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Released: Tuesday, October 16, 2012

The Conference Board Leading Economic Index®  (LEI) for Japan decreased 0.4 percent and The Conference Board Coincident Economic Index® (CEI) remained unchanged in August.

  • The Conference Board LEI for Japan fell again in August, the fifth consecutive monthly decline. Decreases in the index of overtime worked, the (inverted) business failures, and the six-month growth rate of labor productivity more than offset a large positive contribution from new orders for machinery and construction. The LEI contracted by 2.9 percent (about a -5.7 percent annual rate) between February and August 2012, a reversal from the increase of 2.9 percent (about a 5.8 percent annual rate) for the previous six months. Moreover, the weaknesses among the leading indicators have become very widespread in the last six months. 
  • The Conference Board CEI for Japan, a measure of current economic activity, was unchanged in August. Between February and August 2012, the coincident economic index contracted by 1.8 percent (about a -3.6 percent annual rate), a sharp turnaround from the increase of 3.6 percent (about a 7.3 percent annual rate) for the previous six months. Additionally, the weaknesses among the coincident indicators have also become widespread in the last six months. Meanwhile, Japan’s real GDP increased by a downwardly revised 0.7 percent rate (annual rate) in the second quarter of 2012, a sharp deterioration from the 5.3 percent increase (annual rate) in the first quarter.
  • The Conference Board LEI for Japan has been falling since April and as a result, the six-month change in the index remained negative and is now at about the same rate of decline as in the third quarter of 2011. At the same time, The Conference Board CEI for Japan held steady in August following four declines in the previous five months. The six-month growth rate for the index, however, remains negative. Taken together, the composite indexes and their components suggest that the rate of economic growth is likely to remain slow in the near term, and the risk of stagnation is increasing.

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

With the decrease of 0.4 percent in August, The Conference Board LEI for Japan now stands at 94.1 (2004=100).  Based on revised data, this index decreased 0.8 percent in July and decreased 1.5 percent in June.  During the six-month span through August, the index decreased 2.9 percent, and two of the ten components advanced (diffusion index, six-month span equals 20.0 percent).

COINCIDENT INDICATORS.  Only one of the four components that make up The Conference Board CEI for Japan increased in August. The positive contributor to the index was wage and salary income.  Industrial production and number of employed persons declined, while the real retail, wholesale, and manufacturing sales component remained unchanged in August.

Holding steady in August, The Conference Board CEI for Japan now stands at 96.6 (2004=100).  Based on revised data, this index decreased 0.3 percent in July and increased 0.1 percent in June.  During the six-month span through August, the index decreased 1.8 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 October 15, 2012.  Some series are estimated as noted below.

* The series in The Conference Board LEI that are based on our estimates are real operating profits.  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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