The Conference Board CEI for Japan decreased slightly again in June. Large declines in the number of employees and the retail, wholesale, and manufacturing sales* component continued to offset increases in industrial production and wage and salary income. The six-month decline in the index has also moderated in recent months – to 5.5 percent (a -10.6 percent annual rate) for the period ending in June, but the weaknesses among its components have remained widespread. At the same time, real GDP contracted at a 14.2 percent annual rate in the first quarter of 2009, its largest drop in 35 years, following a 13.5 percent decline in the fourth quarter of 2008.
The rates of decline in The Conference Board LEI and The Conference Board CEI for Japan, which became very sharp beginning in the third quarter of 2008, have moderated substantially in recent months. However, given continued weakness in the manufacturing and sales components of the indexes, it is too early to tell if Japan's economy has started to recover. Taken together, the recent behavior of the composite indexes suggests that the current contraction in economic activity is likely to continue, but will probably become less severe in the near term.
LEADING INDICATORS.
Eight of the ten components that make up The Conference Board LEI for Japan increased in June. 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, the (inverted) business failures, the Tankan business conditions survey, interest rate spread, stock prices, the index of overtime worked, real money supply, and dwelling units started. The negative contributors – in order from the larger negative contributor to the smaller – include the new orders for machinery and construction component* and real operating profits*.
With the increase of 1.0 percent in June, The Conference Board LEI for Japan now stands at 67.8 (2004=100). Based on revised data, this index increased 0.9 percent in May and decreased 3.1 percent in April. During the six-month span through June, the index decreased 16.4 percent, and four of the ten components advanced (diffusion index, six-month span equals 40.0 percent).
COINCIDENT INDICATORS.
Two of the four components that make up The Conference Board CEI for Japan increased in June. The positive contributors to the index – in order from the larger positive contributor to the smaller – include industrial production and wage and salary income. The retail, wholesale, and manufacturing sales* component and number of employed persons declined in June.
With the decrease of 0.1 percent in June, The Conference Board CEI for Japan now stands at 91.9 (2004=100). Based on revised data, this index decreased 0.2 percent in May and increased 0.3 percent in April. During the six-month span through June, the index decreased 5.5 percent, and one of the four components advanced (diffusion index, six-month span equals 25.0 percent).
