Conference Board LEI for Japan Decreased in October

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The Conference Board Leading Economic Index® (LEI) for Japan decreased 0.2 percent and The Conference Board Coincident Economic Index® (CEI) increased 0.2 percent in October.

• The Conference Board LEI for Japan declined slightly in October, fueled by large negative contributions from business failures (inverted) and dwelling units started. As a result of four consecutive declines, the leading economic index contracted by 0.9 percent (about a −1.7 percent annual rate) from April to October 2015, a reversal from its growth of 0.5 percent (about a 1.0 percent annual rate) over the previous six months. However, the weaknesses and strengths among its underlying components remain balanced.
• The Conference Board CEI for Japan, a measure of current economic activity, increased in October, with industrial production and sales driving the gain. The six-month growth rate of the coincident economic index rose by 0.7 percent (about a 1.4 percent annual rate), an improvement from its marginal growth of 0.1 percent (about a 0.2 percent annual rate) over the previous six months. Nevertheless, the weaknesses and strengths among the coincident indicators remain balanced. At the same time, real GDP expanded at a 1.0 percent annual rate in the third quarter of 2015, after contracting by 0.5 percent in the second quarter.
• The Conference Board LEI for Japan has declined four months in a row and its six-month growth rate has fallen deeper into negative territory. The latest weakness in the LEI suggests that the economic recovery will likely remain modest going into the new year.

LEADING INDICATORS.  Six 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 stock prices, real money supply, new orders for machinery and construction, the six month growth rate of labor productivity*, the index of overtime worked, and the interest rate spread. The negative contributors – in order from the largest negative contributor to the smallest – include (inverted) business failures, dwelling units started, the Tankan business conditions survey, and real operating profits*.

With the decrease of 0.2 percent in October, The Conference Board LEI for Japan now stands at 102.5 (2010=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 0.9 percent, and five of the ten components advanced (diffusion index, six-month span equals 50.0 percent).

COINCIDENT INDICATORS. Two of the four components that make up The Conference Board CEI for Japan increased in October. The positive contributors to the index were industrial production and the retail, wholesale, and manufacturing sales* component. Wage and salary income and the number of employed persons declined in October.

With the increase of 0.2 percent in October, The Conference Board CEI for Japan now stands at 98.7 (2010=100). Based on revised data, this index increased 0.4 percent in September and decreased 0.1 percent in August. During the six-month span through October, the index increased 0.7 percent, and two of the four components advanced (diffusion index, six-month span equals 50.0 percent).