Japan's key economic composite index shrinks 2.7 points in February
06 Apr 2009
Japan's composite index (CI) of 'coincident economic indicators' sank 2.7 points to a preliminary 86.8 for the seventh consecutive month in February from 89.5 in January, indicating that the economy was deeper into its worst post-war recession.
A preliminary report indicating a drastic slowdown of businesses released today by the Japanese cabinet office, showed the index for February was the lowest since December 2002 and is compared with 100 for the base year of 2005.
The index of leading economic indicators, comprising data such as the number of new job offers and consumer sentiment, shed 2.0 points to 75.2 from 77.1 last month, while the index of lagging indicators fell for the 11th straight month, down 0.8 point to 90.5, which measures performances in the recent past.
The cabinet office, which monitors the coincident index, said the the economy was worsening.
The CI comprises a wide range of indicators such as industrial production, wholesale and retail sales, large-lot electricity use, overtime work hours at manufacturers and the ratio of employment proposed by firms to employment demand from seekers.
The composite index of coincident economic indicators is based on the single-index dynamic factor model which aims at understanding the momentum of the economy by aggregating the percentage change in a selected series of data, while the traditional diffusion indexes aggregate only the direction of change.
The Japanese government switched to a new data series, based on composite rather than diffusion indexes, from the April 2008.
Japan's key Tankan index of business sentiments among corporates for the quarter ended March also hit a record low indicating a drastic slowdown of businesses. (See: Japan's Tankan index of business sentiments at 35-year low)
Japan's economy shrank 3.2 per cent in the fourth quarter, twice as fast as that of U.S. and Euro-zone economies. (See: Japan heading for worst recession since WW II: S&P and Japan's January trade deficit at its worst since WW II)
Analysts expect Japan's economy to continue shrinking in the first half of this year which will be a record five quarters of decline.
