A key gauge of the current state of the economy stayed above the boom-or-bust line of 50 percent in March for the third straight month, but will probably fall below the line next month due to slowing production, the government said Thursday.
The index of coincident economic indicators stood at 81.3 percent for the reporting month, up from a revised 80 percent in February, on such factors as improvement in large-lot electricity use and steady sales at department stores, the Cabinet Office said in a preliminary report.
The index of leading indicators, measuring economic moves about six months down the road, plummeted to 20 percent from a revised 60 percent in February, falling below 50 percent for the first time in five months.
Sharp falls in Tokyo share prices and negative growth in the number of new recruits contributed to the fall, the office said.
Yoshihiko Senoo, director of the Business Statistics Department at the Cabinet Office's Economic and Social Research Institute, said the coincident index looks a bit too high. It should be around 50 percent, given the weaker-than-expected state of production and employment, he said.
A reading above 50 percent is considered a sign of economic expansion, while a figure below that is seen as a sign of contraction.
"It is possible that the indexes will move below 50 percent next month due to concerns over the U.S. and Chinese economies," Senoo said. "Production may not pick up unless the U.S. economy posts growth after the Iraq war and China effectively copes with SARS."
Meanwhile, the index of lagging indicators, designed to gauge economic performance in the recent past, was 60 percent, down from 100 percent in February and remaining above 50 percent for the seventh consecutive month.
The diffusion indexes compare the current levels of various economic data with their levels three months earlier.