II Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table 5 updated with every post, provides the latest annual data for GDP, consumer price index (CPI) inflation, producer price index (PPI) inflation and unemployment (UNE) for the advanced economies, China and the highly-indebted European countries with sovereign risk issues. The table now includes the Netherlands and Finland that with Germany make up the set of northern countries in the euro zone that hold key votes in the enhancement of the mechanism for solution of the sovereign risk issues (Peter Spiegel and Quentin Peel, “Europe: Northern Exposures,” Financial Times, Mar 9, 2011 http://www.ft.com/intl/cms/s/0/55eaf350-4a8b-11e0-82ab-00144feab49a.html#axzz1gAlaswcW). Newly available data on inflation is considered below in this section. The data in Table 5 for the euro zone and its members is updated from information provided by Eurostat but individual country information is provided in this section as soon as available, following Table 5. Data for other countries in Table 5 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section VI World Economic Slowdown following with individual country and regional data tables.
Table 5, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates
| GDP | CPI | PPI | UNE | |
| US | 1.5 | 3.5 | 5.9 | 8.6 |
| Japan | -0.7 | -0.2 | 1.7 | 4.5 |
| China | 9.1 | 4.2 | 2.7 | |
| UK | 0.5 | 5.0* | 5.4* output | 8.3 |
| Euro Zone | 1.4 | 3.0 | 5.5 | 10.3 |
| Germany | 2.6 | 2.9 | 5.3 | 5.5 |
| France | 1.6 | 2.5 | 5.8 | 9.8 |
| Nether-lands | 1.1 | 2.8 | 6.8 | 4.8 |
| Finland | 2.7 | 3.2 | 5.8 | 7.8 |
| Belgium | 1.8 | 3.4 | 6.2 | 6.6 |
| Portugal | -1.7 | 4.0 | 5.5 | 12.9 |
| Ireland | NA | 1.5 | 4.4 | 14.3 |
| Italy | NA | 3.8 | 4.7 | 8.5 |
| Greece | -5.2 | 2.9 | 7.9 | 18.3 |
| Spain | 0.8 | 3.0 | 6.5 | 22.8 |
Notes: GDP: rate of growth of GDP; CPI: change in consumer price inflation; PPI: producer price inflation; UNE: rate of unemployment; all rates relative to year earlier
*Office for National Statistics
PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
CPI http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/october-2011/index.html** Excluding food, beverage, tobacco and petroleum
Source: EUROSTAT; country statistical sources http://www.census.gov/aboutus/stat_int.html
Table 5 shows the simultaneous occurrence of low growth, inflation and unemployment in advanced economies. The US grew at 1.5 percent in IIIQ2011 relative to IIIQ2010 (Table 8, p 11 in http://www.bea.gov/newsreleases/national/gdp/2011/pdf/gdp3q11_2nd.pdf); Japan’s GDP is fell 0.7 percent in IIIQ2011 relative to IIIQ2010 but contracted 1.7 percent in IIQ2011 relative to IIQ2010 because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 but grew at the seasonally-adjusted annual rate (SAAR) of 5.6 percent in IIIQ2011 (http://www.esri.cao.go.jp/jp/sna/sokuhou/kekka/gaiyou/main_1.pdf and see historical data in IIIB below in the text); the UK grew at 0.5 percent in IIIQ2011 relative to IIIQ2010; and the Euro Zone grew at 1.4 percent in IIIQ2011 relative to IIIQ2010 (http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF). These are stagnating or “growth recession” rates, which are positive growth rates instead of contractions but insufficient to recover employment. The rates of unemployment are quite high: 8.6 percent in the US but 18.2 percent for unemployment/underemployment (see Table 3 in http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html), 4.5 percent for Japan, 8.3 percent for the UK with high rates of unemployment for young people and 10.3 percent in the Euro Zone. Twelve months rates of inflation have been quite high, even when some are moderating at the margin: 3.5 percent in the US, minus 0.2 percent for Japan, 3.0 percent for the Euro Zone and 5.0 percent for the UK. Stagflation is still an unknown event but the risk is sufficiently high to be worthy of consideration (see http://cmpassocregulationblog.blogspot.com/2011/06/risk-aversion-and-stagflation.html). The analysis of stagflation also permits the identification of important policy issues in solving vulnerabilities that have high impact on global financial risks. There are six key interrelated vulnerabilities in the world economy that have been causing global financial turbulence: (1) sovereign risk issues in Europe resulting from countries in need of fiscal consolidation and enhancement of their sovereign risk ratings (see Section II in this post http://cmpassocregulationblog.blogspot.com/2011/11/world-inflation-waves-and-monetary_21.html) (2) the tradeoff of growth and inflation in China; (3) slow growth by repression of savings with de facto interest rate controls (http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html), weak hiring (see Section I Recovery without Hiring, Section I United States Hiring Collapse in http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html) and continuing job stress of 24 to 30 million people in the US and stagnant wages in a fractured job market (see Section I Twenty Nine Million in Job Stress); (4) the timing, dose, impact and instruments of normalizing monetary and fiscal policies (see II Budget/Debt Quagmire in http://cmpassocregulationblog.blogspot.com/2011/08/united-states-gdp-growth-standstill.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html http://cmpassocregulationblog.blogspot.com/2011/03/global-financial-risks-and-fed.html http://cmpassocregulationblog.blogspot.com/2011/02/policy-inflation-growth-unemployment.html) in advanced and emerging economies; (5) the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 that had repercussions throughout the world economy because of Japan’s share of about 9 percent in world output, role as entry point for business in Asia, key supplier of advanced components and other inputs as well as major role in finance and multiple economic activities (http://professional.wsj.com/article/SB10001424052748704461304576216950927404360.html?mod=WSJ_business_AsiaNewsBucket&mg=reno-wsj); and (6) the geopolitical events in the Middle East.
There were no changes of direction in the meeting of the Federal Open Market Committee (FOMC) from Nov 1 to Nov 2, 2011. The FOMC released the statement as follows (http://www.federalreserve.gov/newsevents/press/monetary/20111102a.htm):
“For immediate release
Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.”
The FOMC also released the economic projections of governors of the Board of Governors of the Federal Reserve and Federal Reserve Banks presidents shown in Table 6. It is instructive to focus on 2012, as 2011 is almost gone, and there is not much information on what will happen in 2013 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC. The first row for each year shows the projection introduced after the meeting of Nov 2 and the second row “Jun PR” the projection of the Jun meeting. There are three major changes in the view.
1. Growth “GDP ∆.” The FOMC has reduced the forecast of GDP growth in 2012 from 3.3 to 3.7 percent in Jun to 2.5 to 2.9 percent in Nov.
2. Rate of Unemployment “UNEM%.” The FOMC increased the rate of unemployment from 7.8 to 8.2 percent in Jun to 8.5 to 8.7 percent in Nov.
3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 1.5 to 2.0 percent in Jun to virtually the same of 1.4 to 2.0 percent in Nov.
Core Inflation “∆% Core PCE Inflation.” Core inflation is PCE inflation excluding food and energy. There is again not much of a difference of the projection for 2012 in Jun of 1.4 to 2.0 percent and the Nov projection of 1.5 to 2.0 percent.
Table 6, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, November 2011
| ∆% GDP | UNEM % | ∆% PCE Inflation | ∆% Core PCE Inflation | |
| Central | ||||
| 2011 | 1.6 – 1.7 | 9.0 – 9.1 | 2.7 – 2.9 | 1.8 – 1.9 |
| 2012 | 2.5 – 2.9 | 8.5 – 8.7 | 1.4 – 2.0 | 1.5 – 2.0 |
| 2013 | 3.0 – 3.5 3.5 – 4.2 | 7.8 – 8.2 | 1.5 – 2.0 | 1.4 – 1.9 |
| 2014 | 3.0 – 3.9 | 6.8 – 7.7 | 1.5 – 2.0 | 1.5 – 2.0 |
| Longer Run | 2.4 – 2.7 | 5.2 – 6.0 | 1.7 – 2.0 | |
| Range | ||||
| 2011 | 1.6 – 1.8 | 8.9 – 9.1 | 2.5 – 3.3 | 1.7 – 2.0 |
| 2012 | 2.3 – 3.5 | 8.1 – 8.9 | 1.4 – 2.8 | 1.3 – 2.1 |
| 2013 | 2.7 – 4.0 | 7.5 – 8.4 | 1.4 – 2.5 | 1.4 – 2.1 |
| 2014 | 2.7 – 4.5 | 6.5 – 8.0 | 1.5 – 2.4 | 1.4 – 2.2 |
| Longer Run | 2.2 – 3.0 | 5.0 – 6.0 | 1.5 – 2.0 |
Notes: UEM: unemployment; PR: Projection
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20111102.pdf
China is experiencing similar inflation behavior as the advanced economies, as shown in Table 7. Nov inflation of the price indexes for industry is minus 0.7 percent but 12 months inflation is still 2.7 percent and inflation in Jan/Nov 2011 relative to the same period in 2010 is 6.4 percent. There were no drivers of inflation in Oct with all components in Table 7 falling on a monthly basis in row “Month Oct ∆%,” which is also the case for Oct producer prices. This is the case of prices of raw materials which fell 1.0 percent in Nov after increasing 4.1 percent in 12 months and 9.8 percent in the first eleven months relative to a year earlier. Mining prices fell 1.4 percent in Nov after increasing 10.6 percent in 12 months and 16.0 percent in the first eleven months relative to a year earlier. Prices of the various categories of inputs in the purchaser price index also fell in Nov after also falling in Oct.
Table 7, China, Price Indexes for Industry ∆%
| Month Oct ∆% | 12 Months Oct ∆% | Jan-Nov 2011/ | |
| I Producer Price Indexes | -0.7 | 2.7 | 6.4 |
| Means of Production | -0.9 | 2.6 | 7.1 |
| Mining | -1.4 | 10.6 | 16.0 |
| Raw Materials | -1.0 | 4.1 | 9.8 |
| Processing | -0.7 | 1.1 | 5.0 |
| Consumer Goods | -0.1 | 3.1 | 4.3 |
| Food | -0.2 | 5.2 | 7.7 |
| Clothing | 0.2 | 3.8 | 4.3 |
| Daily Use Articles | -0.3 | 2.8 | 4.2 |
| Durable Consumer Goods | -0.1 | -0.4 | -0.6 |
| II Purchaser Price Indexes | -0.7 | 5.1 | 9.7 |
| Nonferrous Metals | -0.5 | 3.6 | 13.3 |
| Fuel and Power | -0.1 | 9.3 | 11.0 |
| Ferrous Metals | -2.0 | 3.7 | 10.2 |
| Raw Chemical Materials | -1.5 | 4.1 | 11.3 |
Source: http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771437.htm
Producer price inflation in China was -0.7 percent in Nov and 2.7 percent in 12 months, as shown in Table 8. In the five months Jul-Nov 2011 annual equivalent inflation is minus 3.1 percent. In contrast, in the first half of the year annual equivalent inflation was 20.4 percent. Inflation has fallen at the margin in China. Inflation worldwide is driven by inflation waves that abate during heightened risk aversion but is driven upward by the carry trade from zero interest rates to positions in commodity futures as analyzed in a past comment of this blog (http://cmpassocregulationblog.blogspot.com/2011/11/world-inflation-waves-and-monetary_21.html), which will be updated in the comment of next week.
Table 8, China, Month and 12 Months Rate of Change of Producer Price Index, ∆%
| 12 Month ∆% | Month ∆% | |
| Nov | 2.7 | -0.7 |
| Oct | 5.0 | -0.7 |
| Sep | 6.5 | 0.0 |
| Aug | 7.3 | 0.1 |
| Jul | 7.5 | 0.0 |
| AE ∆% Jul-Nov | -3.1 | |
| Jun | 7.1 | 0.0 |
| May | 6.8 | 0.3 |
| Apr | 6.8 | 0.5 |
| Mar | 7.3 | 0.6 |
| Feb | 7.2 | 0.8 |
| Jan | 6.6 | 0.9 |
| AE ∆% Jan-Jun | 20.4 | |
| Dec 2010 | 5.9 | 0.7 |
AE: Annual Equivalent
Source: http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771437.htm
Chart 1 of the National Bureau of Statistics of China provides monthly and 12 months rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct and Nov pulled down the 12 months rates to 5.0 percent in Oct and 2.7 percent in Nov. At the margin since Jun inflation had been almost zero to Sep and fell 0.7 percent in Oct and another 0.7 percent in Nov.
![clip_image001[5]](file:///C:\Users\cmpelaez\AppData\Local\Temp\WindowsLiveWriter1264636800\supfiles90BF4B\1209W0201112095651285313593.jpg "clip_image001[5]")
Chart 1, China, Producer Prices for the Industrial Sector Month and 12 months ∆%
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771437.htm
China is highly conscious of food price inflation because of its high weight in the basket of consumption of the population. Consumer price inflation in China in Nov was minus 0.2 percent, 4.2 percent in 12 months and 5.5 percent in Jan-Nov 2011 relative to Jan-Nov 2010, as shown in Table 9. By far the highest increase occurred in food with decline by 0.8 percent in Nov but increase of 8.8 percent in the 12 months ending in Nov and 12.1 percent in the first eleven months relative to a year earlier. Another area of concern is housing with zero price inflation in Nov, 3.0 percent in 12 months and 5.6 percent in the first eleven months relative to a year earlier. Prices of services fell 0.3 percent in Nov but rose 2.4 percent in 12 months and 3.6 percent in the first eleven months relative to a year earlier. In contrast with producer prices, there were increases in several components.
Table 9, China, Consumer Price Index
| 2011 | Nov Month ∆% | Nov 12 Month ∆% | Jan/Nov 2011/ |
| Consumer Prices | -0.2 | 4.2 | 5.5 |
| Urban | -0.2 | 4.2 | 5.4 |
| Rural | -0.2 | 4.3 | 6.0 |
| Food | -0.8 | 8.8 | 12.1 |
| Non-food | 0.1 | 2.2 | 2.7 |
| Consumer Goods | -0.2 | 5.0 | 6.3 |
| Services | -0.3 | 2.4 | 3.6 |
| Commodity Categories: | |||
| Food | -0.8 | 8.8 | 12.1 |
| Tobacco, Liquor | 0.3 | 3.8 | 2.7 |
| Clothing | 1.4 | 3.5 | 2.0 |
| Household | 0.3 | 2.9 | 2.4 |
| Healthcare and Personal | 0.2 | 3.2 | 3.4 |
| Transport Comm. | -0.2 | 0.5 | 0.5 |
| Recreation, Education | -0.8 | 0.1 | 0.4 |
| Housing | 0.0 | 3.0 | 5.6 |
Note: Comm.: Communications
Source: http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771439.htm
Month and 12 months rates of change of consumer prices are provided in Table 10. In contrast with producer prices, the annual equivalent rate of consumer price inflation rose from 2.0 percent in Apr to Jun to 4.3 percent in Jul to Oct and 2.9 percent in Jul-Nov. At the marginal monthly level, consumer prices are increasing at a relatively high rate of 2.9 percent even if lower than 8.3 percent in annual equivalent in Jan-Mar. Inflation waves accelerate in carry trades from zero interest rates to commodity futures positions when risk aversion diminishes.
Table 10, China, Month and 12 Months Rates of Change of Consumer Price Index ∆%
| Month ∆% | 12 Month ∆% | |
| Nov 2011 | -0.2 | 4.2 |
| Oct | 0.1 | 5.5 |
| Sep | 0.5 | 6.1 |
| Aug | 0.3 | 6.2 |
| Jul | 0.5 | 6.5 |
| AE ∆% Jul to Oct | 2.9 | |
| Jun | 0.3 | 6.4 |
| May | 0.1 | 5.5 |
| Apr | 0.1 | 5.3 |
| AE ∆% Apr to Jun | 2.0 | 2.0 |
| Mar | -0.2 | 5.4 |
| Feb | 1.2 | 4.9 |
| Jan | 1.0 | 4.9 |
| AE ∆% Jan to Mar | 8.3 | 8.3 |
| Dec 2010 | 0.5 | 4.6 |
AE: Annual Equivalent
Source: http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771439.htm
Chart 2 of the National Bureau of Statistics of China provides monthly and 12 months rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates but fell 0.2 percent in Nov after increasing only 0.1 percent in Oct.
![clip_image002[5]](file:///C:\Users\cmpelaez\AppData\Local\Temp\WindowsLiveWriter1264636800\supfiles90BF4B\1209W0201112095677194191433.jpg "clip_image002[5]")
Chart 2, China, Consumer Prices ∆% Month and 12 Months Aug 2010 to Aug 2011
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771439.htm
Consumer price inflation in Germany in Nov was flat and 2.4 percent in 12 months, as shown in Table 11. Most inflation in Germany in 2011 has concentrated in three months: 0.4 percent in Jul, 0.5 percent in Mar and 0.5 percent in Feb. A quarter composed of those three months repeated for an entire year would result in annual equivalent inflation of 5.8 percent. Annual equivalent inflation in the quarter Jul-Nov was at the annual equivalent rate of 1.2 percent, which is lower than the 12-month rate of 2.4 percent in Nov.
Table 11, Germany, Consumer Price Index ∆%
| 12 Months ∆% | Month ∆% | |
| Nov 2011 | 2.4 | 0.0 |
| Oct | 2.5 | 0.0 |
| Sep | 2.6 | 0.1 |
| Aug | 2.4 | 0.0 |
| Jul | 2.4 | 0.4 |
| AE ∆% Jul-Nov | 1.2 | |
| Jun | 2.3 | 0.1 |
| May | 2.3 | 0.0 |
| Apr | 2.4 | 0.2 |
| Mar | 2.1 | 0.5 |
| Feb | 2.1 | 0.5 |
| Jan | 2.0 | -0.4 |
| AE ∆% Jan-Jun | 1.8 | |
| Dec 2010 | 1.7 | 1.0 |
| Nov | 1.5 | 0.1 |
| Oct | 1.3 | 0.1 |
| Sep | 1.3 | -0.1 |
| Aug | 1.0 | 0.0 |
| Annual Average ∆% | ||
| 2010 | 1.1 | |
| 2009 | 0.4 | |
| 2008 | 2.6 |
Source: Statistiche Bundesamt Deutschland
Chart 3, of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index of Germany from 2003 to 2011. There is an evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in more recent months. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.
![clip_image003[5]](file:///C:\Users\cmpelaez\AppData\Local\Temp\WindowsLiveWriter1264636800\supfiles90BF4B\1209CPIbild__vpipropertyimage3.jpg "clip_image003[5]")
Chart 3, Germany, Consumer Price Index, Unadjusted, 2005=100
Source: Statistiche Bundesamt Deutschland
Chart 4 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index of Germany and trend from 2007 to 2011. Inflation moderated during the global recession but regained the sharper slope with the new carry trades from zero interest rates to commodity futures beginning in 2010.
![clip_image004[5]](file:///C:\Users\cmpelaez\AppData\Local\Temp\WindowsLiveWriter1264636800\supfiles90BF4B\1209PPIkpre510bild0propertyimage3.jpg "clip_image004[5]")
Chart 4, Germany, Consumer Price Index, Unadjusted and Trend, 2005=100
Source: Statistiche Bundesamt Deutschland
Table 12 provides the monthly and 12 months rate of inflation for segments of the consumer price index. Inflation excluding energy was flat in Nov and rose 1.4 percent in 12 months. Excluding household energy inflation was also flat in Nov and rose 1.9 percent in 12 months. High increases in Germany’s consumer prices in Nov were 4.4 percent in heating oil, 1.1 percent in household energy and 0.4 percent in nondurable consumer goods.
Table 12, Germany, Consumer Price Index ∆%
| Oct 2011 | Weight | 12 Months ∆% | Month ∆% |
| Total | 1,000.00 | 2.4 | 0.0 |
| Excluding heating oil and motor fuels | 955.42 | 1.8 | -0.1 |
| Excluding household energy | 940.18 | 1.9 | 0.0 |
| Excluding Energy | 904.81 | 1.4 | 0.0 |
| Total Goods | 493.00 | 3.7 | 0.3 |
| Nondurable Consumer Goods | 305.11 | 5.2 | 0.4 |
| Medium-Term Life Consumer Goods | 95.24 | 2.0 | 0.1 |
| Durable Consumer Goods | 92.65 | 0.0 | 0.0 |
| Energy Components | |||
| Motor Fuels | 35.37 | 11.3 | -0.4 |
| Household Energy | 59.82 | 11.1 | 1.1 |
| Heating Oil | 9.21 | 28.5 | 4.4 |
| Food | 89.99 | 2.5 | 0.5 |
Inflation in the UK is somewhat higher than in many advanced economies, deserving more detailed analysis. Table 13 provides 12 months rate of change of UK output prices for all manufactured products, excluding food, beverage and petroleum and excluding duty. The 12 months rates rose significantly in 2011 in all three categories, reaching 6.3 percent for all manufactured products in Sep 2011 but declining to 5.7 percent in Oct and then 5.4 percent in Nov. Output price inflation is highly sensitive to commodity prices as shown by the increase by 6.7 percent in 2008 when oil prices rose over $140/barrel even in the midst of a global recession driven by the carry trade from zero interest rates to oil futures. The mirage episode of false deflation in 2001 and 2002 is also captured by the output prices for the UK, which was originated in decline of commodity prices but was used as an argument for the unconventional monetary policy of zero interest rates and quantitative easing during the past decade.
Table 13, UK Output Prices 12 Months ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Nov 2011 | 5.4 | 3.2 | 5.6 |
| Oct | 5.7 | 3.3 | 5.9 |
| Sep | 6.3 | 3.7 | 6.4 |
| Aug | 6.0 | 3.5 | 6.2 |
| Jul | 6.1 | 3.4 | 6.2 |
| Jun | 5.8 | 3.2 | 5.9 |
| May | 5.4 | 3.4 | 5.5 |
| Apr | 5.6 | 3.6 | 5.8 |
| Mar | 5.6 | 3.1 | 5.5 |
| Feb | 5.3 | 3.1 | 5.2 |
| Jan | 5.0 | 3.3 | 5.0 |
| Dec 2010 | 4.2 | 2.7 | 4.0 |
| Year ∆% | Ex Food | ||
| 2010 | 4.2 | 3.0 | 3.9 |
| 2009 | 1.6 | 2.5 | 0.9 |
| 2008 | 6.7 | 3.7 | 6.7 |
| 2007 | 2.3 | 1.4 | 2.1 |
| 2006 | 2.0 | 1.5 | 2.0 |
| 2005 | 1.9 | 1.0 | 1.9 |
| 2004 | 1.0 | -0.3 | 0.6 |
| 2003 | 0.6 | 0.1 | 0.5 |
| 2002 | -0.1 | -0.4 | -0.3 |
| 2001 | -0.3 | -0.6 | -1.1 |
| 2000 | 1.4 | -0.5 | 0.8 |
| 1999 | 0.6 | -0.9 | -0.3 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
Monthly and annual equivalent rates of change of output prices are shown in Table 14. There has been significant deceleration of output price inflation from an annual equivalent rate of 12.0 percent in Jan-Apr to 2.1 percent annual equivalent in May-Nov. As in the euro zone producer price index, there was monthly inflation in all three measurements of UK’s output prices. An important characteristic is that output prices excluding food, beverage and petroleum decelerated from an annual equivalent rate of change of 6.5 percent in Jan-Apr to 1.9 percent in May-Nov. Another important characteristic is that prices in all three measurements rose in each and every month of 2011 with the exception of the decline by 0.1 percent in Oct for the index excluding food, beverage and petroleum. Data in the tables include all revisions.
Table 14, UK Output Prices Month ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Nov 2011 | 0.2 | 0.0 | 0.2 |
| Oct | 0.0 | -0.1 | 0.1 |
| Sep | 0.3 | 0.3 | 0.2 |
| Aug | 0.0 | 0.1 | 0.1 |
| Jul | 0.3 | 0.4 | 0.3 |
| Jun | 0.2 | 0.2 | 0.2 |
| May | 0.2 | 0.2 | 0.2 |
| May-Nov ∆% AE | 2.1 | 1.9 | 2.3 |
| Apr | 1.1 | 0.8 | 0.9 |
| Mar | 1.1 | 0.5 | 1.1 |
| Feb | 0.5 | 0.0 | 0.5 |
| Jan | 1.1 | 0.8 | 1.1 |
| Jan-Apr | 12.0 | 6.5 | 7.1 |
| Dec 2010 | 0.5 | 0.0 | 0.6 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
Input prices in the UK have been more dynamic than output prices, as shown by Table 15. The 12 months rates of increase of input prices, even excluding food, tobacco, beverages and petroleum, are very high, reaching 18.0 percent in Sep 2011 for materials and fuels purchased and 13.2 percent excluding food, beverages and petroleum. Inflation in 12 months of materials and fuels purchased moderated to 13.4 in Oct 2011 and 10.0 percent excluding food, tobacco, beverages and petroleum. There is only comparable experience with 22.2 percent inflation of materials and fuels purchased in 2008 and 16.9 percent excluding food, beverages and petroleum. UK input and output inflation is sensitive to commodity price increases driven by carry trades from zero interest rates. The mirage of false deflation is also observed in input prices in 1999 and then again from 2001 to 2003.
Table 15, UK Input Prices 12 Months ∆% NSA
| Materials and Fuels Purchased | Excluding Food, Tobacco, Beverages and Petroleum | |
| Nov 2011 | 13.4 | 10.0 |
| Oct | 14.3 | 10.8 |
| Sep | 18.0 | 13.2 |
| Aug | 16.3 | 13.0 |
| Jul | 18.5 | 13.3 |
| Jun | 16.8 | 12.6 |
| May | 16.3 | 11.4 |
| Apr | 17.9 | 12.2 |
| Mar | 14.8 | 10.3 |
| Feb | 14.9 | 10.7 |
| Jan | 14.2 | 10.5 |
| Dec 2010 | 13.1 | 9.0 |
| Year ∆% | ||
| 2010 | 9.9 | 5.7 |
| 2009 | -3.8 | 1.6 |
| 2008 | 22.2 | 16.9 |
| 2007 | 2.9 | 2.3 |
| 2006 | 9.8 | 7.3 |
| 2005 | 10.9 | 6.9 |
| 2004 | 3.3 | 1.6 |
| 2003 | 1.2 | -0.6 |
| 2002 | -4.4 | -4.8 |
| 2001 | -1.2 | -1.2 |
| 2000 | 7.4 | 3.7 |
| 1999 | -1.3 | -3.6 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
Table 16 provides monthly percentage changes of UK input prices for materials and fuels purchased and excluding food, tobacco, beverages and petroleum. The carry trade from zero interest rates to commodity futures drove input price inflation to annual equivalent 35.6 percent in Jan-Apr 2011 with input price inflation excluding food, tobacco, beverages and petroleum at annual equivalent of 18.5 percent in Jan-Apr. Risk aversion originating in the sovereign debt crisis in Europe caused unwinding of carry trades with annual equivalent inflation in May-Nov of input price inflation of minus 2.6 percent but a high 4.2 percent excluding foods, tobacco, beverages and petroleum.
Table 16, UK Input Prices Month ∆%
| Materials and Fuels Purchased NSA | Excluding Food, Tobacco, Beverages and Petroleum SA | |
| Nov 2011 | 0.1 | 0.3 |
| Oct | -0.8 | -0.4 |
| Sep | 2.0 | 0.6 |
| Aug | -1.9 | 0.3 |
| Jul | 0.6 | 0.8 |
| Jun | 0.1 | 0.9 |
| May | -1.6 | -0.1 |
| May-Oct ∆% AE | -2.6 | 4.2 |
| Apr | 2.8 | 1.9 |
| Mar | 3.8 | 1.2 |
| Feb | 1.4 | 1.2 |
| Jan | 2.3 | 1.4 |
| Jan-Apr ∆% AE | 35.6 | 18.5 |
| Dec 2010 | 3.9 | 1.8 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12 months rates of inflation of manufactured products, shown in Table 17. Petroleum is the largest contributor with 1.57 percentage points to the 12 months rate in Nov followed by 1.27 percentage points contributed by food products. There are diversified sources of contributions to 12 months output price inflation such as 0.64 percentage points by clothing, textile and leather and 0.43 percentage points by chemical and pharmaceutical. In general, contributions by products rich in commodities are the drivers of inflation. Petroleum was also the most important contributor to monthly output prices with 0.6 percentage points with 0.4 percentage points by tobacco and alcohol, 0.3 percentage points by metal, machinery and equipment, 0.1 percentage points by food and 0.1 percentage points by chemical and pharmaceutical.
Table 17, UK, Contributions to Month and 12 Month Change in Prices of All Manufactured Products, Percentage Points
| Nov 2011 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total % | 5.4 | 5.4 | 0.2 | 0.2 |
| Food Products | 1.27 | 8.2 | 0.02 | 0.1 |
| Tobacco & Alcohol | 0.64 | 6.2 | 0.07 | 0.4 |
| Clothing, Textile & Leather | 0.64 | 6.0 | 0.01 | 0.0 |
| Paper and Printing | 0.14 | 3.8 | -0.02 | -0.3 |
| Petroleum | 1.57 | 14.6 | 0.11 | 0.6 |
| Chemical & Pharmaceutical | 0.43 | 5.0 | 0.02 | 0.1 |
| Metal, Machinery & Equipment | 0.14 | 4.0 | 0.02 | 0.3 |
| Computer, Electrical & Optical | -0.10 | -1.1 | -0.01 | -0.1 |
| Transport Equipment | 0.12 | 1.2 | -0.02 | -0.1 |
| Other Manufactured Products | 0.55 | 3.3 | 0.01 | 0.1 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12 months rates of inflation of input prices, shown in Table 18. Crude oil is the large contributor with 7.80 percentage points to the 12 months rate and 0.14 percentage points to the monthly rate in Nov. Inflation also transfers to the domestic economy through the prices of imported inputs.
Table 18, Contributions to Month and 12 Month Change in Prices of Inputs, Percentage Points
| Nov 2011 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total | 13.4 | 13.4 | 0.1 | 0.1 |
| Fuel | 1.15 | 11.8 | 0.20 | 2.6 |
| Crude Oil | 7.80 | 33.2 | 0.14 | 0.7 |
| Domestic Food Materials | 0.42 | 4.0 | -0.05 | -0.7 |
| Imported Food Materials | 0.45 | 8.1 | -0.01 | -0.3 |
| Other Domestic Produced Materials | 0.22 | 5.4 | 0.00 | -0.1 |
| Imported Metals | 0.43 | 5.0 | -0.02 | -0.4 |
| Imported Chemicals | 0.77 | 6.7 | -0.04 | -0.4 |
| Imported Parts and Equipment | 0.99 | 6.1 | -0.07 | -0.5 |
| Other Imported Materials | 1.18 | 11.5 | -0.05 | -0.6 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/november-2011/index.html
III World Economic Slowdown. The JP Morgan Global All-Industry Output Index produced by JPMorgan and Markit in association with ISM and IFPSM registered improvement in Nov, increasing from the low of the recovery in Oct of 51.3 to 52.0 in Nov (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8909). There was acceleration in both manufacturing and nonmanufacturing in the US with composite activity growing at highest rhythm since Mar. Joseph Lupton, Global Economist at JPMorgan, finds that the combination of low employment and level of new orders could imply continuing global growth below trend in 2012. The JP Morgan Global Manufacturing PMI™ produced by JP Morgan and Markit in association with ISM and IFPSM registered 49.6 in Nov compared with 49.9 in Oct, which means that global manufacturing is contracting at a faster rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8874). The JP Morgan Global Manufacturing PMI™ fell for a third consecutive month. The proximity of the index to 50 suggests near stagnation of world manufacturing but it masks that growth in the US with share of 28.2 percent in the index was the sharpest in seven months. World manufacturing excluding the US fell at the fastest rhythm in 36 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8874). The table “World-Wide Factory Activity, by Country,” of Real Time Economics produced by WSJ Research and published in the Wall Street Journal on Dec 1 (http://blogs.wsj.com/economics/2011/12/01/world-wide-factory-activity-by-country-20/tab/interactive/) shows only six countries with manufacturing indexes above 50 in Nov: Canada (53.3), India (51.0), Russia (52.6), South Africa (51.6), Turkey (52.3) and the US (52.7). The HSBC Brazil Services PMITM compiled by Markit, combining manufacturing and services, registered 51.5 in Nov, which is higher than 51.3 in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8889). While the increase is moderate, André Loes, Chief Economist of HSBC in Brazil, finds that the index has been above the neutral point of 50 during 28 consecutive months and the increase in Nov is the fastest in six months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8889). The HSBC Industrial Production PMI™ for Brazil increased from 46.5 in Oct to 48.7 in Nov, which means contraction at a slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8846). Andre Loes, Chief Economist of HBSC in Brazil, finds that the index registered the highest level since Jun and the fastest rate of monthly change since Dec 2010 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8846). Inventory adjustment in response to expectations on the economy may have caused the decline of industrial production. Loes finds that if this interpretation is valid industry may improve performance in 2012. Services indexes will be released in the following week.
IIIA United States. The Manufacturing ISM Report on Business® purchasing managers’ index jumped 1.9 percentage points from 50.8 in Oct to 52.7 in Nov, indicating continuing growth for 28 consecutive months but at slower rate of change (http://www.ism.ws/ISMReport/MfgROB.cfm). New orders, which are an indicator of future business, rose 4.3 percentage points, from 52.4 in Oct to 56.7 in Nov, indicating growth at a faster rate. The employment index fell 1.7 percentage points from 53.5 in Oct to 51.8 in Nov, indicating growth at slower rate of change. Prices paid or costs of inputs rose 4.0 percentage points from 41.0 in Oct to 45.0 in Oct, which is the second reading below 50 since May.
The nonmanufacturing index of the Institute for Supply Management™ fell 0.9 percentage points in Nov to 52.0 from 52.9 in Oct. According to the IMS, the reading for Nov is the lowest since 50.7 in Jan 2010 (http://www.ism.ws/ISMReport/NonMfgROB.cfm). There are favorable aspects of the Nonmanufacturing ISM Report on Business®: (1) business activity production increase by 2.4 percentage points from 53.8 in Oct to 56.2 in Nov; (2) new orders, indicating future activity, increase 0.6 percentage points from 52.4 in Oct to 53.0 in Nov; and new export orders increased 1.5 percentage points from 54.0 in Oct to 55.5 in Nov. Perhaps the most unfavorable aspect is the decline of employment by 4.4 percentage points from expansion at 53.3 in Oct to contraction at 48.9 in Nov. The establishment survey of the Bureau of Labor Statistics for Nov shows 92.199 million jobs in private service-providing activities in the US compared with 11.803 million jobs in manufacturing (Table B-1, page 29 http://www.bls.gov/news.release/pdf/empsit.pdf). Contraction of jobs in nonmanufacturing can affect many more workers than in manufacturing. Another unfavorable aspect is the increase in prices of 5.4 percentage points from 57.1 in Oct to 62.5 in Nov. Table USA provides the indicators for the US economy.
Table USA, US Economic Indicators
| Consumer Price Index | Oct 12 months NSA ∆%: 3.5; ex food and energy ∆%: 2.1 |
| Producer Price Index | Oct 12 months NSA ∆%: 5.9; ex food and energy ∆% 2.8 |
| PCE Inflation | Sep 12 months NSA ∆%: headline 2.9; ex food and energy ∆% 1.6 |
| Employment Situation | Household Survey: Oct Unemployment Rate SA 9.0% |
| Nonfarm Hiring | Nonfarm Hiring fell from 64.9 million in 2006 to 47.2 million in 2010 or by 17.7 million |
| GDP Growth | BEA Revised National Income Accounts back to 2003 IIIQ2011 SAAR ∆%: 2.5 First three quarters AE ∆% 1.4 |
| Personal Income and Consumption | Sep month ∆% SA Real Disposable Personal Income (RDPI) 0.1 |
| Quarterly Services Report | IIIQ11/IIQII SA ∆%: |
| Employment Cost Index | IIIQ2011 SA ∆%: 0.3 |
| Industrial Production | Oct month SA ∆%: 0.7 |
| Productivity and Costs | Nonfarm Business Productivity IIIQ2011∆% SAAE 3.1; IIIQ2011/IIIQ2010 ∆% 1.1; Unit Labor Costs IIIQ2011 ∆% -2.4; IIIQ2011/IIIQ2010 ∆%: 1.2 Blog 11/04/11 |
| New York Fed Manufacturing Index | General Business Conditions From -8.48 Oct to Nov 0.61 |
| Philadelphia Fed Business Outlook Index | General Index from 8.7 Oct to 3.6 Nov |
| Manufacturing Shipments and Orders | Oct/Sep New Orders SA ∆%: minus 0.4; ex transport ∆%: 0.2 |
| Durable Goods | Oct New Orders SA ∆%: -0.7; ex transport ∆%: 0.7 |
| Sales of New Motor Vehicles | Jan-Nov 2011 11.532 million; Jan-Oct 2011 10.444 million; Jan-Nov 2010 12.28 million. Nov SAAR 13.62 million, Oct SAAR 13.25, Nov 2010 SAAR 12.28 million Blog 12/02/11 |
| Sales of Merchant Wholesalers | Jan-Oct 2011/2010 ∆%: Total 14.8; Durable Goods: 12.4; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Sep 11/Sep 10 NSA ∆%: Total Business 11.5; Manufacturers 10.9 |
| Sales for Retail and Food Services | Jan-Oct 2011/Jan-Oct 2010 ∆%: Retail and Food Services: 7.9; Retail ∆% 8.4 |
| Value of Construction Put in Place | Oct SAAR month SA ∆%: 0.8 Oct 12 months NSA: 0.3 |
| Case-Shiller Home Prices | Sep 2011/Sep 2010 ∆% NSA: 10 Cities minus 3.3; 20 Cities: minus 3.6 |
| FHFA House Price Index Purchases Only | Sep SA ∆% 0.9; |
| New House Sales | Oct month SAAR ∆%: |
| Housing Starts and Permits | Sep Starts month SA ∆%: -0.3; Permits ∆%: 10.9 |
| Trade Balance | Balance Oct SA -$43,466 million versus Sep -$44,170 million |
| Export and Import Prices | Oct 12 months NSA ∆%: Imports 11.0; Exports 6.3 |
| Consumer Credit | Oct ∆% annual rate: 3.7 |
| Net Foreign Purchases of Long-term Treasury Securities | Sep Net Foreign Purchases of Long-term Treasury Securities: $68.6 billion Sep versus Aug $10.7 billion |
| Treasury Budget | Fiscal Year 2012/2011 ∆%: Receipts 8.8; Outlays -8.7; Individual Income Taxes 21.5 Deficit Fiscal Year 2011 Oct $98,466 million |
| Flow of Funds | IIQ2011 ∆ since 2007 Assets -$6311B Real estate -$5111B Financial -$1490 Net Worth -$5802 Blog 09/18/11 |
| Current Account Balance of Payments | IIQ2011 -121B %GDP 3.2 Blog 09/18/11 |
Links to blog comments in Table USA: 12/4/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/20/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/6/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/30/11 http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
10/02/11 http://cmpassocregulationblog.blogspot.com/2011/10/us-growth-standstill-at-08-percent.html
09/25/11 http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html
09/18/11 http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
Manufacturers’ shipments increase 0.6 percent in Oct after increasing 0.3 percent in Sep while new orders fell 0.4 percent in Oct after falling 0.1 percent in Sep, as shown in Table 19. These data are very volatile. Automobile shipments rose 10.3 percent in Oct after increasing 1.4 percent in Sep but falling 5.5 percent in Aug. Volatility is illustrated by decline of 16.8 percent of nondefense aircraft in Oct following decline of 26.7 percent in Sep, growth of 26.2 percent in Aug and 49.9 percent in Jul but decline of 24.0 percent in Jun. Capital goods new orders, indicating investment, fell 5.5 percent in Oct after falling 2.8 percent in Sep but growing 4.7 percent in Aug after growing 3.1 percent in Jul but falling 2.4 percent in Jun. New orders of nondefense capital goods fell 3.7 percent in Oct after falling 3.5 percent in Sep but with strong growth of 5.4 percent in Aug and 4.2 percent in Jul but decline of 2.4 percent in Jun. Excluding more volatile aircraft, capital goods orders still fell 0.8 percent in Oct.
Table 19, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%
| 2011 | Oct ∆% | Sep ∆% | Aug | Jul | Jun |
| All Mfg Industries | |||||
| S | 0.6 | 0.3 | 0.1 | 1.2 | 0.6 |
| NO | -0.4 | -0.1 | 0.1 | 2.1 | -0.4 |
| Excluding | |||||
| S | 0.1 | 0.6 | 0.7 | 0.5 | 0.6 |
| NO | 0.2 | 0.9 | -0.1 | 0.6 | 0.4 |
| Excluding | |||||
| S | 0.7 | 0.4 | 0.0 | 1.3 | 0.6 |
| NO | 0.1 | -0.2 | 0.0 | 2.3 | -0.2 |
| Durable Goods | |||||
| S | 1.6 | -0.4 | 0.1 | 2.1 | 1.1 |
| NO | -0.5 | -1.4 | 0.1 | 4.2 | -1.1 |
| Machinery | |||||
| S | -1.3 | -1.0 | 5.8 | 0.7 | 4.2 |
| NO | 2.9 | -1.9 | -1.9 | 1.9 | -1.4 |
| Computers & Electronic Products | |||||
| S | 1.8 | -0.8 | 0.6 | 1.7 | -1.2 |
| NO | 0.8 | 2.2 | 1.4 | -3.5 | 0.9 |
| Computers | |||||
| S | 7.7 | 3.8 | -4.7 | 4.6 | 3.6 |
| NO | 4.0 | 7.3 | 2.5 | -6.3 | 2.6 |
| Transport | |||||
| S | 5.0 | -1.9 | -4.9 | 7.0 | 0.3 |
| NO | -5.1 | -7.5 | 0.8 | 15.0 | -6.6 |
| Automobiles | |||||
| S | 10.3 | 1.4 | -5.5 | 3.0 | 1.2 |
| Motor Vehicles | |||||
| S | 2.4 | -1.2 | -5.6 | 8.1 | -2.6 |
| NO | 2.3 | -2.1 | -5.4 | 8.5 | -2.0 |
| Nondefense | |||||
| S | 9.0 | 3.1 | 3.4 | 8.8 | 3.2 |
| NO | -16.8 | -26.7 | 26.2 | 49.9 | -24.0 |
| Capital Goods | |||||
| S | 0.3 | -0.4 | 3.0 | 0.7 | 1.7 |
| NO | -5.5 | -2.8 | 4.7 | 3.1 | -2.4 |
| Nondefense Capital Goods | |||||
| S | 0.3 | -0.4 | 3.0 | 1.4 | 2.1 |
| NO | -3.7 | -3.5 | 5.4 | 4.2 | -2.4 |
| Capital Goods ex Aircraft | |||||
| S | -0.1 | -0.5 | 3.1 | 0.3 | 2.0 |
| NO | -0.8 | 1.4 | 0.9 | -0.3 | 0.8 |
| Nondurable | |||||
| S NO | -0.3 | 0.9 | 0.0 | 0.4 | 0.2 |
Note:Mfg: manufacturing; S: shipments; NO: new orders; Transport: transportation
Source: http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf
Chart 5 of the US Census Bureau shows monthly changes in manufacturers’ new orders in the past 12 months. Trends are difficult to discern for these data because of the significant volatility.
Chart 5, US, Manufacturers’ New Orders 2010-2011 Seasonally Adjusted, Month ∆%
Source: US Bureau of the Census
http://www.census.gov/briefrm/esbr/www/esbr022.html
Additional perspective on manufacturers’ shipments and new orders is provided by Table 20. Values are cumulative millions of dollars in Jan-Oct 2011 not seasonally adjusted (NSA). Shipments of all manufacturing industries in the first ten months of 2011 total $4.5 trillion and new orders total $4.4 trillion, growing respectively by 12.3 percent and 12.8 percent relative to the same period in 2010. Excluding transportation equipment, shipments grew 12.7 percent and new orders increased 12.8 percent. Excluding defense, shipments grew 12.6 percent and new orders grew 13.0 percent. Important information in Table 2 is the large share of nondurable goods: with shipments of $2.5 trillion, growing by 14.9 percent, and new orders of $2.5 trillion, growing by 14.9 percent, in part driven by higher prices for food and energy. Durable goods are lower in value, with shipments of $1.9 trillion, growing by 7.9 percent, and new orders of $1.9 trillion, growing by 9.2 percent. Capital goods have relatively high value of $755 billion for shipments, growing 5.8 percent, and new orders $794 billion, growing 9.1 percent, which could be a favorable sign of future investment. Excluding aircraft, capital goods shipments reached $637 billion, growing by 9.9 percent, and new orders $659 billion, growing 11.2 percent. Automobile shipments reached only $52 billion, growing by 5.1 percent. There is no suggestion in these data that the US economy is close to recession.
Table 20, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars
| Jan-Oct 2011 | Shipments | ∆% 2011/ | New Orders | ∆% 2011/ |
| All Manufacturing Industries | 4,469,424 | 11.7 | 4,447,313 | 12.3 |
| Excluding Transport | 4,003,536 | 12.7 | 3,966,746 | 12.8 |
| Excluding Defense | 4,370,989 | 12.6 | 4,344,654 | 13.0 |
| Durable Goods | 1,980,830 | 7.9 | 1,958,719 | 9.2 |
| Machinery | 293,743 | 12.6 | 316,156 | 14.8 |
| Computers & Electronic Products | 306,547 | 2.2 | 238,783 | -0.2 |
| Computers | 41,828 | 11.8 | 41,561 | 11.3 |
| Transport Equipment | 465,888 | 4.1 | 480,657 | 8.9 |
| Automobiles | 52,365 | 5.1 | NA | NA |
| Motor vehicles | 144,314 | 6.5 | 144,156 | 7.2 |
| Nondefense Aircraft | 71,010 | 10.2 | 79,992 | 32.5 |
| Capital Goods | 755,108 | 5.8 | 793,582 | 9.1 |
| Nondefense Capital Goods | 678,216 | 9.8 | 712,538 | 11.9 |
| Capital Goods ex Aircraft | 637,237 | 9.9 | 659,479 | 11.2 |
| Nondurable Goods | 2,488,594 | 14.9 | 2,488,594 | 14.9 |
Note: Transport: transportation
Source: http://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf
Manufacturers’ new orders in the months of Aug, Sep and Oct, not seasonally adjusted are provided in Table 3 from 1992 to 2011. The level of new orders in Oct 2011 of $448,326 million is above the level of $423,058 million in 2006. The comparison is somewhat distorted by inflation in the latter years because the data are not adjusted for inflation.
Table 21, US, Manufacturers’ New Orders NSA Millions of Dollars
| Year | Aug | Sep | Oct |
| 1992 | 229,877 | 251,642 | 250,738 |
| 1993 | 243,322 | 259,484 | 257,233 |
| 1994 | 270,302 | 285,477 | 280,143 |
| 1995 | 286,806 | 307,951 | 294,603 |
| 1996 | 292,389 | 317,268 | 311,265 |
| 1997 | 314,060 | 339,406 | 330,521 |
| 1998 | 314,606 | 339,286 | 323,043 |
| 1999 | 333,204 | 353,716 | 343,647 |
| 2000 | 345,644 | 370,860 | 345,596 |
| 2001 | 328,140 | 320,269 | 327,895 |
| 2002 | 331,164 | 330,911 | 332,120 |
| 2003 | 331,444 | 349,325 | 355,217 |
| 2004 | 363,225 | 373,947 | 370,121 |
| 2005 | 415,196 | 418,386 | 415,061 |
| 2006 | 436,602 | 445,135 | 423,058 |
| 2007 | 468,853 | 454,199 | 470,485 |
| 2008 | 475,880 | 462,904 | 431,450 |
| 2009 | 363,361 | 375,249 | 373,374 |
| 2010 | 406,032 | 423,825 | 407,224 |
| 2011 | 469,793 | 464,693 | 448,326 |
Source: http://www.census.gov/manufacturing/m3/
Sales of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table 22 for Jan-Oct 2011 and percentage changes from the prior month and from Jan-Oct 2010. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 14.8 percent in the first ten months of 2011 relative to the first ten months of 2010 and 0.9 percent in Oct relative to Aug. The value of total sales is quite high at almost four trillion dollars ($3950.7 billion). Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Oct 2011 reached $1764.1 billion, or $1.8 trillion, falling 0.1 percent in Oct relative to Sep but increasing 12.4 percent in Jan-Oct 2011 relative to Jan-Oct 2010. Sales of automotive products reached $275.9 billion in the first ten months of 2011, increasing 3.9 percent in the month and 11.4 percent relative to a year earlier. There is strong performance of 20.1 percent in machinery and 10.5 percent in electrical products. Sales of nondurable goods rose 16.7 percent. The influence of commodity prices is revealed in the increase of 37.8 percent in farm products and 35.6 percent in petroleum products. The final three columns in Table 22 provide the value of inventories and percentage changes from the prior month and from the same month a year earlier. US total inventories of wholesalers increased 1.6 percent in Oct and 10.9 percent relative to a year earlier. Inventories of durable goods of $274.6 billion are 58.4 percent of the total and rose 11.6 percent relative to a year earlier. Automotive inventories jumped 19.6 percent relative to a year earlier. Machinery inventories of $69.2 billion rose 11.6 percent relative to a year earlier. Inventories of nondurable goods of $195.6 percent are 41.6 percent of the total and increased 9.8 percent relative to a year earlier. While inventories of farm products rose by 14.4 in Oct relative to Sep, they declined by 6.0 percent relative to a year earlier. Inventories of petroleum products increased 5.7 percent in Oct and 13.5 percent relative to a year earlier.
Table 22, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%
| 2011 | Sales $ Billions Jan-Oct 2011 | Sales Oct ∆% SA | Sales∆% Jan/ Oct 2011 from 2010NSA | INV $ Billions Oct 2011 NSA | INV Oct ∆% | INV ∆% Oct 2011 from Oct 2010 NSA |
| US Total | 3,950.7 | 0.9 | 14.8 | 470.2 | 1.6 | 10.9 |
| Durable | 1,764.1 | -0.1 | 12.4 | 274.6 | 0.8 | 11.6 |
| Automotive | 275.9 | 3.9 | 11.4 | 43.8 | 0.9 | 19.6 |
| Prof. Equip. | 309.4 | -1.9 | 4.9 | 32.4 | 0.6 | 8.9 |
| Computer Equipment | 164.3 | -1.2 | 5.9 | 12.7 | 0.1 | 7.9 |
| Electrical | 331.4 | 0.3 | 10.5 | 40.9 | 1.3 | 9.2 |
| Machinery | 295.6 | 1.3 | 20.1 | 69.2 | 0.2 | 11.6 |
| Not Durable | 2,186.6 | 1.7 | 16.7 | 195.6 | 2.8 | 9.8 |
| Drugs | 341.8 | 2.1 | 8.7 | 31.6 | -1.1 | 2.3 |
| Apparel | 110.0 | 2.2 | 1.7 | 22.1 | -0.9 | 15.3 |
| Groceries | 481.2 | 0.6 | 10.4 | 34.0 | 0.8 | 17.4 |
| Farm Products | 212.9 | 11.7 | 37.8 | 24.6 | 14.4 | -6.0 |
| Petroleum | 597.2 | 0.0 | 35.6 | 24.6 | 5.7 | 13.5 |
Note: INV: inventories
Sources: http://www2.census.gov/wholesale/pdf/mwts/currentwhl.pdf
Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table 23. The total for the US has remained almost unaltered at 1.16 in Oct and 1.15 in Sep relative to 1.18 in Oct 2010. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.51 in Oct 2011 relative to 1.52 in Oct 2010. Computer equipment operates with low inventory/sales ratios of 0.77 in Oct 2011 relative to 0.73 in Oct 2010 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.87 in Oct 2011, which is equal to 0.87 in Oct 2011 and almost equal to 0.90 in Oct 2010. There are exceptions such as 1.99 in Oct 2011 in apparel that is much higher than 1.80 in Oct 2010.
Table 23, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA
| Oct 2011 | Sep 2011 | Oct 2010 | |
| US Total | 1.16 | 1.15 | 1.18 |
| Durable | 1.51 | 1.49 | 1.52 |
| Automotive | 1.42 | 1.47 | 1.44 |
| Prof. Equip. | 1.02 | 1.01 | 0.97 |
| Comp. Equip. | 0.77 | 0.76 | 0.73 |
| Electrical | 1.21 | 1.20 | 1.20 |
| Machinery | 2.20 | 2.23 | 2.33 |
| Not Durable | 0.87 | 0.87 | 0.90 |
| Drugs | 0.90 | 0.92 | 0.98 |
| Apparel | 1.99 | 2.05 | 1.80 |
| Groceries | 0.68 | 0.67 | 0.65 |
| Farm Products | 1.13 | 1.10 | 1.23 |
| Petroleum | 0.41 | 0.39 | 0.47 |
Sources: http://www2.census.gov/wholesale/pdf/mwts/currentwhl.pdf
Chart 6 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2002 to 2011 seasonally adjusted. Inventory/sales ratios rise during contractions as merchants are caught with increasing inventories because of weak sales and fall during expansions as merchants attempt to fill sales with existing stocks.
Chart 6, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2002-2011
Source: US Census Bureau
http://www2.census.gov/wholesale/img/mwtsbrf.jpg
Table 24 provides the quarterly services report of the US Census Bureau of the Department of Commerce. Data are adjusted for seasonality but not for price changes. Revenue growth decelerated in the third quarter with quarterly growth of 0.6 for information services, 0.8 percent for professional, scientific and technical services, 1.7 percent for administrative services and support and minus 0.9 percent for hospitals. Growth rates in IIIQ2011 relative to IIQ2010 are relatively lower than in IIQ2011 over IQ2011. Growth of revenue in IIIQ2011 relative to IIIQ2010 was still high: 3.4 percent for information services, 5.5 percent for professional, scientific and technical services, 6.3 percent administrative services and support and 2.3 percent for hospitals. There is again the difficulty in separating price and quantity changes.
Table 24, US, Selected Services, Estimates of Quarterly Revenue for Employer Firms, SA Millions of USD and ∆%
| INFO | PROF | ADMIN | HOSP | |
| IIIQ2011 | 288,594 | 341,445 | 156,262 | 209,610 |
| ∆% IIIQ2011/IIQ2011 | 0.6 | 0.8 | 1.7 | -0.9 |
| IIQ2011 | 286,864 | 338,725 | 153,703 | 211,551 |
| ∆% IIQ2011/ | 1.7 | 1.4 | 2.6 | 1.6 |
| IQ2011 | 282,016 | 334,156 | 149,761 | 208,260 |
| ∆% IVQ2011/ | 0.2 | 2.0 | 1.0 | < 0.05 |
| IVQ2010 | 281,440 | 327,759 | 148,347 | 208,188 |
| ∆% IVQ2010/ | 0.8 | 1.3 | 0.9 | 1.6 |
| IIIQ2010 | 279,235 | 323,530 | 147,040 | 204,941 |
| IIQ2010 | 276,202 | 318,274 | 145,971 | 200,987 |
| ∆% Relative Earlier Year Quarter | ||||
| IIIQ2011/ IIIQ2010 | 3.4 | 5.5 | 6.3 | 2.3 |
| IIQ2011/ | 3.9 | 6.4 | 5.3 | 5.3 |
Note: INFO: Information; PROF: Professional, Scientific and Technical Services; ADMIN: Administrative and Support and Waste Management and Remediation Services; HOSP: Hospitals
Source: http://www2.census.gov/services/qss/qss-current.pdf
Chart 7 of the US Bureau of the Census of the Department of Commerce provides the quarterly service report SA from IIIQ2003 to IIIQ2011. The recession from IVQ2007 to IIQ2009 contracted revenue of services but there appears to be continuing growth especially for professional, scientific and technical services.
Chart 7, US, Quarterly Revenue for Selected Services, SA $ Billions
Source: US Census Bureau
http://www2.census.gov/services/qss/qss.gif
There was mild improvement in the balance of international trade in goods and services of the US in Jul to Nov, declining from deficit of $50,540 million in May and $52,104 million in Jul to deficit of $44,170 million in Oct, as shown in Table 25. Exports fell 0.8 percent in Oct while imports fell 0.3 percent. In the months of Jul to Oct, exports increased 4.2, at the annual equivalent rate of 13.2 percent, while imports fell 0.5 percent, at the annual equivalent rate of minus 1.5 percent. The trade balance deteriorated from cumulative deficit of $420,730 million in Jan-Oct 2010 to deficit of $465,224 million in Jan-Oct 2011.
Table 25, US, Trade Balance of Goods and Services Seasonally Adjusted Millions of Dollars and ∆%
| Trade Balance | Exports | Month ∆% | Imports | Month ∆% | |
| Oct 2011 | 43,466 | 179,168 | -0.8 | 222,635 | -0.9 |
| Sep | -44,170 | 180,619 | 1.4 | 224,789 | 0.6 |
| Aug | -45,341 | 178,042 | 0.1 | 223,383 | -0.2 |
| Jul | -46,069 | 177,811 | 3.5 | 223,880 | 0.0 |
| Jun | -52,104 | 171,794 | -2.2 | 223,898 | -1.1 |
| May | -50,540 | 175,734 | -0.3 | 226,275 | 2.9 |
| Apr | -43,561 | 176,306 | 1.3 | 219,867 | -0.4 |
| Mar | -46,397 | 173,981 | 4.9 | 220,378 | 4.2 |
| Feb | -45,718 | 165,727 | -1.3 | 211,444 | -1.9 |
| Jan | -47,858 | 167,849 | 2.3 | 215,707 | 5.5 |
| Dec 2010 | -40,454 | 164,006 | 1.7 | 204,459 | 2.2 |
| Jan-Oct | -465,224 | 1,747,032 | 2,212,257 | ||
| Jan-Oct | -420,730 | 1,512,333 | 1,933,063 |
Note: Trade Balance of Goods and Services = Exports of Goods and Services less Imports of Goods and Services. Trade balance may not add exactly because of errors of rounding.
Source: http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf
Chart 8 of the US Bureau of the Census of the Department of Commerce shows that the trade deficit fell during the economic contraction after 2007 but has grown again during the expansion. There has been a slight improvement in the margin from Jul to Nov as both exports and imports have declined in value. Weaker world and internal demand and moderating commodity price increases explain the flattening curves of exports and imports in Chart 8.
Chart 8, US Balance, Exports and Imports of Goods and Services $ Billions
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr042.html
The balance of international trade in goods of the US seasonally-adjusted is shown in Table 26. The US has a dynamic surplus in services that reduces the large deficit in goods for a still very sizeable deficit in international trade of goods and services. The balance in international trade of goods deteriorated sharply from $538.9 billion in Jan-Oct 2010 to $613.3 billion in Jan-Oct 2011. Deterioration occurred both in the petroleum balance, exports less imports of petroleum, as well as in the non-petroleum balance, exports less imports of non-petroleum goods. Exports rose 18.1 percent with non-petroleum exports growing 15.1 percent. Total imports rose by 16.3 percent with petroleum imports increasing 30.8 percent and non-petroleum imports increasing 12.9 percent.
Table 26, US, International Trade in Goods Balance, Exports and Imports $ Millions and ∆% SA
| Jan-Oct 2011 | Jan-Oct 2010 | ∆% | |
| Total Balance | -613,320 | -538,958 | |
| Petroleum | -271,048 | -220,518 | |
| Non Petroleum | -333,174 | -309,347 | |
| Total Exports | 1,245,087 | 1,058,594 | 17.6 |
| Petroleum | 92,318 | 57,208 | 61.4 |
| Non Petroleum | 1,137,955 | 992,950 | 14.6 |
| Total Imports | 1,858,407 | 1,597,553 | 16.3 |
| Petroleum | 363,365 | 277,726 | 30.8 |
| Non Petroleum | 1,471,129 | 1,302,297 | 12.9 |
Details may not add because of rounding and seasonal adjustment
Source: http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf
US exports and imports of goods not seasonally adjusted in Jan-Oct 2010 and Jan-Oct 2011 are shown in Table 27. The rate of growth of exports was 17.6 percent, which is slightly higher than 16.3 percent for imports. The US has partial hedge of commodity price increases in exports of agricultural commodities that rose 23.9 percent and of mineral fuels that increased 61.2 percent both because of higher prices of raw materials and commodities. The US exports an insignificant amount of crude oil. US exports and imports consist mostly of manufactured products, with less rapidly increasing prices. US manufactured exports rose only 11.8 percent while imports rose 12.7 percent. Significant part of the US trade imbalance originates in mineral fuels growing by 28.3 percent and crude oil increasing by 29.2 percent. The limited hedge in exports of agricultural commodities and mineral fuels compared with substantial imports of mineral fuels and crude oil results in deterioration of the terms of trade of the US, export prices relative to import prices, originating in commodity price increases caused by carry trades from zero interest rates.
Table 27, US, Exports and Imports of Goods, Not Seasonally Adjusted Millions of Dollars and %
| Jan- Oct | Jan-Oct 2010 $ Millions | ∆% | |
| Exports | 1,242,081 | 1,056,141 | 17.6 |
| Manufactured | 807,382 | 721,800 | 11.8 |
| Agricultural | 112,000 | 90,363 | 23.9 |
| Mineral Fuels | 104,221 | 64,668 | 61.2 |
| Crude Oil | 1,127 | 1,236 | -8.8 |
| Imports | 1,856,502 | 1,595,629 | 16.3 |
| Manufactured | 1,333,380 | 1,183,239 | 12.7 |
| Agricultural | 82,034 | 67,579 | 21.4 |
| Mineral Fuels | 380,531 | 296,498 | 28.3 |
| Crude Oil | 279,923 | 216,664 | 29.2 |
Source: http://www.census.gov/foreign-trade/Press-Release/current_press_release/ft900.pdf
US consumer credit grew at the revised seasonally-adjusted annual rate (SAAR) of 1.2 in IIIQ2011 and 3.7 percent in Oct, as shown in Table 28. Revolving credit, or credit cards, fell at the revised SAAR of 2.0 percent in IIIQ2011 but rose 0.6 percent in both Oct and Sep. Non-revolving consumer credit, which accounts for 67.7 percent of total consumer credit in IIIQ2011 grew at the SAAR of 2.7 percent in IIIQ2011 and 5.3 percent in Oct.
Table 28, US, Consumer Credit Seasonally Adjusted Annual Percentage Rate and Billions of Dollars
| IIIQ2011 | Oct | Sep | Aug | |
| ∆% | ||||
| Total | 1.2 | 3.7 | 3.4 | -5.1 |
| Revolving | -2.0 | 0.6 | 0.6 | -2.4 |
| Non Revolving | 2.7 | 5.3 | 4.7 | -6.4 |
| $ Billions | ||||
| Total | 2449.8 | 2457.5 | 2449.8 | 2443.0 |
| Revolving | 792.0 | 792.3 | 792.0 | 791.6 |
| Non Revolving | 1657.9 | 1665.2 | 1657.9 | 1651.4 |
Source: http://www.federalreserve.gov/releases/g19/current/g19.htm
IIIB Japan. The Markit Japan Services PMI™ Composite Output Index fell 3.5 percentage points from 52.4 in Oct to 48.9 in Nov, meaning that private-sector activity has fallen into contraction territory (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8899). Alex Hamilton, economist at Markit and author of the report, finds that panelists view unfavorably the outlook of private-sector activity in the coming 12 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8899). The strong yen and weak world economic growth are beginning to affect manufacturing in Japan. The Markit/JMMA Japan Manufacturing PMITM registered 49.1 in Nov from 50.6 in Oct for the sharpest acceleration of decline of output since Apr after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8837). Alex Hamilton, economist at Markit and author of the report, finds that weakening demand originated in the appreciated yen together with declining new orders from emerging Asia especially China (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8837). Table JPY provides the country data table for Japan.
Table JPY, Japan, Economic Indicators
| Historical GDP and CPI | 1981-2010 Real GDP Growth and CPI Inflation 1981-2010 |
| Corporate Goods Prices | Sep ∆% -0.7 |
| Consumer Price Index | Oct SA ∆% 0.1 |
| Real GDP Growth | IIIQ2011 ∆%: 1.4 on IIQ2011; IIIQ2011 SAAR 5.6% |
| Employment Report | Oct Unemployed 2.88 million Change in unemployed since last year: minus 460 thousand |
| All Industry Index | Sep month SA ∆% -0.9 Blog 11/27/11 |
| Industrial Production | Oct SA month ∆%: 2.4 |
| Machine Orders | Total Oct ∆% 3.2 Private ∆%: -9.2 |
| Tertiary Index | Sep month SA ∆% -0.7 |
| Wholesale and Retail Sales | Oct 12 months: |
| Family Income and Expenditure Survey | Oct 12 months ∆% total nominal consumption minus 0.6, real minus 0.4 Blog 12/02/11 |
| Trade Balance | Exports Oct 12 months ∆%: -3.7 Imports Sep 12 months ∆% 17.9 Blog 11/27/11 |
Links to blog comments in Table JPY: 12/0411 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/properity-without-inflation-world.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
10/02/11 http://cmpassocregulationblog.blogspot.com/2011/10/us-growth-standstill-at-08-percent.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
9/25/11 http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html
07/31/11: http://cmpassocregulationblog.blogspot.com/2011/07/growth-recession-debt-financial-risk.html
Japan’s GDP grew 1.4 percent in IIIQ2011 relative to IIQ2011, as shown in Table 29 that incorporates the latest revisions. The economy of Japan had already weakened in IVQ2010 when GDP was flat. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell in IQ2011 by 1.7 percent and fell again 0.5 percent in IIQ2011 as a result of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010. The deepest quarterly contractions in the recession were 3.2 percent in IVQ2008 and 3.8 percent in IQ2009.
Table 29, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2011 | -1.7 | -0.5 | 1.4 | |
| 2010 | 1.6 | 1.1 | 0.5 | 0.0 |
| 2009 | -3.8 | 1.6 | -0.2 | 1.9 |
| 2008 | 0.8 | -1.3 | -1.2 | -3.2 |
| 2007 | 1.1 | 0.0 | -0.5 | 1.0 |
| 2006 | 0.5 | 0.4 | -0.1 | 1.4 |
| 2005 | 0.2 | 1.3 | 0.3 | 0.2 |
| 2004 | 1.0 | -0.0 | 0.1 | -0.2 |
| 2003 | -0.5 | 1.3 | 0.3 | 1.1 |
| 2002 | -0.2 | 1.0 | 0.6 | 0.4 |
| 2001 | 0.7 | -0.2 | -1.1 | -0.2 |
| 2000 | 1.7 | 0.1 | -0.2 | 0.6 |
Source: http://www.cao.go.jp/index-e.html
Table 30 provides contributions to real GDP at seasonally-adjusted annual rates (SAAR). The SAAR of GDP in IIIQ2011 was a high 5.6 percent. Personal consumption contributed in IIIQ2011 at the SAAR of 1.8 percent and net trade (exports less imports) at 2.3 percent. Gross fixed capital formation contributed at the SAAR of 0.2 percent. Demand has increased in Japan in IIIQ2011.
Table 30, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| GDP | PC | GFCF | Trade | PINV | GOVC | |
| 2011 | ||||||
| I | -6.6 | -2.9 | -0.6 | -0.6 | -2.9 | 0.4 |
| II | -2.0 | 0.7 | 0.7 | -3.9 | 0.0 | 0.6 |
| III | 5.6 | 1.8 | 0.2 | 2.3 | 1.1 | 0.2 |
| IV | ||||||
| 2010 | ||||||
| I | 6.5 | 1.7 | 0.3 | 2.5 | 2.3 | -0.3 |
| II | 4.6 | 0.4 | 1.2 | 0.3 | 1.6 | 1.2 |
| III | 2.0 | 0.8 | 0.4 | -0.5 | 1.2 | 0.3 |
| IV | 0.1 | 0.8 | -0.8 | -0.2 | 0.0 | 0.3 |
| 2009 | ||||||
| I | -14.3 | -1.9 | -2.1 | -4.1 | -7.1 | 0.9 |
| II | 6.4 | 3.8 | -3.0 | 7.3 | -2.1 | 0.5 |
| III | -0.8 | -0.1 | -1.6 | 1.5 | -1.5 | 1.0 |
| IV | 7.8 | 3.8 | 0.3 | 3.0 | 0.2 | 0.4 |
| 2008 | ||||||
| I | 3.2 | 1.4 | 0.3 | 1.5 | -0.2 | 0.0 |
| II | -5.1 | -3.4 | -2.2 | 0.3 | 1.1 | -0.9 |
| III | -4.7 | -0.4 | -1.1 | -0.6 | -2.7 | -0.1 |
| IV | -12.0 | -2.6 | -4.4 | -11.0 | 5.5 | 0.4 |
| 2007 | ||||||
| I | 4.3 | 0.8 | 0.5 | 1.4 | 1.3 | 0.4 |
| II | 0.2 | 0.4 | -1.5 | 0.5 | 0.1 | 0.5 |
| III | -1.8 | -0.8 | -1.7 | 1.6 | -0.7 | -0.2 |
| IV | 3.9 | 0.4 | 0.3 | 1.8 | 0.8 | 0.6 |
Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption
Source: http://www.cao.go.jp/index-e.html
Japan’s quarterly growth of GDP not seasonally-adjusted relative to the same quarter a year earlier is shown in Table 31. The contraction extended over seven quarters from IIQ2008 through IVQ2009. It was strongest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions in 2001 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused decline of GDP in IQ2011 of 0.2 percent relative to the same quarter a year earlier and decline of 1.7 percent in IIQ2011. GDP fell 0.7 percent in IIIQ2011 relative to a year earlier.
Table 31, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2011 | -0.2 | -1.7 | -0.7 | |
| 2010 | 4.8 | 4.4 | 5.4 | 3.1 |
| 2009 | -9.4 | -6.6 | -5.6 | -0.5 |
| 2008 | 1.4 | -0.1 | -0.6 | -4.7 |
| 2007 | 2.8 | 2.3 | 2.0 | 1.6 |
| 2006 | 2.6 | 1.3 | 0.9 | 2.0 |
| 2005 | 0.4 | 1.4 | 1.5 | 1.9 |
| 2004 | 4.0 | 2.6 | 2.2 | 0.7 |
| 2003 | 1.7 | 1.8 | 1.5 | 1.8 |
| 2002 | -1.6 | -0.2 | 1.4 | 1.6 |
| 2001 | 1.6 | 0.9 | 0.0 | -1.0 |
| 2000 | 2.7 | 2.4 | 2.2 | 1.8 |
Source: http://www.cao.go.jp/index-e.html
Japan’s machinery orders in Table 32 weakened in Oct. Total orders grew 3.2 percent in Oct. Private-sector orders excluding volatile orders, which are closely watched, fell 6.9 percent. Orders for manufacturing increased 5.5 percent in Oct in part because of the low level after falling 17.5 percent in Sep and overseas orders rose 1.6 percent in Oct after falling 21.7 percent in Sep.
Table 32, Japan, Machinery Orders, Month ∆%, SA
| 2011 | Oct | Sep | Aug | Jul |
| Total | 3.2 | -3.7 | 6.5 | -11.3 |
| Private Sector | -9.2 | 11.6 | -3.6 | -15.9 |
| Excluding Volatile Orders | -6.9 | -8.2 | 11.0 | -8.2 |
| Mfg | 5.5 | -17.5 | 13.7 | -5.2 |
| Non | -7.3 | 8.5 | -6.1 | -1.4 |
| Gvt | 1.9 | -1.0 | -5.5 | -1.7 |
| From Overseas | 1.6 | -21.7 | 32.3 | -9.8 |
| Through Agencies | 4.0 | 15.9 | -0.2 | -1.5 |
Note: Mfg: manufacturing; Gvt: government
Source: http://www.esri.cao.go.jp/en/stat/juchu/1110juchu-e.html
Total orders for machinery and total private-sector orders excluding volatile orders for Japan are shown in Chart 9 of Japan’s Economic and Social Research Institute at the Cabinet Office. The trend of private-sector orders excluding volatile orders was increasing smoothly but may be flattening or even declining now. There could be reversal of the trend of decline in total orders. Fluctuations still prevent detecting longer term trends.
Chart 9, Japan, Machinery Orders
Source: Japan Economic and Social Research Institute, Cabinet Office
http://www.esri.cao.go.jp/en/stat/juchu/1110juchu-e.html
Table 33 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,662,200 million are divided between JPY 682,437, or 41.1 percent of the total, and domestic orders of JPY 890,844, or 53.6 percent of the total, with orders through agencies of JPY 88,919 million, or 5.4 percent. Orders through agencies are not shown in the table because of the minor value. There is sharp decline of total orders of 6.8 percent from Oct 2010 to Oct 2011 largely driven by decline of 15.6 percent of overseas orders while domestic orders fell only 1.0 percent. Private orders excluding volatile items increased 1.5 percent. There was strong impact from the global recession with total orders falling 23.3 percent, overseas orders dropping 29.4 percent and domestic orders decreasing 17.4 percent. Recovery was vigorous in 2010 with increase of total orders by 9.4 percent, overseas orders by 3.5 percent and domestic orders by 14.1 percent.
Table 33, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series
| Total | Overseas | Domestic | Private ex Volatile | |
| Value Oct 2011 | 1,662,200 | 682,437 | 890,844 | 615,785 |
| % Total | 100.0 | 41.1 | 53.6 | 37.1 |
| Value Oct 2010 | 1,782,922 | 808,971 | 900,151 | 606,801 |
| 12 Months ∆% | ||||
| Oct 2011 | -6.8 | -15.6 | -1.0 | 1.5 |
| Dec 2010 | 9.4 | 3.5 | 14.1 | -0.6 |
| Dec 2009 | 1.8 | 0.4 | 3.6 | -1.9 |
| Dec 2008 | -23.3 | -29.4 | -17.4 | -24.7 |
| Dec 2007 | 1.3 | 9.8 | -4.3 | -6.4 |
| Dec 2006 | 0.8 | 0.9 | -0.1 | 0.1 |
Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Oct 2011 were JPY 88,919 million, or 5.4 percent of the total, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally-adjusted data.
Source: http://www.esri.cao.go.jp/en/stat/juchu/1110juchu-e.html
IIIC China. The HSBC Composite Output Index for China, compiled by Markit, registered a decline from 52.6 in Oct to 48.9 in Nov (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8898
). The composite index combined activity in manufacturing and services such that joint output has moved into contraction territory below 50. A favorable aspect in the index is growth of services employment at the fastest rate in five months, which could maintain demand at high levels. Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that policy could build on the growth of employment in services and the reduction of price pressures to ensure growth above 8 percent in 2012. The HSBC China Manufacturing PMI™ compiled by Markit fell from 51.0 in Oct to 47.7 in Nov, which is the lowest in 32 months, indicating sharp deterioration of manufacturing in China (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8859). The good news in the index is the decline in average input costs for the first time in 16 months. The decline in new business was the prime reason for falling output but export business continued to increase. Hongbin Qu, Chief Economist, China & Co-head of Asian Economic Research at HSBC finds that the combination of weakening production and subdued inflation can lead to easing policies that may still ensure growth of 8 percent for China in 2012.
Table CNY provides the country data table for China.
Table CNY, China, Economic Indicators
| Price Indexes for Industry | Nov 12 months ∆%: 2.7 Nov month ∆%: -0.7 |
| Consumer Price Index | Nov month ∆%: -0.2 Nov 12 month ∆%: 4.2 |
| Value Added of Industry | Oct 12 month ∆%: 13.2 Jan-Oct 2011/Jan-Oct 2010 ∆%: 14.1 |
| GDP Growth Rate | Year IIIQ2011 ∆%: 9.1 |
| Investment in Fixed Assets | Total Jan-Oct ∆%: 24.9 Jan-Oct ∆% real estate development: 33.1 |
| Retail Sales | Nov month ∆%: 1.3 Jan-Nov ∆%: 17.0 |
| Trade Balance | Oct balance $17.03 billion |
Links to blog comments in Table CNY:
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/properity-without-inflation-world.html
Growth rates of retail sales in China monthly, 12 months and cumulative relative to a year earlier are in Table 34. The annual equivalent rate of growth from the monthly rates in Feb-Nov is 16.9 percent, which is close to 17.3 percent in 12 months in Nov and 17.0 in Jan-Nov 2011 relative to a year earlier.
Table 34, China, Total Retail Sales of Consumer Goods ∆%
| 2011 | Month ∆% | 12 Months ∆% | Cumulative ∆%/ |
| Nov | 1.3 | 17.3 | 17.0 |
| Oct | 1.3 | 17.2 | 17.0 |
| Sep | 1.3 | 17.7 | 17.0 |
| Aug | 1.3 | 17.0 | 16.9 |
| Jul | 1.3 | 17.2 | 16.8 |
| Jun | 1.4 | 17.7 | 16.8 |
| May | 1.3 | 16.9 | 16.6 |
| Apr | 1.3 | 17.1 | 16.5 |
| Mar | 1.3 | 17.4 | 17.4 |
| Feb | 1.3 | 11.6 | 15.8 |
| Jan | 19.9 | 19.9 | |
| AE ∆% | 16.9 |
Note: there are slight revisions of month relative to earlier month data but not of the month on the same month year earlier or cumulative relative to cumulative year earlier in the databank
Source: http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771402.htm
http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111110_402765083.htm
http://www.stats.gov.cn/english/newsandcomingevents/t20110810_402746163.htm
http://www.stats.gov.cn/english/statisticaldata/index.htm
Chart 10 shows 12 months growth rates of retail sales in China. Rates are quite high but somewhat lower than in the final months of 2010.
Chart 10, China, Total Retail Sales of Consumer Goods 12 Months ∆%
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/newsandcomingevents/t20111209_402771402.htm
China’s exports and imports and their 12 months rates of growth together with the trade balance in Oct are shown in Table 35. The 12 months rate of growth of exports fell from 24.5 percent in Aug to 17.1 percent in Sep, 15.9 percent in Oct and 13.8 percent in Nov. The 12 months rates of growth of imports fell from 30.2 percent in Aug to 20.9 percent in Sep and then 28.7 percent in Oct but fell to 22.1 percent in Nov. Growth is still extremely high and in comparison with trade data for other countries. The Dow Jones Newswires informs on Oct 15 that the premier of China Wen Jiabao announced that the Chinese yuan will not be further appreciated to prevent adverse effects on exports (http://professional.wsj.com/article/SB10001424052970203914304576632790881396896.html?mod=WSJ_hp_LEFTWhatsNewsCollection). This policy has not been aggressively implemented but there has been partial reversal of appreciation as discussed in IV Valuation of Risk Assets. It is difficult to separate various possibilities from the Senate bill designed to curb imports from China in the US such as weakening international trade.
Table 35, China, Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Nov 2011 | 174.46 | 13.8 | 159.94 | 22.1 | 14.52 |
| Oct | 157.49 | 15.9 | 140.46 | 28.7 | 17.03 |
| Sep | 169.67 | 17.1 | 155.16 | 20.9 | 14.51 |
| Aug | 173.32 | 24.5 | 155.56 | 30.2 | 17.76 |
| Jul | 175.13 | 20.4 | 143.64 | 22.9 | 31.48 |
| Jun | 161.98 | 17.9 | 139.71 | 19.3 | 22.27 |
| May | 157.16 | 19.4 | 144.11 | 28.4 | 13.05 |
| Apr | 155.69 | 29.9 | 144.26 | 21.8 | 11.43 |
| Mar | 152.2 | 35.8 | 152.06 | 27.3 | 0.14 |
| Feb | 96.74 | 2.4 | 104.04 | 19.4 | -7.3 |
| Jan | 150.73 | 37.7 | 144.27 | 51.0 | 6.46 |
| Dec 2010 | 154.15 | 17.9 | 141.07 | 25.6 | 13.08 |
Source: http://english.customs.gov.cn/publish/portal191/
http://english.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1
Table 36 provides China’s cumulative exports and imports and their yearly growth rates together with the trade balance. China is still enjoying strong trade growth.
Table 36, China, Year to Date Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Nov | 1,724.17 | 21.1 | 1585.62 | 26.5 | 138.55 |
| Oct | 1,549.71 | 22.0 | 1,425.68 | 26.9 | 124.03 |
| Sep | 1,392.27 | 22.7 | 1,285.17 | 26.7 | 107.1 |
| Aug | 1,222.63 | 23.6 | 1,129.90 | 27.5 | 92.73 |
| Jul | 1,049.38 | 23.4 | 973.17 | 26.9 | 76.21 |
| Jun | 874.3 | 24.0 | 829.4 | 27.6 | 44.9 |
| May | 712.4 | 25.5 | 689.4 | 29.4 | 23.0 |
| Apr | 555.3 | 27.4 | 545.0 | 29.6 | 10.3 |
| Mar | 399.6 | 26.5 | 400.7 | 32.6 | -1.1 |
| Feb | 247.47 | 21.3 | 248.36 | 36.0 | -0.9 |
| Jan | 150.7 | 37.7 | 144.3 | 51.0 | 6.4 |
| Dec 2010 | 1577.9 | 31.3 | 1394.8 | 38.7 | 183.1 |
Source: http://english.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1
IIID Euro Area. The Markit Eurozone PMI® Composite Output Index, combining manufacturing and services with high correlation with euro zone GDP, improved from 46.5 in Oct to 47.0 in Nov, meaning contraction of private-sector economic activity for the third consecutive month (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8887). The output of all big-four economies of the euro zone—Germany, France, Italy and Spain—contracted simultaneously for the first time since Jul 2009. Chris Williamson, Chief Economist at Markit, finds that the data in the index are consistent with economic contraction of the euro zone by 0.6 percent in IVQ2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8887). Italy’s GDP could decline by 1 percent in IVQ2011 with France and Spain contracting by 0.5 percent. Germany could experience a milder decline but manufacturing is falling with weakness in export orders. The Markit Eurozone Manufacturing PMI® that is highly associated with euro zone manufacturing fell from 47.1 in Oct to 46.4 in Nov, which is the lowest reading in 28 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8840). Chris Williamson, Chief Economist at Markit, finds that production and new orders declined at the fastest rates since the first half of 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8840). All individual indexes of countries in the report fell for the first time since the middle of 2009.
Table EUR provides the regional country data table for the euro zone. The Nov index is consistent with a rate of contraction of manufacturing output at 2 percent in the final quarter of 2011. The debt crisis has introduced significant uncertainty in regional business. Table EUR provides the regional country data table for the euro zone.
Table EUR, Euro Area Economic Indicators
| GDP | IIIQ2011 ∆% 0.2; IIIQ2011/IIIQ2010 ∆% 1.4 Blog 12/04/11 |
| Unemployment | Oct 2011: 10.3% unemployment rate Oct 2011: 16.294 million unemployed Blog 12/02/11 |
| HICP | Sep month ∆%: 0.8 12 months Sep ∆%: 3.0 |
| Producer Prices | Euro Zone industrial producer prices Oct ∆%: 0.1 |
| Industrial Production | Sep month ∆%: -2.0 |
| Industrial New Orders | Sep month ∆%: minus 6.4 Sep 12 months ∆%: 1.6 |
| Construction Output | Jul month ∆%: 1.4 |
| Retail Sales | Oct month ∆%: minus 0.4 |
| Confidence and Economic Sentiment Indicator | Sentiment 93.7 Nov 2011 down from 107 in Dec 2010 Confidence minus 20.4 Oct 2011 down from minus 11 in Dec 2010 Blog 12/02/11 |
| Trade | Jan-Sep 2011/2010 Exports ∆%: 14.4 |
| HICP, Rate of Unemployment and GDP | Historical from 1999 to 2011 Blog 12/02/11 9/04/11 |
Links to blog comments in Table EUR: 12/04/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/21/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/30/11 http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/propddddderity-without-inflation-world.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
10/02/11 http://cmpassocregulationblog.blogspot.com/2011/10/us-growth-standstill-at-08-percent.html
09/25/11 http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html
09/18/11 http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
09/04/11 http://cmpassocregulationblog.blogspot.com/2011/09/global-growth-standstill-recession.html
Euro zone GDP growth relative to the prior quarter and year earlier quarter is shown in Table 37. GDP grew in IIIQ2011 at the same rate of 0.2 percent as in IIQ2011, which is much lower than 0.8 percent in IQ2011. Growth has also decelerated to 1.4 percent in IIIQ2011 relative to the same quarter a year earlier, which is lower than 1.6 percent in IIQ2011 and 2.4 percent in IQ2011. The initial growth momentum of the first quarter of 2011 has not been sustained in IIQ2011 and IIIQ2011.
Table 37, Euro Zone, GDP Growth on Prior Quarter and Year Earlier Quarter, ∆%
| Quarter on Prior Quarter ∆% | Quarter on Same Quarter Year Earlier ∆% | |
| IIIQ2011 | 0.2 | 1.4 |
| IIQ2011 | 0.2 | 1.7 |
| IQ2011 | 0.8 | 2.4 |
| IV2010 | 0.3 | 2.0 |
| IIQ2010 | 0.4 | 2.0 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
The growth rates of the euro zone on a quarter relative to the prior quarter of GDP chain-linked volumes and expenditure components in Table 38 also provide evidence of declining momentum from IQ2011 into IIQ2011 and IIIQ2011. Household consumption fell 0.5 percent in the second quarter of 2011 compared with growth of 0.2 percent in the first quarter of 2011 but rebounded with growth of 0.3 percent in IIIQ2011. There was sharp rise of gross fixed capital formation (GFCF) by 1.9 percent in IQ2011, an excellent result relative to decline by 0.4 percent in IVQ2010 but GFCF was flat in IIQ2011 and increased only slightly by 0.1 percent in IIIQ2011. Export growth rebounded from 1.1 percent in IIQ2011 to 1.5 percent in IIIQ2011. Import growth has been stable around 1 percent with the exception of only 0.3 percent in IIQ2011.
Table 38, Euro Zone, GDP and Expenditure Components, Chain-Linked Volumes, ∆% on Prior Quarter
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 0.2 | 0.2 | 0.8 | 0.3 |
| Household | 0.3 | -0.5 | 0.1 | 0.4 |
| Govt. Cons. | 0.0 | -0.1 | 0.0 | 0.0 |
| GFCF | 0.1 | 0.0 | 1.9 | -0.4 |
| Exports | 1.5 | 1.1 | 1.6 | 1.2 |
| Imports | 1.1 | 0.3 | 1.0 | 1.0 |
Notes: Cons.: Consumption; Govt.: Government, GFCG: Gross fixed capital formation
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
Growth rates of GDP on a quarter relative to the same quarter a year earlier in Table 39 also confirm the declining growth momentum in the euro zone. Growth of household consumption slowed to 0.3 percent in both IIIQ2011 and IIQ2011 compared with yearly rates around 1 percent for the earlier three quarters. Exports grew 5.5 percent in IIIQ2011, which is much lower than 11.5 percent in IVQ2010 and 9.7 percent in IQ2011. There is similar deceleration in growth of imports from 10.7 percent in IVQ2010 to 3.6 percent in IIIQ2011.
Table 39, Euro Zone, GDP and Expenditure Components, Chain-Linked Volumes, ∆% on Same Quarter Year Earlier
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 1.4 | 1.7 | 2.4 | 2.0 |
| Household | 0.3 | 0.3 | 1.0 | 1.1 |
| Govt. Cons. | -0.1 | 0.1 | 0.3 | -0.2 |
| GFCF | 1.6 | 1.6 | 3.7 | 1.2 |
| Exports | 5.5 | 6.2 | 9.7 | 11.5 |
| Imports | 3.6 | 4.4 | 8.1 | 10.7 |
Notes: Cons.: Consumption; Govt.: Government, GFCG: Gross Fixed Capital Formation
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
GDP growth in the euro zone and contributions of expenditure components to change in GDP from the prior quarter are shown in Table 40. Growth 0.2 percent in IIIQ2011 was driven by contribution of 0.2 percentage points of household consumption and exports contribution of 0.6 percentage points.
Table 40, Euro Zone, Contribution of Expenditures Components to Change in GDP from Prior Quarter, %
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 0.2 | 0.2 | 0.8 | 0.3 |
| Household | 0.2 | -0.3 | 0.1 | 0.2 |
| Govt. | 0.0 | 0.0 | 0.0 | 0.0 |
| GFCF | 0.0 | 0.0 | 0.4 | -0.1 |
| Change in | -0.2 | 0.1 | 0.1 | 0.1 |
| Exports | 0.6 | 0.5 | 0.7 | 0.5 |
| Imports | -0.4 | -0.1 | -0.4 | -0.4 |
Notes: Cons.: Consumption; Govt.: Government, GFCG: Gross Fixed Capital Formation; Inv. : Inventories
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
The contributions of expenditure components to GDP change in the euro zone relative to the same quarter a year earlier are provided in Table 41. Momentum in IQ2011 was provided by 3.6 percentage points contributed by exports but the contribution has been shrinking steadily from 4.3 percentage points in IVQ2010 to 2.3 percentage points in IIIQ2011. Paralysis of world demand for exports could have strong effects on the economy of the euro zone. Gross fixed capital formation (GFCF) also proved important in IQ2011 with contribution of 0.7 percentage points but that has declined to 0.3 percentage points in IIIQ2011. Household consumption provided 0.6 percentage points in IQ2011 but only 0.2 percentage points in both IIIQ2011 and IIQ2011.
Table 41, Euro Zone, Contribution of Expenditures Components to Change in GDP from Same Quarter Year Earlier, %
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 1.4 | 1.7 | 2.4 | 2.0 |
| Household | 0.2 | 0.2 | 0.6 | 0.6 |
| Govt. | 0.0 | 0.0 | 0.1 | 0.0 |
| GFCF | 0.3 | 0.3 | 0.7 | 0.2 |
| Change in | 0.0 | 0.3 | 0.4 | 0.7 |
| Exports | 2.3 | 2.5 | 3.8 | 4.3 |
| Imports | -1.5 | -1.7 | -3.1 | -3.8 |
Notes: Cons.: Consumption; Govt.: Government, GFCG: Gross Fixed Capital Formation; Inv. : Inventories
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
Euro zone contributions of gross value added by industry to change in GDP from the prior quarter are shown in Table 42. Growth in IIIQ2011 originated in 0.2 percentage points contributed by construction with everything else flat.
Table 42, Euro Zone, Contributions of Gross Value Added by Industry to Change in GDP from Prior Quarter, Chain-Linked Volumes %
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 0.2 | 0.2 | 0.8 | 0.3 |
| AG | 0.0 | 0.0 | 0.0 | 0.0 |
| IND | 0.0 | 0.1 | 0.2 | 0.2 |
| MFG | 0.0 | 0.1 | 0.3 | 0.2 |
| CONST | 0.2 | 0.0 | 0.1 | -0.1 |
| TRADE | 0.0 | 0.0 | 0.2 | 0.1 |
| FS | 0.0 | 0.0 | 0.1 | 0.0 |
| TAXES LESS | 0.0 | 0.0 | 0.1 | 0.0 |
Note: AG: Agriculture, Hunting & Fishing; IND: Industry, including Electricity; CONST: Construction; TRADE TRANSP: Trade, Transport & Communication Services; FS: Financial Services and Insurance Activities; OTHER SERV: Other Services
Sources: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
Euro zone contributions of gross value added by industry to change in GDP from the same quarter a year earlier are shown in Table 43. Manufacturing, 0.6 percentage points, trade and transportation, 0.3 percentage points, and financial services, 0.1 percentage points, are the drivers of growth in IIIQ2011.
Table 43, Euro Zone, Contributions of Gross Value Added by Industry to Change in GDP from Same Quarter Year Earlier, Chain-Linked Volumes %
| IIIQ2011 | IIQ2011 | IQ2011 | IVQ2010 | |
| GDP | 1.4 | 1.7 | 2.4 | 2.0 |
| AG | 0.0 | 0.0 | 0.0 | 0.0 |
| IND | 0.5 | 0.7 | 0.9 | 1.1 |
| MFG | 0.6 | 0.8 | 1.0 | 1.1 |
| CONST | 0.0 | 0.0 | 0.1 | -0.2 |
| TRADE | 0.3 | 0.4 | 0.6 | 0.5 |
| FS | 0.1 | 0.0 | 0.0 | 0.0 |
| TAXES LESS | 0.1 | 0.1 | 0.4 | 0.1 |
Note: AG: Agriculture, Hunting & Fishing; IND: Industry, including Electricity; CONST: Construction; TRADE TRANSP: Trade, Transport & Communication Services; FS: Financial Services and Insurance Activities; OTHER SERV: Other Services
Sources: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
Euro zone GDP growth of several members of the euro zone is provided in Table 44. Germany continues to grow faster than the rest of the euro area with growth of 0.5 percent in IIIQ2011 and 2.6 percent relative to the same quarter a year earlier. France grew 0.4 percent in IIIQ2011 and 1.6 percent relative to the same quarter a year earlier. Weak economic growth constitutes a constraint in fiscal consolidation required in most of the euro zone countries.
Table 44, Euro Zone, GDP, Quarter over Prior Quarter and Quarter over Same Quarter Year Earlier ∆%
| Sep 2011 | IIIQ2011/ | IIIQ2011/ IIQ2011 ∆% |
| Euro Zone | 0.2 | 1.4 |
| Germany | 0.5 | 2.6 |
| France | 0.4 | 1.6 |
| Netherlands | -0.3 | 1.1 |
| Finland | 0.9 | 2.7 |
| Belgium | 0.0 | 1.8 |
| Portugal | -0.4 | -1.7 |
| Ireland | NA | NA |
| Italy | NA | NA |
| Greece | 0.1 | -5.2 |
| Spain | 0.0 | 0.8 |
| UK | 0.5 | 0.5 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06122011-AP/EN/2-06122011-AP-EN.PDF
Table 45 provides the rate of growth of GDP from 1996 to 2010 and the forecast for 2011 for the euro area and its four largest economies, Germany (DEU), France, Italy and Spain. Germany and Spain show the highest growth rates in 2006 and 2007. Only Germany had initially high rates of growth in the recovery while the three other major economies have underperformed in the expansion from the global recession of 2008 and 2009.
Table 45, Euro Zone, Growth Rates of GDP of Four Largest Economies, 1996-2011, ∆%
| Euro Area | DEU | France | Italy | Spain | |
| 2011* | 1.5 | 2.9 | 1.6 | 0.5 | 0.7 |
| 2010 | 1.9 | 3.7 | 1.5 | 1.5 | -0.1 |
| 2009 | -4.2 | -5.1 | -2.7 | -5.1 | -3.7 |
| 2008 | 0.4 | 1.1 | -0.1 | -1.2 | 0.9 |
| 2007 | 3.0 | 3.3 | 2.3 | 1.7 | 3.5 |
| 2006 | 3.2 | 3.7 | 2.5 | 2.2 | 4.1 |
| 2005 | 1.7 | 0.7 | 1.8 | 0.9 | 3.6 |
| 2004 | 2.2 | 1.2 | 2.5 | 1.7 | 3.3 |
| 2003 | 0.7 | -0.4 | 0.9 | 0.0 | 3.1 |
| 2002 | 0.9 | 0.0 | 0.9 | 0.5 | 2.7 |
| 2001 | 2.0 | 1.5 | 1.8 | 1.9 | 3.7 |
| 2000 | 3.8 | 3.1 | 3.7 | 3.7 | 5.0 |
| 1999 | 2.9 | 1.9 | 1.5 | 1.5 | 4.7 |
| 1998 | 2.8 | 1.9 | 1.4 | 1.4 | 4.5 |
| 1997 | 2.6 | 1.7 | 1.9 | 1.9 | 3.9 |
| 1996 | 1.5 | 0.8 | 1.1 | 1.1 | 2.5 |
Notes: DE: Germany; *Eurostat Forecast
Source: EUROSTAT
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsieb020
Advanced economies are experiencing weak demand. Table 46 provides the volume of retail sales in the euro zone from Jan to Oct 2011. Retail sales grew 0.4 percent in Oct but fell 0.4 percent in twelve months. Cumulative growth of retail sales in the first ten months of 2011 was flat and the annual equivalent rate is zero. The 12 months rates of growth have become negative since Mar.
Table 46, Euro Zone, Volume of Retail Sales, ∆%
| Month ∆% | 12 Months ∆% | |
| Oct 2011 | 0.4 | -0.4 |
| Sep | -0.6 | -1.4 |
| Aug | 0.1 | -0.1 |
| Jul | 0.2 | -0.4 |
| Jun | 0.6 | -0.8 |
| May | -1.1 | -1.8 |
| Apr | 0.8 | 1.1 |
| Mar | -0.8 | -1.4 |
| Feb | 0.2 | 1.1 |
| Jan | 0.2 | 0.6 |
| Jan-Oct ∆% | 0.0 | |
| AE ∆% | 0.0 |
AE: Annual equivalent
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-05122011-AP/EN/4-05122011-AP-EN.PDF
Growth rates of retail sales of the euro zone by products are in Table 47. There is weakness in all products without an increase in any segment in the 12-month rates of change. All product categories grew in the month of Oct with significant strength of 0.5 percent in nonfood product excluding automotive fuel.
Table 47, Euro Zone, Volume of Retail Sales by Products, ∆%
| Oct 2011 | Month ∆% | 12 Months ∆% |
| Total | 0.4 | -0.4 |
| Food, Drinks, Tobacco | 0.2 | -0.4 |
| Nonfood Products ex Automotive Fuel | 0.5 | -0.6 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-05122011-AP/EN/4-05122011-AP-EN.PDF
Monthly and 12 months rates of change of retail sales by member countries of the euro zone are shown in Table 48 for Oct 2011. Retail sales are weak throughout the euro zone. The final line provides retail sales for the UK, which is not a member of the euro zone. Germany, France and the UK are the largest economies with positive growth of retail sales in the 12 months ending in Oct.
Table 48, Euro Zone, Volume of Retail Sales by Member Countries, ∆%
| Oct 2011 | Month ∆% | 12 Months ∆% |
| Euro Zone | 0.4 | -0.4 |
| Germany | 0.7 | 1.4 |
| France | 0.8 | 2.0 |
| Netherlands | NA | NA |
| Finland | -1.6 | 3.8 |
| Belgium | 0.4 | -0.4 |
| Portugal | -3.3 | -9.7 |
| Ireland | 0.1 | -3.0 |
| Italy | NA | NA |
| Greece | NA | NA |
| Spain | -0.8 | -6.8 |
| UK | 0.7 | 2.0 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-05122011-AP/EN/4-05122011-AP-EN.PDF
IIIE Germany. The Markit Germany Composite Output Index, combining output of the manufacturing and service sectors, fell below the zone of 50.0 below zero for the first time since Jul 2009, registering 49.4 in Nov compared with 50.3 in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8876
). The decline in manufacturing production offset the Markit Germany Services Business Activity Index at 50.3 in Nov, which was lower than 50.6 in Oct. New work in services is experiencing the longest period of decline since the global recession in 2008 and 2009. Tim Moore, Senior Economist at Markit and author of the report, evaluates that stagnation may be the best outcome for the German economy in IVQ2011. The Markit/BME Germany Purchasing Managers’ Index® (PMI®) fell from 49.1 in Oct to 47.9 in Nov for the seventh consecutive month (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8860). The index registered the fastest deterioration of overall manufacturing since Jul 2009. While the declines in output and new orders were the fastest since Jun 2009, the rates of decline are much more benign than those experienced during the global recession of 2008 and 2009. Tim Moore, Senior Economist at Markit and author of the report, finds resilience in output of consumer goods that compensated for declines in manufacturing export orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8860). Table DE provides the country data table for Germany.
Table DE, Germany, Economic Indicators
| GDP | IIIQ2011 0.5 ∆%; III/Q2011/IIIQ2010 ∆% 2.5 |
| Consumer Price Index | Oct month SA ∆%: 0.0 |
| Producer Price Index | Oct month ∆%: 0.0 |
| Industrial Production | Oct month SA ∆%: minus 0.8 |
| Machine Orders | Oct month ∆%: 5.2 |
| Retail Sales | Oct Month ∆% 0.7 12 Months ∆% -0.4 Blog 12/02/11 |
| Employment Report | Employment Accounts: |
| Trade Balance | Exports Oct 12 month NSA ∆%: 3.8 Blog 12/11/11 |
Links to blog comments in Table DE: 12/04/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/21/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/30/11 http://cmpassocregulationblog.blogspot.com/2011/10/properity-without-inflation-world.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
10/02/11 http://cmpassocregulationblog.blogspot.com/2011/10/us-growth-standstill-at-08-percent.html
09/18/11 http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
09/04/11 http://cmpassocregulationblog.blogspot.com/2011/09/global-growth-standstill-recession.html
The production industries index of Germany in Table 49 shows growth of 0.8 percent in Oct but 12-month rate of increase of only 0.3. Germany’s industry suffered decline of 11.6 percent in Oct 2009 relative to Oct 2008. Growth in Oct 2010 was 2.1 percent and 8.7 percent in 12 months. The performance of industry from 2004 to 2007 was vigorous with 7.3 percent in 2006 and 10.2 percent in 2007. Data for the production industries index of Germany fluctuate sharply from month to month and also in 12 months rates.
Table 49, Germany, Production Industries, Month and 12 Months ∆%
| 12 Months ∆% Non-adjusted | Month ∆% Seasonally and Calendar Adjusted | |
| Oct 2011 | 0.3 | 0.8 |
| Oct 2010 | 8.7 | 2.1 |
| Oct 2009 | -11.6 | -1.8 |
| Oct 2008 | -3.7 | -2.1 |
| Oct 2007 | 10.2 | 0.0 |
| Oct 2006 | 7.3 | -0.4 |
| Oct 2005 | 1.0 | 1.8 |
| Oct 2004 | -0.2 | 0.8 |
| Oct 2003 | 1.1 | 2.5 |
| Oct 2002 | 0.2 | -1.1 |
Table 50 provides production industries by components from Mar to Oct 2011. The production indexes increased 1.4 percent in Oct. Jul was an excellent month with growth of 3.2 percent but performance was negative in Jun by 0.8 percent, in Aug by 0.4 percent and sharp decline of 2.7 percent in Sep. Manufacturing increased 1.6 percent in Oct. Manufacturing rose 3.6 percent in Jul such that the decline by 0.4 percent in Aug is relative to a high level in Jul but then fell another 3.0 percent in Sep. The same is true of investment goods that gained 1.1 percent in Aug and 5.2 percent in Jul but fell 4.7 percent in Sep, rebounding 2.0 percent in Oct. It is quite difficult to analyze trends in these data.
Table 50, Germany, Production Industries, Industry and Components, Month ∆%
| Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | |
| Production | 0.8 | -2.8 | -0.4 | 3.2 | -0.8 | 0.8 | 0.0 | 1.2 |
| Industry | 0.8 | -2.8 | -0.4 | 3.5 | -0.9 | 1.2 | 0.6 | 1.0 |
| Mfg | 0.8 | -2.8 | -0.4 | 3.6 | -1.0 | 1.3 | 0.4 | 1.0 |
| Intermediate | -0.4 | -2.7 | -0.4 | 2.3 | 0.7 | 0.7 | 1.1 | 0.4 |
| Investment | 2.2 | -4.5 | 1.1 | 5.2 | -2.1 | 2.3 | 0.0 | 1.5 |
| Durable Goods | 2.5 | -0.2 | -9.6 | 15.0 | -6.3 | 0.2 | 0.8 | 1.2 |
| Nondurable Goods | -0.5 | 1.6 | -3.3 | -0.1 | -0.3 | 0.0 | 0.6 | 1.2 |
| Energy | 1.1 | -4.0 | 0.9 | -0.8 | 3.2 | -4.8 | -4.3 | -0.3 |
Seasonally Calendar Adjusted
Table 51 provides 12 months unadjusted rates of growth of industry and components in Germany from Jan 2010 to Oct 2011. Although there are sharp fluctuations in the data there is suggestion of deceleration that would be expected from much higher earlier rates. Growth rates in the recovery from the global recession from IVQ2007 to IIQ2009 were initially very vigorous in comparison with the growth rates before the contraction that are shown in the bottom part of Table 51.
Table 51, Germany, Industry and Components, 12 Months ∆% Unadjusted
| IND | MFG | INTG | INVG | DG | NDG | EN | |
| 2011 | |||||||
| Oct | 1.4 | 1.5 | 0.4 | 4.3 | -2.0 | -3.4 | -10.8 |
| Sep | 6.6 | 6.7 | 6.7 | 9.1 | 3.7 | 0.1 | -9.3 |
| Aug | 13.0 | 12.8 | 11.1 | 20.5 | 4.6 | 1.4 | -5.2 |
| Jul | 8.3 | 8.4 | 6.8 | 13.2 | 7.8 | -0.1 | -9.4 |
| Jun | 1.0 | 1.0 | 1.8 | 2.0 | -10.5 | -2.1 | -6.3 |
| May | 21.4 | 21.5 | 18.0 | 28.2 | 21.6 | 13.2 | -11.7 |
| Apr | 7.5 | 7.6 | 6.2 | 11.0 | 4.8 | 2.3 | -7.5 |
| Mar | 10.7 | 10.9 | 10.2 | 14.8 | 8.5 | 1.9 | -0.3 |
| Feb | 17.0 | 17.2 | 16.3 | 22.4 | 11.0 | 6.1 | -2.9 |
| Jan | 17.1 | 17.2 | 17.0 | 23.2 | 11.2 | 4.4 | -3.0 |
| 2010 | |||||||
| Dec | 17.5 | 17.6 | 14.5 | 26.3 | 9.1 | 2.9 | 4.8 |
| Nov | 13.8 | 13.8 | 13.1 | 19.0 | 7.9 | 3.6 | 2.9 |
| Oct | 9.9 | 10.1 | 10.1 | 13.9 | 6.5 | 0.9 | 0.2 |
| Sep | 9.5 | 9.3 | 12.1 | 10.0 | 7.9 | 1.7 | -2.4 |
| Aug | 17.2 | 17.2 | 19.0 | 20.3 | 19.5 | 6.9 | -2.1 |
| Jul | 9.1 | 8.8 | 12.7 | 8.7 | 7.2 | 0.9 | -0.2 |
| Jun | 16.2 | 16.1 | 20.5 | 16.0 | 20.5 | 5.3 | -2.5 |
| May | 13.3 | 13.3 | 20.2 | 11.6 | 10.7 | 1.7 | 12.8 |
| Apr | 14.9 | 14.8 | 21.8 | 15.3 | 8.5 | 0.0 | 9.9 |
| Mar | 14.2 | 14.5 | 20.4 | 11.7 | 11.8 | 6.4 | 7.2 |
| Feb | 7.1 | 7.5 | 10.8 | 7.0 | 7.4 | -1.2 | 5.4 |
| Jan | 0.6 | 0.9 | 6.7 | -3.4 | -0.4 | -3.9 | 3.3 |
| Dec 2010 | 17.5 | 17.6 | 14.5 | 26.3 | 9.1 | 2.9 | 4.8 |
| Dec 2009 | -3.3 | -3.2 | 3.3 | -9.9 | -0.1 | 1.1 | 3.8 |
| Dec 2008 | -7.6 | -7.4 | -14.4 | -5.5 | -11.2 | 3.7 | -9.0 |
| Dec 2007 | 0.1 | -0.3 | -0.6 | 2.5 | -10.0 | -2.6 | 1.7 |
| Dec 2006 | 3.1 | 3.1 | 5.2 | 2.3 | 8.7 | -1.0 | -5.4 |
| Dec 2005 | 5.8 | 5.8 | 3.5 | 8.9 | 3.2 | 2.2 | 0.6 |
| Dec 2004 | 5.2 | 5.6 | 7.6 | 3.4 | 0.9 | 5.7 | 9.6 |
| Dec 2003 | 5.5 | 5.3 | 5.6 | 6.3 | 1.6 | 4.6 | 0.3 |
| Dec 2002 | 3.7 | 3.4 | 5.3 | 3.4 | -5.9 | 2.2 | -2.6 |
Note: IND: Industry; MFG: Manufacturing; INTG: Intermediate Goods; INVG: Investment Goods; DG: Durable Goods; NDG: Nondurable Goods; EN: Energy
Table 52 provides the month and 12 months rates of growth of manufacturing in Germany in 2011. There are fluctuations in both the rates for a month and in the past 12 months. Deceleration appears in the annual equivalent rate of 12.7 percent for Jan-May but only 0.2 percent in Jun-Oct.
Table 52, Germany, Manufacturing Month and 12 Months ∆%
| Month ∆% SA and Calendar Adjusted | 12 Months ∆% NSA | |
| Oct | 0.8 | 1.5 |
| Sep | -2.8 | 6.7 |
| Aug | -0.4 | 12.8 |
| Jul | 3.6 | 8.4 |
| Jun | -1.0 | 1.0 |
| AE ∆% Jun-Oct | 0.2 | |
| May | 1.3 | 21.5 |
| Apr | 0.4 | 7.6 |
| Mar | 1.0 | 10.9 |
| Feb | 1.6 | 17.2 |
| Jan | 0.7 | 17.2 |
| AE ∆% Jan-May | 12.7 | |
| Dec | 0.3 | 17.6 |
AE: Annual Equivalent
Broader perspective since 2002 is provided by Chart 11 of the Statistiche Bundesamt Deutschland, Federal Statistical Agency of Germany. The index rises by more than one third between 2003 and 2008 with sharp fluctuations and then collapses during the global recession during 2008. Recovery has been in a steep upward trajectory that has recovered at the more recent peaks the losses during the contraction.
Chart 11, Germany, Production Industries, Not Adjusted, 2005=100
Source: Statistiche Bundesamt Deutschland
More detail is provided by Chart 12 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2007 to 2011. There could be some flattening in recent months as depicted by trend.
Chart 12, Germany, Production Index, Not Adjusted Index and Trend, 2005=100
Source: Statistiche Bundesamt Deutschland
Several tables and charts facilitate analysis of machinery orders in Germany. Table 53 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany. The same behavior is observed for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and some negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. Total orders jumped 5.2 percent in Oct 2011 mostly because of the sharp increase of foreign orders by 8.3 percent while domestic orders increased only 1.4 percent.
Table 53, Germany, Volume of Orders Received in Manufacturing, Total, Domestic and Foreign, ∆%
| Total | Total | Foreign | Foreign | Home | Home | |
| 2011 | ||||||
| Oct | 2.0 | 5.2 | 4.5 | 8.3 | -0.9 | 1.4 |
| Sep | 2.2 | -4.6 | 1.1 | -5.8 | 3.5 | -3.0 |
| Aug | 6.5 | -1.4 | 4.3 | 0.3 | 9.3 | -3.2 |
| Jul | 5.7 | -2.4 | 5.3 | -7.0 | 6.1 | 3.7 |
| Jun | 2.9 | 0.8 | 6.2 | 11.0 | -1.2 | -10.1 |
| May | 22.5 | 1.9 | 15.7 | -5.2 | 30.5 | 10.7 |
| Apr | 7.3 | 2.9 | 10.5 | 3.5 | 3.4 | 2.2 |
| Mar | 8.8 | -2.7 | 11.6 | -2.8 | 5.5 | -2.6 |
| Feb | 21.1 | 1.8 | 24.8 | 1.6 | 16.9 | 2.1 |
| Jan | 20.1 | 2.4 | 23.6 | 0.9 | 16.0 | 4.3 |
| AE ∆% | ||||||
| 2010 | ||||||
| Dec | 22.2 | -2.9 | 27.3 | -3.0 | 15.8 | -2.9 |
| Nov | 21.5 | 4.9 | 26.8 | 7.6 | 15.6 | 1.7 |
| Oct | 14.1 | 1.7 | 17.7 | 1.4 | 10.4 | 2.0 |
| Sep | 13.9 | -2.8 | 16.0 | -4.9 | 11.6 | -0.2 |
| Aug | 23.5 | 3.3 | 31.9 | 6.5 | 14.4 | -0.5 |
| Jul | 14.2 | -1.9 | 21.7 | -3.4 | 6.3 | -0.2 |
| Jun | 28.5 | 3.3 | 32.0 | 5.4 | 24.3 | 0.9 |
| May | 24.4 | 0.5 | 28.9 | 1.0 | 19.9 | -0.1 |
| Apr | 29.3 | 2.7 | 33.0 | 2.7 | 25.2 | 2.5 |
| Mar | 29.4 | 5.6 | 32.3 | 6.2 | 26.4 | 5.0 |
| Feb | 23.4 | -0.7 | 27.6 | -0.7 | 18.6 | -0.8 |
| Jan | 16.7 | 4.7 | 23.6 | 4.4 | 9.7 | 5.2 |
| Dec 2009 | 9.2 | -2.1 | 10.6 | -2.4 | 7.4 | -1.7 |
| Dec 2008 | -28.2 | -7.2 | -31.5 | -9.8 | -23.7 | -4.0 |
| Dec 2007 | 7.1 | -1.5 | 9.1 | -2.4 | 4.5 | -0.5 |
| Dec 2006 | 2.9 | 0.3 | 3.4 | 0.0 | 2.2 | 0.5 |
| Dec 2005 | 4.9 | -0.9 | 10.5 | -1.6 | -1.5 | 0.0 |
| Dec 2004 | 12.7 | 6.6 | 12.9 | 8.4 | 12.7 | 4.9 |
| Dec 2003 | 10.7 | 2.4 | 16.4 | 5.4 | 5.1 | -0.8 |
| Dec 2002 | -0.2 | -3.4 | -0.8 | -6.6 | 0.2 | -0.3 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted
Orders for investment goods of Germany are shown in Table 54. The jump of foreign orders by 12.2 percent in Oct 2011 is the driver of the increase by 7.8 percent for total orders while domestic orders increased only 0.9 percent. The same behavior as for total orders is observed in the form of declining orders from all sources for total orders for investment goods. There has been evident deceleration from 2010 and early 2011 with growth rates falling from two digit levels to single digits and multiple negative changes. An important aspect of Germany’s economy shown in Tables 10 and 11 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007.
Table 54, Germany, Volume of Orders Received of Investment Goods Industries, Total, Foreign and Domestic, ∆%
| Total 12 M | Total M | Foreign 12 M | Foreign M | Home 12 M | Home M | |
| 2011 | ||||||
| Oct | 5.1 | 7.8 | 9.9 | 12.2 | -2.3 | 0.9 |
| Sep | 2.8 | -4.7 | 1.8 | -5.7 | 4.6 | -2.9 |
| Aug | 6.0 | -1.1 | 3.5 | 0.7 | 10.2 | -3.7 |
| Jul | 8.5 | -6.3 | 7.7 | -11.9 | 9.6 | 3.6 |
| Jun | 7.1 | 3.1 | 10.6 | 17.1 | 1.2 | -14.8 |
| May | 26.8 | 2.8 | 17.9 | -7.0 | 40.4 | 19.0 |
| Apr | 11.8 | 5.0 | 15.6 | 6.7 | 6.3 | 2.2 |
| Mar | 10.7 | -5.3 | 13.7 | -4.8 | 6.5 | -6.1 |
| Feb | 28.9 | 3.5 | 32.8 | 3.3 | 23.1 | 3.8 |
| Jan | 24.3 | 1.4 | 28.6 | 0.5 | 17.9 | 2.6 |
| 2010 | ||||||
| Dec | 27.3 | -4.6 | 31.0 | -6.1 | 21.3 | -2.1 |
| Nov | 30.1 | 8.1 | 35.9 | 12.2 | 21.5 | 2.2 |
| Oct | 20.6 | 1.7 | 23.9 | 0.3 | 16.0 | 4.0 |
| Sep | 18.1 | -3.9 | 20.4 | -6.2 | 14.6 | -0.2 |
| Aug | 29.3 | 6.8 | 42.8 | 10.4 | 12.0 | 1.4 |
| Jul | 14.1 | -4.7 | 28.4 | -6.9 | -2.3 | -1.3 |
| Jun | 33.5 | 5.6 | 41.3 | 8.8 | 22.2 | 0.7 |
| May | 25.9 | 2.0 | 35.6 | 1.8 | 13.6 | 2.5 |
| Apr | 30.1 | 2.2 | 40.1 | 3.2 | 17.4 | 0.6 |
| Mar | 26.2 | 7.5 | 33.8 | 8.6 | 16.1 | 5.7 |
| Feb | 20.3 | -1.9 | 30.3 | -1.5 | 8.1 | -2.5 |
| Jan | 16.9 | 4.6 | 29.5 | 3.3 | 2.5 | 6.6 |
| Dec 2009 | 8.1 | -1.4 | 13.6 | -1.9 | 0.5 | -0.8 |
| Dec 2008 | -32.2 | -7.6 | -36.7 | -10.7 | -24.4 | -3.1 |
| Dec 2007 | 9.6 | -0.6 | 11.6 | -2.7 | 6.3 | 2.7 |
| Dec 2006 | 3.6 | 1.8 | 3.8 | 1.9 | 3.1 | 1.9 |
| Dec 2005 | 1.9 | -2.8 | 9.8 | -3.8 | -8.5 | -1.3 |
| Dec 2004 | 19.4 | 11.2 | 18.6 | 12.2 | 20.5 | 9.8 |
| Dec 2003 | 11.7 | 2.1 | 17.2 | 5.0 | 5.4 | -1.6 |
| Dec 2002 | -2.8 | -4.3 | -3.7 | -8.1 | -1.8 | 0.2 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted
Chart 13 of the German Statistisches Bundesamt Deutschland shows the sharp upward trend of total orders in manufacturing before the global recession. There is also an obvious upward trend in the recovery from the recession with Germany’s economy being among the most dynamic in the advanced economies until the slowdown in 2011.
Chart 13, Germany, Volume of Total Orders in Manufacturing, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
Chart 14 of the German Statistisches Bundesamt Deutschland provides unadjusted volume of total orders in manufacturing and a trend curve. The final segment on the right could be the beginning of flattening of the trend curve but it is early to reach conclusions.
Chart 14, Germany, Volume of Total Orders in Manufacturing and Trend, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
Twelve months rates of growth Germany’s exports and imports are shown in Table 55. There was sharp decline in the rates in Jun and Jul to single-digit levels. In the 12 months ending in Aug, exports rose 14.6 percent and imports 13.2 percent. In Sep, exports grew 10.6 percent relative to a year earlier and imports grew 12.0 percent. Growth rates in 12 months ending in Oct fell significantly to 3.8 percent for exports and 8.6 percent for imports. Growth had been much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.
Table 55, Germany, Exports and Imports NSA Euro Billions and 12 Months ∆%
| Exports EURO Billions | 12 Months | Imports | 12 Months | |
| Oct | 89.2 | 3.8 | 77.6 | 8.6 |
| Sep | 95.1 | 10.6 | 77.8 | 12.0 |
| Aug | 85.3 | 14.6 | 73.5 | 13.2 |
| Jul | 85.8 | 5.5 | 75.3 | 10.0 |
| Jun | 88.3 | 3.5 | 75.6 | 6.2 |
| May | 92.2 | 21.0 | 77.4 | 17.2 |
| Apr | 84.3 | 12.1 | 73.4 | 18.1 |
| Mar | 98.2 | 14.7 | 79.4 | 14.5 |
| Feb | 84.1 | 20.1 | 72.1 | 27.1 |
| Jan | 78.6 | 24.1 | 68.5 | 24.4 |
| Dec 2010 | 81.0 | 20.0 | 68.4 | 24.3 |
| Nov | 87.6 | 21.2 | 73.7 | 30.9 |
| Oct | 86.0 | 18.7 | 71.5 | 19.1 |
| Sep | 86.0 | 21.2 | 69.5 | 17.0 |
| Aug | 74.4 | 23.8 | 64.9 | 27.1 |
| Jul | 81.4 | 15.3 | 68.4 | 24.4 |
| Jun | 85.3 | 27.5 | 71.2 | 33.9 |
| May | 76.2 | 25.6 | 66.0 | 31.2 |
| Apr | 75.2 | 16.7 | 62.2 | 14.5 |
| Mar | 85.6 | 22.0 | 69.3 | 18.0 |
| Feb | 70.0 | 9.7 | 56.8 | 3.2 |
| Jan | 63.4 | -0.3 | 55.1 | -1.9 |
| Dec 2009 | 67.5 | 1.2 | 55.0 | -7.3 |
| Dec 2008 | 66.7 | -8.6 | 59.4 | -5.0 |
| Dec 2007 | 72.9 | -0.6 | 62.5 | -0.1 |
| Dec 2006 | 73.4 | 10.2 | 62.6 | 8.5 |
| Dec 2005 | 66.6 | 11.5 | 57.7 | 18.1 |
| Dec 2004 | 59.7 | 9.2 | 48.9 | 10.8 |
| Dec 2003 | 54.7 | 7.6 | 44.1 | 3.9 |
| Dec 2002 | 50.8 | 5.5 | ||
| Dec 2001 | 48.2 | -3.7 | ||
| Dec 2000 | 50.0 |
Table 56 provides monthly rates of growth of exports and imports of Germany. Exports surged in Aug after weak rates in Jul and Jun. Exports grew again 1.0 percent in Sep but fell 3.6 percent in Oct. The trade account has benefitted from declines in imports of 0.1 percent in Aug, 0.5 percent in Sep and 1.0 percent in Oct.
Table 56, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted
| Exports | Imports | |
| Oct 2011 | -3.6 | -1.0 |
| Sep | 1.0 | -0.5 |
| Aug | 3.2 | -0.1 |
| Jul | -1.0 | 0.5 |
| Jun | -0.5 | 0.0 |
| May | 3.2 | 3.0 |
| Apr | -4.0 | -1.6 |
| Mar | 5.6 | 2.6 |
| Feb | 2.5 | 3.2 |
| Jan | 0.2 | 4.5 |
| Dec 2010 | -0.4 | -3.2 |
Chart 15 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend.
Chart 15, Germany, Exports Original Value and Trend 2007-2011
Source: Statistisches Bundesamt Deutschland
Chart 16 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend.
Chart 16, Germany, Imports Original Value and Trend 2007-2011
Source: Statistisches Bundesamt Deutschland
Chart 17 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2007. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization in recent months.
Chart 17, Germany, Trade Balance Original and Trend 2007-2011
Source:
Statistisches Bundesamt Deutschland
There is extremely important information in Table 57 for the current sovereign risk crisis in the euro zone. Table 4 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Oct. German exports to other European Union members are 58.7 percent of total exports in Oct and 59.6 percent in Jan-Oct. Exports to the euro area are 39.0 percent in Oct and 40.0 percent in Jan-Oct. Exports to third countries are only 41.3 percent of the total in Oct and 40.4 percent in Jan-Oct. There is similar distribution for imports. Economic performance in Germany is closely related to its high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone.
Table 57, Germany, Structure of Exports and Imports by Region, € Billions and ∆%
| Oct 2011 | 12 Months | Jan-Oct | Jan-Oct 2011/ | |
| Total | 89.2 | 3.8 | 881.1 | 12.5 |
| A. EU | 52.4 % 58.7 | 0.8 | 524.9 % 59.6 | 11.4 |
| Euro Area | 34.8 % 39.0 | -0.4 | 352.1 % 40.0 | 10.2 |
| Non-euro Area | 17.7 % 19.8 | 3.1 | 172.7 % 19.6 | 14.0 |
| B. Third Countries | 36.8 % 41.3 | 8.3 | 356.2 % 40.4 | 14.1 |
| Total Imports | 77.6 | 8.6 | 750.7 | 14.6 |
| C. EU Members | 49.2 % 63.4 | 7.3 | 475.9 % 63.4 | 15.1 |
| Euro Area | 33.8 % 43.6 | 6.1 | 334.2 % 44.5 | 14.3 |
| Non-euro Area | 15.4 % 19.9 | 10.2 | 141.6 % 18.9 | 17.1 |
| D. Third Countries | 28.5 % 36.7 | 10.9 | 274.9 % 36.6 | 13.8 |
Notes: Total Exports = A+B; Total Imports = C+D
IIIF France. There was an improvement in the Markit France Services Activity Index for a two-month high from 44.6 in Oct to mild contraction at 49.6 in Nov that compensated the acceleration of decline in manufacturing. As a result the Markit France Composite Output Index, combining manufacturing and services, rose to a two-month high of 48.8 in Nov from 45.6 in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8906). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI®, finds that weak readings are suggesting contraction of the French economy in IVQ2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8906). Uncertainty from the euro zone debt crisis is driving down confidence in the service sector. The Markit France Manufacturing Purchasing Managers Index® (PMI®) fell to 47.3 in Nov from 48.5 in Oct, which is the lowest reading since Jun 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8861). The index has been in the contraction zone below 50 during four consecutive months. New orders fell at the sharpest rate since Apr 2009 and have fallen during five consecutive months. Jack Kennedy, Senior Economist at Markit, and author of the France Manufacturing PMI® find increasing weakness in domestic and export demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8861). Table FR provides France’s country data table.
Table FR, France, Economic Indicators
| CPI | Oct month ∆% 0.3 |
| PPI | Oct month ∆%: 0.5 Blog 12/04/11 |
| GDP Growth | IIIQ2011/IIQ2011 ∆%: 0.4 |
| Industrial Production | Oct/Sep SA ∆%: |
| Industrial New Orders | Mfg Sep/Aug ∆% -3.1 YOY ∆% 7.9 Blog 11/20/11 |
| Consumer Spending | Oct Manufactured Goods |
| Employment | IIIQ2011 Unemployed 2.631 million |
| Trade Balance | Oct Exports ∆%: month 0.5, 12 months 6.3 Oct Imports ∆%: month minus 0.3, 12 months 7.4 Blog 12/11/11 |
| Confidence Indicators | Historical averages 100 Oct: France 93 Mfg Business Climate 95 Retail Trade 93 Services 92 Building 99 Household 79 Blog 11/27/11 |
Links to blog comments in Table FR: 12/04/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/21/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/30 http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/properity-without-inflation-world.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
10/02/11 http://cmpassocregulationblog.blogspot.com/2011/10/us-growth-standstill-at-08-percent.html
09/25/11 http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html
09/18/11 http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
09/04/11 http://cmpassocregulationblog.blogspot.com/2011/09/global-growth-standstill-recession.html
France’s industrial production by segments is provided in Table 58. Total industry and manufacturing were flat while construction fell 0.5 percent and mining declined 0.2 percent. Manufacturing and industry both fell 2.1 percent in Sep. Manufacturing increased 3.1 percent in Oct relative to a year earlier and industry increased 2.3 percent in Oct relative to a year earlier.
Table 58, France, Industrial Production ∆%
| Oct/Sep | Sep/Aug | QOQ | YOY | |
| Industry | 0.0 | -2.1 | -0.6 | 2.3 |
| Manufacturing | 0.0 | -2.1 | -0.6 | 3.1 |
| Mining | -0.2 | -2.5 | -0.7 | -2.6 |
| Construction | -0.5 | -1.8 | -0.7 | 1.1 |
Note: QOQ: quarter on quarter; YOY:most recent quarter on the same quarter a year earlier
Source: http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20111209
Chart 18 of France’s Institut National de la Statistique et des Études Économiques shows indices of manufacturing in France from 2007 to 2011. Manufacturing, which is CZ in Chart 18, fell deeply in 2008 and part of 2009. All curves of industrial indices tend to flatten recently with subsequent mild declines.
Chart 18, France, Industrial Production Indices 2007-2011
Legend : CZ : Manufacturing - (C1) : Manufacture of food products and beverages - (C3) : Electrical and electronic equipment; machine equipment - (C4) : Manufacture of transport equipment - (C5) : Other manufacturing
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20111209
France has been running a trade deficit fluctuating around €6,000 million, as shown in Table 59. Exports rose 0.5 percent in Oct while imports fell 0.3 percent, resulting in a reduction of the trade deficit from €6571 million in Sep to €6248 million in Oct.
Table 59, France, Exports, Imports and Trade Balance, € Millions
| Exports | Imports | Trade Balance | |
| Oct 2011 | 35,827 | 42,075 | -6,248 |
| Sep | 35,663 | 42,204 | -6,571 |
| Aug | 37,813 | 42,437 | -4,624 |
| Jul | 35,087 | 41,548 | -6,461 |
| Jun | 34,773 | 40,067 | -5,294 |
| May | 34,658 | 41,342 | -6,684 |
| Apr | 34,410 | 41,445 | -7,035 |
| Mar | 35,232 | 41,110 | -5,878 |
| Feb | 34,762 | 41,080 | -6,318 |
| Jan | 34,399 | 40,828 | -6,429 |
| Dec 2010 | 33,711 | 39,165 | -5,454 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/nationales/surcadre_nationales.asp?TF=revue
Month and 12 months rates of growth of exports and imports of France are provided in Table 60. Exports increased 0.5 percent in Oct and grew 9.0 percent in 12 months. Imports fell 0.3 percent in Oct and grew 15.2 percent in 12 months. Growth of exports and imports has fluctuated in 2011 as a result of price surges of commodities and raw materials.
Table 60, France, Exports and Imports, Month and 12 Months ∆%
| Exports | Exports | Imports | Imports 12 Months ∆% | |
| Oct 2011 | 0.5 | 9.0 | -0.3 | 15.2 |
| Sep | -5.8 | 7.5 | -0.5 | 10.3 |
| Aug | 7.8 | 11.6 | 2.1 | 8.1 |
| Jul | 0.9 | 2.4 | 3.7 | 9.2 |
| Jun | 0.3 | 3.8 | -3.1 | 7.9 |
| May | 0.7 | 14.8 | -0.2 | 15.7 |
| Apr | -2.3 | 7.4 | 0.8 | 14.2 |
| Mar | 1.4 | 11.6 | 0.1 | 14.6 |
| Feb | 1.1 | 13.8 | 0.6 | 21.6 |
| Jan | 2.0 | 13.4 | 4.2 | 20.1 |
| Dec 2010 | -4.3 | 13.9 | -0.9 | 14.6 |
| Dec 2009 | 0.6 | -9.9 | -0.2 | -2.3 |
| Dec 2008 | 1.4 | -7.4 | -5.0 | -11.3 |
| Dec 2007 | 5.6 | 5.9 | 2.5 | 8.3 |
| Dec 2006 | 0.9 | 7.4 | 4.0 | 7.2 |
| Dec 2005 | -3.6 | 10.6 | -1.3 | 14.6 |
| Dec 2004 | -6.1 | -3.8 | -2.5 | 5.9 |
| Dec 2003 | 4.9 | 2.9 | 2.7 | 2.7 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/nationales/surcadre_nationales.asp?TF=revue
Table 61 provides cumulative growth of exports and imports and the trade balance in France from 2002 to 2011 (Oct). France’s trade deficit worsened after 2005 and remained high during the global recession. The deficit has swollen in 2011 as a result of the shocks of prices of commodities and raw materials.
Table 61, France, Cumulative Exports, Imports and Trade Balance, € Millions and ∆%, 2002-2011
| Exports | ∆% | Imports | ∆% | Balance | |
| 2011 Oct | 423,981 | 7.4 | 495,536 | 11.0 | -71,555 |
| 2010 | 394,728 | 14.0 | 446,255 | 14.1 | -51,527 |
| 2009 | 346,329 | -17.1 | 391,142 | -17.5 | -44,813 |
| 2008 | 417,632 | 2.7 | 473,852 | 5.5 | -56,220 |
| 2007 | 406,487 | 3.0 | 448,981 | 5.8 | -42,494 |
| 2006 | 394,621 | 9.5 | 424,549 | 10.4 | -29,928 |
| 2005 | 360,376 | 4.4 | 384,588 | 9.6 | -24,212 |
| 2004 | 345,256 | 5.4 | 350,996 | 7.0 | -5,740 |
| 2003 | 327,653 | NA | 327,884 | NA | -231 |
| 2002 | 333,423 | 329,875 | 3,548 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/nationales/surcadre_nationales.asp?TF=revue
IIIG Italy. The Markit/ADACI Business Activity Index rose from 43.9 in Oct to 45.8 in Nov (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8900
). Business activity in Italian services has contracted during seven consecutive months. Phil Smith, economist at Markit and author of the Italy Services PMI®, finds increasing evidence that the economy of Italy may have moved into recession during the second half of 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8900). Cost inflation fell to the lowest since Feb 2010. The Markit/ADACI Italy Purchasing Managers’ Index® (PMI®) rose slightly from the 28-month low of 43.3 in Oct to 44.0 in Nov in the fourth month of deterioration of Italy’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8842). The pace of decline of new business for Italy’s manufacturing continued at the two-and-a half year low registered in Oct and export business declined at the fastest rhythm since Aug 2009. Table IT provides the data table for Italy.
Table IT, Italy, Economic Indicators
| Consumer Price Index | Nov month ∆%: -0.1 |
| Producer Price Index | Oct month ∆%: -0.2 Blog 12/02/11 |
| GDP Growth | IIQ2011/IIQ2010 SA ∆%: 0.8 |
| Labor Report | Jul 2011 Participation rate 62% Employment ratio 56.9% Unemployment rate 8.0% Blog 09/04/11 |
| Industrial Production | Oct month ∆%: minus 0.9 |
| Retail Sales | Sep month ∆%: -0.4 Sep 12 months ∆%: minus 1.6 Blog 11/27/11 |
| Business Confidence | Mfg Nov 94.4, Jun 100.2 Construction Oct 80.1, Jun 74.5 Blog 12/02/11 |
| Consumer Confidence | Consumer Confidence Nov 96.5, Oct 93.3 Economy Nov 83.4, Oct 76.0 Blog 11/27/11 |
| Trade Balance | Balance Sep SA -€ 1350 million versus Aug -€ 2405 |
Links to blog comments in Table IT: 12/04/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/21/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
09/04/11 http://cmpassocregulationblog.blogspot.com/2011/09/global-growth-standstill-recession.html
Italy’s industrial production fell 0.9 percent in Oct and 4.2 percent in 12 months after declining 4.6 percent in Sep and 2.7 percent in 12 months, as shown in Table 62. Industry has accumulated decline of 3.5 percent in Jan-Oct. Industrial production fell 18.8 percent in 2009 after falling 3.5 percent in 2008.
Table 62, Italy, Industrial Production ∆%
| Month ∆% SA | 12 Months ∆% Calendar Adjusted | |
| Oct 2011 | -0.9 | -4.2 |
| Sep | -4.6 | -2.7 |
| Aug | 3.6 | 4.7 |
| Jul | -0.6 | -1.1 |
| Jun | -0.7 | 0.1 |
| May | -0.7 | 1.8 |
| Apr | 0.7 | 3.9 |
| Mar | 0.6 | 3.5 |
| Feb | 1.1 | 2.4 |
| Jan | -1.8 | 0.4 |
| Jan-Oct Cumulative ∆% | –3.5 | |
| Dec 2010 | 0.2 | 6.3 |
| Nov | -0.1 | 5.1 |
| Oct | 0.2 | 3.9 |
| Sep | 0.3 | 5.5 |
| Aug | -0.4 | 11.0 |
| Jul | 0.6 | 7.0 |
| Jun | 0.8 | 9.6 |
| May | 1.3 | 11.9 |
| Apr | 0.7 | 9.1 |
| Mar | -0.3 | 7.8 |
| Feb | -0.5 | 4.2 |
| Jan | 3.7 | 0.7 |
| Dec 2009 | -0.9 | -6.6 |
| Year | ||
| 2010 | 6.4 | |
| 2009 | -18.8 | |
| 2008 | -3.5 |
Source: http://www.istat.it/it/archivio/47509
Chart 19 of the Istituto Nazionale di Statistica of Italy captures the fluctuations of industrial production in 12 months rates of growth. Year-on-year growth of industrial production in Italy has moved into negative territory.
Chart 19, Italy, Industrial Production
Source: Istituto Nazionale di Statistica
Month and 12 months rates of growth of Italy’s industrial production and major categories are provided in Table 63 for Oct 2011. The 12 months rates of change are all negative and relatively high. Total industrial production fell 0.9 percent in Oct with positive growth only of 0.3 percent for consumer goods mostly because of growth of 1.1 percent by nondurables. Production of durable goods fell 3.0 percent in Oct and 8.2 percent in 12 months.
Table 63, Italy, Industrial Production Rate of Change ∆%
| Oct 2011 | Month ∆% | 12 Months ∆% |
| Total | -0.9 | -4.2 |
| Consumer Goods | 0.3 | -5.3 |
| Durable | -3.0 | -8.2 |
| Nondurable | 1.1 | -4.7 |
| Construction Goods | -1.5 | -3.0 |
| Intermediate Goods | -0.2 | -3.8 |
| Energy | -6.3 | -5.3 |
Source: http://www.istat.it/it/archivio/47509
IIIH United Kingdom. The Markit/CIPS UK Services PMI® finds a recurring pattern of weakness in manufacturing partly compensated by relatively stronger services. The Markit/CIPS Business Activity Index registered 52.1 in Nov, suggesting modest growth somewhat higher than 51.3 in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8903). The index has exceeded the no change zone of 50 in all the first ten months of 2011. Chris Williamson, Chief Economist at Markit, finds that the sharp drop of manufacturing combined with modest improvement in services suggests stagnation of the UK economy in IVQ2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8903).The Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) declined to 47.6 in Nov from the upwardly revised 47.8 in Oct for the lowest level since Jun 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=8853). There have been three consecutive monthly declines of manufacturing output in the UK and the rate of decline in Nov was the fastest in more than two-and-a-half year. Declining new orders determined the decline in output as a result of weak domestic and international markets. Table UK provides the data table for the United Kingdom.
Table UK, UK Economic Indicators
| CPI | Sep month ∆%: 0.6 |
| Output/Input Prices | Output Prices: |
| GDP Growth | IIIQ2011 prior quarter ∆% 05; year earlier same quarter ∆%: 0.5 |
| Industrial Production | Sep 2011/Sep 2010 NSA ∆%: Industrial Production minus 0.7; Manufacturing 2.0 |
| Retail Sales | Oct month SA ∆%: 0.6 |
| Labor Market | Aug-Oct Unemployment Rate: 8.3% |
| Trade Balance | Balance Sep minus ₤3,940 million |
Links to blog comments in Table UK:
12/04/11 http://cmpassocregulationblog.blogspot.com/2011/12/twenty-nine-million-in-job-stress.html
11/27/11 http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html
11/20/11 http://cmpassocregulationblog.blogspot.com/2011/11/iv-world-economic-slowdown.html
11/13/11 http://cmpassocregulationblog.blogspot.com/2011/11/recovery-without-hiring-world-financial.html
11/06/11 http://cmpassocregulationblog.blogspot.com/2011/11/twenty-nine-million-unemployed-or.html
10/30 http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html
10/23/11 http://cmpassocregulationblog.blogspot.com/2011/10/properity-without-inflation-world.html
10/16/11 http://cmpassocregulationblog.blogspot.com/2011/10/odds-of-slowdown-or-recession-united.html
10/09/11 http://cmpassocregulationblog.blogspot.com/2011/10/twenty-nine-million-unemployedunderempl.html
09/25/11 http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html
09/18/11 http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html
09/11/11 http://cmpassocregulationblog.blogspot.com/2011/09/financial-turbulence-wriston-doctrine.html
09/04/11 http://cmpassocregulationblog.blogspot.com/2011/09/global-growth-standstill-recession.html
The UK Office for National Statistics provides the output of production industries with revisions. Table 64 incorporates the revisions released on Oct 11, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2011/index.html) and the latest available data for Oct. Manufacturing accounts for 66.6 percent of the production industries of the UK and grew at only 0.3 percent in the 12 months ending in Oct, declining from the high revised rate of growth of 5.8 percent in the 12 months ending in Jan. Capital goods industries grew at 5.9 percent in the 12 months ending in Oct and have been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 10.9 percent in the 12 months ending in Jan. Mining and quarrying fell 11.5 percent in the 12 months ending in Oct mostly as a result of decline in gas and oil. The 12 months rates of growth of the entire index of production industries registered declines for all 12 months from Mar to Oct 2011. Energy and mining have been the factors of decline. The lower part of Table 64 provides rates of change of yearly values. Manufacturing output fell 9.6 percent in 2009 after falling 2.6 percent in 2008 but grew at 3.7 percent in the initial phase of the recovery in 2010.
Table 64, UK, Output of the Production Industries, Chain Volume Indices of Gross Value Added, 12 Months ∆%
| PROD | MNG | MFG | ENGY | CON | CON | CAP | |
| 2011 | |||||||
| Oct | -1.7 | -11.5 | 0.3 | -9.5 | -1.0 | -1.0 | 5.9 |
| Sep | -1.5 | -17.3 | 1.3 | -10.9 | -0.6 | 0.3 | 6.7 |
| Aug | -1.2 | -15.7 | 1.2 | -9.0 | -1.2 | 1.9 | 4.3 |
| Jul | -1.2 | -16.8 | 2.2 | -10.6 | 1.8 | 3.5 | 4.6 |
| Jun | -0.5 | -16.4 | 3.1 | -9.6 | 6.9 | 2.6 | 7.7 |
| May | -1.5 | -22.6 | 3.5 | -13.9 | 2.4 | 3.6 | 6.4 |
| Apr | -1.8 | -16.0 | 2.0 | -11.8 | 1.3 | 3.9 | 4.5 |
| Mar | -0.6 | -16.1 | 2.9 | -10.8 | 1.0 | 0.7 | 8.7 |
| Feb | 1.4 | -12.2 | 4.8 | -8.1 | 0.4 | 0.7 | 10.9 |
| Jan | 3.3 | -4.5 | 5.8 | -3.9 | 3.8 | -0.4 | 10.9 |
| 2010 | |||||||
| Dec | 3.3 | -4.8 | 4.3 | 0.8 | -4.6 | 3.1 | 8.0 |
| Nov | 2.7 | -6.2 | 5.1 | -3.1 | -9.4 | 1.2 | 9.5 |
| Oct | 2.7 | -6.2 | 5.3 | -3.1 | -9.5 | 4.2 | 7.3 |
| Sep | 3.7 | 2.9 | 5.2 | 1.2 | -9.0 | 2.1 | 9.7 |
| Aug | 3.8 | 0.3 | 6.2 | -1.1 | 0.2 | 3.5 | 12.7 |
| Jul | 1.6 | -8.9 | 5.0 | -7.1 | -1.4 | -0.9 | 12.7 |
| Jun | 1.2 | -9.5 | 3.9 | -6.6 | -6.2 | 0.5 | 9.6 |
| May | 2.5 | -1.0 | 3.5 | -1.4 | -2.6 | -3.3 | 12.2 |
| Apr | 0.9 | -5.9 | 2.1 | -3.6 | -3.7 | -6.3 | 10.1 |
| Mar | 2.2 | -1.4 | 3.2 | -0.9 | 0.2 | -1.7 | 9.2 |
| Feb | -0.6 | -8.4 | 1.0 | -5.9 | -1.5 | -2.7 | 7.4 |
| Jan | -1.6 | -8.7 | -0.4 | -5.1 | -3.5 | -1.4 | 4.9 |
| 2010/ | 1.9 | -4.9 | 3.7 | -3.1 | -4.3 | -0.2 | 9.4 |
| 2009/ 2008 | -9.0 | -9.0 | -9.6 | -6.2 | -7.5 | -0.8 | -10.7 |
| 2008/ 2007 | -2.8 | -6.5 | -2.6 | -2.9 | -5.6 | -1.9 | -3.0 |
| 2007/ | 0.5 | -2.5 | 0.8 | -1.2 | 1.0 | -1.7 | 2.5 |
| 2006/ 2005 | -- | -7.6 | 1.7 | -5.4 | 0.3 | 0.7 | 2.9 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Energy; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/october-2011/index.html
Percentage changes in the production industries and major components in the latest month relative to the prior month are shown in Table 65. Manufacturing fell in all months from Jun to Oct with the exception of growth of 0.1 percent in Sep. Growth was stronger in the first five months to May with the exception of decline by 1.3 percent in Apr. Output of consumer durables has fallen sharply in Jul-Oct by cumulative 6.5 percent. Output of capital goods fell 0.8 percent in Jul and then another 0.1 percent in Aug but grew strongly by 2.0 percent in Sep but declined slightly by 0.3 percent in Oct.
Table 65, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, Latest Month on Previous Month ∆%
| PROD | MNG | MFG | ENGY | CON | CON | CAP | |
| 2011 | |||||||
| Oct | -0.7 | 1.8 | -0.7 | -0.8 | -0.4 | -0.6 | -0.3 |
| Sep | 0.0 | -0.7 | 0.1 | -0.8 | -2.4 | -2.0 | 2.0 |
| Aug | 0.3 | 2.6 | -0.4 | 1.9 | -1.8 | 0.3 | -0.1 |
| Jul | -0.4 | -0.4 | -0.2 | -1.2 | -2.1 | -0.2 | -0.8 |
| Jun | 0.2 | 1.2 | -0.2 | 1.3 | 0.3 | 0.6 | 0.0 |
| May | 0.8 | -5.8 | 1.7 | -1.4 | 0.9 | 0.7 | 2.9 |
| Apr | -1.7 | -1.2 | -1.3 | -2.2 | -0.7 | 0.2 | -3.4 |
| Mar | 0.1 | -0.7 | 0.3 | -0.5 | 0.7 | 1.5 | 0.6 |
| Feb | -1.2 | -8.1 | 0.1 | -5.6 | -1.3 | 0.3 | 1.5 |
| Jan | 0.2 | 2.9 | 0.9 | -2.5 | 2.8 | -1.0 | 2.2 |
| 2010 | |||||||
| Dec | 0.2 | -2.5 | -0.7 | 2.1 | 3.9 | 0.2 | -0.6 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Electricity, Gas and Water Supply; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/october-2011/index.html
The weights of components of the production index and contributions by components to the monthly and 12 month rate of change are provided in Table 66. The 12-month rate of output of the production industries of minus 1.7 percent was driven by negative contribution of 1.70 percentage points of the general component of mining with the subcomponent of oil and gas contributing negative 1.75 percentage points. Manufacturing contributed only 0.19 percentage points to growth of the production industries index. The contribution of manufacturing is anemic because of its share of 66.6 percent in the production index. The component of electricity, gas, steam and air conditioning contributed minus 0.01 percentage points. The contributions do not add exactly because of rounding. Manufacturing fell 0.7 percent in Oct contributing minus 0.46 percentage points and electricity fell 4.9 percent in Oct, contributing minus 0.48 percentage points. Growth of mining by 1.8 percent contributed only 0.23 percentage points.
Table 66, UK, Weights of Components, Volume 12 Months and Month ∆% and Percentage Point Contributions of Production Industries by Components
| Weight | Volume 12 Months ∆% Ending i Oct 2011 | % Point | Volume | % Point | |
| PROD | 100.0 | -1.7 | -1.7 | -0.7 | -0.7 |
| MNG | 16.4 | -11.5 | -1.70 | 1.8 | 0.23 |
| MNG 06 | 14.1 | -14.1 | -1.75 | 2.7 | 0.28 |
| MFG | 66.6 | 0.3 | 0.19 | -0.7 | -0.46 |
| ELEC | 9.3 | -5.4 | -0.53 | -4.9 | -0.48 |
| WATER | 7.7 | 4.0 | 0.30 | 0.2 | 0.02 |
Notes: Contrib: Contribution; PROD IND: Index of Production; MNG: Mining and Quarrying (of which 14.4 percent of the total weight in oil and gas extraction); MNG 06: Subdivision of Mining including oil and gas extraction; MFG: Manufacturing; ELEC: Electricity, gas, steam and air conditioning; WATER & SEW: water supply, sewerage and waste management
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/october-2011/index.html
Table 67 provides the breakdown of manufacturing 12-month and monthly growth and percentage contributions. Food products, beverage and tobacco (CA), chemical and chemical products (CE), machinery and equipment (CK), transport equipment (CL) and other manufacturing and repair (CM) provided the impulse to the 12-month rates of growth with all other segments subtracting with negative contributions. Machinery and equipment (CK) contributed 0.13 percentage points to the monthly rate in Oct and wood and paper products and printing (CC) contributed 0.06 percentage points. Weakness was broad-based in all segments of manufacturing in the monthly change in Oct.
Table 67, UK, Growth Rates of Manufacturing and Percentage Point Contributions to the Index of Production, Oct 2011
| Sub-sector | % of production | Year on year growth (%) | Contribution to production (% points) | Month on month growth (%) | Contribution to production (% points) |
| CA | 11.2 | 3.3 | 0.41 | -0.9 | -0.12 |
| CB | 2.1 | -1.1 | -0.02 | 0.2 | 0.00 |
| CC | 5.9 | -1.7 | -0.09 | 1.1 | 0.06 |
| CD | 0.4 | -4.0 | -0.02 | 2.2 | 0.01 |
| CE | 5.5 | 4.5 | 0.22 | -0.8 | -0.04 |
| CF | 4.9 | -20.4 | -1.10 | -2.7 | -0.12 |
| CG | 5.0 | -1.2 | -0.06 | -0.5 | -0.02 |
| CH | 9.3 | -1.1 | -0.09 | -2.1 | -0.18 |
| CI | 4.9 | -1.5 | -0.07 | -0.4 | -0.02 |
| CJ | 2.2 | -5.4 | -0.11 | 1.1 | 0.02 |
| CK | 4.4 | 8.8 | 0.42 | 2.5 | 0.13 |
| CL | 5.8 | 6.6 | 0.47 | -0.4 | -0.03 |
| CM | 4.9 | 4.7 | 0.24 | -2.9 | -0.16 |
Notes:
CA Manufacture of food products, beverages and tobacco; CB Textiles, wearing apparel and leather products; CC Wood and paper products and printing; CD Coke and refined petroleum products; CE Chemicals and chemical products; CF Basic pharmaceutical products and preparations; CG Rubber and plastic products and nonmetallic mineral products; CH Basic metals and metal products; CI Computer, electronic and optical products; CJ Electrical equipment; CK Machinery and equipment not elsewhere classified; CL Transport equipment; CM Other manufacturing and repair.
Source:
http://www.ons.gov.uk/ons/rel/iop/index-of-production/october-2011/index.html
The UK trade account is shown in Table 68. In Oct 2011, the UK ran a deficit in trade of goods and services (total trade) of ₤1552 million. The deficit in trade of goods was ₤7557 million and ₤5970 million in goods excluding oil. A surplus in services of ₤6005 million contributed to the smaller overall deficit in goods and services (-₤7557 million plus ₤6005 equal to -₤1552). Services have contributed to lower trade account deficits and also softened the impact of the global recession on the UK economy. Exports of goods and services were rose 5.8 percent in Oct 2011 and rose 9.9 percent in the quarter Aug-Oct 2011 relative to the same quarter a year earlier with imports falling 1.1 percent in Oct and rising 7.2 percent in Aug-Oct relative to the quarter a year earlier. Excluding oil, UK exports increased 9.6 percent in Oct and increased 10.8 percent in Aug-Oct relative to a year earlier while imports fell 2.6 percent and increased 6.7 percent in Aug-Oct relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports increased 1.2 percent in Oct and rose 7.1 percent in Aug-Oct relative to a year earlier and imports increased 0.5 percent in Oct and fell 2.0 percent in Aug-Oct relative to a year earlier.
Table 68, Value of UK Trade in Goods and Services, Balance of Payments Basis, ₤ Million and ∆%
| ₤ Million SA Oct 2011 | Month ∆% | Aug to Oct 2011 ∆% Aug to Oct 2010 | |
| Total Trade | |||
| Exports | 41,886 | 5.8 | 9.9 |
| Imports | 43,438 | -1.0 | 7.2 |
| Balance | -1,552 | ||
| Trade in Goods | |||
| Exports | 26,512 | 8.7 | 11.6 |
| Imports | 34,069 | -1.5 | 10.0 |
| Balance | -7,557 | ||
| Trade in Goods Excluding Oil | |||
| Exports | 23,570 | 9.6 | 10.8 |
| Imports | 29,540 | -2.6 | 6.2 |
| Balance | -5,970 | ||
| Trade in Services | |||
| Exports | 15,374 | 1.2 | 7.1 |
| Imports | 9,369 | 0.6 | -1.8 |
| Balance | 6,005 |
Source: http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/october-2011/index.html
IV Valuation of Risk Financial Assets. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html
Table 69 shows the phenomenal impulse to valuations of risk financial assets originating in the initial shock of near zero interest rates in 2003-2004 with the fed funds rate at 1 percent, in fear of deflation that never materialized, and quantitative easing in the form of suspension of the auction of 30-year Treasury bonds to lower mortgage rates. World financial markets were dominated by monetary and housing policies in the US. Between 2002 and 2008, the DJ UBS Commodity Index rose 165.5 percent largely because of the unconventional monetary policy encouraging carry trade from low US interest rates to long leveraged positions in commodities, exchange rates and other risk financial assets. The charts of risk financial assets show sharp increase in valuations leading to the financial crisis and then profound drops that are captured in Table 69 by percentage changes of peaks and troughs. The first round of quantitative easing and near zero interest rates depreciated the dollar relative to the euro by 39.3 percent between 2003 and 2008, with revaluation of the dollar by 25.1 percent from 2008 to 2010 in the flight to dollar-denominated assets in fear of world financial risks and then devaluation of the dollar by 13.4 percent by Fri Nov 18, 2011. Dollar devaluation is a major vehicle of monetary policy in reducing the output gap that is implemented in the probably erroneous belief that devaluation will not accelerate inflation, misallocating resources toward less productive economic activities and disrupting financial markets. The last row of Table 69 shows CPI inflation in the US rising from 1.9 percent in 2003 to 4.1 percent in 2007 even as monetary policy increased the fed funds rate from 1 percent in Jun 2004 to 5.25 percent in Jun 2006.
Table 69, Volatility of Assets
| DJIA | 10/08/02-10/01/07 | 10/01/07-3/4/09 | 3/4/09- 4/6/10 | |
| ∆% | 87.8 | -51.2 | 60.3 | |
| NYSE Financial | 1/15/04- 6/13/07 | 6/13/07- 3/4/09 | 3/4/09- 4/16/07 | |
| ∆% | 42.3 | -75.9 | 121.1 | |
| Shanghai Composite | 6/10/05- 10/15/07 | 10/15/07- 10/30/08 | 10/30/08- 7/30/09 | |
| ∆% | 444.2 | -70.8 | 85.3 | |
| STOXX EUROPE 50 | 3/10/03- 7/25/07 | 7/25/07- 3/9/09 | 3/9/09- 4/21/10 | |
| ∆% | 93.5 | -57.9 | 64.3 | |
| UBS Com. | 1/23/02- 7/1/08 | 7/1/08- 2/23/09 | 2/23/09- 1/6/10 | |
| ∆% | 165.5 | -56.4 | 41.4 | |
| 10-Year Treasury | 6/10/03 | 6/12/07 | 12/31/08 | 4/5/10 |
| % | 3.112 | 5.297 | 2.247 | 3.986 |
| USD/EUR | 6/26/03 | 7/14/08 | 6/07/10 | 12/09 |
| Rate | 1.1423 | 1.5914 | 1.192 | 1.338 |
| CNY/USD | 01/03 | 07/21 | 7/15 | 12/09 2011 |
| Rate | 8.2798 | 8.2765 | 6.8211 | 6.3644 |
| New House | 1963 | 1977 | 2005 | 2009 |
| Sales 1000s | 560 | 819 | 1283 | 375 |
| New House | 2000 | 2007 | 2009 | 2010 |
| Median Price $1000 | 169 | 247 | 217 | 203 |
| 2003 | 2005 | 2007 | 2010 | |
| CPI | 1.9 | 3.4 | 4.1 | 1.5 |
Sources: http://professional.wsj.com/mdc/page/marketsdata.html?mod=WSJ_hps_marketdata
http://www.census.gov/const/www/newressalesindex_excel.html
http://federalreserve.gov/releases/h10/Hist/dat00_eu.htm
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://federalreserve.gov/releases/h10/Hist/dat00_ch.htm
Table 70 extracts four rows of Table 69 with the Dollar/Euro (USD/EUR) exchange rate and Chinese Yuan/Dollar (CNY/USD) exchange rate that reveal pursuit of exchange rate policies resulting from monetary policy in the US and capital control/exchange rate policy in China. The ultimate intentions are the same: promoting internal economic activity at the expense of the rest of the world. The easy money policy of the US was deliberately or not but effectively to devalue the dollar from USD 1.1423/EUR on Jun 26, 2003 to USD 1.5914/EUR on Jul 14, 2008, or by 39.3 percent. The flight into dollar assets after the global recession caused revaluation to USD 1.192/EUR on Jun 7, 2010, or by 25.1 percent. After the temporary interruption of the sovereign risk issues in Europe from Apr to Jul, 2010, shown in Table 72 below, the dollar has devalued again to USD 1.338/EUR or by 12.2 percent. Yellen (2011AS, 6) admits that Fed monetary policy results in dollar devaluation with the objective of increasing net exports, which was the policy that Joan Robinson (1947) labeled as “beggar-my-neighbor” remedies for unemployment. China fixed the CNY to the dollar for a long period at a highly undervalued level of around CNY 8.2765/USD until it revalued to CNY 6.8211/USD until Jun 7, 2010, or by 17.6 percent and after fixing it again to the dollar, revalued to CNY 6.3603/USD on Fri Dec 9, 2011, or by an additional 6.7 percent, for cumulative revaluation of 23.1 percent. The Dow Jones Newswires informs on Oct 15 that the premier of China Wen Jiabao announced that the Chinese yuan will not be further appreciated to prevent adverse effects on exports (http://professional.wsj.com/article/SB10001424052970203914304576632790881396896.html?mod=WSJ_hp_LEFTWhatsNewsCollection). The policy appeared to be implemented because the rate of CNY 6.3838/USD on Oct 21, 2011, amounts to a small depreciation of 0.1 percent relative to the rate of CNY 6.379/USD a week earlier on Oct 14, 2011. Table 69 now includes three last rows with the CNY/USD weekly rate. The final row of Table 70 shows the percentage change from the prior week with positive signs for appreciation and negative signs for depreciation. In the week of Nov 11 there was no change but the CNY depreciated by 0.2 percent in the week of Nov 18 and by a further 0.4 percent in the week of Nov 25, for cumulative depreciation of 0.6 percent in the two weeks. In the week of Dec 2, revaluation returned with appreciation of 0.3 percent. In the week of Nov 9, there was minute depreciation of 0.1 percent. In the Meanwhile, the Senate of the US is proceeding with a bill on China’s trade that could create a confrontation but may not be approved by the entire Congress.
Table 70, Dollar/Euro (USD/EUR) Exchange Rate and Chinese Yuan/Dollar (CNY/USD) Exchange Rate
| USD/EUR | 6/26/03 | 7/14/08 | 6/07/10 | 12/02 |
| Rate | 1.1423 | 1.5914 | 1.192 | 1.338 |
| CNY/USD | 01/03 | 07/21 | 7/15 | 12/02 2011 |
| Rate | 8.2798 | 8.2765 | 6.8211 | 6.3644 |
| Weekly Rates | 11/18/ 2011 | 11/25/ 2011 | 12/02/ | 12/09/ 2011 |
| CNY/USD | 6.3568 | 6.3816 | 6.3603 | 6.3644 |
| ∆% from Earlier Week* | -0.2 | -0.4 | 0.3 | -0.1 |
*Negative sign is depreciation, positive sign is appreciation
Source: Table 69 and same table in earlier blog posts.
Dollar devaluation did not eliminate the US current account deficit, which is projected by the International Monetary Fund (IMF) with the new database of Sep 2011 at 3.1 percent of GDP in 2011 and at 2.2 percent of GDP in 2015, as shown in Table 71. Revaluation of the CNY has not reduced the current account surplus of China, which is projected by the IMF to increase from 5.2 percent of GDP in 2011 to 7.0 percent of GDP in 2015.
Table 71, Fiscal Deficit, Current Account Deficit and Government Debt as % of GDP and 2011 Dollar GDP
| GDP 2011 | FD | CAD | Debt | FD%GDP | CAD%GDP | Debt | |
| US | 15065 | -7.9 | -3.1 | 72.6 | -3.1 | -2.2 | 86.7 |
| Japan | 5855 | -8.9 | 2.5 | 130.5 | -8.4 | 2.4 | 160.0 |
| UK | 2481 | -5.7 | -2.7 | 72.9 | 0.4 | -0.9 | 75.2 |
| Euro | 13355 | -1.5 | 0.1 | 68.6 | 1.5 | 0.5 | 69.3 |
| Ger | 3629 | 0.4 | 5.0 | 56.9 | 2.1 | 4.7 | 55.3 |
| France | 2808 | -3.4 | -2.7 | 80.9 | -2.5 | 0.6 | 83.9 |
| Italy | 2246 | 0.5 | -3.5 | 100.4 | 4.5 | -2.0 | 96.7 |
| Can | 1759 | -3.7 | -3.3 | 34.9 | 0.3 | -2.6 | 35.1 |
| China | 6988 | -1.6 | 5.2 | 22.2 | 0.1 | 7.0 | 12.9 |
| Brazil | 2518 | 3.2 | -2.3 | 38.6 | 2.9 | -3.2 | 34.1 |
Note: GER = Germany; Can = Canada; FD = fiscal deficit; CAD = current account deficit
FD is primary except total for China; Debt is net except gross for China
Source: http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/index.aspx
There is a new carry trade that learned from the losses after the crisis of 2007 or learned from the crisis how to avoid losses. The sharp rise in valuations of risk financial assets shown in Table 69 above after the first policy round of near zero fed funds and quantitative easing by the equivalent of withdrawing supply with the suspension of the 30-year Treasury auction was on a smooth trend with relatively subdued fluctuations. The credit crisis and global recession have been followed by significant fluctuations originating in sovereign risk issues in Europe, doubts of continuing high growth and accelerating inflation in China, events such as in the Middle East and Japan and legislative restructuring, regulation, insufficient growth, falling real wages, depressed hiring and high job stress of unemployment and underemployment in the US now with realization of growth standstill recession. The “trend is your friend” motto of traders has been replaced with a “hit and realize profit” approach of managing positions to realize profits without sitting on positions. There is a trend of valuation of risk financial assets driven by the carry trade from zero interest rates with fluctuations provoked by events of risk aversion. Table 72, which is updated for every comment of this blog, shows the deep contraction of valuations of risk financial assets after the Apr 2010 sovereign risk issues in the fourth column “∆% to Trough.” There was sharp recovery after around Jul 2010 in the last column “∆% Trough to 12/09/11,” which has been recently stalling or reversing amidst profound risk aversion. “Let’s twist again” monetary policy during the week of Sep 23 caused deep worldwide risk aversion and selloff of risk financial assets (http://cmpassocregulationblog.blogspot.com/2011/09/imf-view-of-world-economy-and-finance.html http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html). Monetary policy was designed to increase risk appetite but instead suffocated risk exposures. After the surge in the week of Dec 2 and mixed performance of markets in the week of Dec 9 there are now only three assets with negative change in valuation in column “∆% Trough to 12/09/11:” NYSE Financial minus 3.5 percent, Japan’s Nikkei Average minus 3.3 percent and Shanghai Composite minus 2.8 percent. The highest valuations are by US equities indexes: DJIA 25.8 percent and S&P 500 22.7 percent. Michael Mackenzie and Robin Wigglesworth, writing on Oct 21, 2011, on “Us earnings tell story of resilience,” published in the Financial Times (http://www.ft.com/intl/cms/s/0/c44187d4-fb1f-11e0-bebe-00144feab49a.html#axzz1bVlVmY6d), analyze the strong earnings performance of US companies that explains the recovery of the DJIA by 24.1 percent from the trough and of the S&P 500 by 21.7 percent. Mackenzie and Wigglesworth quote S&P Capital IQ that a blended average of actual and forecast earnings on IIIQ2011 relative to IIIQ2010 could show growth of 14.6 percent. The carry trade from zero interest rates to leveraged positions in risk financial assets had proved strongest for commodity exposures but US equities have regained leadership. Before the current round of risk aversion, all assets in the column “∆% Trough to 12/09/11” had double digit gains relative to the trough around Jul 2, 2010 but now most valuations show increases of less than 10 percent: European stocks index STOXX 50 is now 1.2 percent above the trough on Jul 2, 2010; Dow Global is 7.5 percent above the trough; Dow Asia Pacific is now higher by 2.8 percent; and Dax is 5.6 percent above the trough on May 25, 2010. Japan’s Nikkei Average is 3.3 percent below the trough on Aug 31, 2010 and 25.1 percent below the peak on Apr 5, 2010. The Nikkei Average closed at 8536.46 on Fri Dec 9, which is 16.8 percent below 10,254.43 on Mar 11 on the date of the Great East Japan Earthquake/tsunami. Global risk aversion erased the earlier gains of the Nikkei. The dollar depreciated by 12.2 percent relative to the euro and even higher before the new bout of sovereign risk issues in Europe. The column “∆% week to 12/09/2011” in Table 72 shows sharp mixed performance of risk financial assets in the week of Dec 9. There are still high uncertainties on European sovereign risks, US and world growth recession and China’s growth and inflation tradeoff. Sovereign problems in the “periphery” of Europe and fears of slower growth in Asia and the US cause risk aversion with trading caution instead of more aggressive risk exposures. There is a fundamental change in Table 72 from the relatively upward trend with oscillations since the sovereign risk event of Apr-Jul 2010. Performance is best assessed in the column “∆% Peak to 12/09/11” that provides the percentage change from the peak in Apr 2010 before the sovereign risk event to Dec 2, 2011. Most risk financial assets had gained not only relative to the trough as shown in column “∆% Trough to 12/09/11” but also relative to the peak in column “∆% Peak to 12/09/11.” There are now only two US equity indexes above the peak in Table 72: DJIA 8.7 percent and S&P 500 3.1 percent. There are several indexes well below the peak: NYSE Financial Index (http://www.nyse.com/about/listed/nykid.shtml) by 24.1 percent, Nikkei Average by 23.1 percent, Shanghai Composite by 26.8 percent, STOXX 50 by 14.3 percent, Dow Global by 12.3 percent and Dow Asia Pacific by 10.0 percent. The factors of risk aversion have adversely affected the performance of risk financial assets. The performance relative to the peak in Apr 2010 is more important than the performance relative to the trough around early Jul because improvement could signal that conditions have returned to normal levels before European sovereign doubts in Apr 2010. The situation of risk financial assets has worsened.
Table 72, Stock Indexes, Commodities, Dollar and 10-Year Treasury
| Peak | Trough | ∆% to Trough | ∆% Peak to 12/09 /11 | ∆% Week 12/09/ 11 | ∆% Trough to 12/09 11 | |
| DJIA | 4/26/ | 7/2/10 | -13.6 | 8.7 | 1.4 | 25.8 |
| S&P 500 | 4/23/ | 7/20/ | -16.0 | 3.1 | 0.9 | 22.7 |
| NYSE Finance | 4/15/ | 7/2/10 | -20.3 | -23.1 | 1.2 | -3.5 |
| Dow Global | 4/15/ | 7/2/10 | -18.4 | -12.3 | -0.3 | 7.5 |
| Asia Pacific | 4/15/ | 7/2/10 | -12.5 | -10.0 | -2.0 | 2.8 |
| Japan Nikkei Aver. | 4/05/ | 8/31/ | -22.5 | -25.1 | -1.2 | -3.3 |
| China Shang. | 4/15/ | 7/02 | -24.7 | -26.8 | -1.9 | -2.8 |
| STOXX 50 | 4/15/10 | 7/2/10 | -15.3 | -14.3 | 0.6 | 1.2 |
| DAX | 4/26/ | 5/25/ | -10.5 | -5.5 | -1.5 | 5.6 |
| Dollar | 11/25 2009 | 6/7 | 21.2 | 11.6 | 0.0 | -12.2 |
| DJ UBS Comm. | 1/6/ | 7/2/10 | -14.5 | -1.4 | -2.3 | 15.3 |
| 10-Year T Note | 4/5/ | 4/6/10 | 3.986 | 2.065 |
T: trough; Dollar: positive sign appreciation relative to euro (less dollars paid per euro), negative sign depreciation relative to euro (more dollars paid per euro)
Source: http://professional.wsj.com/mdc/page/marketsdata.html?mod=WSJ_hps_marketdata
Bernanke (2010WP) and Yellen (2011AS) reveal the emphasis of monetary policy on the impact of the rise of stock market valuations in stimulating consumption by wealth effects on household confidence. Table 73 shows a gain by Apr 29, 2011 in the DJIA of 14.3 percent and of the S&P 500 of 12.5 percent since Apr 26, 2010, around the time when sovereign risk issues in Europe began to be acknowledged in financial risk asset valuations. The last row of Table 73 for Dec 2 shows that the S&P 500 is now 3.6 percent above the Apr 26, 2010 level and the DJIA is 8.7 percent above the level on Apr 26, 2010. Multiple rounds of risk aversion eroded the earlier gains, showing that risk aversion can destroy market value even with zero interest rates. Much the same as zero interest rates and quantitative easing have not had any effects in recovering economic activity while distorting financial markets and resource allocation.
Table 73, Percentage Changes of DJIA and S&P 500 in Selected Dates
| 2010 | ∆% DJIA from prior date | ∆% DJIA from | ∆% S&P 500 from prior date | ∆% S&P 500 from |
| Apr 26 | ||||
| May 6 | -6.1 | -6.1 | -6.9 | -6.9 |
| May 26 | -5.2 | -10.9 | -5.4 | -11.9 |
| Jun 8 | -1.2 | -11.3 | 2.1 | -12.4 |
| Jul 2 | -2.6 | -13.6 | -3.8 | -15.7 |
| Aug 9 | 10.5 | -4.3 | 10.3 | -7.0 |
| Aug 31 | -6.4 | -10.6 | -6.9 | -13.4 |
| Nov 5 | 14.2 | 2.1 | 16.8 | 1.0 |
| Nov 30 | -3.8 | -3.8 | -3.7 | -2.6 |
| Dec 17 | 4.4 | 2.5 | 5.3 | 2.6 |
| Dec 23 | 0.7 | 3.3 | 1.0 | 3.7 |
| Dec 31 | 0.03 | 3.3 | 0.07 | 3.8 |
| Jan 7 | 0.8 | 4.2 | 1.1 | 4.9 |
| Jan 14 | 0.9 | 5.2 | 1.7 | 6.7 |
| Jan 21 | 0.7 | 5.9 | -0.8 | 5.9 |
| Jan 28 | -0.4 | 5.5 | -0.5 | 5.3 |
| Feb 4 | 2.3 | 7.9 | 2.7 | 8.1 |
| Feb 11 | 1.5 | 9.5 | 1.4 | 9.7 |
| Feb 18 | 0.9 | 10.6 | 1.0 | 10.8 |
| Feb 25 | -2.1 | 8.3 | -1.7 | 8.9 |
| Mar 4 | 0.3 | 8.6 | 0.1 | 9.0 |
| Mar 11 | -1.0 | 7.5 | -1.3 | 7.6 |
| Mar 18 | -1.5 | 5.8 | -1.9 | 5.5 |
| Mar 25 | 3.1 | 9.1 | 2.7 | 8.4 |
| Apr 1 | 1.3 | 10.5 | 1.4 | 9.9 |
| Apr 8 | 0.03 | 10.5 | -0.3 | 9.6 |
| Apr 15 | -0.3 | 10.1 | -0.6 | 8.9 |
| Apr 22 | 1.3 | 11.6 | 1.3 | 10.3 |
| Apr 29 | 2.4 | 14.3 | 1.9 | 12.5 |
| May 6 | -1.3 | 12.8 | -1.7 | 10.6 |
| May 13 | -0.3 | 12.4 | -0.2 | 10.4 |
| May 20 | -0.7 | 11.7 | -0.3 | 10.0 |
| May 27 | -0.6 | 11.0 | -0.2 | 9.8 |
| Jun 3 | -2.3 | 8.4 | -2.3 | 7.3 |
| Jun 10 | -1.6 | 6.7 | -2.2 | 4.9 |
| Jun 17 | 0.4 | 7.1 | 0.04 | 4.9 |
| Jun 24 | -0.6 | 6.5 | -0.2 | 4.6 |
| Jul 1 | 5.4 | 12.3 | 5.6 | 10.5 |
| Jul 8 | 0.6 | 12.9 | 0.3 | 10.9 |
| Jul 15 | -1.4 | 11.4 | -2.1 | 8.6 |
| Jul 22 | 1.6 | 13.2 | 2.2 | 10.9 |
| Jul 29 | -4.2 | 8.4 | -3.9 | 6.6 |
| Aug 05 | -5.8 | 2.1 | -7.2 | -1.0 |
| Aug 12 | -1.5 | 0.6 | -1.7 | -2.7 |
| Aug 19 | -4.0 | -3.5 | -4.7 | -7.3 |
| Aug 26 | 4.3 | 0.7 | 4.7 | -2.9 |
| Sep 02 | -0.4 | 0.3 | -0.2 | -3.1 |
| Sep 09 | -2.2 | -1.9 | -1.7 | -4.8 |
| Sep 16 | 4.7 | 2.7 | 5.4 | 0.3 |
| Sep 23 | -6.4 | -3.9 | -6.5 | -6.2 |
| Sep 30 | 1.3 | -2.6 | -0.4 | -6.7 |
| Oct 7 | 1.7 | -0.9 | 2.1 | -4.7 |
| Oct 14 | 4.9 | 3.9 | 5.9 | 1.0 |
| Oct 21 | 1.4 | 5.4 | 1.1 | 2.2 |
| Oct 28 | 3.6 | 9.2 | 3.8 | 6.0 |
| Nov 04 | -2.0 | 6.9 | -2.5 | 3.4 |
| Nov 11 | 1.4 | 8.5 | 0.8 | 4.3 |
| Nov 18 | -2.9 | 5.3 | -3.8 | 0.3 |
| Nov 25 | -4.8 | 0.2 | -4.7 | -4.4 |
| Dec 02 | 7.0 | 7.3 | 7.4 | 2.7 |
| Dec 09 | 1.4 | 8.7 | 0.9 | 3.6 |
Source: http://professional.wsj.com/mdc/public/page/mdc_us_stocks.html?mod=mdc_topnav_2_3014
Table 74, updated with every post, shows that exchange rate valuations affect a large variety of countries, in fact, almost the entire world, in magnitudes that cause major problems for domestic monetary policy and trade flows. Dollar devaluation is expected to continue because of zero fed funds rate, expectations of rising inflation, large budget deficit of the federal government (http://professional.wsj.com/article/SB10001424052748703907004576279321350926848.html?mod=WSJ_hp_LEFTWhatsNewsCollection) and now zero interest rates indefinitely but with interruptions caused by risk aversion events. Such an event actually occurred in the week of Sep 23 reversing the devaluation of the dollar in the form of sharp appreciation of the dollar relative to other currencies from all over the world including the offshore Chinese yuan market. Column “Peak” in Table 74 shows exchange rates during the crisis year of 2008. There was a flight to safety in dollar-denominated government assets as a result of the arguments in favor of TARP (Cochrane and Zingales 2009). This is evident in various exchange rates that depreciated sharply against the dollar such as the South African rand (ZAR) at the peak of depreciation of ZAR 11.578/USD on Oct 22, 2008, subsequently appreciating to the trough of ZAR 7.238/USD by Aug 15, 2010 but now depreciating by 11.6 percent to ZAR 8.076/USD on Dec 9, which is still 30.5 percent stronger than on Oct 22, 2008. An example from Asia is the Singapore Dollar (SGD) highly depreciated at the peak of SGD 1.553/USD on Mar 3, 2009 but subsequently appreciating by 13.2 percent to the trough of SGD 1.348/USD on Aug 9, 2010 but is now only 4.2 percent stronger at SGD 1.292/USD on Dec 9 relative to the trough of depreciation but still stronger by 16.8 percent relative to the peak of depreciation on Mar 3, 2009. Another example is the Brazilian real (BRL) that depreciated at the peak to BRL 2.43/USD on Dec 5, 2008 but appreciated to the trough at BRL 1.737/USD on Apr 30, 2010, showing depreciation of 3.9 percent relative to the trough to BRL 1.805/USD on Dec 9 but still stronger by 25.7 percent relative to the peak on Dec 5, 2008. At one point in 2011 the Brazilian real traded at BRL 1.55/USD and in the week of Sep 23 surpassed BRL 1.90/USD in intraday trading for depreciation of more than 20 percent. The Banco Central do Brasil, Brazil’s central bank, lowered its policy rate SELIC for the third consecutive meeting of its monetary policy committee, COPOM (http://www.bcb.gov.br/textonoticia.asp?codigo=3268&IDPAI=NEWS):
“Copom reduces the Selic rate to 11.00 percent
30/11/2011 7:47:00 PM
Brasília - Continuing the process of adjustment of monetary conditions, the Copom unanimously decided to reduce the Selic rate to 11.00 percent, without bias.
The Copom understands that, by promptly mitigating the effects stemming from a more restrictive global environment, a moderate adjustment in the basic rate level is consistent with the scenario of inflation convergence to the target in 2012.”
Unconventional monetary policy of zero interest rates and quantitative easing creates trends such as the depreciation of the dollar followed by Table 74 but with abrupt reversals during risk aversion. The main effects of unconventional monetary policy are on valuations of risk financial assets and not necessarily on consumption and investment or aggregate demand.
Table 74, Exchange Rates
| Peak | Trough | ∆% P/T | Dec 09, 2011 | ∆T Dec 09 2011 | ∆P Dec 09 2011 | |
| EUR USD | 7/15 | 6/7 2010 | 12/09 2011 | |||
| Rate | 1.59 | 1.192 | 1.338 | |||
| ∆% | -33.4 | 10.9 | -18.8 | |||
| JPY USD | 8/18 | 9/15 | 12/09 2011 | |||
| Rate | 110.19 | 83.07 | 77.62 | |||
| ∆% | 24.6 | 6.6 | 29.6 | |||
| CHF USD | 11/21 2008 | 12/8 2009 | 12/09 2011 | |||
| Rate | 1.225 | 1.025 | 0.924 | |||
| ∆% | 16.3 | 9.9 | 24.6 | |||
| USD GBP | 7/15 | 1/2/ 2009 | 12/09 2011 | |||
| Rate | 2.006 | 1.388 | 1.566 | |||
| ∆% | -44.5 | 11.4 | -28.1 | |||
| USD AUD | 7/15 2008 | 10/27 2008 | 12/09 | |||
| Rate | 1.0215 | 1.6639 | 1.021 | |||
| ∆% | -62.9 | 41.1 | 4.1 | |||
| ZAR USD | 10/22 2008 | 8/15 | 12/09 2011 | |||
| Rate | 11.578 | 7.238 | 8.076 | |||
| ∆% | 37.5 | -11.6 | 30.5 | |||
| SGD USD | 3/3 | 8/9 | 12/09 | |||
| Rate | 1.553 | 1.348 | 1.292 | |||
| ∆% | 13.2 | 4.2 | 16.8 | |||
| HKD USD | 8/15 2008 | 12/14 2009 | 12/09 | |||
| Rate | 7.813 | 7.752 | 7.781 | |||
| ∆% | 0.8 | -0.4 | 0.4 | |||
| BRL USD | 12/5 2008 | 4/30 2010 | 12/09 2011 | |||
| Rate | 2.43 | 1.737 | 1.805 | |||
| ∆% | 28.5 | -3.9 | 25.7 | |||
| CZK USD | 2/13 2009 | 8/6 2010 | 12/09 | |||
| Rate | 22.19 | 18.693 | 18.975 | |||
| ∆% | 15.7 | -1.5 | 14.5 | |||
| SEK USD | 3/4 2009 | 8/9 2010 | 12/09 2011 | |||
| Rate | 9.313 | 7.108 | 6.726 | |||
| ∆% | 23.7 | 5.4 | 27.8 | |||
| CNY USD | 7/20 2005 | 7/15 | 12/09 | |||
| Rate | 8.2765 | 6.8211 | 6.3644 | |||
| ∆% | 17.6 | 6.7 | 23.1 |
Symbols: USD: US dollar; EUR: euro; JPY: Japanese yen; CHF: Swiss franc; GBP: UK pound; AUD: Australian dollar; ZAR: South African rand; SGD: Singapore dollar; HKD: Hong Kong dollar; BRL: Brazil real; CZK: Czech koruna; SEK: Swedish krona; CNY: Chinese yuan; P: peak; T: trough
Note: percentages calculated with currencies expressed in units of domestic currency per dollar; negative sign means devaluation and no sign appreciation
Source: http://professional.wsj.com/mdc/public/page/mdc_currencies.html?mod=mdc_topnav_2_3000
http://federalreserve.gov/releases/h10/Hist/dat00_ch.htm
Chart 20 of the Board of Governors of the Federal Reserve System provides indexes of the dollar from 2010 to 2011. The dollar depreciates during episodes of risk appetite but appreciate during risk aversion as funds seek dollar-denominated assets in avoiding financial risk.
Chart 20, Broad, Major Currency, and Other Important Trading Partners Indexes for the US Dollar
Source: Board of Governors of the Federal Reserve System
Table 75, updated with every blog comment, provides in the second column the yield at the close of market of the 10-year Treasury note on the date in the first column. The price in the third column is calculated with the coupon of 2.625 percent of the 10-year note current at the time of the second round of quantitative easing after Nov 3, 2010 and the final column “∆% 11/04/10” calculates the percentage change of the price on the date relative to that of 101.2573 at the close of market on Nov 4, 2010, one day after the decision on quantitative easing by the Fed on Nov 3, 2010. Prices with new coupons such as 2.0 percent in recent auctions (http://www.treasurydirect.gov/RI/OFAuctions?form=extended&cusip=912828RR3) are not comparable to prices in Table 75. The highest yield in the decade was 5.510 percent on May 1, 2001 that would result in a loss of principal of 22.9 percent relative to the price on Nov 4. Monetary policy has created a “duration trap” of bond prices. Duration is the percentage change in bond price resulting from a percentage change in yield or what economists call the yield elasticity of bond price. Duration is higher the lower the bond coupon and yield, all other things constant. This means that the price loss in a yield rise from low coupons and yields is much higher than with high coupons and yields. Intuitively, the higher coupon payments offset part of the price loss. Prices/yields of Treasury securities were affected by the combination of Fed purchases for its program of quantitative easing and also by the flight to dollar-denominated assets because of geopolitical risks in the Middle East, subsequently by the tragic Great East Japan Earthquake and Tsunami and now again by the sovereign risk doubts in Europe and the growth recession in the US and the world. The yield of 2.065 percent at the close of market on Fri Dec 9 would be equivalent to price of 105.0363 in a hypothetical bond maturing in 10 years with coupon of 2.625 percent for price gain of 3.7 percent relative to the price on Nov 4, 2010, one day after the decision on the second program of quantitative easing, as shown in the last row of Table 75. If inflation accelerates, yields of Treasury securities may rise sharply. Yields are not observed without special yield-lowering effects such as the flight into dollars caused by the events in the Middle East, continuing purchases of Treasury securities by the Fed, the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 affecting Japan, recurring fears on European sovereign credit issues and worldwide risk aversion in the week of Sep 30 caused by “let’s twist again” monetary policy. The realization of a growth standstill recession is also influencing yields. Important causes of the earlier rise in yields shown in Table 75 are expectations of rising inflation and US government debt estimated to exceed 70 percent of GDP in 2012 (http://cmpassocregulationblog.blogspot.com/2011/08/united-states-gdp-growth-standstill.html http://cmpassocregulationblog.blogspot.com/2011/02/policy-inflation-growth-unemployment.html http://cmpassocregulationblog.blogspot.com/2011/04/budget-quagmire-fed-commodities_10.html), rising from 40.8 percent of GDP in 2008, 53.5 percent in 2009 (Table 2 in http://cmpassocregulationblog.blogspot.com/2011/04/budget-quagmire-fed-commodities_10.html) and 69 percent in 2011. On Dec 8, 2011, the line “Reserve Bank credit” in the Fed balance sheet stood at $2803 billion, or $2.8 trillion, with portfolio of long-term securities of $2579 billion, or $2.6 trillion, consisting of $1578 billion Treasury nominal notes and bonds, $68 billion of notes and bonds inflation-indexed, $106 billion Federal agency debt securities and $827 billion mortgage-backed securities; reserve balances deposited with Federal Reserve Banks reached $1547 billion or $1.5 trillion (http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1). There is no simple exit of this trap created by the highest monetary policy accommodation in US history together with the highest deficits and debt in percent of GDP since World War II. Risk aversion from various sources, discussed in section III World Financial Turbulence, has been affecting financial markets for several months. The risk is that in a reversal of risk aversion that has been typical in this cyclical expansion of the economy yields of Treasury securities may back up sharply.
Table 75, Yield, Price and Percentage Change to November 4, 2010 of Ten-Year Treasury Note
| Date | Yield | Price | ∆% 11/04/10 |
| 05/01/01 | 5.510 | 78.0582 | -22.9 |
| 06/10/03 | 3.112 | 95.8452 | -5.3 |
| 06/12/07 | 5.297 | 79.4747 | -21.5 |
| 12/19/08 | 2.213 | 104.4981 | 3.2 |
| 12/31/08 | 2.240 | 103.4295 | 2.1 |
| 03/19/09 | 2.605 | 100.1748 | -1.1 |
| 06/09/09 | 3.862 | 89.8257 | -11.3 |
| 10/07/09 | 3.182 | 95.2643 | -5.9 |
| 11/27/09 | 3.197 | 95.1403 | -6.0 |
| 12/31/09 | 3.835 | 90.0347 | -11.1 |
| 02/09/10 | 3.646 | 91.5239 | -9.6 |
| 03/04/10 | 3.605 | 91.8384 | -9.3 |
| 04/05/10 | 3.986 | 88.8726 | -12.2 |
| 08/31/10 | 2.473 | 101.3338 | 0.08 |
| 10/07/10 | 2.385 | 102.1224 | 0.8 |
| 10/28/10 | 2.658 | 99.7119 | -1.5 |
| 11/04/10 | 2.481 | 101.2573 | - |
| 11/15/10 | 2.964 | 97.0867 | -4.1 |
| 11/26/10 | 2.869 | 97.8932 | -3.3 |
| 12/03/10 | 3.007 | 96.7241 | -4.5 |
| 12/10/10 | 3.324 | 94.0982 | -7.1 |
| 12/15/10 | 3.517 | 92.5427 | -8.6 |
| 12/17/10 | 3.338 | 93.9842 | -7.2 |
| 12/23/10 | 3.397 | 93.5051 | -7.7 |
| 12/31/10 | 3.228 | 94.3923 | -6.7 |
| 01/07/11 | 3.322 | 94.1146 | -7.1 |
| 01/14/11 | 3.323 | 94.1064 | -7.1 |
| 01/21/11 | 3.414 | 93.4687 | -7.7 |
| 01/28/11 | 3.323 | 94.1064 | -7.1 |
| 02/04/11 | 3.640 | 91.750 | -9.4 |
| 02/11/11 | 3.643 | 91.5319 | -9.6 |
| 02/18/11 | 3.582 | 92.0157 | -9.1 |
| 02/25/11 | 3.414 | 93.3676 | -7.8 |
| 03/04/11 | 3.494 | 92.7235 | -8.4 |
| 03/11/11 | 3.401 | 93.4727 | -7.7 |
| 03/18/11 | 3.273 | 94.5115 | -6.7 |
| 03/25/11 | 3.435 | 93.1935 | -7.9 |
| 04/01/11 | 3.445 | 93.1129 | -8.0 |
| 04/08/11 | 3.576 | 92.0635 | -9.1 |
| 04/15/11 | 3.411 | 93.3874 | -7.8 |
| 04/22/11 | 3.402 | 93.4646 | -7.7 |
| 04/29/11 | 3.290 | 94.3759 | -6.8 |
| 05/06/11 | 3.147 | 95.5542 | -5.6 |
| 05/13/11 | 3.173 | 95.3387 | -5.8 |
| 05/20/11 | 3.146 | 95.5625 | -5.6 |
| 05/27/11 | 3.068 | 96.2089 | -4.9 |
| 06/03/11 | 2.990 | 96.8672 | -4.3 |
| 06/10/11 | 2.973 | 97.0106 | -4.2 |
| 06/17/11 | 2.937 | 97.3134 | -3.9 |
| 06/24/11 | 2.872 | 97.8662 | -3.3 |
| 07/01/11 | 3.186 | 95.2281 | -5.9 |
| 07/08/11 | 3.022 | 96.5957 | -4.6 |
| 07/15/11 | 2.905 | 97.5851 | -3.6 |
| 07/22/11 | 2.964 | 97.0847 | -4.1 |
| 07/29/11 | 2.795 | 98.5258 | -2.7 |
| 08/05/11 | 2.566 | 100.5175 | -0.7 |
| 08/12/11 | 2.249 | 103.3504 | 2.1 |
| 08/19/11 | 2.066 | 105.270 | 3.7 |
| 08/26/11 | 2.202 | 103.7781 | 2.5 |
| 09/02/11 | 1.992 | 105.7137 | 4.4 |
| 09/09/11 | 1.918 | 106.4055 | 5.1 |
| 09/16/11 | 2.053 | 101.5434 | 0.3 |
| 09/23/11 | 1.826 | 107.2727 | 5.9 |
| 09/30/11 | 1.912 | 106.4602 | 5.1 |
| 10/07/11 | 2.078 | 104.9161 | 3.6 |
| 10/14/11 | 2.251 | 103.3323 | 2.0 |
| 10/21/11 | 2.220 | 103.6141 | 2.3 |
| 10/28/11 | 2.326 | 102.6540 | 1.4 |
| 11/04/11 | 2.066 | 105.0270 | 3.7 |
| 11/11/11 | 2.057 | 105.1103 | 3.8 |
| 11/18/11 | 2.003 | 105.6113 | 4.3 |
| 11/25/11 | 1.964 | 105.9749 | 4.7 |
| 12/02/11 | 2.042 | 105.2492 | 3.9 |
| 12/09/11 | 2.065 | 105.0363 | 3.7 |
Note: price is calculated for an artificial 10-year note paying semi-annual coupon and maturing in ten years using the actual yields traded on the dates and the coupon of 2.625% on 11/04/10
Source:
http://professional.wsj.com/mdc/public/page/mdc_bonds.html?mod=mdc_topnav_2_3000
V Economic Indicators. Crude oil input in refineries increased 1.6 percent to 14,822 thousand barrels per day on average in the four weeks ending on Dec 2 from 14,594 thousand barrels per day in the four weeks ending on Nov 25, as shown in Table 76. The rate of capacity utilization in refineries continues at a relatively high level of 85.7 percent on Dec 2, 2011, which is higher than on Dec 3, 2010 at 84.9 percent and higher than 84.4 on Nov 25, 2011. Imports of crude oil increased 2.4 percent from 8,605 thousand barrels per day on average in the four weeks ending on Nov 25 to 8,809 thousand barrels per day in the week of Dec 2. Increasing utilization in refineries but with increasing imports resulted in increase of commercial crude oil stocks by 1.4 million barrels from 334.7 million barrels on Nov 25 to 336.1 million barrels on Dec 2. Motor gasoline production increased 0.9 percent from 9,152 thousand barrels per day in the week of Nov 25 to 9,230 thousand barrels per day on average in the week of Dec 2. Gasoline stocks increased 5.2 million barrels and stocks of fuel oil increased 2.5 million barrels. Supply of gasoline fell from 8,955 thousand barrels per day on Dec 3, 2010, to 8,640 thousand barrels per day on Dec 2, 2011, or by 3.5 percent, while fuel oil supply rose 3.4 percent. Part of the fall in consumption of gasoline is due to higher prices and part to the growth recession. Table 1 also shows increase in the WTI price of crude oil by 12.4 percent from Dec 3, 2010 to Dec 2, 2011. Gasoline prices rose 11.2 percent from Dec 6, 2010 to Dec 5, 2011. Increases in prices of crude oil and gasoline relative to a year earlier are moderating because year earlier prices are already reflecting the commodity price surge and commodity prices have been declining recently during worldwide risk aversion.
Table 76, US, Energy Information Administration Weekly Petroleum Status Report
| Four Weeks Ending Thousand Barrels/Day | 12/02/11 | 11/25/11 | 12/03/10 |
| Crude Oil Refineries Input | 14,822 Week ∆%: + 1.6 | 14,594 | 14,394 |
| Refinery Capacity Utilization % | 85.7 | 84.4 | 84.9 |
| Motor Gasoline Production | 9,230 Week ∆%: +0.9 | 9,152 | 9,017 |
| Distillate Fuel Oil Production | 4,845 Week ∆%: +3.9 | 4,665 | 4,371 |
| Crude Oil Imports | 8,809 Week ∆%: +2.4 | 8,605 | 8,563 |
| Motor Gasoline Supplied | 8,640 ∆% 2011/2010= -3.5% | 8,664 | 8,955 |
| Distillate Fuel Oil Supplied | 3,855 ∆% 2011/2010 = +3.4% | 3,965 | 3,729 |
| 12/02/11 | 11/25/11 | 12/03/10 | |
| Crude Oil Stocks | 336.1 | 334.7 | 355.9 |
| Motor Gasoline Million B | 215.0 ∆= +5.2 MB | 209.8 | 214.0 |
| Distillate Fuel Oil Million B | 141.0 | 138.5 | 160.2 |
| WTI Crude Oil Price $/B | 100.20 ∆% 2011/2010 12.4 | 96.16 | 89.18 |
| 12/05/11 | 11/28/11 | 12/06/10 | |
| Regular Motor Gasoline $/G | 3.290 ∆% 2011/2010 | 3.307 | 2.958 |
B: barrels; G: gallon
Chart 21 of the US Energy Information Administration shows the commercial stocks of crude oil of the US. There have been fluctuations around an upward trend since 2005. Crude oil stocks trended downwardly during a few weeks but have been increasing in the past few weeks.
Chart 21, US, Weekly Crude Oil Ending Stocks
Source: US Energy Information Administration
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W
Chart 22 of the US Energy Information Administration provides closer view of US crude oil stocks since Dec 2009. Crude oil stocks rose in a clear trend throughout 2010 but began to drop on a downward trend since May 2011. There is less need to stock oil after May with declining prices if it is anticipated that prices in future months may be lower. The final part of the chart shows the increase in oil stocks in the weeks of Nov 25 and Dec 2.
Chart 22, US, Crude Oil Stocks
Source: US Energy Information Administration
Chart 23 of the US Energy Information Administration shows the price of WTI crude oil since the 1980s. Chart 4 captures commodity price shocks during the past decade. The costly mirage of deflation was caused by the decline in oil prices resulting from the recession of 2001. The upward trend after 2003 was promoted by the carry trade from near zero interest rates. The jump above $140/barrel during the global recession in 2008 can only be explained by the carry trade promoted by monetary policy of zero fed funds rate. After moderation of risk aversion, the carry trade returned with resulting sharp upward trend of crude prices.
Chart 23, US, Crude Oil Futures Contract
Source: US Energy Information Administration
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D
There is significant difference between initial claims for unemployment insurance adjusted and not adjusted for seasonality provided in Table 77. Seasonally adjusted claims fell 23,000 from 404,000 on Nov 26 to 381,000 on Dec 3. Claims not adjusted for seasonality increased 151,002, from 372,640 on Nov 26 to 523,642 on Dec 3. There is strong seasonality in layoffs early in Dec.
Table 77, US, Initial Claims for Unemployment Insurance
| 2011 | SA | NSA | 4-week MA SA |
| Dec 3 | 381,000 | 523,642 | 393,250 |
| Nov 26 | 404,000 | 372,640 | 396,250 |
| Change | -23,000 | +151,002 | -3,00 |
| Nov 19 | 396,000 | 440,157 | 395,250 |
| Prior Year | 425,000 | 585,711 | 430,250 |
Note: SA: seasonally adjusted; NSA: not seasonally adjusted; MA: moving average
Source: http://www.dol.gov/opa/media/press/eta/ui/current.htm
Table 78 provides seasonally and not seasonally adjusted claims in the comparable week for the years from 2000 to 2011. Seasonally adjusted claims typically exceed claims not adjusted for seasonality. Claims not seasonally adjusted have declined from 673,097 on Dec 5, 2009 to 585,711 on Dec 4, 2011 and now to 523,642 on Dec 3, 2011. There is strong indication of significant decline in the level of layoffs in the US.
Table 78, US, Unemployment Insurance Weekly Claims
| Not Seasonally Adjusted Claims | Seasonally Adjusted Claims | |
| Dec 02, 2000 | 447,262 | 338,000 |
| Dec 01, 2001 | 605,916 | 465,000 |
| Nov 30, 2002 | 385,788 | 377,000 |
| Nov 29, 2003 | 357,811 | 357,000 |
| Dec 04, 2004 | 473,570 | 343,000 |
| Dec 03, 2005 | 444,600 | 321,000 |
| Dec 02, 2006 | 448,898 | 327,000 |
| Dec 01, 2007 | 462,902 | 344,000 |
| Nov 29, 2008 | 537,230 | 532,000 |
| Dec 05, 2009 | 673,097 | 491,000 |
| Dec 04, 2010 | 585,711 | 425,000 |
| Dec 03, 2011 | 523,642 | 381,000 |
Source: http://workforcesecurity.doleta.gov/unemploy/wkclaims/report.asp
VI Interest Rates. It is quite difficult to measure inflationary expectations because they tend to break abruptly from past inflation. There could still be an influence of past and current inflation in the calculation of future inflation by economic agents. Table 79 provides inflation of the CPI. In Jul-Oct 2011, CPI inflation for all items seasonally adjusted was 3.3 percent in annual equivalent, that is, compounding inflation in Jul-Oct and assuming it would be repeated for a full year. In the 12 months ending in Oct, CPI inflation of all items not seasonally adjusted was 3.5 percent. The second row provides the same measurements for the CPI of all items excluding food and energy: 2.1 percent in 12 months and 1.8 percent in annual equivalent. Bloomberg provides the yield curve of US Treasury securities (http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/). The lowest yield is minus 0.00 percent for three months, 0.04 percent for six months, 0.08 percent for 12 months, 0.22 percent for two years, 0.38 percent for three years, 0.91 percent for five years, 1.48 percent for seven years, 2.06 percent for ten years and 3.11 percent for 30 years. The Irving Fisher definition of real interest rates is approximately the difference between nominal interest rates, which are those estimated by Bloomberg, and the rate of inflation expected in the term of the security, which could behave as in Table 79. Real interest rates in the US have been negative during substantial periods in the past decade while monetary policy pursues a policy of attaining its “dual mandate” of (http://www.federalreserve.gov/aboutthefed/mission.htm):
“Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates”
Negative real rates of interest distort calculations of risk and returns from capital budgeting by firms, through lending by financial intermediaries to decisions on savings, housing and purchases of households. Inflation on near zero interest rates misallocates resources away from their most productive uses and creates uncertainty of the future path of adjustment to higher interest rates that inhibit sound decisions.
Table 79, US, Consumer Price Index Percentage Changes 12 months NSA and Annual Equivalent ∆%
| ∆% 12 Months Oct 2011/Oct | ∆% Annual Equivalent Jul-Oct 2011 SA | |
| CPI All Items | 3.5 | 3.3 |
| CPI ex Food and Energy | 2.1 | 1.8 |
Source: http://www.bls.gov/news.release/pdf/cpi.pdf
VII Conclusion. The US economy is in growth standstill at an annual equivalent rate in the first three quarters of 1.2 percent primarily driven by drawing on savings. Real disposable income is falling. There are around 29 million people in the US unemployed or underemployed. Real wages are falling. There is no exit from unemployment, underemployment and falling real wages because of the collapse of hiring. The euro is fighting for survival. Inflation has occurred in three waves in 2011 with higher inflation induced by carry trades from zero interest rates to commodity futures when there is subdued risk aversion. Inflation declined in the middle of the year because of unwinding carry trades as a result of financial risk aversion originating in the sovereign debt crisis of Europe. The crucial issue of “let’s twist again “monetary policy is if lowering the yields of long-term Treasury securities would have any impact on investment and consumption or aggregate demand. The decline of long-term yields of Treasury securities would have to cause decline of yields of asset-backed securities used to securitize loans for investment by firms and purchase of durable goods by consumers. The decline in costs of investment and consumption of durable goods would ultimately have to result in higher investment and consumption. It is possible that the decline in yields captured by event studies is ephemeral. The decline in yields just after “let’s twist again” monetary policy was caused by the flight out of risk financial assets into Treasury securities, which is the opposite of the desired effect of encouraging risk-taking in asset-backed securities and lending. The yield curve edged upwardly in spite of “let’s twist again monetary policy” (Go to http://cmpassocregulationblog.blogspot.com/ http://sites.google.com/site/economicregulation/carlos-m-pelaez)
http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10).
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Pelaez, Carlos M. and Carlos A. Pelaez. 2009a. Financial Regulation after the Global Recession. Basingstoke: Palgrave Macmillan. http://www.amazon.com/Carlos-Manuel-Pel%C3%A1ez/e/B001HCUT10
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© Carlos M. Pelaez, 2010, 2011
Appendix I. The Great Inflation
Inflation and unemployment in the period 1966 to 1985 is analyzed by Cochrane (2011Jan, 23) by means of a Phillips circuit joining points of inflation and unemployment. Chart I1 for Brazil in Pelaez (1986, 94-5) was reprinted in The Economist in the issue of Jan 17-23, 1987 as updated by the author. Cochrane (2011Jan, 23) argues that the Phillips circuit shows the weakness in Phillips curve correlation. The explanation is by a shift in aggregate supply, rise in inflation expectations or loss of anchoring. The case of Brazil in Chart I1 cannot be explained without taking into account the increase in the fed funds rate that reached 22.36 percent on Jul 22, 1981 (http://www.federalreserve.gov/releases/h15/data.htm) in the Volcker Fed that precipitated the stress on a foreign debt bloated by financing balance of payments deficits with bank loans in the 1970s; the loans were used in projects, many of state-owned enterprises with low present value in long gestation. The combination of the insolvency of the country because of debt higher than its ability of repayment and the huge government deficit with declining revenue as the economy contracted caused adverse expectations on inflation and the economy. This interpretation is consistent with the case of the 24 emerging market economies analyzed by Reinhart and Rogoff (2010GTD, 4), concluding that “higher debt levels are associated with significantly higher levels of inflation in emerging markets. Median inflation more than doubles (from less than seven percent to 16 percent) as debt rises from the low (0 to 30 percent) range to above 90 percent. Fiscal dominance is a plausible interpretation of this pattern.”
The reading of the Phillips circuits of the 1970s by Cochrane (2011Jan, 25) is doubtful about the output gap and inflation expectations:
“So, inflation is caused by ‘tightness’ and deflation by ‘slack’ in the economy. This is not just a cause and forecasting variable, it is the cause, because given ‘slack’ we apparently do not have to worry about inflation from other sources, notwithstanding the weak correlation of [Phillips circuits]. These statements [by the Fed] do mention ‘stable inflation expectations. How does the Fed know expectations are ‘stable’ and would not come unglued once people look at deficit numbers? As I read Fed statements, almost all confidence in ‘stable’ or ‘anchored’ expectations comes from the fact that we have experienced a long period of low inflation (adaptive expectations). All these analyses ignore the stagflation experience in the 1970s, in which inflation was high even with ‘slack’ markets and little ‘demand, and ‘expectations’ moved quickly. They ignore the experience of hyperinflations and currency collapses, which happen in economies well below potential.”
Chart I1, Brazil, Phillips Circuit 1963-1987
©Carlos Manuel Pelaez, O cruzado e o austral. São Paulo: Editora Atlas, 1986, pages 94-5. Reprinted in: Brazil. Tomorrow’s Italy, The Economist, 17-23 January 1987, page 25.
DeLong (1997, 247-8) shows that the 1970s were the only peacetime period of inflation in the US without parallel in the prior century. The price level in the US drifted upward since 1896 with jumps resulting from the two world wars: “on this scale, the inflation of the 1970s was as large an increase in the price level relative to drift as either of this century’s major wars” (DeLong, 1997, 248). Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html). As DeLong (1997) shows, the Great Inflation began in the mid 1960s, well before the oil shocks of the 1970s (see also the comment to DeLong 1997 by Taylor 1997, 276-7). TableI1 provides the change in GDP, CPI and the rate of unemployment from 1960 to 1990. There are three waves of inflation (1) in the second half of the 1960s; (2) from 1973 to 1975; and (3) from 1978 to 1981. In one of his multiple important contributions to understanding the Great Inflation, Meltzer (2005) distinguishes between one-time price jumps, such as by oil shocks, and a “maintained” inflation rate. Meltzer (2005) uses a dummy variable to extract the one-time oil price changes, resulting in a maintained inflation rate that was never higher than 8 to 10 percent in the 1970s. There is revealing analysis of the Great Inflation and its reversal by Meltzer (2005, 2010a, 2010b).
Table I1, US Annual Rate of Growth of GDP and CPI and Unemployment Rate 1960-1982
| ∆% GDP | ∆% CPI | UNE | |
| 1960 | 2.5 | 1.4 | 6.6 |
| 1961 | 2.3 | 0.7 | 6.0 |
| 1962 | 6.1 | 1.3 | 5.5 |
| 1963 | 4.4 | 1.6 | 5.5 |
| 1964 | 5.8 | 1.0 | 5.0 |
| 1965 | 6.4 | 1.9 | 4.0 |
| 1966 | 6.5 | 3.5 | 3.8 |
| 1967 | 2.5 | 3.0 | 3.8 |
| 1968 | 4.8 | 4.7 | 3.4 |
| 1969 | 3.1 | 6.2 | 3.5 |
| 1970 | 0.2 | 5.6 | 6.1 |
| 1971 | 3.4 | 3.3 | 6.0 |
| 1972 | 5.3 | 3.4 | 5.2 |
| 1973 | 5.8 | 8.7 | 4.9 |
| 1974 | -0.6 | 12.3 | 7.2 |
| 1975 | -0.2 | 6.9 | 8.2 |
| 1976 | 5.4 | 4.9 | 7.8 |
| 1977 | 4.6 | 6.7 | 6.4 |
| 1978 | 5.6 | 9.0 | 6.0 |
| 1979 | 3.1 | 13.3 | 6.0 |
| 1980 | -0.3 | 12.5 | 7.2 |
| 1981 | 2.5 | 8.9 | 8.5 |
| 1982 | -1.9 | 3.8 | 10.8 |
| 1983 | 4.5 | 3.8 | 8.3 |
| 1984 | 7.2 | 3.9 | 7.3 |
| 1985 | 4.1 | 3.8 | 7.0 |
| 1986 | 3.5 | 1.1 | 6.6 |
| 1987 | 3.2 | 4.4 | 5.7 |
| 1988 | 4.1 | 4.4 | 5,3 |
| 1989 | 3.6 | 4.6 | 5.4 |
| 1990 | 1.9 | 6.1 | 6.3 |
Note: GDP: Gross Domestic Product; CPI: consumer price index; UNE: rate of unemployment; CPI and UNE are at year end instead of average to obtain a complete series
Source: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/web/empsit/cpseea01.htm
http://data.bls.gov/pdq/SurveyOutputServlet
There is a false impression of the existence of a monetary policy “science,” measurements and forecasting with which to steer the economy into “prosperity without inflation.” Market participants are remembering the Great Bond Crash of 1994 shown in Table I2 when monetary policy pursued nonexistent inflation, causing trillions of dollars of losses in fixed income worldwide while increasing the fed funds rate from 3 percent in Jan 1994 to 6 percent in Dec. The exercise in Table I2 shows a drop of the price of the 30-year bond by 18.1 percent and of the 10-year bond by 14.1 percent. CPI inflation remained almost the same and there is no valid counterfactual that inflation would have been higher without monetary policy tightening because of the long lag in effect of monetary policy on inflation (see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and Romer 2004). The pursuit of nonexistent deflation during the past ten years has resulted in the largest monetary policy accommodation in history that created the 2007 financial market crash and global recession and is currently preventing smoother recovery while creating another financial crash in the future. The issue is not whether there should be a central bank and monetary policy but rather whether policy accommodation in doses from zero interest rates to trillions of dollars in the fed balance sheet endangers economic stability.
Table I2, Fed Funds Rates, Thirty and Ten Year Treasury Yields and Prices, 30-Year Mortgage Rates and 12-month CPI Inflation 1994
| 1994 | FF | 30Y | 30P | 10Y | 10P | MOR | CPI |
| Jan | 3.00 | 6.29 | 100 | 5.75 | 100 | 7.06 | 2.52 |
| Feb | 3.25 | 6.49 | 97.37 | 5.97 | 98.36 | 7.15 | 2.51 |
| Mar | 3.50 | 6.91 | 92.19 | 6.48 | 94.69 | 7.68 | 2.51 |
| Apr | 3.75 | 7.27 | 88.10 | 6.97 | 91.32 | 8.32 | 2.36 |
| May | 4.25 | 7.41 | 86.59 | 7.18 | 88.93 | 8.60 | 2.29 |
| Jun | 4.25 | 7.40 | 86.69 | 7.10 | 90.45 | 8.40 | 2.49 |
| Jul | 4.25 | 7.58 | 84.81 | 7.30 | 89.14 | 8.61 | 2.77 |
| Aug | 4.75 | 7.49 | 85.74 | 7.24 | 89.53 | 8.51 | 2.69 |
| Sep | 4.75 | 7.71 | 83.49 | 7.46 | 88.10 | 8.64 | 2.96 |
| Oct | 4.75 | 7.94 | 81.23 | 7.74 | 86.33 | 8.93 | 2.61 |
| Nov | 5.50 | 8.08 | 79.90 | 7.96 | 84.96 | 9.17 | 2.67 |
| Dec | 6.00 | 7.87 | 81.91 | 7.81 | 85.89 | 9.20 | 2.67 |
Notes: FF: fed funds rate; 30Y: yield of 30-year Treasury; 30P: price of 30-year Treasury assuming coupon equal to 6.29 percent and maturity in exactly 30 years; 10Y: yield of 10-year Treasury; 10P: price of 10-year Treasury assuming coupon equal to 5.75 percent and maturity in exactly 10 years; MOR: 30-year mortgage; CPI: percent change of CPI in 12 months
Sources: yields and mortgage rates http://www.federalreserve.gov/releases/h15/data.htm CPI ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.t
© Carlos M. Pelaez, 2010, 2011
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