The government on Wednesday downgraded its assessment of business conditions with the release of a key economic indicator that was below the boom-or-bust line for the second consecutive month in December, thanks to weak production and consumption indicators.
The index of coincident economic indicators, a key gauge of the current state of the economy, stood at 44.4 percent in December, up from a revised 30 percent the previous month, the Cabinet Office said in a preliminary report.
In November, the index sank beneath the boom-or-bust line of 50 percent for the first time in 10 months due to a decline in industrial production. A reading above 50 percent is considered a sign of economic expansion, while a figure below that is seen as a sign of contraction.
In December, indicators on industrial production and shipments as well as an indicator on department store sales remained mired in negative territory for the second consecutive month.
Five of the nine available component indicators were in negative territory in the reporting month.
“The moves of the index of coincident indicators have been weak recently,” a senior Cabinet Office official said.
But the official maintained that it is too early to decide whether the economy’s improving trend has evaporated.
“We cannot immediately decide only by looking at data for one or two months,” he said.
The coincident index is expected to rise to around 50 percent in January in line with an anticipated increase in industrial production of 2.1 percent, he said.
The official said the government will closely monitor moves in production activities as their outlook is unclear.
The Cabinet Office meanwhile said the index of leading indicators, measuring economic moves about six months ahead, stood at 60 percent in December, staying above 50 percent for the second straight month.
The index of lagging indicators, designed to gauge economic performance in the recent past, stood at 16.7 percent, compared with 66.7 percent a month earlier.
The diffusion indexes compare the current levels of various economic data with their levels three months earlier.
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