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Released: Tuesday, December 11, 2012

The Conference Board Leading Economic Index® (LEI) for Japan decreased 0.5 percent, while The Conference Board Coincident Economic Index®  (CEI) increased 0.7 percent in October.

  • The Conference Board LEI for Japan fell for a seventh consecutive month in October. Large declines in the index of overtime worked, the six-month growth rate of labor productivity, and new orders for machinery and construction more than offset the large positive contribution from dwelling units started. With this month’s decline, the LEI has contracted by 5.3 percent (about a -10.3 percent annual rate) between April and October 2012, sharply down from the increase of 3.1 percent (about a 6.2 percent annual rate) for the previous six months. In addition, the weaknesses among the leading indicators have remained widespread in recent months. 
  • The Conference Board CEI for Japan, a measure of current economic activity, increased in October following three consecutive monthly declines. Despite the gain in October, the six-month change in the coincident economic index remains negative, declining by 0.5 percent (about a -1.0 percent annual rate), slightly worse than the 0.2 percent decline (about a -0.4 percent annual rate) for the previous six months. However, the strengths and weaknesses among the coincident indicators have become balanced in the last six months. Meanwhile, Japan’s real GDP contracted by 3.5 percent (annual rate) in the third quarter of 2012, and the second quarter has been revised down to a decline of 0.1 percent (annual rate).
  • The Conference Board LEI for Japan has been declining since April of this year, and as a result its six-month growth rate has fallen deeper into negative territory. At the same time, The Conference Board CEI for Japan increased in October for the first time in four months, but its six-month change remains negative as well. Taken together, the composite indexes and their components suggest that the downturn in the economy may continue in the coming months.

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

With the decrease of 0.5 percent in October, The Conference Board LEI for Japan now stands at 92.7 (2004=100).  Based on revised data, this index decreased 0.5 percent in September and decreased 0.6 percent in August.  During the six-month span through October, the index decreased 5.3 percent, and three of the ten components advanced (diffusion index, six-month span equals 30.0 percent).

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

With the increase of 0.7 percent in October, The Conference Board CEI for Japan now stands at 96.8 (2004=100).  Based on revised data, this index decreased 0.7 percent in September and decreased 0.1 percent in August.  During the six-month span through October, the index decreased 0.5 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 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 December 10, 2012.  Some series are estimated as noted below.

* The series in The Conference Board LEI that are based on our estimates are the six month growth rate of labor productivity, 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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