, the composite indexes and their components suggest that the recovery, which was regaining some traction before these events, may pause again, and that economic activity will likely slow in the coming months.

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

With the decrease of 0.8 percent in March, The Conference Board LEI for Japan now stands at 96.5 (2004=100).  Based on revised data, this index increased 0.9 percent in February and increased 1.2 percent in January.  During the six-month span through March, the index increased 0.6 percent, and seven of the ten components advanced (diffusion index, six-month span equals 70.0 percent).

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

With the decrease of 2.6 percent in March, The Conference Board CEI for Japan now stands at 96.6 (2004=100).  Based on revised data, this index increased 0.4 percent in February and increased 0.3 percent in January.  During the six-month span through March, the index decreased 1.9 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 Conference Board Leading Economic Index®  (LEI) for Japan and The Conference Board Coincident Economic Index® (CEI) for Japan reported in this release are those available “as of” 5:00 P.M. ET May 4, 2011.  Some series are estimated as noted below.

* The series in The Conference Board LEI that are based on our estimates are real operating profits and new orders for machinery.  The series in The Conference Board CEI that is based on our estimates is real manufacturing sales.

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

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