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Released: Thursday, September 8, 2011

The Conference Board Leading Economic Index® (LEI) for Japan increased 0.9 percent The Conference Board Coincident Economic Index® (CEI) decreased 0.3 percent in July.

  • The Conference Board LEI for Japan rebounded in July, but there were large downward revisions to the index between March and May as real data for operating profits* for the second quarter became available. The six-month growth rate of productivity and dwelling units started made large positive contributions to the index this month. Despite the gain in July, the six-month growth in the leading economic index continued to slow – to -2.7 percent (about a -5.3 percent annual rate) through July 2011, significantly down from the 0.4 percent increase (about a 0.8 percent annual rate) between July 2010 and January 2011. In addition, the weaknesses among the leading indicators have been slightly more widespread than the strengths in recent months. 
  • The Conference Board CEI for Japan, a measure of current economic activity, fell in July following two consecutive gains. All components declined except industrial production this month.  With the decline in July, the six-month change in the coincident economic index remained negative, falling by 2.1 percent (about a -4.2 percent annual rate) during the period through July, a sharp slowdown from the 0.1 percent increase (about a 0.2 percent annual rate) for the previous six months. Meanwhile, real GDP growth has been declining for three consecutive quarters, falling by 1.3 percent in the second quarter of 2011, following a 3.6 percent decline (annual rate) in the first quarter.
  • The Conference Board LEI for Japan increased in July for the first time since the March earthquake, but there were large downward revisions to the previous several months and the six-month growth in the leading economic index continued to decline. Meanwhile, The Conference Board CEI for Japan decreased this month after increasing in the previous two months, and its six-month growth rate has remained negative through July. Taken together, the composite indexes and their components suggest that economic activity will remain weak in the near term.

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

With the increase of 0.9 percent in July, The Conference Board LEI for Japan now stands at 93.8 (2004=100).  Based on revised data, this index remained unchanged in June and decreased 0.9 percent in May.  During the six-month span through July, the index decreased 2.7 percent, and four of the ten components advanced (diffusion index, six-month span equals 40.0 percent).

COINCIDENT INDICATORS. Only one of the four components that make up The Conference Board CEI for Japan decreased in July. The positive contributor to the index was industrial production.  The retail, wholesale, and manufacturing sales* component, wage and salary income, and number of employed persons declined in July.

With the decrease of 0.3 percent in July, The Conference Board CEI for Japan now stands at 96.8 (2004=100).  Based on revised data, this index increased 0.5 percent in June and increased 0.4 percent in May.  During the six-month span through July, the index decreased 2.1 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 September 7, 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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