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Benchmark Revisions - November 2006

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Released: Tuesday, November 8, 2005

The Conference Board reports today that the leading index for Japan increased 0.4 percent, and the coincident index increased 0.3 percent in September.

  • The leading index increased again in September for the fourth consecutive month, and the strength among the leading indicators has continued to be relatively widespread in recent months. With this month’s gain, the growth rate of the leading index has picked up to about a 2.0 – 3.0 percent annual rate, up from the zero to slightly negative growth at the end of 2004, but this is still well below the peak growth rate reached in the first half of 2004.
  • The coincident index also increased again in September after staying essentially flat from April to July. These increases keep it on a slightly rising trend. At the same time, real GDP grew at a 3.3 percent annual rate in the second quarter of 2005, down from a 5.8 percent rate in the first quarter. The recent behavior of the leading index suggests that the economy will continue to expand moderately in the near term.

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

With the increase of 0.4 percent in September, the leading index now stands at 99.7 (1990=100). Based on revised data, this index increased 0.2 percent in both August and July. During the six-month span through September, the index increased 1.3 percent, and eight of the ten components advanced (diffusion index, six-month span equals 80.0 percent).

Coincident Indicators. Three of the four components that make up the coincident index increased in September. The positive contributors to the index – in order from the largest positive contributor to the smallest – include number of employed persons, industrial production, and wage and salary income*. The retail, wholesale, and manufacturing sales* component declined in September.

With the increase of 0.3 percent in September, the coincident index now stands at 105.3 (1990=100). Based on revised data, this index increased 0.2 percent in August and declined 0.1 percent in July. During the six-month span through September, the index decreased 1.2 percent, and all four components advanced (diffusion index, six-month span equals 100.0 percent).

Data Availability. The data series used to compute the two composite indexes reported in this release are those available “as of” 5:00 P.M. ET November 7, 2005. 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 and 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.

Notes: Starting with the July 2005 press release, The Conference Board uses Real Retail, Wholesale, and Manufacturing Sales as a component of the coincident index. This will replace the individual sales series previously used. Before the aggregation is done, the individual sales series will be deflated to adjust for changes in the price levels. Real wholesale sales and real manufacturing sales are deflated with the wholesale price for manufacturing goods. (As part of this revision an error in the price index that was used to deflate manufacturing sales was also corrected.) Real retail sales are deflated with the consumer price index. The resulting three deflated series are added together to provide new real retail, wholesale, and manufacturing sales data. The Coincident Index is now more consistent with other measures of economic activity, such as industrial production and GDP (particularly after 2001).

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

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