A key gauge of the current state of the economy rose above the boom-or-bust line of 50 percent in May for the first time in three months.
The Cabinet Office said in a preliminary report released Tuesday that the index of coincident economic indicators stood at 66.7 percent in the reporting month, bolstered by a slew of upbeat data such as strong readings in industrial output and sales by small and midsize companies.
The index had been above the crucial line for 10 consecutive months until February. It then stood at 50 percent in March, before falling below this line in April, according to revised data.
A Cabinet Office official attributed the improvement to the best readings in data for industrial output, overtime hours, shipments of investment goods, sales by small and midsize companies, and the ratio of job offers to job-seekers since the current economic recovery started in January 2001.
He said the economy is on a recovery path and the index is likely to top the 50 percent line again in June, given the slew of upbeat economic indicators.
A reading above 50 percent is considered a sign of economic expansion. A figure below this line is seen as a sign of contraction.
The index of leading indicators, predicting economic developments about six months ahead, also came to 66.7 percent, staying above the 50 percent line for the ninth straight month, mainly due to growing housing starts.
The index of lagging indicators, designed to measure economic performance in the recent past, stood at 83.3 percent, staying above the line for nine consecutive months due to increasing corporate tax revenue.
The diffusion indexes compare the levels of various economic data for a reporting month with levels three months earlier.