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


The Conference Board LEI for Japan fell again in December, and the weaknesses among the leading indicators were widespread. Negative contributions from new orders for machinery and construction, business failures (inverted), and real operating profits more than offset positive contributions from the index of overtime worked, stock prices, and the yield spread. With the decline in December, the six-month change in the Leading Economic Index stands at -2.8 percent (a -5.5 percent annual rate) in the second half of 2010 – down from 3.0 percent (about a 6.1 percent annual rate) in the previous six months. Still, the six-month decline through December was less severe than it had been through October and November. In addition, the strengths among the leading indicators became more widespread than the weaknesses in the six months through December.

The Conference Board CEI for Japan, a measure of current economic activity, increased in December, the first increase in eight months. Industrial production, employment, and income components contributed positively to the index this month. Despite the gain in December, the six-month change in the Coincident Economic Index remains negative – at -1.2 percent (a -2.4 percent annual rate) through the end of 2010, down from 1.5 percent (about a 3.1 percent annual rate) for the previous six months. Meanwhile, real GDP grew at a 4.5 percent annual rate in the third quarter of 2010, following an increase of 3.0 percent annual rate in the second quarter.

The Conference Board LEI for Japan continued to fall in December. However, this month’s decrease was the smallest in the last four months, and the six-month decline in the index has also become somewhat less severe. At the same time, The Conference Board CEI for Japan increased in December for the first time since April 2010, although its six-month growth rate remains negative. Taken together, the behavior of the composite indexes suggests that economic activity is likely to remain weak in the coming months.

LEADING INDICATORS

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

With the decrease of 0.4 percent in December, The Conference Board LEI for Japan now stands at 93.4 (2004=100). Based on revised data, this index decreased 0.5 percent in November and decreased 1.4 percent in October. During the six-month span through December, the index decreased 2.8 percent, and seven of the ten components advanced (diffusion index, six-month span equals 70.0 percent).

COINCIDENT INDICATORS

Three of the four components that make up The Conference Board CEI for Japan increased in December. The positive contributors to the index include (from the largest positive contributor to the smallest) industrial production, number of employed persons, and wage and salary income. The retail, wholesale, and manufacturing sales component declined in December.

With the increase of 0.4 percent in December, The Conference Board CEI for Japan now stands at 97.6 (2004=100). Based on revised data, this index decreased 0.3 percent in November and decreased 0.8 percent in October. During the six-month span through December, the index decreased 1.2 percent, and only one of the four components advanced (diffusion index, six-month span equals 25.0 percent).