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March Index of Business Conditions: Leading Index Still Below 50

May 10, 2007
By Ken Worsley


The Cabinet Office released its figures for March’s Index of Business Conditions on Wednesday, and although the Lagging Index has moved into positive territory, the Leading and Coincident Indexes remain below the 50 level.

March’s Leading Index score of 40 is higher than February’s 27.3, but slightly below the 40.9 score in January. A score below 50 indicates that growth may experience a slowdown in the coming three to six months.

Bloomberg is predicting that Japan’s GDP grew at an annualized 2.7% in the first quarter of 2007, which would be a slowdown from the fourth quarter of 2006. That slowdown is being attributed to companies spending less in anticipation of a slowdown in the US economy. As Bloomberg points out:

Japan’s economy may lose more steam as U.S. demand for the country’s electronics and cars wanes and falling wages subdue consumer spending at home.

The coincident index, which measures conditions in the current period, was also below 50. The leading and coincident indexes have thus both been below 50 for four consecutive months, which had not happened since the last quarter of 2004 (the report is now done monthly).

Itsushi Tachi, a spokesperson for the Cabinet Office, told reporters that there are no real concerns over a recession, saying:

The economy is still expanding. As long as we have a record high in some indicators within six months, we can’t say the economy has peaked.

Not sure if I agree with that, but it’s hard to say when he’s being so vague on which ’some indicators’ we’d like to see at new record highs.

Filed Under Business, Cabinet Office, Economic Reports 

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Comments

2 Responses to “March Index of Business Conditions: Leading Index Still Below 50”

  1. Bearish Investor on May 10th, 2007 7:12 am

    I suspect that Japan’s 1Q GDP numbers will reflect America’s anemic first quarter GDP preliminary measurement. Still, it doesn’t look like American consumers slowed down with the economy. Maybe Japan will fair better than expected in this world awash with liquidity.

    Those are big word coming from Itsushi Tachi. Frankly, I’m surprised that he would suggest such a thing in Japan of all places. He must have been under a rock the past 15 years.

  2. Ken Worsley on May 10th, 2007 10:57 am

    BI,

    Regarding Itsushi Tachi: he’s a government spokesperson. I don’t think anyone expects them to know what they’re talking about or tell the truth to reporters. They say what their bosses tell them to.

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