Japan's key economic gauge falls 1.4 point in Oct, gov't downgrades assessment

16:53, December 07, 2010      

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A key gauge of Japan's current economic conditions dropped for a second straight month in October, the Cabinet Office said in a report on Tuesday.

The composite index of coincident indicators such as industrial output, retail sales and overtime working hours, which reflects current business conditions in Japan stood at 100.7 against the 2005 base of 100, the Cabinet Office said in a preliminary report, down from an upwardly revised 102.0 in September and marking a second straight month-on-month drop.

October's coincident index reading, however, came in higher than economists' median forecast of 100.8.

The leading composite index, which measures the state of the economy three months ahead, fell 1.4 points to 97.2, marking the fourth straight month-on-month drop, with economists expecting the indicator to drop to 97.3 from a reading of 98.6 in September, the report showed.

The lagging index, which reflects economic conditions three months in the past rose 0.9 point to 89.2, following a reading of 88.3 in September -- lower than the preliminary 88.4, but higher than 87.4 booked in August and marking a second straight month-on- month rise.

The diffusion index of coincident indicators stood at 33.3, well down on September's upwardly revised reading of 50.0 and below the key 50 level for the frost time in 18 months, the Cabinet Office said.

The diffusion index of leading indicators in October stood at 20.0, dropping from 36.4 in the previous month and staying below the key 50 level for five straight months, according to the government data.

A reading above 50 points indicates an economic expansion, while a reading below 50 indicates contraction.

The government downgraded its overall assessment of the economy to "stalled," compared with the previous month's assessment that it shows signs of improvement but is at a standstill.

The composite index is calculated based on the growth and shrinkage of the component indicators and shows the direction and size of economic trends.



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