About a week ago, the Japanese Cabinet Office's synthetic indexes of some of the components of Gross Domestic Product intimated that third quarter GDP growth might slow from the second quarter and could even be negative. Another indicator of economic growth was released today by the Teikoku Data Bank, Ltd*. Their monthly survey, conducted over the internet, of more than 20,000 domestic Japanese firms shows how business men appraise current conditions and the prospects of conditions three, six and twelve months ahead.

TDB's economic trends research is a fairly recent endeavor. Data for current conditions are available from May 2002 and those for conditions three, six and twelve months ahead are available only form April, 2004. The first chart shows the available data for the appraisals of current conditions for the whole economy and for conditions expected in three months. Like most survey respondents, respondents to the TDB survey tend to believe things will be better in the future as a result the three month ahead index has generally been higher than that of current conditions. Atypically, however, the October diffusion index of current conditions improved while that for conditions three months ahead declined.

Throughout their limited histories the diffusion indexes in the TDB's economic trends series have rarely been above the 50% mark that would indicates a neutral or positive appraisal of conditions. They have, however, improved from the extreme pessimism of the early years. In addition to an appraisal of economic trends for the economy as a whole, there are appraisals by large and small firms and appraisals for conditions in a number of industries. Small and medium sized firms are becoming less negative on the general outlook. In October the index for current conditions for the economy by small firms rose .67 percentage points or more than the .11 percentage points for the large firms. Two of the industries--manufacturing and retail-for which there are diffusion indexes of current conditions are shown in the second chart. While continued improvement is seen in manufacturing, there is less enthusiasm for the retail sector. In October, the manufacturing index increased by .46 percentage points while that for the retail sector declined by .13 percentage points.

On balance it would seem that the data contained in the TDB's October economic trend series point to a lackluster performance.