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Released: Thursday, July 7, 2011

The Conference Board Leading Economic Index®(LEI) for Japan decreased 0.4 percent and The Conference Board Coincident Economic Index® increased 0.7 percent in May.

  • The Conference Board LEI for Japan fell again in May, following two consecutive monthly declines. The six-month growth rate of productivity, new orders for machinery and construction, and stock prices continued to decrease this month. With the decline in May, the six-month change in the leading economic index continued to fall – to -0.9 percent (a -1.9 percent annual rate) between November 2010 and May 2011. In addition, the strengths among the leading indicators have become less widespread and were just balanced with the weaknesses over the last six months.
  • The Conference Board CEI for Japan, a measure of current economic activity, increased in May following two consecutive declines. Industrial production rebounded sharply this month, more than offsetting a negative contribution from number of employed persons. Despite the gain in May, the six-month change in the coincident economic index remained negative – at -0.4 percent (a -0.8 percent annual rate) in the period through May 2011, slightly up from the 1.0 percent decline (a -2.0 percent annual rate) for the previous six months. Meanwhile, real GDP declined sharply – at a 3.5 percent annual rate in the first quarter of 2011, following a 2.9 percent decline (annual rate) in the fourth quarter of last year.
  • The Conference Board LEI for Japan continued to decline through May. However, the decline was smaller than in the previous two months. At the same time, The Conference Board CEI for Japan rebounded in May. Although its six-month change remained negative, this decline has also moderated recently. Taken together, the composite indexes and their components suggest that economic activity will remain weak in the near term, although the weakness could become more moderate.

LEADING INDICATORS.Seven of the ten components that make up The Conference Board LEI for Japan increased in May. The positive contributors to the index – in order from the largest positive contributor to the smallest – include the (inverted) business failures, the index of overtime worked, real money supply, interest rate spread, the Tankan business conditions survey, dwelling units started, 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 new orders for machinery and construction component*, and stock prices.

With the decrease of 0.4 percent in May, The Conference Board LEI for Japan now stands at 94.2 (2004=100). Based on revised data, this index decreased 2.0 percent in April and decreased 0.8 percent in March. During the six-month span through May, the index declined 0.9 percent, and five of the ten components advanced (diffusion index, six-month span equals 55.0 percent).

COINCIDENT INDICATORS. Three of the four components that make up The Conference Board CEI for Japan increased in May. The positive contributors to the index – in order from the largest positive contributor to the smallest – include industrial production, the retail, wholesale, and manufacturing sales* component, and wage and salary income. Number of employed persons declined in May. With the increase of 0.7 percent in May, The Conference Board CEI for Japan now stands at 97.7. Based on revised data, this index decreased 0.2 percent in April and decreased 2.4 percent in March. During the six-month span through May, the index declined 0.4 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 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 July 6, 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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