The Conference Board reports today that the leading index for Japan increased 0.2 percent and the coincident index increased 0.2 percent in November.



The leading index increased again in November, and the level of the leading index in previous months was revised up due to data revisions in real operating profits. Despite this month's increase, the growth of the leading index has slowed to a 0.4 percent annual rate from May to November (a 0.2 percent change), well below the range of 4.5 to 5.5 percent (annual rate) in the first half of 2006. Moreover, the weaknesses among the leading indicators have been more widespread in recent months.

The coincident index also increased slightly in November, continuing to grow on its upward trend. At the same time, real GDP grew at a 0.8 percent annual rate in the third quarter of 2006 (revised down from the 2.0 percent rate previously reported), down from the 1.9 percent average annual rate in the first half of 2006. The current behavior of the leading index continues to suggest that economic growth is likely to persist, but at a slow pace in the near term.

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

With the increase of 0.2 percent in November, the leading index now stands at 88.1 (1990=100). Based on revised data, this index increased 0.6 percent in October and remained unchanged in September. During the six-month span through November, the index increased 0.2 percent, and four of the ten components advanced (diffusion index, six-month span equals 45.0 percent).

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

With the increase of 0.2 percent in November, the coincident index now stands at 107.6 (1990=100). Based on revised data, this index increased 0.6 percent in October and 0.1 percent in September. During the six-month span through November, the index increased 0.9 percent, and all four components advanced (diffusion index, six-month span equals 100.0 percent).