Recovery without Hiring, World Inflation Waves, Single Employment Mandate of Monetary Easing Policy, Global Financial Turbulence and World Economic and Trade Slowdown with Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2010, 2011, 2012
I Recovery without Hiring
IA Hiring Collapse
IB Labor Underutilization
IC Ten Million Fewer Full-time Jobs
ID Youth and Middle-Aged Unemployment
II World Inflation Waves
IIA World Inflation Waves
IIA Appendix: Transmission of Unconventional Monetary Policy
IAi Theory
IAii Policy
IAiii Evidence
IAiv Unwinding Strategy
IIB United States Inflation
IIB1 Long-term US Inflation
IIB2 Current US Inflation
III World Financial Turbulence
IIIA Financial Risks
IIIE Appendix Euro Zone Survival Risk
IIIF Appendix on Sovereign Bond Valuation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great Inflation
IIIB Appendix on Safe Haven Currencies
IIIC Appendix on Fiscal Compact
IIID Appendix on European Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit Financing of Growth and the Debt Crisis
IIIGA Monetary Policy with Deficit Financing of Economic Growth
IIIGB Adjustment during the Debt Crisis of the 1980s
IV Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table IV-1, updated with every blog comment, 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 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. Data in Table IV-1 for the euro zone and its members are updated from information provided by Eurostat but individual country information is provided in this section as soon as available, following Table IV-1. Data for other countries in Table IV-1 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section V World Economic Slowdown following with individual country and regional data tables.
Table IV-1, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates
| GDP | CPI | PPI | UNE | |
| US | 2.3 | 1.7 | 2.0 | 8.1 |
| Japan | 3.5 | -0.4 | -1.8 | 4.3 |
| China | 8.9 | 2.0 | -3.5 | |
| UK | -0.8 | 2.6* | 2.2* output | 8.1 |
| Euro Zone | -0.5 | 2.6 | 1.8 | 11.3 |
| Germany | 1.0 CA | 2.2 | 0.9 | 5.5 |
| France | 0.3 | 2.4 | 1.3 | 10.3 |
| Nether-lands | -0.5 | 2.5 | 2.5 | 5.3 |
| Finland | 0.3 | 3.3 | 0.9 | 7.6 |
| Belgium | -0.4 | 2.6 | 2.7 | 7.2 |
| Portugal | -3.3 | 3.2 | 3.0 | 15.7 |
| Ireland | NA | 2.6 | 1.6 | 14.9 |
| Italy | -2.5 | 3.3 | 2.4 | 10.7 |
| Greece | -6.2 | 1.2 | 4.1 | NA |
| Spain | -1.3 | 2.7 | 2.6 | 25.1 |
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 http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/july-2012/index.html **Core
PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html Source: EUROSTAT; country statistical sources http://www.census.gov/aboutus/stat_int.html
Table IV-1 shows the simultaneous occurrence of low growth, inflation and unemployment in advanced economies. The US grew at 2.3 percent in IIQ2012 relative to IIQ2011 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2012/pdf/gdp2q12_2nd.pdf See I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html). Japan’s GDP fell 0.7 percent in IVQ2011 relative to IVQ2010 and contracted 1.8 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 6.9 percent in IIIQ2011, increasing at the SAAR of 0.3 percent in IVQ 2011, 5.3 percent in IQ2012 and 0.7 percent in IIQ2012 (see Section VB); the UK grew at minus 0.5 percent in IIQ2012 relative to IQ2012 and GDP fell 0.5 percent in IIQ2012 relative to IIQ2011 (see Section VH at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html); and the Euro Zone grew at minus 0.2 percent in IIQ2012, 0.0 percent in IQ2012 relative to IVQ2011 and fell 0.5 percent in IIQ2012 relative to IIQ2011 (see Section at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html). These are stagnating or “growth recession” rates, which are positive or about nil growth rates instead of contractions but insufficient to recover employment. The rates of unemployment are quite high: 8.1 percent in the US but 17.4 percent for unemployment/underemployment or job stress of 28.1 million (see Table I-4 at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html http://cmpassocregulationblog.blogspot.com/2012/06/mediocre-recovery-without-jobs.html http://cmpassocregulationblog.blogspot.com/2012/05/recovery-without-jobs-twenty-eight.html http://cmpassocregulationblog.blogspot.com/2012/04/thirty-million-unemployed-or.html), 4.3 percent for Japan (see Section VB at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or_3778.html), 8.1 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH and earlier http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/07/world-inflation-waves-financial_22.html) and 11.3 percent in the Euro Zone (section VD at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or_3778.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 1.7 percent in the US, -0.4 percent for Japan, 2.0 percent for China, 2.6 percent for the Euro Zone and 2.6 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 III and earlier http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html); (2) the tradeoff of growth and inflation in China now with change in growth strategy to domestic consumption instead of investment and political developments in a decennial transition; (3) slow growth by repression of savings with de facto interest rate controls (see IIB at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html), weak hiring with the loss of 10 million full-time jobs (see Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million.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 at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html); (4) the timing, dose, impact and instruments of normalizing monetary and fiscal policies (see Section I at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html and earlier IV Budget/Debt Quagmire in http://cmpassocregulationblog.blogspot.com/2012/02/thirty-one-million-unemployed-or.html 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) geopolitical events in the Middle East.
In the effort to increase transparency, the Federal Open Market Committee (FOMC) provides both economic projections of its participants and views on future paths of the policy rate that in the US is the federal funds rate or interest on interbank lending of reserves deposited at Federal Reserve Banks. These projections and views are discussed initially followed with appropriate analysis.
Jon Hilsenrath, writing on “Fed sets stage for stimulus,” on Aug 31, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390443864204577623220212805132.html?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzes the essay presented by Chairman Bernanke at the Jackson Hole meeting of central bankers, as defending past stimulus with unconventional measures of monetary policy that could be used to reduce extremely high unemployment. Chairman Bernanke (2012JHAug31, 18-9) does support further unconventional monetary policy impulses if required by economic conditions (http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm):
“Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
Professor John H Cochrane (2012Aug31), at the University of Chicago Booth School of Business, writing on “The Federal Reserve: from central bank to central planner,” on Aug 31, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444812704577609384030304936.html?mod=WSJ_hps_sections_opinion), analyzes that the departure of central banks from open market operations into purchase of assets with risks to taxpayers and direct allocation of credit subject to political influence has caused them to abandon their political independence and accountability. Cochrane (2012Aug31) finds a return to the proposition of Milton Friedman in the 1960s that central banks can cause inflation and macroeconomic instability.
Jon Hilsenrath, writing on “Bernanke letter defends Fed actions,” on Aug 24, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444358404577609231770784446.html?mod=WSJ_hp_LEFTWhatsNewsCollection#project%3Dissaletter082412%26articleTabs%3Darticle), finds support for FOMC policies and possible further actions in a letter by Chairman Bernanke (2012Aug22) in reply to inquiry by Representative Darrell Issa (2012Aug1), which were obtained and published by the WSJ on Aug 22, 2012 (http://online.wsj.com/public/resources/documents/Bernankeletter0812.pdf http://s3.documentcloud.org/documents/413447/issaletter0812.pdf). Issa (2012Aug1) inquired from Chairman Bernanke about analysis of monetary policy of various types, including by distinguished Professor Allan Meltzer (http://www.amazon.com/Allan-H.-Meltzer/e/B001H6MWPC/ref=ntt_dp_epwbk_0), the author of three scholarly analytical volumes on the history of the Federal Reserve (Meltzer 2004, 2010a, 2010b), who has emphasized the short-term nature of economic policy that could be more effective if focused on the long term. Chairman Bernanke (2012Aug22), who is also an eminent scholar, provided detailed answers to the queries by Issa (2012Aug1). The first sentence of the reply ignited positive risk taking in financial markets operating with low holiday volumes: “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.”
The statement of the FOMC at the conclusion of its meeting on Sep 13, 2012, revealed the following policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm):
“Release Date: September 13, 2012
For immediate release
Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.”
There are several important issues in this statement.
1. Mandate. The FOMC 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”
2. Open-ended Quantitative Easing. Earlier programs are continued with an additional open-ended $40 billion of bond purchases per months: “To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”
3. Advance Guidance on Accommodative Policy after Recovery Strengthening. Policy will be accommodative even after the economy recovers satisfactorily: “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.”
4. Monitoring and Policy Focus on Jobs. The FOMC reconsiders its policy continuously in accordance with available information: “The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”
Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval of (1.99, 2.0). Symmetric targets appear to have been abandoned in favor of a self-imposed single jobs mandate of easing monetary policy even with the economy growing at or close to potential output (http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm): “The [Federal Open Market] Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the recovery strengthens.” The impact on the overall economy and the financial system of errors of policy are magnified by large-scale policy doses of trillions of dollars of quantitative easing and zero interest rates. The US economy has been experiencing financial repression as a result of negative real rates of interest during nearly a decade and programmed in monetary policy statements until 2015 or, for practical purposes, forever. The essential calculus of risk/return in capital budgeting and financial allocations has been distorted. If economic perspectives are doomed until 2015 such as to warrant zero interest rates and open-ended bond-buying by “printing” digital bank reserves (http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html), rational investors and consumers will not invest and consume until just before interest rates are likely to increase. Monetary policy statements on intentions of zero interest rates for another three years or now virtually forever discourage investment and consumption or aggregate demand that can increase economic growth and generate more hiring and opportunities to increase wages and salaries. The doom scenario used to justify monetary policy accentuates adverse expectations on discounted future cash flows of potential economic projects that can revive the economy and create jobs. If it were possible to project the future with the central tendency of the monetary policy scenario and monetary policy tools do exist to reverse this adversity, why the tools have not worked before and even prevented the financial crisis? If there is such thing as “monetary policy science”, why it has such poor record and current inability to reverse production and employment adversity? There is no excuse of arguing that additional fiscal measures are needed because they were deployed simultaneously with similar ineffectiveness.
Table IV-2 provides economic projections of governors of the Board of Governors of the Federal Reserve and regional presidents of Federal Reserve Banks released at the meeting of Sep 13, 2012. The Fed releases the data with careful explanations (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf). Columns “∆% GDP,” “∆% PCE Inflation” and “∆% Core PCE Inflation” are changes “from the fourth quarter of the previous year to the fourth quarter of the year indicated.” The GDP report for IIQ2012 is analyzed in I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html) and the PCE inflation data from the report on personal income and outlays (Section IV at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html and earlier http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). The Bureau of Economic Analysis (BEA) provides the second estimate of IIQ2012 GDP with the third estimate to be released on Sep 27 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm). PCE inflation is the index of personal consumption expenditures (PCE) of the report of the Bureau of Economic Analysis (BEA) on “Personal Income and Outlays” (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm), which is analyzed in sections IA and IV in this blog for Jul 2012 at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html. The next report on “Personal Income and Outlays” for Aug will be released at 8:30 AM on Sep 28, 2012 (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm). PCE core inflation consists of PCE inflation excluding food and energy. Column “UNEMP %” is the rate of unemployment measured as the average civilian unemployment rate in the fourth quarter of the year. The Bureau of Labor Statistics (BLS) provides the Employment Situation Report with the civilian unemployment rate in the first Friday of every month, which is analyzed in this blog (the Aug report in Section I at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and the Jul report is analyzed at http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html). The report for Sep will be released on Fri Oct 5, 2012 (http://www.bls.gov/ces/). “Longer term projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy” (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf).
It is instructive to focus on 2012 and 2013 as 2014 and 2015 and longer term are too far away, and there is not much information even 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 but the second block of numbers provides the range of projections by FOMC participants. The first row for each year shows the projection introduced after the meeting of Sep 13, 2012 and the second row “PR” the projection of the Jun 20, 2012 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 2011 to 2.5 to 2.9 percent in Nov 2011 and 2.2 to 2.7 percent at the Jan 25 meeting but increased it to 2.4 to 2.9 percent at the Apr 25, 2012 meeting, reducing it to 1.9 to 2.4 percent at the Jun 20, 2012 meeting and further to 1.7 to 2.0 percent at the Sep 13, 2012 meeting. GDP growth in 2013 has been increased to 2.5 to 3.0 percent at the meeting on Sep 13
2012 from 2.2 to 2.8 percent at the meeting on Jun 20, 2012. Rate of Unemployment “UNEM%.” The FOMC increased the rate of unemployment from 7.8 to 8.2 percent in Jun 2011 to 8.5 to 8.7 percent in Nov 2011 but has reduced it to 8.2 to 8.5 percent at the Jan 25 meeting and further down to 7.8 to 8.0 percent at the Apr 25, 2012 meeting but increased it to 8.0 to 8.2 percent at the Jun 20, 2012 meeting and did not change it at 8.0 to 8.2 at the meeting on Sep 13, 2012. The rate of unemployment for 2013 has been changed to 7.6 to 7.9 percent at the Sep 13 meeting compared with 7.5 to 8.0 percent at the Jun 20 meeting.
3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 1.5 to 2.0 percent in Jun 2011 to virtually the same of 1.4 to 2.0 percent in Nov 2011 but has reduced it to 1.4 to 1.8 percent at the Jan 25 meeting but increased it to 1.9 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.2 to 1.7 percent at the Jun 20, 2012 meeting. The interval was increased to 1.7 to 1.8 percent at the Sep 13, 2012 meeting.
4. 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 2011 of 1.4 to 2.0 percent and the Nov 2011 projection of 1.5 to 2.0 percent, which has been reduced slightly to 1.5 to 1.8 percent at the Jan 25 meeting but increased to 1.8 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.7 to 2.0 percent at the Jun 20, 2012 meeting. The projection was virtually unchanged at 1.7 to 1.9 percent at the Sep 13 meeting. For 2013, the projection for core inflation was changed from 1.6 to 2.0 percent at the Jun 20, 2012 meeting to 1.7 to 2.0 percent at the Sep 13, 2012 meeting.
Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, June 2012 and Sep 2012
| ∆% GDP | UNEM % | ∆% PCE Inflation | ∆% Core PCE Inflation | |
| Central | ||||
| 2012 Jun PR | 1.7 to 2.0 1.9 to 2.4 | 8.0 to 8.2 8.0 to 8.2 | 1.7 to 1.8 1.2 to 1.7 | 1.7 to 1.9 1.7 to 2.0 |
| 2013 | 2.5 to 3.0 | 7.6 to 7.9 | 1.6 to 2.0 | 1.7 to 2.0 1.6 to 2.0 |
| 2014 | 3.0 to 3.8 | 6.7 to 7.3 | 1.6 to 2.0 | 1.8 to 2.0 |
| 2015 | 3.0 to 3.8 NA | 6.0 to 6.8 NA | 1.8 to 2.0 NA | 1.9 to 2.0 NA |
| Longer Run Jun PR | 2.3 to 2.5 2.3 to 2.5 | 5.2 to 6.0 5.2 to 6.0 | 2.0 2.0 | |
| Range | ||||
| 2012 | 1.6 to 2.0 | 8.0 to 8.3 | 1.5 to 1.9 | 1.6 to 2.0 |
| 2013 | 2.3 to 3.5 | 7.0 to 8.1 | 1.5 to 2.1 | 1.6 to 2.0 |
| 2014 | 2.7 to 4.1 | 6.3 to 7.5 | 1.6 to 2.2 | 1.6 to 2.2 |
| 2015 Jun PR | 2.5 to 4.2 NA | 5.7 to 6.9 NA | 1.8 to 2.3 NA | 1.8 to 2.3 NA |
| Longer Run Jun PR | 2.2 to 3.0 2.2 to 3.0 | 5.0 to 6.3 4.9 to 6.3 | 2.0 2.0 |
Notes: UEM: unemployment; PR: Projection
Source:
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf
Another important decision at the FOMC meeting on Jan 25, 2012, is formal specification of the goal of inflation of 2 percent per year but without specific goal for unemployment (http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm):
“Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.
The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.
Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.
The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.
The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.
In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. ”
The probable intention of this specific inflation goal is to “anchor” inflationary expectations. Massive doses of monetary policy of promoting growth to reduce unemployment could conflict with inflation control. Economic agents could incorporate inflationary expectations in their decisions. As a result, the rate of unemployment could remain the same but with much higher rate of inflation (see Kydland and Prescott 1977 and Barro and Gordon 1983; 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). Strong commitment to maintaining inflation at 2 percent could control expectations of inflation.
The FOMC continues its efforts of increasing transparency that can improve the credibility of its firmness in implementing its dual mandate. Table IV-3 provides the views by participants of the FOMC of the levels at which they expect the fed funds rate in 2012, 2013, 2014 and the in the longer term. Table IV-3 is inferred from a chart provided by the FOMC with the number of participants expecting the target of fed funds rate (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf). There are 18 participants expecting the rate to remain at 0 to ¼ percent in 2012 and only one to be higher. Not much change is expected in 2013 either with 15 participants anticipating the rate at the current target of 0 to ¼ percent and only four expecting higher rates. The rate would still remain at 0 to ¼ percent in 2014 for 13 participants with four expecting the rate to be in the range of 1.0 to 2.0 percent and two participants expecting rates from 2.0 to 3.0. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels until late in 2014. For 2015, ten participants expect rates to be below 1.0 percent while four expect rates from 3.0 to 4.5 percent. In the long-run, all 19 participants expect rates to be between 3.0 and 4.5 percent.
Table IV-3, US, Views of Target Federal Funds Rate at Year-End of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012
| 0 to 0.25 | 0.5 to 1.0 | 1.0 to 1.5 | 1.0 to 2.0 | 2.0 to 3.0 | 3.0 to 4.5 | |
| 2012 | 18 | 1 | ||||
| 2013 | 15 | 3 | 1 | |||
| 2014 | 13 | 4 | 2 | |||
| 2015 | 1 | 9 | 3 | 2 | 4 | |
| Longer Run | 19 |
Source:
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf
Additional information is provided in Table IV-4 with the number of participants expecting increasing interest rates in the years from 2012 to 2015. It is evident from Table IV-4 that the prevailing view in the FOMC is for interest rates to continue at low levels in future years. This view is consistent with the economic projections of low economic growth, relatively high unemployment and subdued inflation provided in Table IV-2.
Table IV-4, US, Views of Appropriate Year of Increasing Target Federal Funds Rate of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012
| Appropriate Year of Increasing Target Fed Funds Rate | Number of Participants |
| 2012 | 1 |
| 2013 | 3 |
| 2014 | 2 |
| 2015 | 12 |
| 2016 | 1 |
Source:
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf
Inflation in advanced economies has been fluctuating in waves at the production level alternation of surges and moderation of commodity price shocks. Table IV-5 provides month and 12-month percentage rates of inflation of Japan’s corporate goods price index (CGPI). Inflation measured by the CGPI increased 0.3 percent in Aug and fell 1.8 percent in 12 months. Measured by 12-month rates, CGPI inflation increased from minus 0.2 percent in Jul 2010 to a high of 2.2 percent in Jul 2011 and to minus 1.8 percent in Aug 2012. Calendar-year inflation for 2011 is 1.5 percent, which is the highest after declines in 2009 and 2010 but lower than 4.6 percent in the commodity shock driven by zero interest rates during the global recession in 2008. Inflation of the corporate goods prices follows waves similar to those in other indices around the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html). In the first wave, annual equivalent inflation reached 5.9 percent in Jan-Apr, driven by commodity price shocks of the carry trade from zero interest rates to commodity futures. In the second wave, carry trades were unwound because of risk aversion caused by the European debt crisis, resulting in average annual equivalent inflation of minus 1.2 percent in May-Jun. In the third wave, renewed risk aversion caused annual equivalent decline of the CGPI of minus 2.2 percent in Jul-Nov. In the fourth wave, continuing risk aversion resulted in annual equivalent inflation of minus 0.6 percent in Dec 2011 to Jan 2012. In the fifth wave, renewed risk appetite resulted in annual equivalent inflation of 3.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation dropped to minus 6.6 percent in May-Jul 2012. In the seventh wave, annual equivalent inflation jumped to 3.7 percent in Aug 2012. Unconventional monetary policies of zero interest rates and quantitative easing have created a difficult environment for economic and financial decisions with significant inflation volatility.
Table IV-5, Japan, Corporate Goods Price Index (CGPI) ∆%
| Month | Year | |
| Aug | 0.3 | -1.8 |
| AE ∆% Aug | 3.7 | |
| Jul | -0.5 | -2.2 |
| Jun | -0.7 | -1.4 |
| May | -0.5 | -0.7 |
| AE ∆% May-Jul | -6.6 | |
| Apr | 0.1 | -0.4 |
| Mar | 0.5 | 0.3 |
| Feb 2012 | 0.2 | 0.4 |
| AE ∆% Feb-Apr | 3.3 | |
| Jan | -0.1 | 0.3 |
| Dec 2011 | 0.0 | 0.8 |
| AE ∆% Dec-Jan | -0.6 | |
| Nov | -0.1 | 1.3 |
| Oct | -0.8 | 1.3 |
| Sep | -0.2 | 2.0 |
| Aug | -0.1 | 2.2 |
| Jul | 0.3 | 2.2 |
| AE ∆% Jul-Nov | -2.2 | |
| Jun | 0.0 | 1.9 |
| May | -0.2 | 1.6 |
| AE ∆% May-Jun | -1.2 | |
| Apr | 0.8 | 1.8 |
| Mar | 0.6 | 1.3 |
| Feb | 0.1 | 0.7 |
| Jan | 0.4 | 0.6 |
| AE ∆% Jan-Apr | 5.9 | |
| Dec 2010 | 0.5 | 1.2 |
| Nov | -0.1 | 0.9 |
| Oct | -0.1 | 0.9 |
| Sep | 0.0 | -0.1 |
| Aug | -0.1 | 0.0 |
| Jul | 0.0 | -0.2 |
| Calendar Year | ||
| 2011 | 1.5 | |
| 2010 | -0.1 | |
| 2009 | -5.3 | |
| 2008 | 4.6 |
AE: annual equivalent
Source: Bank of Japan http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1208.pdf
Chart IV-1 of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan. Percentage changes of inflation of services are not as sharp as those of goods. Japan had the same sharp waves of inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). Inflation also collapsed in the beginning of the 1980s as a result of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid 2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.
Chart IV-1, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1980-2012
Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
There is similar behavior of year-on-year percentage changes of the US producer price index from 1980 to 2012 in Chart IV-2 of the US Bureau of Labor Statistics as in Chart IV-13 with the domestic goods CGPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.
Chart IV-2, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1980-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
Finer detail is provided by Chart IV-3 of the domestic CGPI from 2008 to 2012. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion.
Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2012
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
There is similar behavior of the US producer price index from 2008 to 2012 in Chart IV-16 as in the domestic CGPI in Chart IV-4. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-4. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.
Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009.
Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, 2008-2012
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
Japan imports primary commodities and raw materials. As a result, the import corporate goods price index in Chart IV-6 shows an upward trend after the rise during the global recession in 2008 driven by carry trades from fed funds rates collapsing to zero into commodity futures and decline during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan.
Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, 2008-2012
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2012. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from interest rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).
Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2012
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
The producer price index of the US from 19700 to 2012 in Chart II-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.
Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-6. Petroleum and coal with weight of 5.7 percent increased 1.8 percent in Aug and fell 5.1 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.8 percent, increased 0.4 percent in Aug and increased 1.4 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income.
Table IV-6, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%
| Aug 2012 | Weight | Month ∆% | 12 Month ∆% |
| Total | 1000.0 | +0.3 | -1.8 |
| Food, Beverages, Tobacco, Feedstuffs | 137.5 | 0.0 | -0.3 |
| Petroleum & Coal | 57.4 | 1.8 | -5.1 |
| Production Machinery | 30.8 | 0.4 | 1.4 |
| Electronic Components | 31.0 | 0.2 | -4.4 |
| Electric Power, Gas & Water | 52.7 | 1.8 | 10.3 |
| Iron & Steel | 56.6 | -0.2 | -9.3 |
| Chemicals | 92.1 | 0.5 | -3.5 |
| Transport | 136.4 | -0.1 | -1.3 |
Source: Bank of Japan http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1208.pdf
Percentage point contributions to change of the corporate goods price index (CGPI) in Jun 2012 are provided in Table IV-7 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.3 percent in Aug, the energy shock resulting from carry trades is evident in the 0.11 percentage points added by energy-rich components: electric power gas & water and petroleum & coal products. The exports CGPI increased 0.3 percent on the basis of the contract currency with contribution of 0.12 percentage points by chemical and related products that are rich in raw materials, 0.14 percentage points by metals and related products and 0.12 percentage points by other primary products and manufactured goods. The imports CGPI increased 0.4 percent on the contract currency basis. Petroleum, coal & natural gas contributed 0.42 percentage points because of carry trades into energy commodity exposures and metals & related products deducted 0.12 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions.
Table IV-7, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index
| Groups Aug 2012 | Contribution to Change Percentage Points |
| A. Domestic Corporate Goods Price Index | Monthly Change: |
| Electric Power, Gas & Water | 0.11 |
| Petroleum & Coal Products | 0.11 |
| Chemicals & Related Products | 0.04 |
| Agriculture, Forestry & Fishery | -0.02 |
| Iron & Steel | -0.01 |
| B. Export Price Index | Monthly Change: |
| Chemicals & Related Products | 0.12 |
| Other Primary Products & Manufactured Goods | 0.12 |
| Electric & Electronic Products | -0.04 |
| C. Import Price Index | Monthly Change: 0.4 % contract currency basis |
| Petroleum, Coal & Natural Gas | 0.42 |
| Textile | 0.09 |
| Metals & Related Products | -0.12 |
| Other Primary Products & Manufactured Goods | 0.12 |
Source: Bank of Japan
http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1208.pdf
China is experiencing similar inflation behavior as the advanced economies in prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices in Aug, as shown in Table IV-8. Inflation of the price indexes for industry in Aug 2012 is minus 3.5 percent; 12-month inflation is minus 1.3 percent in Aug; and inflation in Jan-Aug 2012 relative to Jan-Aug 2011 is minus 1.3 percent. Inflation of segments in Aug 2012 in China is provided in Table IV-8 in column “Month Aug ∆%.” There were decreases of prices of mining & quarrying of 1.5 percent in Aug and 8.3 percent in 12 months. Prices of consumer goods were flat in Aug and increased 0.2 percent in 12 months. Prices of inputs in the purchaser price index fell 0.5 percent in Aug and declined 4.1 percent in 12 months. Fuel and power decreased 0.8 percent in Aug and 2.6 percent in 12 months. An important category of inputs for exports is textile raw materials, decreasing 0.3 percent in Aug and 1.4 percent in 12 months.
Table IV-8, China, Price Indexes for Industry ∆%
| Month Aug ∆% | 12-Month Aug ∆% | Jan-Aug 2012/Jan-Aug 2011 ∆% | |
| I Producer Price Indexes | -0.5 | -3.5 | -1.3 |
| Means of Production | -0.7 | -4.6 | -2.0 |
| Mining & Quarrying | -1.5 | -8.3 | -0.4 |
| Raw Materials | -0.6 | -5.2 | -1.3 |
| Processing | -0.7 | -3.9 | -2.5 |
| Consumer Goods | 0.0 | 0.2 | 1.1 |
| Food | 0.1 | 0.5 | 1.9 |
| Clothing | 0.0 | 1.7 | 2.3 |
| Daily Use Articles | -0.1 | 0.3 | 1.0 |
| Durable Consumer Goods | 0.0 | -1.2 | -0.9 |
| II Purchaser Price Indexes | -0.5 | -4.1 | -1.2 |
| Fuel and Power | -0.8 | -2.6 | 2.2 |
| Ferrous Metals | -1.9 | -9.8 | -5.4 |
| Nonferrous Metals | -0.8 | -9.9 | -6.1 |
| Raw Chemical Materials | -0.2 | -6.5 | -3.4 |
| Wood & Pulp | -0.3 | -0.9 | 0.7 |
| Building Materials | -0.5 | -2.4 | 0.4 |
| Other Industrial Raw Materials | -0.1 | -2.0 | -0.7 |
| Agricultural | 0.5 | -1.8 | 0.2 |
| Textile Raw Materials | -0.3 | -1.4 | -0.4 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
China’s producer price inflation follows waves similar to those around the world (Section II), as shown in Table IV-9. In the first wave, annual equivalent inflation was 6.4 percent in Jan-Jun, driven by carry trades from zero interest rates to commodity futures. In the second wave, risk aversion unwound carry trades, resulting in annual equivalent inflation of minus 3.1 percent in Jul-Nov. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 2.4 percent in Dec-Jan. In the fourth wave, new carry trades resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. A fifth wave is beginning with annual equivalent minus 7.0 percent in May-Aug 2012. There are declining producer prices in China in Aug in contrast with increases worldwide.
Table IV-9, China, Month and 12-Month Rate of Change of Producer Price Index, ∆%
| 12-Month ∆% | Month ∆% | |
| Aug | -3.5 | -0.5 |
| Jul | -2.9 | -0.8 |
| Jun | -2.1 | -0.7 |
| May | -1.4 | -0.4 |
| AE ∆% May-Aug | -7.0 | |
| Apr | -0.7 | 0.2 |
| Mar | -0.3 | 0.3 |
| Feb | 0.0 | 0.1 |
| AE ∆% Feb-Apr | 2.4 | |
| Jan | 0.7 | -0.1 |
| Dec 2011 | 1.7 | -0.3 |
| AE ∆% Dec-Jan | -2.4 | |
| 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 | 6.4 | |
| Dec 2010 | 5.9 | 0.7 |
AE: Annual Equivalent
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart IV-9 of the National Bureau of Statistics of China provides monthly and 12-month rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct, Nov, Dec 2011, Jan, Mar, Apr, May, Jun, Jul and Aug 2012 pulled down the 12-month rates to 5.0 percent in Oct 2011, 2.7 percent in Nov, 1.7 percent in Dec, 0.7 percent in Jan 2012, 0.0 percent in Feb, minus 0.3 percent in Mar, minus 0.7 percent in Apr, minus 1.4 percent in May, 2.1 in Jun, minus 2.9 percent in Jul and minus 3.5 percent in Aug.
Chart IV-9, China, Producer Prices for the Industrial Sector Month and 12 months ∆%
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart IV-10 of the National Bureau of Statistics of China provides monthly and 12-month inflation of the purchaser product indices for the industrial sector. Decreasing monthly inflation with four successive contractions from Oct 2011 to Jan 2012 and May-Aug 2012 pulled down the 12-month rate to minus 4.1 percent in Aug.
Chart IV-10, China, Purchaser Product Indices for Industrial Sector
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
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 Jul was 0.6 percent and 2.0 percent in 12 months, as shown in Table IV-10. Food prices increased 1.5 percent in Aug and increased 3.4 percent in 12 months and 5.9 percent in Jan-Aug 2012 relative to Jan-Aug 2011. Another area of concern is housing inflation which was 0.4 in Aug but increased 2.2 percent in 12 months. Prices of services increased 0.2 percent in Aug and gained 2.0 percent in 12 months.
Table IV-10, China, Consumer Price Index
| 2012 | Aug Month ∆% | Aug 12- Month ∆% | Jan-Aug 2012 ∆% Jan-Aug 2011 |
| Consumer Prices | 0.6 | 2.0 | 2.9 |
| Urban | 0.6 | 2.1 | 3.0 |
| Rural | 0.6 | 1.8 | 2.8 |
| Food | 1.5 | 3.4 | 5.9 |
| Non-food | 0.1 | 1.4 | 1.6 |
| Consumer Goods | 0.7 | 2.1 | 3.4 |
| Services | 0.2 | 2.0 | 1.8 |
| Commodity Categories: | |||
| Food | 1.5 | 3.4 | 5.9 |
| Tobacco, Liquor | 0.1 | 3.0 | 3.4 |
| Clothing | -0.2 | 3.1 | 3.4 |
| Household | 0.0 | 1.8 | 2.1 |
| Healthcare & Personal Articles | 0.1 | 1.3 | 2.2 |
| Transportation & Communication | 0.1 | -0.8 | -0.2 |
| Recreation, Education, Culture & Services | 0.1 | 0.4 | 0.3 |
| Residence | 0.4 | 2.2 | 1.9 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Month and 12-month rates of change of consumer prices are provided in Table IV-11. There are waves of consumer price inflation in China similar to those around the world (Section II World Inflation Wave). In the first wave, consumer prices increased at the annual equivalent rate of 8.3 percent in Jan-Mar 2011, driven by commodity price increases resulting from unconventional monetary policy of zero interest rates. In the second wave, risk aversion unwound carry trades with annual equivalent inflation falling to the rate of 2.0 percent in Apr-Jun 2011. In the third wave, inflation returned at 2.9 percent with renewed interest in commodity exposures in Jul-Nov 2011. In the fourth wave, inflation returned at a high 5.8 percent annual equivalent in Dec 2011 to Mar 2012. In the fifth wave, annual equivalent inflation was minus 3.9 percent in Apr to Jun 2012. In the sixth wave, annual equivalent inflation rose to 4.3 percent. Inflation volatility originating in unconventional monetary policy clouds investment and consumption decisions by business and households.
Table IV-11, China, Month and 12-Month Rates of Change of Consumer Price Index ∆%
| Month ∆% | 12-Month ∆% | |
| Aug 2012 | 0.6 | 2.0 |
| Jul | 0.1 | 1.8 |
| AE ∆% Jul-Aug | 4.3 | |
| Jun | -0.6 | 2.2 |
| May | -0.3 | 3.0 |
| Apr | -0.1 | 3.4 |
| AE ∆% Apr to Jun | -3.9 | |
| Mar | 0.2 | 3.6 |
| Feb | -0.1 | 3.2 |
| Jan | 1.5 | 4.5 |
| Dec 2011 | 0.3 | 4.1 |
| AE ∆% Dec to Mar | 5.8 | |
| Nov | -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 Nov | 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 | |
| Dec 2010 | 0.5 | 4.6 |
AE: Annual Equivalent
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart IV-11 of the National Bureau of Statistics of China provides monthly and 12-month rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates. Consumer prices fell 0.2 percent in Nov 2011 after increasing only 0.1 percent in Oct but increased 0.3 percent in Dec and a high 1.5 percent in Jan 2012, declining 0.1 percent in Feb, rising 0.2 percent in Mar and declining 0.1 percent in Apr, 0.3 percent in May and 0.6 percent in Jun 2012 but increasing 0.1 percent in Jul and 0.6 percent in Aug 2012. The decline of 0.1 percent in Feb 2012 pulled down the 12-month rate to 3.2 percent, which bounced back to 3.6 percent in Mar with the monthly increase of 0.2 percent and fell to 2.2 percent in Jun with increasing monthly decline from Apr to Jun 2012. Even with increase of 0.1 percent in Jul 2012, consumer price inflation in 12 months fell to 1.8 percent in Jul 2012 but bounced back to 2.0 percent with increase of 0.6 percent in Aug.
Chart IV-11, 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/
The harmonized index of consumer prices of the euro area in Table IV-12 has similar inflation waves as in most countries (see Section II World Inflation Waves). In the first wave, consumer prices in the euro area increased at the annual equivalent rate of 5.2 percent in Jan-Apr 2011. In the second wave, risk aversion caused unwinding of commodity carry trades with inflation decreasing at the annual equivalent rate of minus 2.4 percent in May-Jul 2011. In the third wave, improved risk appetite resulted in annual equivalent inflation in Aug-Dec at 4.3 percent. In the fourth wave, return of risk aversion caused decline of consumer prices at the annual equivalent rate of minus 3.0 percent in Dec 2011 to Jan 2012. In the fifth wave, improved attitudes toward risk aversion resulted in higher consumer price inflation at the high annual equivalent rate of 9.6 percent in Feb-Apr 2012. In the sixth wave, equivalent inflation fell to minus 2.8 percent in May-Jul 2012. In the eighth wave, increasing risk appetite caused new carry trade exposures that resulted in annual equivalent inflation of 4.9 percent in Aug 2012. Inflation volatility around the world is confusing the information required in investment and consumption decisions.
Table IV-12, Euro Area Harmonized Index of Consumer Prices Month and 12 Months ∆%
| Month ∆% | 12 Months ∆% | |
| Aug | 0.4 | 2.6 |
| AE ∆% Aug | 4.9 | |
| Jul 2012 | -0.5 | 2.4 |
| Jun | -0.1 | 2.4 |
| May | -0.1 | 2.4 |
| AE ∆% May-Jul | -2.8 | |
| Apr | 0.5 | 2.6 |
| Mar | 1.3 | 2.7 |
| Feb | 0.5 | 2.7 |
| AE ∆% Feb-Apr | 9.6 | |
| Jan | -0.8 | 2.7 |
| Dec 2011 | 0.3 | 2.7 |
| AE ∆% Dec-Jan | -3.0 | |
| Nov | 0.1 | 3.0 |
| Oct | 0.4 | 3.0 |
| Sep | 0.7 | 3.0 |
| Aug | 0.2 | 2.6 |
| AE ∆% Aug-Dec | 4.3 | |
| Jul | -0.6 | 2.6 |
| Jun | 0.0 | 2.7 |
| May | 0.0 | 2.7 |
| AE ∆% May-Jul | -2.4 | |
| Apr | 0.6 | 2.8 |
| Mar | 1.4 | 2.7 |
| Feb | 0.4 | 2.4 |
| Jan | -0.7 | 2.3 |
| AE ∆% Jan-Apr | 5.2 | |
| Dec 2010 | 0.6 | 2.2 |
AE: annual equivalent
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Table IV-13 provides inflation, unemployment and real GDP growth in the euro area yearly from 1999 to 2011 together with growth forecasts of EUROSTAT for 2012 and 2013. Inflation in the euro zone remained subdued around 2 percent in the first five years of the euro zone from 1999 to 2004, as shown in Table IV-13. Inflation climbed above 2.0 percent after 2005, peaking at 3.3 percent in 2008 with the surge in commodity prices but falling to 0.3 percent in 2009 with the collapse of commodity prices. Inflation climbed back to 1.6 percent in 2010 and 2.7 percent in 2011. Under the regime of zero interest rates inflation returns worldwide during relaxation of risk aversion.
Table IV-13, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, ∆%
| Year | HICP ∆% | Unemployment | GDP ∆% |
| 1999 | 1.2 | 9.6 | 2.9 |
| 2000 | 2.2 | 8.7 | 3.8 |
| 2001 | 2.4 | 8.1 | 2.0 |
| 2002 | 2.3 | 8.5 | 0.9 |
| 2003 | 2.1 | 9.0 | 0.7 |
| 2004 | 2.2 | 9.3 | 2.2 |
| 2005 | 2.2 | 9.2 | 1.7 |
| 2006 | 2.2 | 8.5 | 3.3 |
| 2007 | 2.1 | 7.6 | 3.0 |
| 2008 | 3.3 | 7.6 | 0.4 |
| 2009 | 0.3 | 9.6 | -4.4 |
| 2010 | 1.6 | 10.1 | 2.0 |
| 2011 | 2.7 | 10.2 | 1.4 |
| 2012* | -0.3 | ||
| 2013* | 1.0 |
*EUROSTAT forecast Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
EUROSTAT provides the decomposition in percentage point contributions of the rate of inflation of 2.6 percent in the 12 months ending in Aug 2012 relative to Aug 2011 shown in Table IV-14. Energy-rich components dominate the 12-month rate of inflation with percentage point contributions: 0.38 by fuel for transport, 0.10 by heating oil and 0.09 by gas and 0.10 by both gas and electricity. Table IV-14 only lists highest magnitudes of positive and negative contributions.
Table IV-14, Euro Area, Harmonized Index of Consumer Prices Sub-Indices with Most Important Impact %
| Aug 2012/ Aug 2011 ∆% 2.6 | Weight 2012 % | Rate ∆% | Impact |
| Positive Contribution | |||
| Fuel for Transport | 48.5 | 10.0 | 0.38 |
| Heating Oil | 8.9 | 13.5 | 0.10 |
| Gas | 18.3 | 7.8 | 0.09 |
| Electricity | 26.4 | 6.0 | 0.09 |
| Tobacco | 23.4 | 5.5 | 0.07 |
| Fruit | 11.8 | 6.0 | 0.04 |
| Negative Contribution | |||
| Financial Services | 6.8 | -4.7 | -0.05 |
| Audio-visual Equipment | 5.0 | -8.1 | -0.05 |
| Cars | 36.2 | 1.0 | -0.06 |
| Rents | 60.5 | 1.6 | -0.07 |
| Garments | 50.7 | 1.5 | -0.08 |
| Telecom | 29.8 | -3.3 | -0.18 |
PP: percentage points
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-14092012-BP/EN/2-14092012-BP-EN.PDF
EUROSTAT provides the decomposition in percentage point contributions of the rate of inflation of 0.4 percent in Aug 2012 relative to Jul 2012 shown in Table IV-15. The increase of the HIPC by 0.4 percent was largely dominated by increase of fuel for transport by 4.3 percent that added 0.21 percentage points.
Table IV-15, Euro Area, Harmonized Index of Consumer Prices Sub-Indices with Most Important Impact %
| Aug 2012/Jul 2012 ∆ % 0.4 | Weight 2012 % | Rate ∆% | Impact Percentage Points |
| Positive Contribution | |||
| Fuels for Transport | 48.5 | 4.3 | 0.21 |
| Heating Oil | 8.9 | 4.9 | 0.04 |
| Air Transport | 6.3 | 4.0 | 0.03 |
| Sea Transport | 1.0 | 9.7 | 0.01 |
| Garments | 50.7 | 0.6 | 0.01 |
| Package Holidays | 14.2 | 0.9 | 0.01 |
| Negative Contribution | |||
| Footwear | 13.6 | -0.7 | -0.01 |
| Gardens, Plants and Flowers | 6.1 | -1.9 | -0.01 |
| Restaurants and Cafés | 68.8 | 0.1 | -0.02 |
| Vegetables | 14.0 | -1.1 | -0.02 |
| Cars | 36.2 | -0.2 | -0.02 |
| Fruit | 11.8 | -1.7 | -0.03 |
Source: EUROSTAThttp://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-14092012-BP/EN/2-14092012-BP-EN.PDF
The estimate of consumer price inflation in Germany in Table IV-16 is 2.1 percent in 12 months ending in Aug 2012, 0.4 percent NSA in Aug 2012 relative to Jul 2012 and 0.4 percent SA in Aug 2012 relative to Jul 2012. There are waves of consumer price inflation in Germany similar to those worldwide (Section II World Inflation Waves), as shown in Table IV-16. In the first wave, annual equivalent inflation was 4.9 percent in Feb-Apr 2011 NSA and 2.4 percent SA during risk appetite in carry trades from zero interest rates to commodity futures. In the second wave, annual equivalent consumer price inflation collapsed to 0.6 percent NSA and 2.4 percent SA in May-Jun 2011 because of risk aversion caused by European sovereign debt event. In the third wave, annual equivalent consumer price inflation was 1.2 percent NSA and 1.9 percent SA in Jul-Nov 2011 as a result of relaxed risk aversion. In the fourth wave, annual equivalent inflation was 1.8 percent NSA and 1.2 percent SA in Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation rose to 4.9 percent NSA and 2.4 percent SA in Feb-Apr 2012 during another energy-commodity carry trade shock. In the sixth wave, annual equivalent inflation in May-Jun 2012 is minus 1.8 percent NSA and 1.2 percent SA. In the seventh wave, annual equivalent inflation NSA is 4.9 percent in Jul-Aug 2012, on the basis of the second estimate for Aug by Statistisches Bundesamt Deutschland, and 3.7 percent SA. Under unconventional monetary policy of zero interest rates and quantitative easing inflation becomes highly volatile during alternative shocks of risk aversion and risk appetite, preventing sound investment and consumption decisions.
Table IV-16, Germany, Consumer Price Index ∆%
| 12-Month ∆% | Month ∆% NSA | Month ∆% SA | |
| Aug 2012 | 2.1 | 0.4 | 0.4 |
| Jul | 1.7 | 0.4 | 0.2 |
| AE ∆% Jul-Aug | 4.9 | 3.7 | |
| Jun | 1.7 | -0.1 | 0.1 |
| May | 1.9 | -0.2 | 0.1 |
| AE ∆% May-Jun | -1.8 | 1.2 | |
| Apr | 2.1 | 0.2 | 0.2 |
| Mar | 2.1 | 0.3 | 0.1 |
| Feb | 2.3 | 0.7 | 0.3 |
| AE ∆% Feb-Apr | 4.9 | 2.4 | |
| Jan | 2.1 | -0.4 | 0.1 |
| Dec 2011 | 2.1 | 0.7 | 0.1 |
| AE ∆% Dec-Jan | 1.8 | 1.2 | |
| Nov | 2.4 | 0.0 | 0.1 |
| Oct | 2.5 | 0.0 | 0.1 |
| Sep | 2.6 | 0.1 | 0.3 |
| Aug | 2.4 | 0.0 | 0.1 |
| Jul | 2.4 | 0.4 | 0.2 |
| AE ∆% Jul-Nov | 1.2 | 1.9 | |
| Jun | 2.3 | 0.1 | 0.2 |
| May | 2.3 | 0.0 | 0.2 |
| AE ∆% May-Jun | 0.6 | 2.4 | |
| Apr | 2.4 | 0.2 | 0.2 |
| Mar | 2.1 | 0.5 | 0.2 |
| Feb | 2.1 | 0.5 | 0.2 |
| Jan | 2.0 | -0.4 | 0.2 |
| AE ∆% Feb-Apr | 4.9 | 2.4 | |
| 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 ∆% | |||
| 2011 | 2.3 | ||
| 2010 | 1.1 | ||
| 2009 | 0.4 | ||
| 2008 | 2.6 |
AE: Annual Equivalent
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/09/PE12_311_611.html;jsessionid=80EC749C8A1CBD0B6CA3001A6375E7CF.cae1
Chart IV-12, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index of Germany from 2003 to 2012. There is an evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in subsequent months with renewed strength in Dec, decline in Jan 2012 and another upward spike from Feb to Apr 2012, new drop in May-Jun 2012 and increases in Jul and Aug 2012. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.
Chart IV-12, Germany, Consumer Price Index, Unadjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart IV-13, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2003 to 2012. Chart IV-13 captures inflation waves with alternation of periods of positive and negative slopes resulting from zero interest rates with shocks of risk appetite and risk aversion. For example, the negative slope of decline of inflation 0.2 percent in May 2012 and 0.1 percent in Jun 2012 follows an upward slope of price increases in Feb-Apr 2012 after decline of inflation by 0.4 percent in Jan 2012. The final segment shows another positive slope caused by inflation of 0.4 percent in Jul 2012, which is followed by 0.4 percent in Aug 2012 in preliminary estimates. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.
Chart IV-13, Germany, Consumer Price Index, Unadjusted and Trend, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table IV-17 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (Section II Word Inflation Waves and earlier at http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 0.8 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 2.7 percent in Aug-Nov with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.0 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012.
Table IV-17, France, Consumer Price Index, Month and 12-Month ∆%
| Month ∆% | 12-Month ∆% | |
| Aug | 0.7 | 2.1 |
| AE ∆% Aug | 8.7 | |
| Jul | -0.4 | 1.9 |
| Jun | 0.0 | 1.9 |
| May | -0.1 | 2.0 |
| AE ∆% May-Jul | -2.0 | |
| Apr | 0.1 | 2.1 |
| Mar | 0.8 | 2.3 |
| Feb | 0.4 | 2.3 |
| AE ∆% Feb-Apr | 5.3 | |
| Jan | -0.4 | 2.3 |
| Dec 2011 | 0.4 | 2.5 |
| AE ∆% Dec-Jan | 0.0 | |
| Nov | 0.3 | 2.5 |
| Oct | 0.2 | 2.3 |
| Sep | -0.1 | 2.2 |
| Aug | 0.5 | 2.2 |
| AE ∆% Aug-Nov | 2.7 | |
| Jul | -0.4 | 1.9 |
| Jun | 0.1 | 2.1 |
| May | 0.1 | 2.0 |
| AE ∆% May-Jul | -0.8 | |
| Apr | 0.3 | 2.1 |
| Mar | 0.8 | 2.0 |
| Feb | 0.5 | 1.7 |
| Jan | -0.2 | 1.8 |
| AE ∆% Jan-Apr | 4.3 | |
| Dec 2010 | 0.5 | 1.8 |
| Annual | ||
| 2011 | 2.1 | |
| 2010 | 1.5 | |
| 2009 | 0.1 | |
| 2008 | 2.8 | |
| 2007 | 1.5 | |
| 2006 | 1.6 | |
| 2005 | 1.8 | |
| 2004 | 2.1 | |
| 2003 | 2.1 | |
| 2002 | 1.9 | |
| 2001 | 1.7 | |
| 2000 | 1.7 | |
| 1999 | 0.5 | |
| 1998 | 0.7 | |
| 1997 | 1.2 | |
| 1996 | 2.0 | |
| 1995 | 1.8 | |
| 1994 | 1.6 | |
| 1993 | 2.1 | |
| 1992 | 2.4 | |
| 1991 | 3.2 |
AE: Annual Equivalent
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20120912
Table IV-17 provides in the lower panel the estimates of inflation by the Institut National de la Statistique et des Études Économiques (INSEE) for the years from 1991 to 2011. Inflation has been relatively moderate in France. The rise of inflation to 2.8 percent in 2008 was caused by the commodity price shock as investment funds shifted from other risk financial assets into carry trades driven by interest rates falling toward zero. INSEE estimates 2011 inflation at 2.1 percent.
Chart IV-14 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows headline and core consumer price inflation of France. Inflation rose during the commodity price shock of unconventional monetary policy. Risk aversion in late 2008 and beginning of 2009 caused collapse of valuation of commodity futures with resulting decline in inflation. Unconventional monetary policy with alternations of risk aversion resulted in higher inflation in France that stabilized in recent months until the increase of 0.2 percent in Oct 2011, 0.3 percent in Nov and 0.4 percent in Dec that were followed by decline of 0.4 percent in Jan 2012 and increases of 0.4 percent in Feb and 0.8 percent in Mar followed by 0.1 percent in Apr minus 0.1 percent in May and no change in Jun 2012 with marginal decline of 0.4 percent in Jul. Inflation returned with 0.7 percent in Aug 2012. Both the headline and core indexes are showing negative slopes in the new environment of risk aversion that causes reversals of carry trades into commodity futures prices but the headline index increases in Aug 2012.
Chart IV-14, France, Consumer Price Index (IPC) and Core Consumer Price Index (ISJ) 12 Months Rates of Change
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20120912
The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-18. Annual equivalent inflation in the first four months of 2011 was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.8 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. Economies are shocked worldwide by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion.
Table IV-18, Italy, Consumer Price Index
| Month | 12 Months | |
| Aug 2012 | 0.4 | 3.2 |
| Jul | 0.1 | 3.1 |
| AE ∆% Jul-Aug | 3.0 | |
| June | 0.2 | 3.3 |
| May | 0.0 | 3.2 |
| AE ∆% May-Jun | 1.2 | |
| Apr | 0.5 | 3.3 |
| Mar | 0.5 | 3.3 |
| Feb | 0.4 | 3.3 |
| AE ∆% Feb-Apr | 5.8 | |
| Jan | 0.3 | 3.2 |
| Dec 2011 | 0.4 | 3.3 |
| AE ∆% Dec-Jan | 4.3 | |
| Nov | -0.1 | 3.3 |
| Oct | 0.6 | 3.4 |
| AE ∆% Oct-Nov | 3.0 | |
| Sep | 0.0 | 3.0 |
| Aug | 0.3 | 2.8 |
| Jul | 0.3 | 2.7 |
| AE ∆% Jul-Sep | 2.4 | |
| Jun | 0.1 | 2.7 |
| May | 0.1 | 2.6 |
| AE ∆% May-Jun | 1.2 | |
| Apr | 0.5 | 2.6 |
| Mar | 0.4 | 2.5 |
| Feb | 0.3 | 2.4 |
| Jan | 0.4 | 2.1 |
| AE ∆% Jan-Apr | 4.9 | |
| Dec 2010 | 0.4 | 1.9 |
| Annual | ||
| 2011 | 2.8 | |
| 2010 | 1.5 | |
| 2009 | 0.8 | |
| 2008 | 3.3 | |
| 2007 | 1.8 | |
| 2006 | 2.1 |
Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/70210
Consumer price inflation in Italy by segments in the final estimate by ISTAT for Aug 2012 is provided in Table IV-19. Total consumer price inflation in Aug was 0.4 percent and 3.2 percent in 12 months. Inflation of goods was 0.2 percent and 3.9 percent in 12 months. Prices of durable goods were unchanged in Aug and increased only 0.8 percent in 12 months, as typical in most countries. Prices of energy increased 1.8 percent in Aug and increased 13.4 percent in 12 months. Food prices fell 0.1 percent in Aug and increased 2.5 percent in 12 months. Prices of services increased 0.7 percent in Aug and rose 2.3 percent in 12 months. Transport prices, also influenced by commodity prices, increased 3.1 percent in Aug and increased 4.1 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion.
Table IV-19, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%
| Aug 2012 | Month ∆% | 12-Month ∆% |
| General Index | 0.4 | 3.2 |
| I Goods | 0.2 | 3.9 |
| Food | -0.1 | 2.5 |
| Energy | 1.8 | 13.4 |
| Durable | 0.0 | 0.8 |
| Nondurable | -0.1 | 0.9 |
| II Services | 0.7 | 2.3 |
| Housing | 0.1 | 2.5 |
| Communications | -0.1 | 1.7 |
| Transport | 3.1 | 4.1 |
Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/70210
Chart IV-21 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy that was discontinued in the beginning wave of commodity prices if risk appetite continues.
Chart, IV-15, Italy, Consumer Price Index, 12-Month Percentage Changes
Source: Istituto Nazionale di Statistica
V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx) to show GDP in dollars in 2010 and the growth rate of real GDP of the world and selected regional countries from 2011 to 2014. The IMF revised some of the projections in its World Economic Outlook Update released on Jul 16, 2012 (http://www.imf.org/external/pubs/ft/weo/2012/update/02/index.htm). Table V-1 incorporates these revisions with lines “Rev” where appropriate. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 3.5 percent in 2012 but accelerating to 3.9 percent in 2013 instead of 4.1 percent in the earlier projection, 4.4 percent in 2014 and 4.5 percent in 2015. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,670 billion of world output of $69,660 billion, or 48.3 percent, but are projected to grow at much lower rates than world output, 2.0 percent on average from 2012 to 2015 in contrast with 4.1 percent for the world as a whole, incorporating the revisions. While the world would grow 17.3 percent in the four years from 2012 to 2015, the G7 as a whole would grow 8.4 percent. The difference in dollars of 2011 is rather high: growing by 17.3 percent would add $12.1 trillion of output to the world economy, or roughly two times the output of the economy of Japan of $5,869 but growing by 8.4 percent would add $5.9 trillion of output to the world, or about the output of Japan in 2011. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2011 of $25,237 billion, or 36.2 percent of world output. The EMDEs would grow cumulatively 26.3 percent or at the average yearly rate of 6.0 percent, contributing $6.6 trillion from 2012 to 2015 or the equivalent of somewhat less than the GDP of $7,298 billion of China in 2011. The final four countries in Table 1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,317 billion, or 19.1 percent of world output, which is equivalent to 39.6 percent of the combined output of the major advanced economies of the G7.
Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth
| GDP USD 2011 | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | |
| World Rev | 69,660 | 3.5 | 4.1 3.9 | 4.4 | 4.5 |
| G7 Rev | 33,670 | 1.5 1.4 | 1.9 1.9 | 2.3 | 2.5 |
| Canada | 1,737 | 2.1 | 2.2 | 2.4 | 2.4 |
| France Rev | 2,776 | 0.5 0.3 | 1.1 0.8 | 1.9 | 1.9 |
| DE Rev | 3,577 | 0.6 1.0 | 1.5 1.4 | 1.3 | 1.3 |
| Italy | 2,199 | -1.9 | -0.3 | 0.5 | 1.0 |
| Japan Rev | 5,869 | 2.0 2.4 | 1.7 1.5 | 1.5 | 1.3 |
| UK | 2,418 | 0.8 | 2.0 | 2.5 | 2.6 |
| US Rev | 15,094 | 2.1 0.2 | 2.4 1.4 | 2.9 | 3.3 |
| Euro Area Rev | 13,115 | -0.3 | 0.9 0.7 | 1.4 | 1.6 |
| DE Rev | 3,577 | 0.6 1.0 | 1.5 1.4 | 1.3 | 1.3 |
| France Rev | 2,776 | 0.5 0.3 | 1.1 0.8 | 1.9 | 1.9 |
| Italy | 2,199 | -1.9 | -0.3 | 0.5 | 1.0 |
| POT | 239 | -3.3 | 0.3 | 2.1 | 1.9 |
| Ireland | 218 | 0.5 | 2.1 | 2.5 | 2.8 |
| Greece | 303 | -4.7 | 0.0 | 2.5 | 3.1 |
| Spain Rev | 1,494 | -1.8 -1.5 | 0.1 -0.6 | 1.6 | 1.6 |
| EMDE Rev | 25,237 | 5.7 5.6 | 6.0 5.9 | 6.2 | 6.3 |
| Brazil Rev | 2,493 | 3.0 2.5 | 4.2 4.6 | 4.0 | 4.1 |
| Russia | 1,850 | 4.0 | 3.9 | 3.9 | 3.9 |
| India Rev | 1,676 | 6.9 6.1 | 7.3 6.5 | 7.5 | 7.7 |
| China Rev | 7,298 | 8.2 8.0 | 8.8 8.5 | 8.7 | 8.7 |
Notes: Rev: Revision of July 19, 2012; DE: Germany; EMDE: Emerging and Developing Economies (150 countries); POT: Portugal
Source: IMF World Economic Outlook databank
http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx
http://www.imf.org/external/pubs/ft/weo/2012/update/02/index.htm
Table V-2 is constructed with the WEO database to provide rates of unemployment from 2011 to 2015 for major countries and regions. In fact, unemployment rates for 2011 in Table ESV-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high for the countries with sovereign debt difficulties in Europe: 12.7 percent for Portugal (POT), 14.4 percent for Ireland, 17.3 percent for Greece, 21.6 percent for Spain and 8.4 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.7 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.
Table V-2, IMF World Economic Outlook Database Projections of Unemployment Rate as Percent of Labor Force
| % Labor Force 2011 | % Labor Force 2012 | % Labor Force 2013 | % Labor Force 2014 | % Labor Force 2015 | |
| World | NA | NA | NA | NA | NA |
| G7 | 7.7 | 7.4 | 7.3 | 7.0 | 6.7 |
| Canada | 7.5 | 7.4 | 7.3 | 7.1 | 6.9 |
| France | 9.7 | 9.9 | 10.1 | 9.8 | 9.4 |
| DE | 6.0 | 5.6 | 5.5 | 5.3 | 5.3 |
| Italy | 8.4 | 9.5 | 9.7 | 9.8 | 9.5 |
| Japan | 4.5 | 4.5 | 4.4 | 4.3 | 4.2 |
| UK | 8.0 | 8.3 | 8.2 | 7.8 | 7.4 |
| US | 8.9 | 8.2 | 7.9 | 7.5 | 6.9 |
| Euro Area | 10.1 | 10.9 | 10.8 | 10.5 | 10.1 |
| DE | 6.0 | 5.6 | 5.5 | 5.3 | 5.3 |
| France | 9.7 | 9.9 | 10.1 | 9.8 | 9.4 |
| Italy | 8.4 | 9.5 | 9.7 | 9.8 | 9.5 |
| POT | 12.7 | 14.3 | 13.9 | 13.2 | 12.4 |
| Ireland | 14.4 | 14.5 | 13.8 | 12.9 | 12.0 |
| Greece | 17.3 | 19.4 | 19.4 | 18.2 | 16.8 |
| Spain | 21.6 | 24.2 | 23.9 | 22.8 | 21.9 |
| EMDE | NA | NA | NA | NA | NA |
| Brazil | 6.0 | 6.0 | 6.5 | 7.0 | 7.0 |
| Russia | 7.5 | 6.5 | 6.0 | 6.0 | 6.0 |
| India | NA | NA | NA | NA | NA |
| China | 4.1 | 4.0 | 4.0 | 4.0 | 4.0 |
Notes: DE: Germany; EMDE: Emerging and Developing Economies (150 countries)
Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weoselgr.aspx
Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog for IQ2012 and IIQ2012. Growth is weak throughout most of the world. Japan’s GDP increased 1.3 percent in IQ2012 and 2.9 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP grew 0.2 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 0.7 percent, which is much lower than 5.3 percent in IQ2012. Growth of 3.2 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. China grew at 1.8 percent in IIQ2012, which annualizes to 7.4 percent. Xinhuanet informs that Premier Wen Jiabao considers the need for macroeconomic stimulus, arguing that “we should continue to implement proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). Premier Wen elaborates that “the country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). China’s GDP grew 7.6 percent in IIQ2012 relative to IIQ2011. Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2012. China’s GDP grew 8.1 percent in IQ2012 relative to a year earlier but only 7.6 percent in IIQ2012 relative to a year earlier. GDP was flat in the euro area in IQ2012 and also in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.5 percent relative to a year earlier. Germany’s GDP increased 0.5 percent in IQ2012 and 1.7 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.3 percent and 0.5 percent relative to a year earlier but 1.0 percent relative to a year earlier when adjusted for calendar (CA) effects. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.5 percent at SAAR and 2.3 percent relative to a year earlier (Section I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html) but with substantial underemployment and underemployment (Section I at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html) and weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million.html). UK GDP fell 0.5 percent in IIQ2012, declining 0.5 percent relative to IIQ2011. In IQ2011, UK GDP fell 0.3 percent, declining 0.2 percent relative to a year earlier. UK GDP fell 0.5 percent in IIQ2012 and 0.5 percent relative to a year earlier. Italy has experienced decline of GDP in four consecutive quarters from IIIQ2011 to IIQ2012. Italy’s GDP fell 0.8 percent in IIQ2012 and declined 2.6 percent relative to IIQ2011. France’s GDP stagnated in both IQ2012 and IIQ2012 and increased 0.3 percent relative to a year earlier.
Table V-3, Percentage Changes of GDP Quarter on Prior Quarter and on Same Quarter Year Earlier, ∆%
| IQ2012/IVQ2011 | IQ2012/IQ2011 | |
| United States | QOQ: 0.5 SAAR: 2.0 | 2.4 |
| Japan | QOQ: 1.3 SAAR: 5.3 | 2.9 |
| China | 1.8 | 8.1 |
| Euro Area | 0.0 | 0.0 |
| Germany | 0.5 | 1.7 |
| France | 0.0 | 0.3 |
| Italy | -0.8 | -1.5 |
| United Kingdom | -0.3 | -0.2 |
| IIQ2012/IQ2012 | IIQ2012/IIQ2011 | |
| United States | QOQ: 0.4 SAAR: 1.5 | 2.3 |
| Japan | QOQ: 0.2 | 3.2 |
| China | 1.8 | 7.6 |
| Euro Area | -0.2 | -0.5 |
| Germany | 0.3 | 0.5 1.0 CA |
| France | 0.0 | 0.3 |
| Italy | -0.8 | -2.6 |
| United Kingdom | -0.5 | -0.5 |
QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate
Source: Country Statistical Agencies
http://www.bea.gov/national/index.htm#gdp http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html http://www.stats.gov.cn/enGliSH/
There is evidence of deceleration of growth of world trade and even contraction in more recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html). In Jul 2012, Japan’s exports decreased 5.8 percent in the month and 8.1 percent in 12 months while imports increased 4.4 percent in the month and 2.1 percent in 12 months. The second part of Table V-4 shows that net trade deducted 0.3 percentage points from Japan’s growth of GDP in IIQ2012. In Jul 2012, China’s exports fell 1.8 percent in the month and increased 1.0 percent in 12 months. In Aug 2012, China’s exports increased 0.6 percent and increased 2.7 percent in 12 months. Germany’s exports increased 0.5 percent in the month of Jul and increased 9.2 percent in the 12 months ending in Jul while imports increased 0.9 percent in the month of Jul and increased 1.9 percent in the 12 months ending in Jul. Net trade contributed 1.1 percentage points to growth of Germany’s GDP in IIQ2012. The Flash Germany Composite Output Index of the Markit Flash Germany PMI®, combining manufacturing and services, fell from 47.5 in Jul to 47.0 in Aug, which is the lowest since Jun 2009 and the fourth consecutive month of decline with declines of both services and manufacturing and sharp decline of new export orders for manufacturers (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949). Tim Moore, Senior Economist at Markit, finds deterioration in business conditions in Germany relative to the first semester of 2012 with new export orders in manufacturing falling at the sharpest rate since Apr 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949).
UK’s exports fell 4.6 percent in Jun and decreased 1.4 percent in Apr-Jun 2012 relative to Apr-Jun 2011 while imports fell 0.7 percent in Jun and increased 2.2 percent in Apr-Jun 2012 relative to Apr-Jun 2011. UK exports increased 5.2 percent in Jul and decreased 0.7 percent in May-Jul relative to a year earlier while imports fell 1.7 percent in Jul and decreased 0.4 percent in May-Jul relative to a year earlier. Net trade deducted 1.0 percentage points from UK GDP growth in IIQ2012. France’s exports fell 1.9 percent in Jun and net trade deducted 0.5 percentage points to GDP growth in IIQ2012. US exports increased 0.9 percent in Jun 2012 and 7.1 percent in Jan-Jun relative to a year earlier but net trade deducted 0.31 percentage points from GDP growth in IIQ2012. The Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI™) seasonally adjusted increased marginally from 51.4 in Jul to 51.9 in Aug, indicating the third weakest reading since Oct 2009 in the beginning of the current recovery with the lowest in Dec 2010 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). New export orders registered 48.7 in Aug still in contraction territory with 48.6 in Jul. Rob Dodson, Economist at Markit, finds that IIIQ2012 is at the lowest in the current recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.
Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points
| Exports | Exports 12 M ∆% | Imports | Imports 12 M ∆% | |
| USA | 0.9 Jun | 7.1 Jan-Jun | -1.5 Jun | 6.0 Jan-Jun |
| Japan Jul | -5.8 | -8.1 | 4.4 | 2.1 |
| China | -1.8 Jul 0.6 Aug | 1.0 Jul 7.8 Jan-Jul 2.7 Aug 7.1 Jan-Aug | 2.2 Jul -0.3 Aug | 4.7 Jul 6.5 Jan-Jul -2.6 Aug 5.2 Jan-Aug |
| Euro Area | 2.2 Jun | 8.3 Jan-Jun | -2.9 Jun | 2.4 Jan-Jun |
| Germany | 0.5 Jul CSA | 9.2 Jul | 0.9 Jul CSA | 1.9 Jul |
| France Jul | 0.8 | 3.6 | -3.5 | 1.9 |
| Italy Jun | -1.4 | 5.5 | -5.3 | -7.1 |
| UK | -4.6 Jun 5.2 Jul | -1.4 Apr-Jun -0.7 May-Jul | -0.7 Jun -1.7 | 2.2 Apr-Jun -0.4 May-Jul |
| Net Trade % Points GDP Growth | % Points | |||
| USA IIQ2012 | -0.31 | |||
| Japan IIQ2012 | -0.3 | |||
| Germany IIQ2012 | 1.1 | |||
| France IIQ2012 | -0.5 | |||
| UK IIQ2012 | -1.0 |
Sources: http://www.census.gov/foreign-trade/ http://www.bea.gov/iTable/index_nipa.cfm
http://www.customs.go.jp/toukei/latest/index_e.htm http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
http://english.customs.gov.cn/publish/portal191/ http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1 http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp
http://www.statistics.gov.uk/hub/index.html
The geographical breakdown of exports by imports of Japan with selected regions and countries is provided in Table V-5 for Jul 2012. The share of Asia in Japan’s trade is more than one half, 55.6 percent of exports and 45.1 percent of imports. Within Asia, exports to China are 19.0 percent of total exports and imports from China 21.6 percent of total imports. The second largest export market for Japan in Jul 2012 is the US with share of 17.6 percent of total exports and share of imports from the US of 8.8 percent in total imports. Western Europe has share of 9.6 percent in Japan’s exports and of 11.0 percent in imports. Rates of growth of exports of Japan in Jul are sharply negative for most countries and regions with the exception of 4.7 percent for exports to the US, 15.3 percent to Canada and 9.0 percent for exports to the Middle East. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity, which could be part of the explanation for the decline of Japan’s exports by 8.1 percent in Jul 2012 while imports increased by 2.1 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Jul are sharply higher with exception of declines in imports mostly of raw materials: minus 5.4 percent for Middle East, minus 6.6 percent for Australia and minus 27.7 percent for Brazil. Imports from Asia increased 2.8 percent in the 12 months ending in Jul while imports from China increased 3.3 percent.
Table V-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yens
| Jun 2012 | Exports | 12 months ∆% | Imports Millions Yens | 12 months ∆% |
| Total | 5,313,281 | -8.1 | 5,830,663 | 2.1 |
| Asia | 2,956,186 | -9.0 | 2,629,261 | 2.8 |
| China | 1,009,095 | -11.9 | 1,259,160 | 3.3 |
| USA | 934,186 | 4.7 | 512,324 | 7.6 |
| Canada | 63,745 | 15.3 | 93,209 | 15.8 |
| Brazil | 38,537 | -8.7 | 72,324 | -27.7 |
| Mexico | 69,165 | -5.6 | 29,749 | 15.9 |
| Western Europe | 510,315 | -28.4 | 639,386 | 8.4 |
| Germany | 137,005 | -19.8 | 169,862 | 14.9 |
| France | 38,336 | -33.3 | 94,594 | 18.8 |
| UK | 70,222 | -32.0 | 47,673 | 25.2 |
| Middle East | 184,758 | 9.0 | 989,543 | -5.4 |
| Australia | 110,817 | -25.0 | 399,395 | -6.6 |
Source: http://www.customs.go.jp/toukei/latest/index_e.htm
Table USA, US Economic Indicators
| Consumer Price Index | Aug 12 months NSA ∆%: 1.7; ex food and energy ∆%: 1.9 Aug month ∆%: 0.6; ex food and energy ∆%: 0.1 |
| Producer Price Index | Aug 12-month NSA ∆%: 2.0; ex food and energy ∆% 2.5 |
| PCE Inflation | Jul 12-month NSA ∆%: headline 1.3; ex food and energy ∆% 1.6 |
| Employment Situation | Household Survey: Aug Unemployment Rate SA 8.1% |
| Nonfarm Hiring | Nonfarm Hiring fell from 69.4 million in 2004 to 50.1 million in 2011 or by 19.3 million |
| GDP Growth | BEA Revised National Income Accounts IIQ2012/IIQ2011 2.3 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.7 |
| Personal Income and Consumption | Jul month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 |
| Quarterly Services Report | IQ12/IQ11 SA ∆%: |
| Employment Cost Index | IIQ2012 SA ∆%: 0.5 |
| Industrial Production | Aug month SA ∆%: -1.2 Manufacturing Jul SA ∆% -0.7 Aug 12 months SA ∆% 3.8, NSA 4.1 |
| Productivity and Costs | Nonfarm Business Productivity IIQ2012∆% SAAE 2.2; IIQ2012/IIQ2011 ∆% 1.2; Unit Labor Costs SAAE IIQ2012 ∆% 1.5; IIQ2012/IIQ2011 ∆%: 0.9 Blog 9/9/2012 |
| New York Fed Manufacturing Index | General Business Conditions From Jul 7.39 to Aug -5.85 |
| Philadelphia Fed Business Outlook Index | General Index from Jul minus 12.9 to Aug minus 7.1 |
| Manufacturing Shipments and Orders | Jul New Orders SA ∆%: 2.8; ex transport ∆%: 0.8 |
| Durable Goods | Jul New Orders SA ∆%: 4.2; ex transport ∆%: -0.4 |
| Sales of New Motor Vehicles | Aug 2012 9,711,044; Aug 2011 8,464,450. Aug SAAR 14.52 million, Jul SAAR 14.09 million, Aug 2011 SAAR 12.46 million Blog 9/2/12 |
| Sales of Merchant Wholesalers | Jan-Jul 2012/Jan-Jul 2011 NSA ∆%: Total 6.8; Durable Goods: 8.7; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Jul 12/Jul 11 NSA ∆%: Sales Total Business 3.7; Manufacturers 2.9 |
| Sales for Retail and Food Services | Jan-Aug 2012/Jan-Aug 2011 ∆%: Retail and Food Services 5.8; Retail ∆% 5.6 |
| Value of Construction Put in Place | Jul SAAR month SA ∆%: -0.9 Jul 12-month NSA: 9.6 |
| Case-Shiller Home Prices | Jun 2012/Jun 2011 ∆% NSA: 10 Cities 0.1; 20 Cities: 0.5 |
| FHFA House Price Index Purchases Only | Jun SA ∆% 0.7; |
| New House Sales | Jul 2012 month SAAR ∆%: |
| Housing Starts and Permits | Jul Starts month SA ∆%: -1.1 ; Permits ∆%: 6.8 |
| Trade Balance | Balance Jul SA -$42002 million versus Jun -$41899 million |
| Export and Import Prices | Aug 12-month NSA ∆%: Imports -2.2; Exports -0.9 |
| Consumer Credit | Jul ∆% annual rate: -1.5 |
| Net Foreign Purchases of Long-term Treasury Securities | Jun Net Foreign Purchases of Long-term Treasury Securities: $9.3 billion |
| Treasury Budget | Fiscal Year Oct-Aug 2012/2011 ∆%: Receipts 6.1; Outlays 1.7; Individual Income Taxes 3.9 Deficit Fiscal Year 2012 Oct-Jul $973,172 million CBO Forecast 2012FY Deficit $1.171 trillion Blog 9/16/2012 |
| CBO Budget and Economic Outlook | 2012 Deficit $1128 B 7.3% GDP Debt 11,318 B 72.8% GDP 2013 Deficit $614 B, Debt 12,064 B 76.1% GDP Blog 8/26/12 |
| Commercial Banks Assets and Liabilities | Jul 2012 SAAR ∆%: Securities 17.7 Loans 3.1 Cash Assets 31.6 Deposits 15.4 Blog 8/26/12 |
| Flow of Funds | IQ2012 ∆ since 2007 Assets -$4113B Real estate -$4916B Financial $367.3MM Net Worth -$3300B Blog 6/17/12 |
| Current Account Balance of Payments | IQ2012 -$137B %GDP 3.6 Blog 06/17/12 |
Links to blog comments in Table USA:
9/9/12 http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html
9/2/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html
8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html
8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html
8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html
6/17/12 http://cmpassocregulationblog.blogspot.com/2012/06/destruction-of-three-trillion-dollars_17.html
Industrial production decreased 1.2 percent in Aug, as shown in Table VA-1, with all data seasonally adjusted. In the six months ending in Aug, industrial production accumulated decline of 0.4 percent at the annual equivalent rate of decline of 0.8 percent, which is substantially lower than 2.8 percent growth in 12 months. Business equipment fell 0.2 percent in Aug, growing 11.4 percent in the 12 months ending in Aug and at the annual equivalent rate of 7.4 percent in the six months ending in Aug. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/current/): “Capacity utilization for total industry moved down 1.0 percentage point to 78.2 percent, a rate 2.1 percentage points below its long-run (1972-2011) average.” United States industry is decelerating.
Table VA-1, US, Industrial Production and Capacity Utilization, SA, ∆%, %
| 2012 | Aug | Jul | Jun | May | Apr | Mar | Aug 12/ Aug 11 |
| Total | -1.2 | 0.5 | 0.1 | 0.0 | 0.8 | -0.6 | 2.8 |
| Market | |||||||
| Final Products | -0.9 | 0.4 | 0.4 | 0.4 | 0.8 | -0.7 | 3.1 |
| Consumer Goods | -1.2 | 0.4 | -0.1 | 0.7 | 0.8 | -1.1 | 0.3 |
| Business Equipment | -0.2 | 0.1 | 1.9 | 0.3 | 1.3 | 0.2 | 11.4 |
| Non | -0.9 | -0.2 | -0.1 | -0.3 | 0.9 | -0.9 | 1.1 |
| Construction | -0.1 | -0.6 | -0.5 | -1.6 | 0.8 | -1.0 | 3.0 |
| Materials | -1.5 | 0.9 | 0.0 | -0.2 | 0.8 | -0.4 | 3.0 |
| Industry Groups | |||||||
| Manufacturing | -0.7 | 0.4 | 0.4 | -0.6 | 0.7 | -0.7 | 3.8 |
| Mining | -1.8 | 1.0 | 0.6 | 0.0 | 0.6 | -0.1 | 3.0 |
| Utilities | -3.6 | 1.3 | -2.7 | 5.4 | 2.3 | -0.6 | -4.7 |
| Capacity | 78.2 | 79.2 | 78.9 | 78.9 | 79.0 | 78.4 | 1.4 |
Sources: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g17/current/
Manufacturing decreased 0.7 percent in Aug seasonally adjusted, increasing 4.1 percent not seasonally adjusted in 12 months, and fell 0.5 percent in the six months ending in Aug or at the annual equivalent rate of 1.0 percent. A longer perspective of manufacturing in the US is provided by Table VA-2. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 as shown by 12 months rates of growth. Growth rates appeared to be increasing again closer to 5 percent but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.4 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession manufacturing fell in the past six months.
Table VA-2, US, Monthly and 12-Month Rates of Growth of Manufacturing ∆%
| Month SA ∆% | 12-Month NSA ∆% | |
| Aug 2012 | -0.7 | 4.1 |
| Jul | 0.4 | 4.4 |
| Jun | 0.4 | 5.2 |
| May | -0.6 | 5.1 |
| Apr | 0.7 | 5.7 |
| Mar | -0.7 | 4.3 |
| Feb | 0.9 | 5.9 |
| Jan | 1.0 | 4.9 |
| Dec 2011 | 1.5 | 4.4 |
| Nov | 0.0 | 4.0 |
| Oct | 0.5 | 4.3 |
| Sep | 0.3 | 4.0 |
| Aug | 0.3 | 3.4 |
| Jul | 0.8 | 3.2 |
| Jun | 0.0 | 3.1 |
| May | 0.2 | 2.9 |
| Apr | -0.6 | 4.1 |
| Mar | 0.6 | 6.0 |
| Feb | 0.2 | 6.3 |
| Jan | 0.4 | 6.3 |
| Dec 2010 | 1.0 | 6.6 |
| Nov | 0.2 | 5.5 |
| Oct | 0.1 | 6.6 |
| Sep | 0.2 | 6.7 |
| Aug | 0.0 | 7.1 |
| Jul | 0.8 | 7.3 |
| Jun | 0.0 | 9.0 |
| May | 1.4 | 8.3 |
| Apr | 1.0 | 6.5 |
| Mar | 1.1 | 4.2 |
| Feb | 0.1 | 0.6 |
| Jan | 0.9 | 0.5 |
| Dec 2009 | 0.1 | -3.7 |
| Nov | 0.9 | -6.6 |
| Oct | -0.1 | -9.4 |
| Sep | 0.7 | -10.7 |
| Aug | 1.0 | -13.7 |
| Jul | 1.2 | -15.3 |
| Jun | -0.3 | -17.8 |
| May | -1.2 | -17.8 |
| Apr | -0.8 | -18.4 |
| Mar | -2.1 | -17.5 |
| Feb | 0.0 | -16.3 |
| Jan | -2.9 | -16.6 |
| Dec 2008 | -3.3 | -14.1 |
| Nov | -2.3 | -11.4 |
| Oct | -0.7 | -9.1 |
| Sep | -3.4 | -8.8 |
| Aug | -1.4 | -5.3 |
| Jul | -1.1 | -3.8 |
| Jun | -0.6 | -3.2 |
| May | -0.6 | -2.5 |
| Apr | -1.1 | -1.3 |
| Mar | -0.4 | -0.7 |
| Feb | -0.4 | 0.8 |
| Jan | -0.4 | 2.1 |
| Dec 2007 | 0.3 | 1.9 |
| Nov | 0.4 | 3.2 |
| Oct | -0.5 | 2.7 |
| Sep | 0.5 | 2.9 |
| Aug | -0.5 | 2.6 |
| Jul | 0.2 | 3.4 |
| Jun | 0.3 | 2.9 |
| May | -0.2 | 3.1 |
| Apr | 0.8 | 3.6 |
| Mar | 0.6 | 2.5 |
| Feb | 0.6 | 1.7 |
| Jan | -0.5 | 1.4 |
| Dec 2006 | 2.8 | |
| Dec 2005 | 3.4 | |
| Dec 2004 | 4.0 | |
| Dec 2003 | 1.8 | |
| Dec 2002 | 2.3 | |
| Dec 2001 | -5.5 | |
| Dec 2000 | 0.4 | |
| Dec 1999 | 5.4 | |
| Average ∆% Dec 1986-Dec 2011 | 2.3 | |
| Average ∆% Dec 1986-Dec 1999 | 4.3 | |
| Average ∆% Dec 1999-Dec 2006 | 1.3 | |
| Average ∆% Dec 1999-Dec 2011 | 0.2 |
Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g17/current/
Chart VA-1 of the Board of Governors of the Federal Reserve System provides industrial production, manufacturing and capacity since the 1970s. There was acceleration of growth of industrial production, manufacturing and capacity in the 1990s because of rapid growth of productivity in the US (Cobet and Wilson (2002); see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes of the curves flatten in the 2000s. Production and capacity have not recovered to the levels before the global recession.
Chart VA-1, US, Industrial Production, Capacity and Utilization
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g17/current/ipg1.gif
The modern industrial revolution of Jensen (1993) is captured in Chart VA-2 of the Board of Governors of the Federal Reserve System (for the literature on M&A and corporate control see Pelaez and Pelaez, Regulation of Banks and Finance (2009a), 143-56, Globalization and the State, Vol. I (2008a), 49-59, Government Intervention in Globalization (2008c), 46-49). The slope of the curve of total industrial production accelerates in the 1990s to a much higher rate of growth than the curve excluding high-technology industries. Growth rates decelerate into the 2000s and output and capacity utilization have not recovered fully from the strong impact of the global recession. Growth in the current cyclical expansion has been more subdued than in the prior comparably deep contractions in the 1970s and 1980s. Chart VA-2 shows that the past recessions after World War II are the relevant ones for comparison with the recession after 2007 instead of common comparisons with the Great Depression (http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html). The bottom left-hand part of Chart VA-2 shows the strong growth of output of communication equipment, computers and semiconductor that continued from the 1990s into the 2000s. Output of semiconductors has already surpassed the level before the global recession.
Chart VA-2, US, Industrial Production, Capacity and Utilization of High Technology Industries
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g17/current/ipg3.gif
Additional detail on industrial production and capacity utilization is provided in Chart VA-3 of the Board of Governors of the Federal Reserve System. Production of consumer durable goods fell sharply during the global recession by more than 30 percent and is still around 5 percent below the level before the contraction. Output of nondurable consumer goods fell around 10 percent and is some 5 percent below the level before the contraction. Output of business equipment fell sharply during the contraction of 2001 but began rapid growth again after 2004. An important characteristic is rapid growth of output of business equipment in the cyclical expansion after sharp contraction in the global recession. Output of defense and space only suffered reduction in the rate of growth during the global recession and surged ahead of the level before the contraction. Output of construction supplies collapsed during the global recession and is well below the level before the contraction. Output of energy materials was stagnant before the contraction but has recovered sharply above the level before the contraction.
Chart VA-3, US, Industrial Production and Capacity Utilization
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g17/current/ipg2.gif
Table VA-3 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.5 percent in US national income in IQ2012 and 86.4 percent in IIQ2012. Most of US national income is in the form of services. In Aug 2012, there were 133.092 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/pdf/empsit.pdf Table B-1). Total private jobs of 112.349 million NSA in Aug 2012 accounted for 84.4 percent of total nonfarm jobs of 133.092 million, of which 12.074 million, or 10.8 percent of total private jobs and 9.1 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 93.605 million NSA in Aug 2012, or 70.3 percent of total nonfarm jobs and 83.3 percent of total private-sector jobs. Manufacturing has share of 11.0 percent in US national income in IQ2011, as shown in Table ESIII-1. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.
Table VA-3, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total
| SAAR IQ2012 | % Total | SAAR | % Total | |
| National Income WCCA | 13,788.3 | 100.0 | 13,873.7 | 100.0 |
| Domestic Industries | 13,573.4 | 98.4 | 13,639.1 | 98.3 |
| Private Industries | 11,922.7 | 86.5 | 11,985.9 | 86.4 |
| Agriculture | 134.0 | 1.0 | ||
| Mining | 211.0 | 1.5 | ||
| Utilities | 211.9 | 1.5 | ||
| Construction | 585.6 | 4.3 | ||
| Manufacturing | 1521.9 | 11.0 | ||
| Durable Goods | 865.2 | 6.3 | ||
| Nondurable Goods | 656.6 | 4.8 | ||
| Wholesale Trade | 831.6 | 6.0 | ||
| Retail Trade | 947.5 | 6.9 | ||
| Transportation & WH | 416.5 | 3.0 | ||
| Information | 486.7 | 3.5 | ||
| Finance, insurance, RE | 2301.3 | 16.7 | ||
| Professional, BS | 1955.0 | 14.2 | ||
| Education, Health Care | 1380.8 | 10.0 | ||
| Arts, Entertainment | 541.1 | 3.9 | ||
| Other Services | 397.9 | 2.9 | ||
| Government | 1650.7 | 12.0 | 1653.3 | 11.9 |
| Rest of the World | 214.9 | 1.6 | 234.6 | 1.7 |
Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services
Source: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
The United States Census Bureau has released revisions of trade statistics from Jan 2009 to Mar 2012 (http://www.census.gov/foreign-trade/Press-Release/2011pr/final_revisions/). Table VA-4 provides the trade balance of the US and monthly growth of exports and imports seasonally adjusted with the latest release and revisions (http://www.census.gov/foreign-trade/). Because of heavy dependence on imported oil, fluctuations in the US trade account originate largely in fluctuations of commodity futures prices caused by carry trades from zero interest rates into commodity futures exposures in a process similar to world inflation waves (Section II World Inflation Waves). The US trade balance improved from deficit of $52,647 million in Mar 2012 to deficit of $49,826 million in Apr 2012 and lower deficits of $47,596 million in May, $41,899 million in Jun and $42,002 million in Jul 2012. The decline of exports in Jun of 1.0 percent was higher than decline of imports of 1.5 percent. The deterioration of the trade deficit from $44,507 million in Feb 2012 to $51,647 million in Mar 2012 resulted from growth of exports of 2.5 percent while imports jumped 5.2 percent. The US trade balance had improved from deficit of $52,209 million in Jan 2012 to lower deficit of $44,507 million in Feb 2012 mostly because of decline of imports by 2.7 percent while exports increased 0.9 percent. The US trade balance deteriorated sharply from Nov 2011 to Jan 2012 with growth of imports by cumulative 3.0 percent and cumulative increase of exports of 0.1 percent, resulting in deficits of $48,835 million in Nov, $51,748 million in Dec and $52,209 million in Jan, which are the highest since $50,234 million in Jun 2011. In the months of Jun to Oct 2011, exports increased 1.8 percent while imports increased 0.5 percent, resulting in improvement of the trade deficit from $50,234 million in Jun to $45,703 million in Oct. The trade balance deteriorated from cumulative deficit of $493,737 million in Jan-Dec 2010 to deficit of $559,880 million in Jan-Dec 2011.
Table VA-4, US, Trade Balance of Goods and Services Seasonally Adjusted Millions of Dollars and ∆%
| Trade Balance | Exports | Month ∆% | Imports | Month ∆% | |
| Jul 2012 | -42,002 | 183,269 | -1.0 | 225,271 | -0.8 |
| Jun | -41,899 | 185,182 | 1.2 | 227,081 | -1.5 |
| May | -47,596 | 183,058 | 0.1 | 230,654 | -0.8 |
| Apr | -49,826 | 182,825 | -1.1 | 232,651 | -1.6 |
| Mar | -51,647 | 184,867 | 2.5 | 236,514 | 5.2 |
| Feb | -44,507 | 180,348 | 0.9 | 224,855 | -2.7 |
| Jan | -52,209 | 178,802 | 0.6 | 231,011 | 0.7 |
| Dec 2011 | -51,748 | 177,751 | 0.6 | 229,499 | 1.8 |
| Nov | -48,835 | 176,710 | -1.1 | 225,545 | 0.5 |
| Oct | -45,703 | 178,742 | -1.0 | 224,445 | -0.3 |
| Sep | -44,467 | 180,629 | 1.3 | 225,096 | 0.9 |
| Aug | -44,775 | 178,382 | 0.0 | 223,157 | -0.3 |
| Jul | -45,580 | 178,339 | 3.3 | 223,919 | 0.4 |
| Jun | -50,234 | 172,664 | -1.7 | 222,988 | -0.2 |
| May | -47,669 | 175,673 | 0.0 | 223,343 | 1.9 |
| Apr | -43,556 | 175,662 | 0.9 | 219,218 | 0.1 |
| Mar | -44,902 | 174,169 | 4.6 | 219,071 | 3.7 |
| Feb | -44,801 | 166,545 | -0.9 | 211,346 | -2.0 |
| Jan | -47,523 | 168,098 | 1.6 | 215,621 | 4.6 |
| Dec 2010 | -40,677 | 165,499 | 1.7 | 206,176 | 2.2 |
| Jan-Dec | -559,880 | 2,103,367 | 2,663,247 | ||
| Jan-Dec | -494,737 | 1,842,485 | 2,337,222 |
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 and seasonality. Source: US Census Bureau http://www.census.gov/foreign-trade/
Table VA-5 provides the US international trade balance, exports and imports on an annual basis from 1992 to 2011. The trade balance deteriorated sharply over the long term. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US increased from $119.9 billion in IQ2011, or 3.2 percent of GDP to $137.3 billion in IQ2012, or 3.6 percent of GDP (http://cmpassocregulationblog.blogspot.com/2012/06/destruction-of-three-trillion-dollars_17.html). The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71).
Table VA-5, US, International Trade Balance, Exports and Imports SA, Millions of Dollars
| Period | Balance | Exports | Imports |
| Total | |||
| Annual | |||
| 1992 | -39,212 | 616,882 | 656,094 |
| 1993 | -70,311 | 642,863 | 713,174 |
| 1994 | -98,493 | 703,254 | 801,747 |
| 1995 | -96,384 | 794,387 | 890,771 |
| 1996 | -104,065 | 851,602 | 955,667 |
| 1997 | -108,273 | 934,453 | 1,042,726 |
| 1998 | -166,140 | 933,174 | 1,099,314 |
| 1999 | -263,160 | 967,008 | 1,230,168 |
| 2000 | -376,749 | 1,072,783 | 1,449,532 |
| 2001 | -361,771 | 1,007,726 | 1,369,496 |
| 2002 | -417,432 | 980,879 | 1,398,311 |
| 2003 | -490,984 | 1,023,519 | 1,514,503 |
| 2004 | -605,357 | 1,163,146 | 1,768,502 |
| 2005 | -708,624 | 1,287,441 | 1,996,065 |
| 2006 | -753,288 | 1,459,823 | 2,213,111 |
| 2007 | -696,728 | 1,654,561 | 2,351,289 |
| 2008 | -698,338 | 1,842,682 | 2,541,020 |
| 2009 | -379,154 | 1,578,945 | 1,958,099 |
| 2010 | -494,737 | 1,842,485 | 2,337,222 |
| 2011 | -559,880 | 2,103,367 | 2,663,247 |
Source: http://www.census.gov/foreign-trade/
Chart VA-4 of the US Census Bureau of the Department of Commerce shows that the trade deficit (gap between exports and imports) fell during the economic contraction after 2007 but has grown again during the expansion. There was slight improvement at the margin from Jul to Oct 2011 but new increase in the gap from Nov 2011 to Jan 2012 and again in Mar as exports grow less rapidly than imports. There is improvement in Apr 2012 with imports declining at a faster rate of 1.6 percent than decline of exports by 1.1 percent and growth of exports of 0.1 percent in May 2012 with imports declining 0.8 percent. Further improvement occurred in Jun with importing increasing 1.2 percent and exports declining 1.5 percent. There was deterioration in Jul with exports declining 1.0 percent and imports only 0.8 percent. Weaker world and internal demand and fluctuating commodity price increases explain the declining or less dynamic changes in exports and imports in Chart VA-4.
Chart VA-4, US Balance, Exports and Imports of Goods and Services $ Billions
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr042.html
Chart VA-5 of the US Census Bureau provides the US trade account in goods and services SA from Jan 1992 to Jun 2012. There is a long-term trend of deterioration of the US trade deficit shown vividly by Chart VA-5. The trend of deterioration was reversed by the global recession from IVQ2007 to IIQ2009. Deterioration resumed together with recovery and was influenced significantly by the carry trade from zero interest rates to commodity futures exposures (these arguments are elaborated in 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 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). Earlier research focused on the long-term external imbalance of the US in the form of trade and current account deficits (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). US external imbalances have not been resolved and tend to widen together with improving world economic activity and commodity price shocks.
Chart VA-5. US, Balance of Trade SA, Monthly, Millions of Dollars, Jan 1992-Jul 2012
Source: US Census Bureau
http://www.census.gov/foreign-trade/
Chart VA-6 of the US Census Bureau provides US exports SA from Jan 1992 to Jul 2012. There was sharp acceleration from 2003 to 2007 during worldwide economic boom and increasing inflation. Exports fell sharply during the financial crisis and global recession from IVQ2007 to IIQ2009. Growth picked up again together with world trade and inflation but stalled in the final segment.
Chart VA-6. US, Exports SA, Monthly, Millions of Dollars Jan 1992-Jul 2012
Source: US Census Bureau http://www.census.gov/foreign-trade/
Chart VA-7 of the US Census Bureau provides US imports SA from Jan 1992 to Jul 2012. Growth was stronger between 2003 and 2007 with worldwide economic boom and inflation. There was sharp drop during the financial crisis and global recession. There is stalling import levels in the final segment resulting from weaker world economic growth and diminishing inflation because of risk aversion.
Chart VA-7. US, Imports SA, Monthly, Millions of Dollars Jan 1992-Jul 2012
Source: US Census Bureau http://www.census.gov/foreign-trade/
Chart VA-7 of the US Census Bureau provides US imports SA from Jan 1992 to Jul 2012. Growth was stronger between 2003 and 2007 with worldwide economic boom and inflation. There was sharp drop during the financial crisis and global recession. There is stalling import levels in the final segment resulting from weaker world economic growth and diminishing inflation because of risk aversion.
The balance of international trade in goods of the US seasonally-adjusted is shown in Table VA-6. 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 improved from $60.9 billion in Jul 2011 to $57.3 billion in Jul 2012. Improvement of the goods balance in Jul 2012 relative to Jul 2011 occurred mostly in the petroleum balance, exports less imports of goods other than petroleum, in the magnitude of reducing the deficit by $5.5 billion, while there was moderate deterioration in the nonpetroleum balance, exports less imports of petroleum goods, in the magnitude of increasing the deficit by $2.1 billion. US terms of trade, export prices relative to import prices, and the US trade account fluctuate in accordance with the carry trade from zero interest rates to commodity futures exposures, especially oil futures. Exports rose 3.3 percent with non-petroleum exports growing 8.8 percent. Total imports rose 0.3 percent with petroleum imports declining 14.9 percent and non-petroleum imports increasing 4.3 percent.
Table VA-6, US, International Trade in Goods Balance, Exports and Imports $ Millions and ∆% SA
| Jul 2012 | Jul 2011 | ∆% | |
| Total Balance | -57,259 | -60,889 | |
| Petroleum | -20,914 | -26,273 | |
| Non Petroleum | -35,808 | -33,735 | |
| Total Exports | 130,812 | 126,585 | 3.3 |
| Petroleum | 9,838 | 9,886 | -0.5 |
| Non Petroleum | 119,575 | 115,207 | 3.8 |
| Total Imports | 188,071 | 187,474 | 0.3 |
| Petroleum | 30,752 | 36,159 | -14.9 |
| Non Petroleum | 155,382 | 148,943 | 4.3 |
Details may not add because of rounding and seasonal adjustment
Source: US Census Bureau http://www.census.gov/foreign-trade/
US exports and imports of goods not seasonally adjusted in Jan-Jun 2012 and Jan-Jun 2011 are shown in Table VA-7. The rate of growth of exports was 6.2 percent and 5.5 percent for imports. The US has partial hedge of commodity price increases in exports of agricultural commodities that fell 3.3 percent and of mineral fuels that increased 11.2 percent both because of higher prices of raw materials and commodities that are falling again currently because of shocks of risk aversion. 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 7.5 percent while imports rose 7.9 percent. Significant part of the US trade imbalance originates in imports of mineral fuels increasing 14.3 percent and crude oil increasing 0.1 percent with significant decline at the margin in oil prices. The limited hedge in exports of agricultural commodities and mineral fuels compared with substantial imports of mineral fuels and crude oil results in waves of deterioration of the terms of trade of the US, or export prices relative to import prices, originating in commodity price increases caused by carry trades from zero interest rates. These waves are similar to those in worldwide inflation (Section II World Inflation Waves).
Table VA-7, US, Exports and Imports of Goods, Not Seasonally Adjusted Millions of Dollars and %
| Jan-Jul 2012 $ Millions | Jan-Jul 2011 $ Millions | ∆% | |
| Exports | 895,441 | 842,898 | 6.2 |
| Manufactured | 594,317 | 553,027 | 7.5 |
| Agricultural | 77,487 | 80,102 | -3.3 |
| Mineral Fuels | 78,185 | 70,320 | 11.2 |
| Crude Oil | 1,034 | 779 | 32.7 |
| Imports | 1,323,937 | 1,254,425 | 5.5 |
| Manufactured | 979,543 | 907,802 | 7.9 |
| Agricultural | 61,712 | 57,798 | 6.8 |
| Mineral Fuels | 257,943 | 225,638 | 14.3 |
| Crude Oil | 193,820 | 193,586 | 0.1 |
Source: US Census Bureau http://www.census.gov/foreign-trade/
Chart VA-7B provides prices of total US imports 2001-2012. Prices fell during the contraction of 2001. Import price inflation accelerated after unconventional monetary policy of near zero interest rates in 2003-2004 and quantitative easing by withdrawing supply with the suspension of 30-year Treasury bond auctions. Slow pace of adjusting fed funds rates from 1 percent by increments of 25 basis points in 17 consecutive meetings of the Federal Open Market Committee (FOMC) between Jun 2004 and Jun 2006 continued to give impetus to carry trades. The reduction of fed funds rates toward zero in 2008 fueled a spectacular global hunt for yields that caused commodity price inflation in the middle of a global recession. After risk aversion in 2009 because of the announcement of TARP (Troubled Asset Relief Program) creating anxiety on “toxic assets” in bank balance sheets (see Cochrane and Zingales 2009), prices collapsed because of unwinding carry trades. Renewed price increases returned with zero interest rates and quantitative easing. Monetary policy impulses in massive doses have driven inflation and valuation of risk financial assets in wide fluctuations over a decade.
Chart VA-7B, US, Prices of Total US Imports 2001=100, 2001-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-8 provides 12-month percentage changes of prices of total US imports from 2001 to 2012. The only plausible explanation for the wide oscillations is by the carry trade originating in unconventional monetary policy. Import prices jumped in 2008 during deep and protracted global recession driven by carry trades from zero interest rates to long, leveraged positions in commodity futures. Carry trades were unwound during the financial panic in the final quarter of 2008 that resulted in flight to government obligations. Import prices jumped again in 2009 with subdued risk aversion because US banks did not have unsustainable toxic assets. Import prices then fluctuated as carry trades were resumed during periods of risk appetite and unwound during risk aversion resulting from the European debt crisis.
Chart VA-8, US, Prices of Total US Imports, 12-Month Percentage Changes, 2001-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-9 provides prices of US imports from 1982 to 2012. There is no similar episode to that of the increase of commodity prices in 2008 during a protracted and deep global recession with subsequent collapse during a flight into government obligations. Trade prices have been driven by carry trades created by unconventional monetary policy in the past decade.
Chart VA-9, US, Prices of Total US Imports, 2001=100, 1982-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-10 provides 12-month percentage changes of US total imports from 1982 to 2012. There have not been wide consecutive oscillations as the ones during the global recession of IVQ2007 to IIQ2009.
Chart VA-10, US, Prices of Total US Imports, 12-Month Percentage Changes, 1982-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-11 provides the index of US export prices from 2001 to 2012. Import and export prices have been driven by impulses of unconventional monetary policy in massive doses. The most recent segment in Chart IIB-5 shows declining trend resulting from a combination of the world economic slowdown and the decline of commodity prices as carry trade exposures are unwound because of risk aversion to the sovereign debt crisis in Europe.
Chart VA-11, US, Prices of Total US Exports, 2001=100, 2001-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-12 provides prices of US total exports from 1982 to 2012. The rise before the global recession from 2003 to 2008, driven by carry trades, is also unique in the series and is followed by another steep increase after risk aversion moderated in IQ2009.
Chart VA-12, US, Prices of Total US Exports, 2001=100, 1982-2012
Source: http://www.bls.gov/mxp/data.htm
Chart VA-13 provides 12-month percentage changes of total US exports from 1982 to 2012. The uniqueness of the oscillations around the global recession of IVQ2007 to IIQ2009 is clearly revealed.
Chart VA-13, US, Prices of Total US Exports, 12-Month Percentage Changes, 1982-2012
Source: http://www.bls.gov/mxp/data.htm
Twelve-month percentage changes of US prices of exports and imports are provided in Table VA-8. Import prices have been driven since 2003 by unconventional monetary policy of near zero interest rates influencing commodity prices according to moods of risk aversion. In a global recession without risk aversion until the panic of Sep 2008 with flight to government obligations, import prices rose 18.1 percent in the twelve months ending in Aug 2008 and fell 15.3 percent in the 12 months ending in Aug 2009 when risk aversion developed in 2008 until mid 2009. Import prices rose again sharply in Aug 2010 by 3.8 percent and in Aug 2011 by 12.9 percent in the presence of zero interest rates with relaxed mood of risk aversion until carry trades were unwound in May 2011 and following months as shown by decline of import prices by 2.2 percent in the 12 months ending in Aug 2012 and of 0.9 percent in exports. Fluctuations are much sharper in imports because of the high content of oil that as all commmodities futures contracts increases sharply with zero interest rates and risk appetite, contracting under risk aversion. There is similar behavior of prices of imports ex fuels, exports and exports ex agricultural goods but less pronounced than for commodity-rich prices dominated by carry trades from zero interest rates. A critical event resulting from unconventional monetary policy driving higher commodity prices by carry trades is the deterioration of the terms of trade, or export prices relative to import prices, that has adversely affected US real income growth relative to what it would have been in the absence of unconventional monetary policy. Europe, Japan and other advanced economies have experienced similar deterioration of their terms of trade. Because of unwinding carry trades of commodity futures as a result of risk aversion, import prices fell 2.2 percent in the 12 months ending in Aug 2012, export prices fell 0.9 percent and prices of nonagricultural exports fell 1.9 percent. Imports excluding fuel fell 0.5 in the 12 months ending in Aug 2012. At the margin, prices in world exports and imports are increasing again because of carry trades in a temporary mood of risk appetite.
Table VA-8, US, Twelve-Month Percentage Rates of Change of Prices of Exports and Imports
| Imports | Imports Ex Fuels | Exports | Exports Non-Ag | |
| Aug 2012 | -2.2 | -0.5 | -0.9 | -1.9 |
| Aug 2011 | 12.9 | 5.4 | 9.4 | 8.0 |
| Aug 2010 | 3.8 | 2.7 | 4.1 | 3.9 |
| Aug 2009 | -15.3 | -5.1 | -6.2 | -5.3 |
| Aug 2008 | 18.1 | 6.6 | 8.3 | 6.8 |
| Aug 2007 | 1.9 | 2.4 | 3.7 | 2.5 |
| Aug 2006 | 6.0 | 2.9 | 5.2 | 5.3 |
| Aug 2005 | 8.2 | 1.3 | 3.1 | 2.8 |
| Aug 2004 | 7.1 | 2.8 | 4.0 | 3.9 |
| Aug 2003 | 2.0 | 0.3 | 0.9 | 0.8 |
| Aug 2002 | -1.3 | NA | -0.3 | -0.6 |
| Aug 2001 | -4.4 | NA | -1.0 | -1.6 |
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart VA-14 shows the US monthly import price index of all commodities excluding fuels from 2001 to 2012. All curves of nominal values follow the same behavior under the influence of unconventional monetary policy. Zero interest rates without risk aversion result in jumps of nominal values while under strong risk aversion even with zero interest rates there are declines of nominal values.
Chart VA-14, US, Import Price Index All Commodities Excluding Fuels, 2001=100, 2001-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-15 provides 12-month percentage changes of the US import price index excluding fuels between 2001 and 2012. There is the same behavior of carry trades driving up without risk aversion and down with risk aversion prices of raw materials, commodities and food in international trade during the global recession of IVQ2007 to IIQ2009 and in previous and subsequent periods.
Chart VA-15, US, Import Price Index All Commodities Excluding Fuels, 12-Month Percentage Changes, 2002-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-16 provides the monthly US import price index ex petroleum from 2001 to 2012. Prices including or excluding commodities follow the same fluctuations and trends originating in impulses of unconventional monetary policy of zero interest rates.
Chart VA-16, US, Import Price Index ex Petroleum, 2001=100, 2001-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-17 provides the US import price index ex petroleum from 1982 to 2012. There is the same unique hump in 2008 caused by carry trades from zero interest rates to prices of commodities and raw materials.
Chart VA-17, US, Import Price Index ex Petroleum, 2001=100, 1982-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-18 provides 12-month percentage changes of the import price index ex petroleum from 1986 to 2012. The oscillations caused by the carry trade in increasing prices of commodities and raw materials without risk aversion and subsequently decreasing them during risk aversion are quite unique.
Chart VA-18, US, Import Price Index ex Petroleum, 12-Month Percentage Changes, 1986-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-19 of the US Energy Information Administration provides the price of the crude oil futures contract from 1985 to 2012. There is the same hump in 2008 as in all charts caused by the common factor of carry trades from zero interest rates to commodity futures positions with risk appetite and subsequent decline when carry trades were unwound during shocks of risk aversion.
Chart VA-19, 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
The price index of US imports of petroleum and petroleum products in shown in Chart VA-20. There is similar behavior of the curves all driven by the same impulses of monetary policy.
Chart VA-20, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 2001-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-21 provides the price index of petroleum and petroleum products from 1982 to 2012. The rise in prices during the global recession in 2008 and the decline after the flight to government obligations is unique in the history of the series. Increases in prices of trade in petroleum and petroleum products were induced by carry trades and declines by unwinding carry trades in flight to government obligations.
Chart VA-21, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 1982-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-22 provides 12-month percentage changes of the price index of US imports of petroleum and petroleum products from 1982 to 2012. There were wider oscillations in this index from 1999 to 2001 (see Barsky and Killian 2004 for an explanation).
Chart VA-22, US, Import Price Index of Petroleum and Petroleum Products, 12-Month Percentage Changes, 1982-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
The price index of US exports of agricultural commodities is in Chart VA-23 from 2001 to 2012. There are similar fluctuations and trends as in all other price index originating in unconventional monetary policy repeated over a decade. The most recent segment in 2011 has declining trend in a new flight from risk resulting from the sovereign debt crisis in Europe followed by another decline in Jun 2012.
Chart VA-23, US, Exports Price Index of Agricultural Commodities, 2001=100, 2001-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-24 provides the price index of US exports of agricultural commodities from 1982 to 2012. The increase in 2008 in the middle of deep, protracted contraction was induced by unconventional monetary policy. The decline from 2008 into 2009 was caused by unwinding carry trades in a flight to government obligations. The increase into 2011 and current pause were also induced by unconventional monetary policy in waves of increases during relaxed risk aversion and declines during unwinding of positions because of aversion to financial risk.
Chart VA-24, US, Exports Price Index of Agricultural Commodities, 2001=100, 1982-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-25 provides 12-month percentage changes of the index of US exports of agricultural commodities from 1986 to 2012. The wide swings in 2008, 2009 and 2011 are only explained by unconventional monetary policy inducing carry trades from zero interest rates to commodity futures and reversals during risk aversion.
Chart VA-25, US, Exports Price Index of Agricultural Commodities, 12-Month Percentage Changes, 1986-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-26 shows the export price index of nonagricultural commodities from 2001 to 2012. Unconventional monetary policy of zero interest rates drove price behavior during the past decade. Policy has been based on the myth of stimulating the economy by climbing the negative slope of an imaginary short-term Phillips curve.
Chart VA-26, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 2001-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart VA-27 provides a longer perspective of the price index of US nonagricultural commodities from 1982 to 2012. Increases and decreases around the global contraction after 2007 were caused by carry trade induced by unconventional monetary policy.
Chart VA-27, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 1982-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Finally, Chart VA-28 provides 12-month percentage changes of the price index of US exports of nonagricultural commodities from 1986 to 2012. The wide swings before, during and after the global recession beginning in 2007 were caused by carry trades induced by unconventional monetary policy.
Chart VA-28, US, Exports Price Index of Nonagricultural Commodities, 12-Month Percentage Changes, 1986-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Growth rates and levels of sales in millions of dollars of manufacturers, retailers and merchant wholesalers are provided in Table VA-9. Total business sales increased 0.9 percent in Jul after falling 1.2 percent in Jun and increased 3.7 percent in the 12 months ending in Jul. Sales of manufacturers increased 2.0 percent in Jul after falling 1.2 percent in Jun and increased 2.9 percent in the 12 months ending in Jul. Retailers’ sales increased 0.7 percent in Jul, fell 0.8 percent in Jun and increased 3.0 percent in 12 months ending in Jul. Sales of merchant wholesalers fell 0.1 percent in Jun, falling 1.4 percent in Jun and increased 5.4 percent in 12 months ending in Jul. These data are not adjusted for price changes such that they reflect increases in both quantities and prices.
Table VA-9, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers
| Jul 12/ Jun 12 | Jul 2012 | Jun 12/ May 12 ∆% SA | Jul 12/ Jul 11 | |
| Total Business | 0.9 | 1,211,125 | -1.2 | 3.7 |
| Manufacturers | 2.0 | 458,463 | -1.2 | 2.9 |
| Retailers | 0.7 | 355,982 | -0.8 | 3.0 |
| Merchant Wholesalers | -0.1 | 396,680 | -1.4 | 5.4 |
Source: US Census Bureau http://www.census.gov/mtis/
Chart VA-28B of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and partial recovery in the final segment. Data are not adjusted for price changes.
Chart VA-28B, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jul 2012
US Census Bureau http://www.census.gov/mtis/
Chart VA-7 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is decline in the final segment.
Chart VA-29, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jul 2012
US Census Bureau http://www.census.gov/mtis/
Businesses added cautiously to inventories to replenish stocks. Retailers added 0.6 percent to inventories in Jun 2012 and 1.1 percent in May with growth of 7.0 percent in 12 months, as shown in Table VA-10. Total business increased inventories by 0.8 percent in Jul, 0.1 percent in Jun and 5.3 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.28 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.
Table VA-10, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios
| Inventory Change | Jul 12 | Jul12/ Jun 12 ∆% SA | Jun 12/ May 12 ∆% SA | Jul 12/ Jul 11 ∆% NSA |
| Total Business | 1,581,538 | 0.8 | 0.1 | 5.3 |
| Manufacturers | 611,804 | 0.5 | -0.1 | 2.9 |
| Retailers | 487,227 | 1.1 | 0.8 | 8.3 |
| Merchant | 482,507 | 0.7 | -0.2 | 5.4 |
| Inventory/ | Jul 12 | Jul 2012 SA | Jun 2012 SA | Jul 2011 SA |
| Total Business | 1,581,538 | 1.28 | 1.29 | 1.25 |
| Manufacturers | 611,804 | 1.27 | 1.29 | 1.26 |
| Retailers | 487,227 | 1.39 | 1.38 | 1.33 |
| Merchant Wholesalers | 482,507 | 1.21 | 1.20 | 1.18 |
Source: US Census Bureau http://www.census.gov/mtis/
Chart VA-30 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Jul 2012. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Data are not adjusted for price changes.
Chart VA-30, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jul 2012
US Census Bureau http://www.census.gov/mtis/
Chart VA-31 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Jul 2012 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions.
Chart VA-31, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jul 2012
US Census Bureau http://www.census.gov/mtis/
Inventories follow business cycles. When recession hits sales inventories pile up, declining with expansion of the economy. In a fascinating classic opus, Lloyd Meltzer (1941, 129) concludes:
“The dynamic sequences (I) through (6) were intended to show what types of behavior are possible for a system containing a sales output lag. The following conclusions seem to be the most important:
(i) An economy in which business men attempt to recoup inventory losses will always undergo cyclical fluctuations when equilibrium is disturbed, provided the economy is stable.
This is the pure inventory cycle.
(2) The assumption of stability imposes severe limitations upon the possible size of the marginal propensity to consume, particularly if the coefficient of expectation is positive.
(3) The inventory accelerator is a more powerful de-stabilizer than the ordinary acceleration principle. The difference in stability conditions is due to the fact that the former allows for replacement demand whereas the usual analytical formulation of the latter does not. Thus, for inventories, replacement demand acts as a de-stabilizer. Whether it does so for all types of capital goods is a moot question, but I believe cases may occur in which it does not.
(4) Investment for inventory purposes cannot alter the equilibrium of income, which depends only upon the propensity to consume and the amount of non-induced investment.
(5) The apparent instability of a system containing both an accelerator and a coefficient of expectation makes further investigation of possible stabilizers highly desirable.”
Chart VA-10 shows the increase in the inventory/sales ratios during the recessions of 2001 and 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012.
Chart VA-32, Total Business Inventories/Sales Ratios 2002 to 2011
Source: US Census Bureau
http://www2.census.gov/retail/releases/historical/mtis/img/mtisbrf.gif
Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-11 for Jul 2012 and percentage changes from the prior month and for Jan-Jul 2012 relative to Jan-Jul 2011. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 6.8 percent in Jan-Jul 2012 relative to Jan-Jul 2011 and fell 0.1 percent in Jul 2012 relative to Jun 2012. The value of total sales is quite high at $2845.4 billion, exceeding four trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Jul 2012 reached $1271.5 billion, over two trillion for a year, decreasing 0.8 percent in Jul relative to Jun and increasing 8.9 percent in Jan-Jul 2012 relative to Jan-Jul 2011. Sales of automotive products reached $229.5 billion in Jan-Jul 2012, increasing 0.8 percent in the month and increasing 13.2 percent relative to a year earlier. There is strong performance of 14.5 percent in machinery and 2.5 percent in electrical products. Sales of nondurable goods rose 5.3 percent over a year earlier. The influence of commodity prices moderated as shown by increase of 5.6 percent in farm products and increase of 6.8 percent in petroleum products with decrease of 2.0 percent in Jul. The final three columns in Table VA-11 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers increased 0.7 percent in Jun and increased 5.4 percent relative to a year earlier. Inventories of durable goods of $291.3 billion are 60.4 percent of total inventories of $482.5 billion and rose 8.9 percent relative to a year earlier. Automotive inventories jumped 13.2 percent relative to a year earlier. Machinery inventories of $79.8 billion rose 18.2 percent relative to a year earlier. Inventories of nondurable goods of $191.7 billion are 39.7 percent of the total and increased 0.4 percent relative to a year earlier. Inventories of farm products increased 2.6 percent in Jul relative to Jun and declined 2.5 percent relative to a year earlier. Inventories of petroleum products decreased 0.7 percent in Jul and fell 14.4 percent relative to a year earlier.
Table VA-11, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%
| 2012 | Sales $ Billions Jan-Jul 2012 | Sales Jul ∆% SA | Sales∆% Jan-Jul 2012 from Jan-Jul 2011 NSA | INV $ Billions Jul 2012 NSA | INV Jul ∆% SA | INV ∆% Jul 2012 from Jul 2011 NSA |
| US Total | 2845.4 | -0.1 | 6.8 | 482.5 | 0.7 | 5.4 |
| Durable | 1271.5 | -0.8 | 8.7 | 291.3 | 0.7 | 8.9 |
| Automotive | 229.5 | 0.8 | 26.8 | 45.8 | 0.4 | 13.2 |
| Prof. Equip. | 217.8 | -2.3 | 3.3 | 33.3 | 1.5 | 2.1 |
| Computer Equipment | 110.3 | -1.8 | 0.6 | 13.3 | 3.8 | 1.9 |
| Electrical | 213.0 | 0.2 | 2.0 | 41.5 | -0.6 | 2.5 |
| Machinery | 223.1 | -1.0 | 14.5 | 79.8 | 1.6 | 18.2 |
| Not Durable | 1573.9 | 0.5 | 5.3 | 191.7 | 0.7 | 0.4 |
| Drugs | 248.4 | 1.2 | 3.1 | 35.5 | 2.2 | 9.2 |
| Apparel | 81.2 | -1.4 | 6.6 | 22.6 | -1.3 | -3.9 |
| Groceries | 336.5 | 1.1 | 8.7 | 34.5 | 0.3 | 6.2 |
| Farm Products | 123.3 | 5.6 | -6.7 | 16.7 | 2.6 | -2.5 |
| Petroleum | 451.8 | -2.0 | 6.8 | 24.7 | -0.7 | -14.4 |
Note: INV: inventories
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Chart VA-33 of the US Census Bureau provides wholesale trade sales without adjustment for seasonality or price changes from Jan 1992 to Jul 2012. The jagged curve of wholesale trade sales without adjustment shows strong seasonal variations. There is a strong long-term trend interrupted by sharp drop during the global recession. Growth resumed along a stronger upward trend and the level in Jun 2012 surpasses the peak before the global recession.
Chart VA-33, US, Wholesale Trade Sales, Monthly, NSA, Jan 1992-Jun 2012, Millions of Dollars
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Table VA-34 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Jul 2012. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop.
Chart VA-34, US, Wholesale Trade Sales, Monthly, SA, Jan 1992-Jun 2012, Millions of Dollars
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Chart VA-35 of the US Census Bureau provides monthly percentage changes of US wholesale trade not seasonally adjusted from Jan 1992 to Jul 2012. The scatter diagram provides wide monthly percentage changes in wholesale trade sales.
Chart VA-35, US, Wholesale Trade Sales, Monthly Percentage Change, NSA, Jan 1992-Jun 2012, %
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-12. The total for the US has remained almost without change at 1.21 in Jul 2012, 1.20 in Jun 2012 and 1.18 in Jul 2011. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.59 in Jul 2012, 1.57 in Jun 2012 and 1.50 in Jul 2011. Computer equipment operates with low inventory/sales ratios of 0.75 to 0.79 in Jun-Jul 2012 relative to 0.76 in Jul 2011 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.89 in Jul 2012 and 0.89 in Jun 2012, which is almost equal to 0.91 in Jul 2011. There are exceptions such as 1.75 in Jul 2012 in apparel that is equal to 1.75 in Jun 2012 and lower than 2.00 in Jun 2011 perhaps.
Table VA-12, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA
| Jul 2012 | Jun 2012 | Jul 2011 | |
| US Total | 1.21 | 1.20 | 1.18 |
| Durable | 1.59 | 1.57 | 1.50 |
| Automotive | 1.36 | 1.37 | 1.47 |
| Prof. Equip. | 1.04 | 1.00 | 1.02 |
| Comp. Equip. | 0.79 | 0.75 | 0.76 |
| Electrical | 1.33 | 1.34 | 1.31 |
| Machinery | 2.51 | 2.45 | 2.21 |
| Not Durable | 0.89 | 0.89 | 0.91 |
| Drugs | 0.99 | 0.98 | 0.90 |
| Apparel | 1.75 | 1.75 | 2.00 |
| Groceries | 0.72 | 0.73 | 0.72 |
| Farm Products | 1.18 | 1.22 | 1.22 |
| Petroleum | 0.40 | 0.39 | 0.46 |
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Chart VA-36 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2002 to 2012 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. There is an increase in the inventory/sales ratio in 2012 but not yet significantly higher.
Chart VA-36, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2002-2011
Source: US Census Bureau
http://www2.census.gov/wholesale/img/mwtsbrf.jpg
Sales of retail and food services increased 0.9 percent in Aug after increasing 0.6 percent in Jul seasonally adjusted (SA), growing 5.8 percent in Jan-Aug 2012 relative to Jan-Aug 2011 not seasonally adjusted (NSA), as shown in Table VA-13. Excluding motor vehicles and parts, retail sales increased 0.8 percent in Aug 2012, increasing 0.8 percent in Jul 2012 SA, increasing 5.2 percent NSA in Jan-Aug 2012 relative to a year earlier. Sales of motor vehicles and parts increased 1.3 percent in Aug 2012 after increasing 0.1 percent in Jul SA and increasing 8.5 percent NSA in Jan-Aug 2012 relative to a year earlier. Gasoline station sales increased 5.5 percent SA in Aug 2012 after increasing 0.4 percent in Jul 2012 in increasing prices of gasoline, increasing 3.8 percent in Jan-Aug 2012 relative to a year earlier.
Table VA-13, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%
| Aug/ Jul ∆% SA | Jul/Jun ∆% SA | Jan-Aug 2012 Million Dollars NSA | Jan-Aug 2012 from Jan-Aug 2011 ∆% NSA | |
| Retail and Food Services | 0.9 | 0.6 | 3,207,701 | 5.8 |
| Excluding Motor Vehicles and Parts | 0.8 | 0.8 | 2,605,540 | 5.2 |
| Motor Vehicles & Parts | 1.3 | 0.1 | 602,161 | 8.5 |
| Retail | 0.9 | 0.7 | 2,854,265 | 5.6 |
| Building Materials | 1.0 | 1.2 | 198,252 | 6.4 |
| Food and Beverage | 0.0 | 0.4 | 418,867 | 3.7 |
| Grocery | 0.0 | 0.4 | 376,898 | 3.4 |
| Health & Personal Care Stores | 0.2 | 1.7 | 183,076 | 2.0 |
| Clothing & Clothing Accessories Stores | -0.1 | 0.7 | 148,097 | 6.4 |
| Gasoline Stations | 5.5 | 0.4 | 365,948 | 3.8 |
| General Merchandise Stores | -0.3 | 0.1 | 404,191 | 1.9 |
| Food Services & Drinking Places | 0.5 | 0.3 | 353,436 | 8.0 |
Source: US Census Bureau http://www.census.gov/retail/
Chart VA-37 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been increasing strongly monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.
Chart VA-37, US, Percentage Change of Retail and Food Services Sales
Source: US Census Bureau
http://www2.census.gov/retail/releases/historical/marts/img/martsbrf.gif
Chart VA-38 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Aug 2012 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series. Data are not adjusted for price changes.
Chart VA-38, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Aug 2012, Millions of Dollars
Source: US Census Bureau http://www.census.gov/retail/
Chart VA-39 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Aug 2012. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level.
Chart VA-39, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Aug 2012, Millions of Dollars
Source: US Census Bureau http://www.census.gov/retail/
Twelve-month rates of growth of US sales of retail and food services in Jul from 2000 to 2012 are shown in Table VA-14. Nominal sales have been dynamic in 2012, 2011 and 2010 after decline of 7.6 percent in 2009 and decrease of 1.2 percent in 2008. It is difficult to separate price and quantity effects in these nominal data.
Table VA-14, US, Percentage Change in 12-Month Sales for Retail and Food Services, ∆% NSA
| Aug | 12 Months ∆% |
| 2012 | 5.6 |
| 2011 | 9.4 |
| 2010 | 2.8 |
| 2009 | -7.6 |
| 2008 | -1.2 |
| 2007 | 3.3 |
| 2006 | 5.7 |
| 2005 | 9.0 |
| 2004 | 2.9 |
| 2003 | 3.2 |
| 2002 | 4.2 |
| 2001 | 3.8 |
| 2000 | 7.1 |
Source: US Census Bureau http://www.census.gov/retail/
The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-15. The data are in seasonally-adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-15) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-15) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Jul 2012, revolving credit was $851 billion, or 31.5 percent of total consumer credit of $2705 billion, and non-revolving credit was $1855 billion, or 68.6 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 and extending to IIQ2009 as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.3 percent in annual data and sharp decline of 7.4 percent in revolving credit. There was a sharp jump in consumer credit outstanding in May 2012: 8.7 percent total, 13.8 percent revolving and 6.3 percent non-revolving. Consumer credit increased 5.3 percent in Jun 2012 with decrease of revolving credit at 4.5 percent and growth of non-revolving credit at 9.8 percent. Consumer credit fell at 1.5 percent in Jul 2012 with sharp decline of revolving credit at 6.8 percent and meager increase of non-revolving credit at 1.0 percent.
Table VA-15, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars
| Total ∆% | REV ∆% | NRV ∆% | Total $B | REV $B | NREV $B | |
| 2012 | ||||||
| Jul | -1.5 | -6.8 | 1.0 | 2705 | 851 | 1855 |
| Jun | 5.3 | -4.5 | 9.8 | 2709 | 856 | 1853 |
| May | 8.7 | 13.8 | 6.3 | 2699 | 859 | 1840 |
| IIQ | 6.2 | 1.3 | 8.6 | 2709 | 856 | 1853 |
| IQ | 5.7 | 0.6 | 8.1 | 2669 | 853 | 1816 |
| 2011 | ||||||
| IVQ | 5.9 | 1.8 | 7.8 | 2632 | 851 | 1780 |
| IIIQ | 1.9 | -1.2 | 3.4 | 2594 | 848 | 1746 |
| IIQ | 3.0 | 0.9 | 4.1 | 2582 | 850 | 1732 |
| 2011 | 3.4 | 0.2 | 5.0 | 2632 | 851 | 1780 |
| 2010 | -1.3 | -7.4 | 2.5 | 2545 | 850 | 1695 |
| 2009 | -4.5 | -8.8 | -1.8 | 2439 | 922 | 1517 |
| 2008 | 0.8 | 0.2 | 1.2 | 2549 | 1010 | 1538 |
| 2007 | 5.9 | 8.5 | 4.3 | 2529 | 1008 | 1521 |
Note: REV: Revolving; NREV: Non-revolving; ∆%: simple annual rate from unrounded data; Total may not add exactly because of rounding
Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g19/current/default.htm
Chart VA-40 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on consumer installment loans at commercial banks, new autos 48 month loans, not seasonally adjusted. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.
Chart VA-40, US, Total Consumer Credit Owned and Securitized SA and Financing Rate on Consumer Installment Loans at Commercial Banks NSA, Millions of Dollars and Percent, 1972-2008
Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g19/current/default.htm
Chart VA-41 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on consumer installment loans at commercial banks, new autos 48 month loan, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012 but with significant fluctuations.
Chart VA-41, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on Consumer Installment Loans at Commercial Banks NSA, Feb 1972-Jun 2012
Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g19/current/default.htm
The US Treasury budget for fiscal year 2012 in Oct 2010-Aug 2011 and Oct 2011-Aug 2012 is shown in Table VA-16. Receipts increased 6.1 percent in the first eleven months of fiscal year 2012 relative to the same ten months in fiscal year 2011. Individual income taxes have grown 3.9 percent relative to the same period a year earlier. Outlays increased 1.7 percent relative to a year earlier. Table VA-16 also provides the projection of the Congressional Budget Office (CBO) of the deficit for fiscal year 2012 at $1.2 trillion not very different from that in fiscal year 2011 of $1.3 trillion. The deficits from 2009 to 2012 exceed one trillion dollars per year, adding to $5.2 trillion in four years, which is the worst fiscal performance since World War II.
Table VA-16, US, Treasury Budget in Fiscal Year to Date Million Dollars
| Fiscal Year 2012 | Oct 2011 to Aug 2012 | Oct 2010 to Aug 2011 | ∆% |
| Receipts | 2,187,527 | 2,062,342 | 6.1 |
| Outlays | 3,351,900 | 3,296,387 | 1.7 |
| Deficit | -1,164,373 | -1,234,045 | NA |
| Individual Income Taxes | 1,015,419 | 977,092 | 3.9 |
| Social Insurance | 521,335 | 518,166 | 0.6 |
| Receipts | Outlays | Deficit (-), Surplus (+) | |
| $ Billions | |||
| CBO Forecast Fiscal Year 2012 | 2,456 | 3,627 | -1,171 |
| Fiscal Year 2011 | 2,303 | 3,603 | -1,300 |
| Fiscal Year 2010 | 2,162 | 3,456 | -1,294 |
| Fiscal Year 2009 | 2,105 | 3,518 | -1,413 |
| Fiscal Year 2008 | 2,524 | 2,983 | -459 |
Source: http://www.fms.treas.gov/mts/index.html
VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/gor1204a.pdf
http://www.boj.or.jp/en/mopo/outlook/gor1204b.pdf). For fiscal 2012, the forecast is of growth of GDP between 2.1 and 2.4 percent, with domestic producer price inflation (Corporate Goods Price Index, CGPI) in the range of 0.4 to 0.7 percent and the all items CPI less fresh food of 0.1 to 0.4 percent.
Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year
| Fiscal Year | Real GDP | Domestic CGPI | CPI All Items Less Fresh Food |
| 2011 | |||
| Apr 2012 | -0.2 to –0.2 | +1.7 | 0.0 |
| Jan 2012 | -0.4 to –0.3 | +1.8 to +1.9 | -0.1 to 0.0 |
| 2012 | |||
| Apr 2012 | +2.1 to +2.4 | +0.4 to +0.7 | +0.1 to +0.4 |
| Jan 2012 | +1.8 to +2.1 | -0.1 to +0.2 | 0.0 to +0.2 |
| 2013 | |||
| Apr 2012 | +1.6 to +1.8 | +0.7 to +0.9 | +0.5 to +0.7 |
| Jan 2012 | +1.4 to +1.7 | +0.6 to 1.0 | +0.4 to +0.5 |
Figures in brackets are the median of forecasts of Policy Board members
Source: Policy Board, Bank of Japan
http://www.boj.or.jp/en/mopo/outlook/gor1204a.pdf
http://www.boj.or.jp/en/mopo/outlook/gor1204b.pdf
Private-sector activity in Japan contracted at a moderate rate with the Markit Composite Output PMI™ Index increasing from 47.4 in Jul to 48.6 in Aug, which is still below 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9974). Alex Hamilton, economist at Markit and author of the report, finds that three consecutive monthly declines of both output of manufacturing and activity in services suggest disappearing growth of the economy of Japan (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9974). The Markit Business Activity Index of Services increased from 47.5 in Jul to 49.3 in Aug, also showing contraction at slower pace (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9974). The Markit/JMMA Purchasing Managers’ Index™ (PMI™), seasonally adjusted, fell from 47.9 in Jul to 47.7 in Aug, in the weakest private-sector manufacturing activity in 16 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9971). Alex Hamilton, economist at Markit and author of the report, finds deterioration in total new business of exports and domestic with orders with growth restrained in the midst of weakening international demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9971).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 | Aug ∆% +0.3 |
| Consumer Price Index | Jul NSA ∆% -0.3; Jul 12 months NSA ∆% -0.4 |
| Real GDP Growth | IIQ2012 ∆%: 0.3 on IQ2012; IIQ2012 SAAR 0.7; |
| Employment Report | Jul Unemployed 2.88 million Change in unemployed since last year: minus 240 thousand |
| All Industry Indices | Jun month SA ∆% 0.2 Blog 8/26/12 |
| Industrial Production | Jul SA month ∆%: -1.2 |
| Machine Orders | Total Jul ∆% -2.6 Private ∆%: 4.3 |
| Tertiary Index | Jul month SA ∆% -0.8 |
| Wholesale and Retail Sales | Jul 12 months: |
| Family Income and Expenditure Survey | Jul 12-month ∆% total nominal consumption 1.2, real 1.7 Blog 9/2/12 |
| Trade Balance | Exports Jul 12 months ∆%: -8.1 Imports Jul 12 months ∆% 2.1 Blog 8/26/12 |
Links to blog comments in Table JPY:
9/2/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html
8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html
8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.html
Japan’s GDP increased 0.2 percent in IIQ2012 relative to IQ2011, seasonally adjusted, as shown in Table VB-1 that incorporates the latest revisions. IQ2012 GDP growth was revised to 1.3 percent. The economy of Japan had already weakened in IVQ2010 when GDP was virtually flat at 0.1 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell in IQ2011 by 2.0 percent and fell again 0.3 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 but GDP growth fell to 0.8 percent in IIIQ2012 and was flat in IVQ2010. The deepest quarterly contractions in the recession were 3.2 percent in IVQ2008 and 4.0 percent in IQ2009.
Table VB-1, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 1.3 | 0.2 | ||
| 2011 | -2.0 | -0.3 | 1.7 | 0.1 |
| 2010 | 1.2 | 1.5 | 0.7 | 0.0 |
| 2009 | -4.0 | 1.7 | -0.1 | 1.9 |
| 2008 | 0.6 | -1.2 | -1.1 | -3.2 |
| 2007 | 1.0 | 0.2 | -0.4 | 0.9 |
| 2006 | 0.4 | 0.4 | -0.1 | 1.3 |
| 2005 | 0.2 | 1.3 | 0.4 | 0.2 |
| 2004 | 1.1 | -0.1 | 0.2 | -0.3 |
| 2003 | -0.5 | 1.2 | 0.4 | 1.0 |
| 2002 | -0.2 | 1.0 | 0.7 | 0.4 |
| 2001 | 0.7 | -0.2 | -1.1 | -0.1 |
| 2000 | 1.7 | 0.2 | -0.3 | 0.7 |
| 1999 | -0.9 | 0.4 | -0.1 | 0.4 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Table VB-2 provides contributions to real GDP at seasonally-adjusted annual rates (SAAR). The SAAR of GDP in IIQ2012 was 0.7 percent: 0.3 from growth of personal consumption expenditures (PC) plus 1.2 percent of gross fixed capital formation (CFCF), less 0.3 of net trade (exports less imports), less 0.6 percentage points of private inventory investment (PINV) plus 0.1 percentage points of government consumption. The SAAR of GDP in IQ2012 was revised downward to 5.3 percent: 3.0 percentage points from growth of personal consumption expenditures (PC) less 0.4 percentage points from gross fixed capital formation (GFCF) plus 0.9 percentage points from government consumption (GOVC) plus net trade (exports less imports) of 0.6 percentage points plus 1.2 percentage point of private inventory change. The SAAR of GDP in IIIQ2011 was revised to a high 6.9 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 2.7 percentage points in IIIQ2011. Growth in 2011 and IQ2012 has been driven by personal consumption expenditures.
Table VB-2, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| GDP | PC | GFCF | Trade | PINV | GOVC | |
| 2012 | ||||||
| I | 5.3 | 3.0 | -0.4 | 0.6 | 1.2 | 0.9 |
| II | 0.7 | 0.3 | 1.2 | -0.3 | -0.6 | 0.1 |
| 2011 | ||||||
| I | -7.9 | -3.4 | -0.6 | -1.0 | -3.1 | 0.3 |
| II | -1.3 | 1.3 | 0.5 | -3.6 | 0.0 | 0.5 |
| III | 6.9 | 2.7 | 0.5 | 2.7 | 0.8 | 0.2 |
| IV | 0.3 | 1.8 | 2.6 | -2.9 | -1.5 | 0.3 |
| 2010 | ||||||
| I | 5.0 | 1.4 | 0.3 | 2.0 | 1.6 | -0.4 |
| II | 6.0 | 0.7 | 1.2 | 0.7 | 2.1 | 1.3 |
| III | 2.7 | 1.1 | 0.8 | -0.4 | 1.1 | 0.3 |
| IV | 0.0 | 0.6 | -0.7 | -0.4 | 0.1 | 0.3 |
| 2009 | ||||||
| I | -15.1 | -2.2 | -1.9 | -4.4 | -7.4 | 0.9 |
| II | 7.1 | 4.0 | -3.2 | 7.7 | -1.9 | 0.5 |
| III | -0.3 | 0.3 | -1.4 | 1.7 | -1.8 | 1.0 |
| IV | 7.9 | 3.5 | 0.3 | 2.9 | 0.7 | 0.4 |
| 2008 | ||||||
| I | 2.6 | 1.3 | 0.5 | 1.1 | -0.4 | 0.0 |
| II | -4.5 | -3.3 | -2.4 | 0.7 | 1.3 | -0.9 |
| III | -4.4 | -0.2 | -0.9 | -0.4 | -2.9 | -0.1 |
| IV | -12.2 | -2.8 | -4.5 | -11.3 | 5.8 | 0.4 |
| 2007 | ||||||
| I | 4.0 | 0.8 | 0.6 | 1.1 | 1.3 | 0.4 |
| II | 0.7 | 0.5 | -1.6 | 0.9 | 0.2 | 0.5 |
| III | -1.7 | -0.7 | -1.7 | 1.8 | -0.9 | -0.2 |
| IV | 3.7 | 0.3 | 0.2 | 1.5 | 1.1 | 0.6 |
Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Long-term economic growth in Japan was significantly improved by increasing competitiveness in world markets. Net trade of exports and imports in an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions help to cushion the economy of Japan from the global recession. Net trade has deducted from GDP growth in six of the eight quarters from IIIQ2010 IIQ2012. The only strong contribution of net trade was 2.7 percent in IIIQ2011. Private consumption has assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.
Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| Net Trade | Export | Imports | |
| 2012 | |||
| I | 0.6 | 2.0 | -1.4 |
| II | -0.3 | 0.7 | -1.1 |
| 2011 | |||
| I | -1.0 | -0.2 | -0.8 |
| II | -3.6 | -3.6 | 0.0 |
| III | 2.7 | 4.7 | -2.0 |
| IV | -2.9 | -2.3 | -0.6 |
| 2010 | |||
| I | 2.0 | 3.3 | -1.3 |
| II | 0.7 | 3.6 | -2.9 |
| III | -0.4 | 0.7 | -1.1 |
| IV | -0.4 | -0.1 | -0.2 |
| 2009 | |||
| I | -4.4 | -16.5 | 12.0 |
| II | 7.7 | 5.2 | 2.5 |
| III | 1.7 | 4.8 | -3.2 |
| IV | 2.9 | 4.0 | -1.1 |
| 2008 | |||
| I | 1.1 | 1.9 | -0.9 |
| II | 0.7 | -1.1 | 1.9 |
| III | -0.4 | -0.1 | -0.3 |
| IV | -11.3 | -10.3 | -1.0 |
| 2007 | |||
| I | 1.1 | 1.5 | -0.5 |
| II | 0.9 | 1.8 | -0.9 |
| III | 1.8 | 1.3 | 0.5 |
| IV | 1.5 | 2.0 | -0.5 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Japan’s quarterly growth of GDP not seasonally-adjusted relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.3 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 2001-2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 relative to the same quarter a year earlier and decline of 1.8 percent in IIQ2011. GDP fell 0.6 percent in IIIQ2011 relative to a year earlier and fell 0.7 percent in IVQ2011 relative to a year earlier. Growth resumed with 2.9 percent in IQ2012 relative to a year earlier. Growth of 3.2 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen that erode the country’s competitiveness in world markets.
Table VB-4, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 2.9 | 3.2 | ||
| 2011 | 0.0 | -1.8 | -0.6 | -0.7 |
| 2010 | 4.8 | 4.5 | 5.6 | 3.2 |
| 2009 | -9.3 | -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 |
| 1999 | -0.3 | 0.1 | -0.1 | -0.5 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Japan’s total machinery orders seasonally adjusted in Table VB-5 fell 2.6 percent in Jul 2012 and in three of the four months Apr-Jul 2012. Total private sector orders fell 21.0 percent in May but after increasing 16.4 percent in Apr and increased 4.3 percent in Jul. Private-sector orders excluding volatile orders, which are closely watched, increased 4.6 percent in Jul after increasing 5.6 percent in Jun but falling 14.8 percent in May. Orders for manufacturing fell 2.9 percent in Jun after decreasing 6.4 percent in May but rebounded with 12.0 percent in Jul. Overseas orders decreased 9.8 percent in Jun and increased 3.0 percent in Jul. There is significant volatility in industrial orders in advanced economies.
Table VB-5, Japan, Machinery Orders, Month ∆%, SA
| 2012 | Jul | Jun | May | Apr |
| Total | -2.6 | 7.4 | -14.5 | -4.0 |
| Private Sector | 4.3 | 9.3 | -21.0 | 16.4 |
| Excluding Volatile Orders | 4.6 | 5.6 | -14.8 | 5.7 |
| Mfg | 12.0 | -2.9 | -8.0 | 3.4 |
| Non Mfg ex Volatile | -2.1 | 2.6 | -6.4 | 5.7 |
| Government | -13.5 | 19.2 | -21.8 | -5.0 |
| From Overseas | 3.0 | -9.8 | 0.3 | 0.3 |
| Through Agencies | 14.1 | -5.3 | 8.7 | -21.1 |
Note: Mfg: manufacturing
Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html
Total orders for machinery and total private-sector orders excluding volatile orders for Japan are shown in Chart VB-1 of Japan’s Economic and Social Research Institute at the Cabinet Office. The trend of private-sector orders excluding volatile orders was showing recovery from the drop after Mar 2011 because of the earthquake/tsunami. There was reversal of the trend of increase in total orders with recent decreases. Fluctuations still prevent detecting longer term trends but recovery is evident from the global recession. There was a major setback by the declines in May 2012 shown in the last segment of Chart VB-1 with partial recovery in Jun 2012 and decline again in Jul 2012.
Chart VB-1, Japan, Machinery Orders
Source: Japan Economic and Social Research Institute, Cabinet Office
http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html
Table VB-6 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,700,619 million in Jul 2012 are divided between JPY 672,881 million overseas orders, or 39.6 percent of the total, and domestic orders of JPY 926,006 million, or 54.5 percent of the total, with orders through agencies of JPY 101,732 million, or 6.0 percent of the total. Orders through agencies are not shown in the table because of the minor value. Twelve-month percentages changes in Jul 2012 reversed declines: 2.6 percent for total orders, minus 1.9 percent for overseas orders, 3.2 percent for domestic orders and 1.7 percent for private orders excluding volatile items. Total orders fell 10.9 percent in the 12 months ending in Jun with declines of 11.3 percent in overseas orders and 12.4 percent of domestic orders. Performance was strong in Apr with growth of total orders of 7.5 percent mostly because of growth of domestic orders by 23.0 percent and also in Mar with growth of total orders of 8.1 percent and of domestic orders of 19.0 percent. Percentage growth of overseas orders was negative in six consecutive months from Feb to Jul 2012. Performance in Feb 2012 was weak with growth of total orders of minus 9.3 percent, minus 8.9 percent of overseas orders, minus 11.2 percent of domestic orders and 8.9 percent of private orders excluding volatile items. Jan 2012 was quite strong with growth of total orders of 9.8 percent driven by growth of overseas orders of 18.3 percent. There is sharp reversal of 12-month percentage changes in Nov with increase of 11.0 percent in total orders, 8.0 percent in overseas orders, 13.5 percent in domestic orders and 12.5 percent in private orders excluding volatile items. The pace of increase declined in Dec with growth in 12 months of 0.8 percent for total orders, 12.6 percent for overseas orders, decline of 8.5 percent for domestic orders and growth of private orders excluding volatile items of 6.3 percent. There was strong impact from the global recession with total orders falling 23.3 percent in 2008, 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. The heavy impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 also affected machinery orders.
Table VB-6, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series
| Total | Overseas | Domestic | Private ex Volatile | |
| Value Jul 2012 | 1,700,619 | 672,881 | 926,006 | 670,295 |
| % Total | 100.0 | 39.6 | 54.5 | 39.4 |
| Value Jul 2011 | 1,658,084 | 686,228 | 896,866 | 658,868 |
| % Total | 100.0 | 41.4 | 54.1 | 39.7 |
| 12-month ∆% | ||||
| Jul 2012 | 2.6 | -1.9 | 3.2 | 1.7 |
| Jun 2012 | -10.9 | -11.3 | -12.4 | -9.9 |
| May 2012 | -6.8 | -7.0 | -8.6 | 1.0 |
| Apr 2012 | 7.5 | -9.6 | 23.0 | 6.6 |
| Mar 2012 | 8.1 | -10.0 | 19.0 | -1.1 |
| Feb 2012 | -9.3 | -8.9 | -11.2 | 8.9 |
| Jan 2012 | 9.8 | 18.3 | 0.5 | 5.7 |
| Dec 2011 | 0.8 | 12.6 | -8.5 | 6.3 |
| Nov 2011 | 11.0 | 8.0 | 13.5 | 12.5 |
| 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 Jul 2012 were JPY 101,732 million, or 6.0 percent of the total and 4,5 percent of the total in Jul 2011, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally-adjusted data.
Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html
The tertiary activity index of Japan decreased 0.8 percent SA in Jul 2012 and increased 0.8 percent NSA in the 12 months ending in Jun 2012, as shown in Table VB-7. The tertiary activity index of Japan seasonally adjusted fell at the annual equivalent rate of minus 4.1 percent in Jan-Apr 2012 for cumulative decline of 1.4 percent but increased 2.6 percent not seasonally adjusted in the 12 months ending in Apr 2012, as shown in Table VB-5. The tertiary activity index fell 1.1 percent in the first seven months of 2012 or at the annual equivalent rate of minus 1.9 percent. There was strong impact from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in the decline of the tertiary activity index by 5.4 percent in Mar 2011 and 3.4 percent in 12 months. The performance of the tertiary sector in the quarter Jul-Sep 2011 was weak: increase of 0.4 percent in Jul, increase of 0.1 percent in Aug and decline of 0.2 percent in Sep, after increasing 1.2 percent in Jun. The not seasonally adjusted index increased 4.2 percent in the 12 months ending in Mar 2012 but the 12-month percentage rate dropped to 0.8 percent in Jul 2012. Most of the growth occurred in the quarter from Apr to Jun 2011 with gain of 4.3 percent or at annual equivalent rate of 18.1 percent.
Table VB-7, Japan, Tertiary Activity Index, ∆%
| Month ∆% SA | 12 Months ∆% NSA | |
| Jul 2012 | -0.8 | 0.8 |
| Jun | 0.2 | 0.9 |
| May | 0.9 | 3.2 |
| Apr | -0.2 | 2.6 |
| Mar | -0.6 | 4.2 |
| Feb | 0.0 | 2.4 |
| Jan | -0.6 | 0.4 |
| Dec 2011 | 1.6 | 1.2 |
| Nov | -0.8 | -0.3 |
| Oct | 0.6 | 0.9 |
| Sep | -0.2 | 0.1 |
| Aug | 0.1 | 0.8 |
| Jul | 0.4 | 0.1 |
| Jun | 1.2 | 1.0 |
| May | 0.9 | -0.2 |
| Apr | 2.1 | -2.3 |
| Mar | -5.4 | -3.4 |
| Feb | 0.3 | 2.0 |
| Jan | 0.5 | 1.0 |
| Dec 2010 | -0.2 | 1.8 |
| Nov | 0.6 | 2.5 |
| Oct | 0.2 | 0.5 |
| Sep | -0.4 | 1.3 |
| Aug | 0.1 | 2.3 |
| Jul | 0.7 | 1.6 |
| Jun | 0.1 | 1.0 |
| May | -0.3 | 1.2 |
| Dec 2009 | -5.2 | |
| Dec 2008 | -3.3 | |
| Dec 2007 | -0.3 | |
| Dec 2006 | 0.6 | |
| Dec 2005 | 2.6 | |
| Dec 2004 | 1.6 | |
| Calendar Year | ||
| 2011 | 0.1 | |
| 2010 | 1.3 | |
| 2009 | -5.2 |
Source: http://www.meti.go.jp/english/statistics/index.html
Month and 12-month rates of growth of the tertiary activity index of Japan and components in Jun are provided in Table VB-8. Electricity, gas, heat supply and water increased 0.8 percent in Jul and decreased 1.0 percent in the 12 months ending in Jul. Wholesale and retail trade decreased 1.6 percent in the month of Jul and fell 1.3 percent in 12 months. Information and communications increased 0.2 percent in Jul and 1.2 percent in 12 months.
Table VB-8, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%
| Jul 2012 | Weight | Month ∆% SA | 12 Months ∆% NSA |
| Tertiary Index | 10,000.0 | -0.8 | 0.8 |
| Electricity, Gas, Heat Supply & Water | 372.9 | 0.8 | -1.0 |
| Information & Communications | 951.2 | 0.2 | 1.2 |
| Wholesale & Retail Trade | 2,641.2 | -1.6 | -1.3 |
| Finance & Insurance | 971.1 | -1.5 | 3.3 |
| Real Estate & Goods Rental & Leasing | 903.4 | 0.3 | 0.2 |
| Scientific Research, Professional & Technical Services | 551.3 | 0.3 | 5.7 |
| Accommodations, Eating, Drinking | 496.0 | -0.7 | -0.6 |
| Living-Related, Personal, Amusement Services | 552.7 | -1.9 | -0.9 |
| Learning Support | 116.9 | -1.2 | 0.7 |
| Medical, Health Care, Welfare | 921.1 | 0.1 | 3.9 |
| Miscellaneous ex Government | 626.7 | -0.9 | 0.4 |
Source: http://www.meti.go.jp/english/statistics/index.html
VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20120904_402833237.htm). Table CIPMNM provides this index and components from Jan to Aug 2012. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug.
Table CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| 2012 | Total Index | New Orders | Interm. | Subs Prices | Exp |
| Aug | 56.3 | 52.7 | 57.6 | 51.2 | 63.2 |
| Jul | 55.6 | 53.2 | 49.7 | 48.7 | 63.9 |
| Jun | 56.7 | 53.7 | 52.1 | 48.6 | 65.5 |
| May | 55.2 | 52.5 | 53.6 | 48.5 | 65.4 |
| Apr | 56.1 | 52.7 | 57.9 | 50.3 | 66.1 |
| Mar | 58.0 | 53.5 | 60.2 | 52.0 | 66.6 |
| Feb | 57.3 | 52.7 | 59.0 | 51.2 | 63.8 |
| Jan | 55.7 | 52.2 | 58.2 | 51.1 | 65.3 |
Notes: Interm.: Intermediate; Subs: Subscription; Exp: Business Expectations
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/english/pressrelease/t20120904_402833237.htm
Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Aug 2011 to Aug 2012. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012.
Chart CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, Seasonally Adjusted
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/english/pressrelease/t20120904_402833237.htm
Table CIPMNMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul and 48.7 in Aug. The index of employment also fell from 51.0 in Apr to 49.1 in Aug.
Table CIPMNMFG, China, Manufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| 2012 | IPM | PI | NOI | INV | EMP | SDEL |
| Aug | 49.2 | 50.9 | 48.7 | 45.1 | 49.1 | 50.0 |
| Jul | 50.1 | 51.8 | 49.0 | 48.5 | 49.5 | 49.0 |
| Jun | 50.2 | 52.0 | 49.2 | 48.2 | 49.7 | 49.1 |
| May | 50.4 | 52.9 | 49.8 | 45.1 | 50.5 | 49.0 |
| Apr | 53.3 | 57.2 | 54.5 | 48.5 | 51.0 | 49.6 |
| Mar | 53.1 | 55.2 | 55.1 | 49.5 | 51.0 | 48.9 |
| Feb | 51.0 | 53.8 | 51.0 | 48.8 | 49.5 | 50.3 |
| Jan | 50.5 | 53.6 | 50.4 | 49.7 | 47.1 | 49.7 |
IPM: Index of Purchasing Managers; PI: Production Index; NOI: New Orders Index; EMP: Employed Person Index; SDEL: Supplier Delivery Time Index
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/english/pressrelease/t20120904_402833158.htm
China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20120904_402833158.htm). Chart CIPMM provides the index from Aug 2011 to Aug 2012. There is deceleration from 51.2 in Sep 2011 to marginal contraction at 49.0 in Nov 2011. Manufacturing activity recovered to 53.3 in Apr 2012 but then declined to 50.4 in May 2012 and 50.1 in Jun 2012, which is the lowest in a year with exception of contraction at 49.0 in Nov 2011. The index then fell to contraction at 49.2 in Aug 2012.
Chart CIPMMFG, China, Manufacturing Index of Purchasing Managers, Seasonally Adjusted
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/english/pressrelease/t20120904_402833158.htm
The HSBC China Services PMI™, compiled by Markit, shows stagnating business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 51.9 in Jul to 49.9 in Aug with manufacturing declining and services expanding at slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9976). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that China faces downside risks that require further policy measures to confront the external shock to its economy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9976). The HSBC Business Activity index decreased from 52.0 in Jul to 53.1 in Aug with slower activity in services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9976). The HSBC Purchasing Managers’ Index™ (PMI™), compiled by Markit, decreased to 47.6 in Aug from 49.3 in Jul, in the tenth consecutive month of deterioration and the weakest reading since Mar 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9972). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that that new export orders deteriorated at the fastest rhythm since Mar 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9972).
Wang Xiaotian, writing on China Daily, on “China cuts its reserve ratio again,” published by Xinhuanet on May 13, 2012 (http://news.xinhuanet.com/english/china/2012-05/13/c_131584252.htm), informs that the People’s Bank of China (PBC) (http://www.pbc.gov.cn/publish/english/963/index.html) reduced the reserve requirement imposed on Chinese lenders by 50 basis points with the objective of injecting liquidity to strengthen the economy. This is the second such reduction of reserve requirements in 2012. The reduction is estimated to release CNY 400 in China’s money market. The reserve requirement will be 20 percent for larger banks and 16.5 percent for smaller banks. The measures are intended to strengthen the economy. Xinhuanet, writing on “China announces surprise rate cuts amid economic downshift,” on Jun 5, 2012 (http://news.xinhuanet.com/english/china/2012-07/05/c_131697843.htm), informs that the central bank of China People’s Bank of China reduced the one year deposit rate by 25 basis points and the one year lending rate by 31 basis points effective Jun 6, 2012. The People’s Bank of China posts the new rates (http://www.pbc.gov.cn/publish/english/955/2012/20120608171005950734495/20120608171005950734495_.html). Table CNY provides the country data table for China.
Table CNY, China, Economic Indicators
| Price Indexes for Industry | Aug 12-month ∆%: minus 3.5 Aug month ∆%: minus 0.5 |
| Consumer Price Index | Aug month ∆%: 0.6 Aug 12 months ∆%: 2.0 |
| Value Added of Industry | Aug month ∆%: 0.69 Jan-Aug 2012/Jan-Aug 2011 ∆%: 10.1 |
| GDP Growth Rate | Year IIQ2012 ∆%: 7.6 |
| Investment in Fixed Assets | Aug month ∆%: 1.33 Total Jan-Aug 2012 ∆%: 20.2 Real estate development: 15.6 |
| Retail Sales | Aug month ∆%: 1.28 Jan-Aug ∆%: 14.1 |
| Trade Balance | Aug balance $26.66 billion Cumulative Aug: $120.76 billion |
Links to blog comments in Table CNY:
7/15/12 http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million_15.html
Cumulative and 12-months rates of value added of industry in China are provided in Table VC-1. Value added in total industry in Jan-Aug 2012 increased 10.1 percent relative to a year earlier and 8.9 percent in the 12 months ending in Jul 2012. Heavy industry had been the driver of growth with a cumulative rate of 11.0 percent relative to a year earlier in Jan-Mar 2012 that declined to 10.5 percent in Jan-Apr 2012 relative to the same period a year earlier and further down to 10.1 percent in Jan-Jun 2012, 9.9 percent in Jan-Jul 2012 and 9.8 percent in Jan-Aug 2012. Light industry grew 10.5 percent in Jan-Aug 2012 relative to a year earlier and 8.5 percent in 12 months ending in Aug 2012. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 10.1 percent in Jan-Aug 2012.
Table VC-1, China, Growth Rate of Value Added of Industry ∆%
| Industry | Light Industry | Heavy | State | Private | |
| 2012 | |||||
| Jan-Aug | 10.1 | 10.5 | 9.8 | 6.3 | 15.4 |
| 12 M Aug | 8.9 | 8.6 | 9.0 | 5.3 | 14.3 |
| Jan-Jul | 10.3 | 10.8 | 9.9 | 6.6 | 12.1 |
| 12 M Jul | 9.2 | 10.1 | 8.8 | 4.8 | 10.9 |
| Jan-Jun | 10.5 | 11.1 | 10.1 | 7.0 | 12.4 |
| 12 M Jun | 9.5 | 9.0 | 9.6 | 6.5 | 11.5 |
| Jan-May | 10.7 | 11.5 | 10.3 | 6.7 | 12.4 |
| 12 M May | 9.6 | 9.1 | 9.8 | 6.6 | 11.0 |
| Jan-Apr | 11.0 | 12.3 | 10.5 | 6.6 | 12.9 |
| 12 M Apr | 9.3 | 10.3 | 8.9 | 4.3 | 10.7 |
| Jan-Mar | 11.6 | 13.2 | 11.0 | 7.2 | 13.8 |
| 12 M Mar | 11.9 | 13.9 | 11.2 | 8.0 | 13.7 |
| Jan-Feb | 11.4 | 12.7 | 10.9 | 7.3 | 13.9 |
| 2011 | |||||
| Jan-Dec | 13.9 | 13.0 | 14.3 | 9.9 | 15.8 |
| 12 M Dec | 12.8 | 12.6 | 13.0 | 9.2 | 14.7 |
| Jan-Nov | 14.0 | 13.0 | 14.4 | 9.9 | 16.0 |
| 12 M Nov | 12.4 | 12.4 | 12.4 | 7.8 | 14.4 |
| Jan-Oct | 14.1 | 13.0 | 14.5 | 10.1 | 9.1 |
| 12 M Oct | 13.2 | 12.1 | 13.7 | 8.9 | 15.1 |
| Jan-Sep | 14.2 | 13.1 | 14.6 | 10.4 | 16.1 |
| 12 M Sep | 13.8 | 12.8 | 14.3 | 9.9 | 16.0 |
| Jan-Aug | 14.2 | 13.1 | 14.6 | 10.4 | 16.1 |
| 12 M Aug | 13.5 | 13.4 | 13.5 | 9.4 | 15.5 |
| Jan-Jul | 14.3 | ||||
| 12 M | 14.0 | 12.8 | 14.5 | 9.5 | |
| Jan-Jun | 14.3 | 13.1 | 14.7 | 10.7 | 19.7 |
| 12 M | 15.1 | 13.9 | 15.6 | 10.7 | 20.8 |
| Jan-May | 14.0 | 12.9 | 14.4 | 10.7 | 19.3 |
| 12 M May | 13.3 | 12.9 | 13.5 | 8.9 | 18.7 |
| Jan-Apr | 14.2 | 12.9 | 14.7 | 11.2 | 19.5 |
| 12 M Apr | 13.4 | 11.9 | 14.0 | 10.4 | 18.0 |
| Jan-Mar | 14.4 | 13.1 | 14.9 | 11.4 | 19.8 |
| 12 M Mar | 14.8 | 12.8 | 15.6 | 12.9 | 19.2 |
| 12 M Feb | 14.9 | 13.1 | 15.6 | 10.5 | 21.7 |
| Jan-Feb | 14.1 | 13.3 | 14.4 | 10.6 | 20.3 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart VC-1 provides 12-month percentage changes of value added of industry in 2011 and from Jan to Aug 2012. Growth rates of value added of industry in the first five months of 2010 were higher than in 2011 as would be expected in an earlier phase of recovery from the global recession. Growth rates have converged in the second half of 2011 to lower percentages with further decline into 2012.
Chart VC-1, China, Growth Rate of Total Value Added of Industry, 12-Month ∆%
Source: National Bureau of Statistics of China
http://www.stats.gov.cn:82/tjfx/jdfx/t20120909_402834387.htm
Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-2. Rates for Jan-Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Aug 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 10.4 percent for motor vehicles and 13.8 percent for nonferrous metals. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012.
Table VC-2, China, Industrial Production Operation ∆%
| Elec- | Pig Iron | Cement | Crude | Non- | Motor Vehicles | |
| 2012 | ||||||
| Jan-Aug | 3.8 | -0.5 | 8.7 | 2.5 | 13.8 | 10.4 |
| 12 M Aug | 4.8 | 2.6 | 5.9 | -0.4 | 13.8 | 9.7 |
| Jan-Jul | 3.8 | 6.1 | 5.3 | 1.6 | 6.7 | 7.4 |
| 12M Jul | 2.1 | 6.5 | 6.1 | 1.1 | 4.1 | 12.3 |
| Jan-Jun | 3.7 | 6.1 | 5.5 | 1.7 | 6.7 | 6.7 |
| 12 M Jun | 0.0 | 6.7 | 6.5 | -0.6 | 5.8 | 13.8 |
| Jan-May | 4.7 | 6.3 | 5.0 | 2.2 | 5.1 | 6.2 |
| 12 M May | 2.7 | 6.3 | 4.3 | 0.7 | 6.6 | 18.5 |
| Jan-Apr | 5.0 | 6.2 | 5.5 | 2.9 | 4.6 | 3.1 |
| 12 M Apr | 0.7 | 7.9 | 4.9 | -0.3 | 2.3 | 10.7 |
| Jan-Mar | 7.1 | 6.5 | 7.3 | 3.1 | 5.8 | 0.0 |
| 12 M Mar | 7.2 | 10.2 | 7.9 | 2.0 | 3.3 | 5.1 |
| Jan-Feb | 7.1 | 4.6 | 4.8 | 4.0 | 8.4 | -1.8 |
| 2011 | ||||||
| Jan-Dec | 12.0 | 8.4 | 16.1 | 4.9 | 10.6 | 3.0 |
| 12 M Dec | 9.7 | 3.7 | 7.0 | 4.0 | 13.2 | -6.5 |
| Jan-Nov | 12.0 | 13.1 | 17.2 | 5.3 | 10.2 | 3.9 |
| 12 M Nov | 8.5 | 7.8 | 11.2 | 3.2 | 8.2 | -1.3 |
| Jan-Oct | 12.3 | 13.7 | 18.0 | 5.4 | 10.4 | 5.2 |
| 12 M | 9.3 | 13.4 | 16.5 | -0.9 | 3.7 | 1.3 |
| Jan-Sep | 12.7 | 13.9 | 18.1 | 6.0 | 11.2 | 5.5 |
| 12 M Sep | 11.5 | 18.8 | 15.7 | 1.5 | 13.9 | 2.5 |
| Jan-Aug | 13.0 | 13.1 | 18.4 | 6.6 | 4.7 | |
| 12 M Aug | 10.0 | 12.9 | 12.8 | 4.5 | 15.6 | 9.5 |
| Jan-Jul | 13.3 | 13.0 | 19.2 | 6.9 | 9.9 | 4.0 |
| 12 M | 13.2 | 14.9 | 16.8 | 5.9 | 9.8 | -1.3 |
| 12 M | 16.2 | 14.8 | 19.9 | -0.7 | 9.8 | 3.6 |
| 12 M | 12.1 | 10.6 | 19.2 | 6.0 | 14.2 | -1.9 |
| 12 M Apr | 11.7 | 8.3 | 22.4 | 6.8 | 6.1 | -1.6 |
| 12 M Mar | 14.8 | 13.7 | 29.8 | 8.0 | 11.6 | 9.9 |
| 12 M Feb | 11.7 | 14.5 | 9.1 | 10.9 | 14.4 | 10.3 |
| 12 M Jan | 5.1 | 3.5 | 16.4 | 12.2 | 1.4 | 23.9 |
| 12 M Dec 2010 | 5.6 | 4.6 | 17.3 | 10.3 | -1.9 | 27.6 |
M: month
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Monthly growth rates of industrial production in China are provided in Table VC-3. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.16 percent in Mar. The rate of 0.33 percent in Apr is the lowest in the monthly series from Feb 2011 to Aug 2012. Monthly sales growth remained below 1 percent in all the first seven months of 2012 with the exception of Mar 2012.
Table VC-3, China, Industrial Production Operation, Month ∆%
| 2011 | Month ∆% |
| Feb | 0.93 |
| Mar | 0.99 |
| Apr | 1.32 |
| May | 0.79 |
| Jun | 1.30 |
| Jul | 0.82 |
| Aug | 0.85 |
| Sep | 1.00 |
| Oct | 0.75 |
| Nov | 0.73 |
| Dec | 0.96 |
| Jan 2012 | 0.46 |
| Feb | 0.61 |
| Mar | 1.16 |
| Apr | 0.33 |
| May | 0.85 |
| Jun | 0.73 |
| Jul | 0.65 |
| Aug | 0.69 |
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/
Table VC-4 provides cumulative growth of investment in fixed assets in China in 2011 relative to 2010 and in Jan-Aug 2012 relative to a year earlier. Total fixed investment has grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent. In Jan-Aug 2012 investment in fixed assets in China grew 20.2 percent relative to a year earlier and 15.6 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Aug 2012.
Table VC-4, China, Investment in Fixed Assets ∆% Relative to a Year Earlier
| Total | State | Real Estate Development | |
| Jan-Aug 2012 | 20.2 | 12.9 | 15.6 |
| Jan-Jul | 20.4 | 12.6 | 15.4 |
| Jan-Jun | 20.4 | 13.8 | 16.6 |
| Jan-May | 20.1 | 10.0 | 18.5 |
| Jan-Apr | 20.2 | 9.5 | 18.7 |
| Jan-Mar | 20.9 | 9.0 | 23.5 |
| Jan-Feb | 21.5 | 8.8 | 27.8 |
| Jan-Dec 2011 | 23.8 | 11.1 | 27.9 |
| Jan-Nov | 24.5 | 11.7 | 29.9 |
| Jan-Oct | 24.9 | 12.4 | 31.1 |
| Jan-Sep | 24.9 | 12.7 | 32.0 |
| Jan-Aug | 25.0 | 12.1 | 33.2 |
| Jan-Jul | 25.4 | 13.6 | 33.6 |
| Jan-Jun | 25.6 | 14.6 | 32.9 |
| Jan-May | 25.8 | 14.9 | 34.6 |
| Jan-Apr | 25.4 | 16.6 | 34.3 |
| Jan-Mar | 25.0 | 17.0 | 34.1 |
| Jan-Feb | 24.9 | 15.6 | 35.2 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart VC-2 provides cumulative fixed asset investment in China relative to a year earlier. Growth rose to 25.8 percent in Jan-May 2011 and then fell back to 24.9 percent in Sep and Oct 2011, declining further to 24.5 percent in Nov and 23.8 percent in Dec 2011 with deeper drop in Jan-Feb 2012 to 21.5 percent, 20.9 percent in Jan-Mar, 20.2 percent in Jan-Apr 2012, 20.1 percent in Jan-Apr 2012, 20.4 percent in both Jan-Jun 2012 and Jan-Jul 2012 and 20.2 percent in Jan-Aug 2012.
Chart VC-2, China, Investment in Fixed Assets, ∆% Cumulative over Year Earlier
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/
Monetary policy has been used in China in the form of increases in interest rates and required reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 35.2 percent in Jan-Feb 2011 to 31.1 percent in Jan-Oct 2011, 29.9 percent in Jan-Nov 2011, 27.9 percent in Jan-Dec 2011, 27.8 percent in Jan-Feb 2012 and sharper decline to 23.5 percent in Jan-Mar 2012, 18.7 percent in Jan-Apr 2012 and 18.5 percent in Jan-May 2012. The trend of decline continued with 16.6 percent in Jan-Jun 2012, 15.4 percent in Jan-Jul 2012 and 15.6 percent in Jan-Aug 2012.
Chart VC-3, China, Investment in Real Estate Development, ∆% Cumulative over Year Earlier
Source: National Bureau of Statistics of China
http://www.stats.gov.cn:82/tjfx/jdfx/t20120909_402834388.htm
Table VC-5 provides monthly growth rates of investment in fixed assets in China from Feb 2011 to Aug 2012. Growth rates moderated from Nov 2011 to May 2012. The rate of 0.92 percent in Mar 2012 is the lowest for any month after Mar 2011 but rates rebounded to 1.72 percent in May 2012, 1.67 percent in Jun, 1.41 in Jul 2012 and 1.33 in Aug 2012.
Table VC-5, China, Investment in Fixed Assets, Month ∆%
| Month ∆% | |
| Feb 2011 | -0.23 |
| Mar | 2.45 |
| Apr | 2.22 |
| May | 1.68 |
| Jun | 1.48 |
| Jul | 1.58 |
| Aug | 1.62 |
| Sep | 1.80 |
| Oct | 1.83 |
| Nov | 1.12 |
| Dec | 1.46 |
| Jan 2012 | 1.18 |
| Feb | 1.99 |
| Mar | 0.92 |
| Apr | 1.15 |
| May | 1.72 |
| Jun | 1.67 |
| Jul | 1.41 |
| Aug | 1.33 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Growth rates of retail sales in China monthly, 12 months and cumulative relative to a year earlier are in Table VC-6. There is still insufficient data to assess if the decline of growth rates to cumulative 14.7 percent in Feb 2012, 14.8 percent in Mar, 14.7 percent in Apr, 14.5 percent in May, 14.4 percent in Jun, 14.2 percent in Jul and 14.1 percent in Aug constitutes the beginning of irreversible downward trend but percentage growth rates have declined in Jan-Aug 2012 relative to earlier months.
Table VC-6, China, Total Retail Sales of Consumer Goods ∆%
| Month ∆% | 12-Month ∆% | Cumulative ∆%/ | |
| 2012 | |||
| Aug | 1.28 | 13.2 | 14.1 |
| Jul | 1.11 | 13.1 | 14.2 |
| Jun | 1.29 | 13.7 | 14.4 |
| May | 1.38 | 13.8 | 14.5 |
| Apr | 0.29 | 14.1 | 14.7 |
| Mar | 1.23 | 15.2 | 14.8 |
| Feb | 1.28 | 14.7 | 14.7 |
| Jan | 0.07 | ||
| 2011 | |||
| Dec | 1.63 | 18.1 | 17.1 |
| Nov | 1.40 | 17.3 | 17.0 |
| Oct | 1.34 | 17.2 | 17.0 |
| Sep | 1.56 | 17.7 | 17.0 |
| Aug | 1.50 | 17.0 | 16.9 |
| Jul | 1.57 | 17.2 | 16.8 |
| Jun | 1.49 | 17.7 | 16.8 |
| May | 1.39 | 16.9 | 16.6 |
| Apr | 1.30 | 17.1 | 16.5 |
| Mar | 1.26 | 17.4 | 17.4 |
| Feb | 1.35 | 11.6 | 15.8 |
| Jan | 19.9 | 19.9 |
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: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales in 2011. There is again a drop into 2012 with the lowest percentages in Chart VC-4.
Chart VC-4, China, Total Retail Sales of Consumer Goods 12-Month ∆%
Source: National Bureau of Statistics of China
http://www.stats.gov.cn/enGliSH/
Table VC-7 provides monthly percentage changes of retail sales in China. Although the rate of 0.07 percent in Jan 2012 is the lowest in Table VC-7, the rate of 1.38 percent in May is relatively high and 1.23 percent in Mar is also relatively low followed by lower 0.29 percent in Apr and subdued rates of 1.11 percent in Jul and 1.28 percent in Aug 2012.
Table VC-7, China, Retail Sales, Month ∆%
| 2011 | Month ∆% |
| Feb | 1.35 |
| Mar | 1.26 |
| Apr | 1.30 |
| May | 1.39 |
| Jun | 1.49 |
| Jul | 1.57 |
| Aug | 1.50 |
| Sep | 1.56 |
| Oct | 1.34 |
| Nov | 1.40 |
| Dec | 1.63 |
| 2012 | |
| Jan | 0.07 |
| Feb | 1.28 |
| Mar | 1.23 |
| Apr | 0.29 |
| May | 1.38 |
| Jun | 1.29 |
| Jul | 1.11 |
| Aug | 1.28 |
Source: National Bureau of Statistics of China http://www.stats.gov.cn/enGliSH/
Table VC-8 provides China’s exports, imports, trade balance and percentage changes from Dec 2010 to Aug 2012. China’s trade growth is decelerating with growth of exports of 2.7 percent in the 12 months ending in Aug 2012 and minus 2.6 percent for imports. The number that caught attention in financial markets was growth of 1.0 percent in exports in the 12 months ending in Jul 2012. Imports were also weak, growing 4.7 percent in 12 months ending in Jul 2012. Exports increased 11.3 percent in Jun 2012 relative to a year earlier while imports grew 6.3 percent. The rate of growth of exports fell to 4.9 percent in Apr 2012 relative to a year earlier and imports increased 0.3 percent but export growth was 15.3 percent in May and imports increased 12.7 percent. China reversed the large trade deficit of USD 31.48 billion in Feb 2012 with a surplus of $5.35 billion in Mar 2012, $18.42 billion in Apr 2012, $18.7 billion in May 2012, $31.7 billion in Jun 2012, $25.2 billion in Jul 2012 and $26.7 billion in Aug 2012. Exports fell 0.5 percent in the 12 months ending in Jan while imports fell 15.3 percent for a still sizeable trade surplus of $27.3 billion. In Feb, exports increased 18.4 percent while imports jumped 39.6 percent for a sizeable deficit of $31.48 billion. There are distortions from the New Year holidays.
Table VC-8, China, Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Aug 2012 | 177.97 | 2.7 | 151.31 | -2.6 | 26.66 |
| Jul | 176.94 | 1.0 | 151.79 | 4.7 | 25.15 |
| Jun | 180.20 | 11.3 | 148.48 | 6.3 | 31.72 |
| May | 181.1 | 15.3 | 162.4 | 12.7 | 18.7 |
| Apr | 163.25 | 4.9 | 144.83 | 0.3 | 18.42 |
| Mar | 165.66 | 8.9 | 160.31 | 5.3 | 5.35 |
| Feb | 114.47 | 18.4 | 145.95 | 39.6 | -31.48 |
| Jan | 149.94 | -0.5 | 122.66 | -15.3 | 27.28 |
| Dec 2011 | 174.72 | 13.4 | 158.20 | 11.8 | 16.52 |
| Nov | 174.46 | 13.8 | 159.94 | 22.1 | 14.53 |
| 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 | 11.42 |
| Mar | 152.20 | 35.8 | 152.06 | 27.3 | 0.14 |
| Feb | 96.74 | 2.4 | 104.04 | 19.4 | -7.31 |
| 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.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1
Table VC-9 provides cumulative exports, imports and the trade balance of China together with percentage growth of exports and imports. The trade balance in 2011 of $155.14 billion is lower than those from 2008 to 2010. China’s trade balance reached $120.76 billion in Aug 2012 with cumulative growth of exports of 7.1 percent and 5.2 percent of imports. There is a rare cumulative deficit of $4.2 billion in Feb 2012 reversed to a small surplus in Mar 2012 and a higher surplus of $19.3 billion in Apr 2012, increasing to $37.9 billion in May, $68.9 billion in Jun 2012, $94.1 billion in Jul 2012 and $120.8 billion in Aug 2012. More observations are required to detect trends of Chinese trade but available data suggest deceleration.
Table VC-9, China, Year to Date Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Aug 2012 | 1309.21 | 7.1 | 1188.45 | 5.2 | 120.76 |
| Jul | 1131.24 | 7.8 | 1037.14 | 6.4 | 94.10 |
| Jun | 954.38 | 9.2 | 885.46 | 6.7 | 68.91 |
| May | 774.4 | 8.7 | 736.5 | 6.7 | 37.9 |
| Apr | 593.24 | 6.9 | 573.94 | 5.1 | 19.3 |
| Mar | 430.06 | 7.6 | 428.95 | 6.9 | 1.11 |
| Feb | 264.40 | 6.9 | 268.64 | 7.7 | -4.24 |
| Jan | 149.94 | -0.5 | 122.66 | -15.3 | 27.28 |
| Dec 2011 | 1,898.60 | 20.3 | 1,743.46 | 24.9 | 155.14 |
| Nov | 1,724.01 | 21.1 | 1585.61 | 26.4 | 138.40 |
| Oct | 1,549.71 | 22.0 | 1,425.68 | 26.9 | 124.03 |
| Sep | 1,392.27 | 22.7 | 1,285.17 | 26.7 | 107.10 |
| 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 | 829.37 | 27.6 | 44.93 |
| May | 712.37 | 25.5 | 689.41 | 29.4 | 22.96 |
| Apr | 555.30 | 27.4 | 545.02 | 29.6 | 10.28 |
| Mar | 399.64 | 26.5 | 400.66 | 32.6 | -1.02 |
| Feb | 247.47 | 21.3 | 248.36 | 36.0 | -0.89 |
| Jan | 150.7 | 37.7 | 144.27 | 51.0 | 6.46 |
| Dec 2010 | 1577.93 | 31.3 | 1394.83 | 38.7 | 183.10 |
Source: http://english.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1 http://english.customs.gov.cn/publish/portal191/
VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.4 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.3 percent in 2012 but growth of 1.0 percent in 2013.
Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment Rate and GDP, ∆%
| Year | HICP ∆% | Unemployment | GDP ∆% |
| 1999 | 1.2 | 9.6 | 2.9 |
| 2000 | 2.2 | 8.7 | 3.8 |
| 2001 | 2.4 | 8.1 | 2.0 |
| 2002 | 2.3 | 8.5 | 0.9 |
| 2003 | 2.1 | 9.0 | 0.7 |
| 2004 | 2.2 | 9.3 | 2.2 |
| 2005 | 2.2 | 9.2 | 1.7 |
| 2006 | 2.2 | 8.5 | 3.3 |
| 2007 | 2.1 | 7.6 | 3.0 |
| 2008 | 3.3 | 7.6 | 0.4 |
| 2009 | 0.3 | 9.6 | -4.4 |
| 2010 | 1.6 | 10.1 | 2.0 |
| 2011 | 2.7 | 10.2 | 1.4 |
| 2012* | -0.3 | ||
| 2013* | 1.0 |
*EUROSTAT forecast http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
The Markit Eurozone PMI® Composite Output Index, combining services and manufacturing activity with close association with GDP, fell marginally from 46.5 in Jul to 46.3 in Aug, which is the eleventh contraction in the past twelve months and the seventh consecutive monthly contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10038) in the deepest contraction in three years. Rob Dobson, Senior Economist at Markit, finds that the data are consistent with recession in the third quarter in the form of GDP decline (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10038). The Markit Eurozone Manufacturing PMI® increased from 44.0 in Jul to 45.3 in Aug, which indicates contraction below 50 during 13 consecutive orders and decline in new export orders during 14 consecutive months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9986). Rob Dobson, Senior Economist at Markit, finds that the index suggests manufacturing is exerting pressure on GDP and that euro area debt issues combine with lower world economic growth in weakening internal markets, trade within the euro area and trade with the rest of the world (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9986). Table EUR provides the regional data table for the euro area.
Table EUR, Euro Area Economic Indicators
| GDP | IIQ2012 ∆% -0.2; IIQ2012/IIQ2011 ∆% -0.4 Blog 8/19/12 |
| Unemployment | Jul 2012: 11.3% unemployment rate Jul 2012: 18.002 million unemployed Blog 9/2/12 |
| HICP | Aug month ∆%: 0.4 12 months Jul ∆%: 2.6 |
| Producer Prices | Euro Zone industrial producer prices Jul ∆%: 0.4 |
| Industrial Production | Jul month ∆%: 0.6; Jul 12 months ∆%: -2.3 |
| Retail Sales | Jul month ∆%: -0.2 |
| Confidence and Economic Sentiment Indicator | Sentiment 86.1 Aug 2012 Confidence minus 24.6 Aug 2012 Blog 9/2/12 |
| Trade | Jan-Jun 2012/Jan-Jun 2011 Exports ∆%: 8.3 Jun 2012 12-month Exports ∆% 12.3 Imports ∆% 2.1 |
Links to blog comments in Table EUR:
9/9/12 http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html
9/2/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html
8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html
Industrial production in the euro area increased 0.6 percent in Jul 2012, declining in six of nine months from Nov 2011 to Jul 2012, as shown in Table VD-1 with revised estimates by EUROSTAT. Energy was the only segment decreasing in May. Improved weather caused decline of energy by 8.4 percent in Mar that drove down the rate of growth of total industry to minus 0.1 percent. All segments of industrial production fell in Dec. Industrial production is highly volatile in the euro zone.
Table VD-1, Euro Zone, Industrial Production Month ∆%
| Total | INT | ENE | CG | DUR | NDUR | |
| Jul 2012 | 0.6 | 0.1 | -1.2 | 2.4 | -0.5 | -0.6 |
| Jun | -0.6 | -0.5 | 1.2 | -1.2 | 0.4 | -0.9 |
| May | 0.9 | 0.6 | -1.2 | 1.2 | 0.3 | 2.0 |
| Apr | -1.1 | -1.3 | 5.3 | -2.9 | -1.0 | -1.7 |
| Mar | -0.1 | 1.0 | -8.4 | 1.2 | -0.1 | 1.5 |
| Feb | 0.7 | -1.3 | 8.0 | 0.9 | -1.6 | -1.2 |
| Jan | -0.2 | 0.6 | 0.8 | -1.0 | 0.0 | -0.7 |
| Dec 2011 | -0.8 | -1.0 | -2.8 | -0.3 | 0.2 | 0.0 |
| Nov | -0.4 | -0.1 | 0.2 | 0.1 | 0.3 | -1.6 |
Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12092012-AP/EN/4-12092012-AP-EN.PDF
Table VD-2 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. Industrial production decreased 2.3 percent in the 12 months ending in Jul. All segments fell in 12 months ending in Jul 2012 with multiple declines in Jul with exception of increase of energy by 0.3 percent.
Table VD-2, Euro Zone, Industrial Production 12-Month ∆%
| 2012 | Jul Month ∆% | Jul 12-Month ∆% |
| Total | -0.6 | -2.3 |
| Intermediate Goods | 0.1 | -3.3 |
| Energy | -1.2 | 0.3 |
| Capital Goods | 2.4 | -0.9 |
| Durable Consumer Goods | -0.5 | -9.4 |
| Nondurable Consumer Goods | -0.6 | -2.2 |
Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12092012-AP/EN/4-12092012-AP-EN.PDF
There has been significant decline in percentage changes of industrial production and major categories in 12-month rates throughout 2011 and into 2012 as shown in Table VD-6. The 12-month rate of growth in Nov 2011 of 0.0 percent has fallen to minus 2.1 percent in Jun 2012. Trend is difficult to identify because of significant volatility. Capital goods were growing at 4.7 percent in the 12 months ending in Nov 2011 and at minus 0.9 percent in the 12 months ending in Jun 2012.
Table VD-3, Euro Zone, Industrial Production 12-Month ∆%
| Total | INT | ENE | CG | DUR | NDUR | |
| Jul 2012 | -2.3 | -3.3 | 0.3 | -0.9 | -9.4 | -2.2 |
| Jun | -2.1 | -3.7 | 1.3 | -0.9 | -2.5 | -2.2 |
| May | -2.6 | -3.8 | -0.5 | -1.8 | -6.5 | -2.1 |
| Apr | -2.6 | -4.6 | 2.6 | -1.0 | -6.9 | -3.8 |
| Mar | -1.7 | -2.8 | -6.4 | 2.5 | -6.1 | -1.9 |
| Feb | -1.8 | -4.6 | 3.8 | 1.0 | -5.7 | -4.5 |
| Jan | -1.8 | -1.9 | -7.3 | 1.6 | -3.1 | -1.9 |
| Dec 2011 | -1.7 | -0.1 | -12.2 | 2.1 | -2.9 | -0.5 |
| Nov | 0.0 | -0.6 | -5.4 | 4.7 | -3.1 | -1.7 |
Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods
Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12092012-AP/EN/4-12092012-AP-EN.PDF
Blanchard (2011WEOSep) analyzes the difficulty of fiscal consolidation efforts during periods of weak economic growth. Table VD-4 provides monthly and 12-month percentage changes of industrial production in the euro zone for various members and the UK, which is not a member. The only positive growth rates of industrial production in the 12 months ending in Jul 2012 are 5.1 percent for Ireland and 1.2 percent for Finland.
Table VD-4, Euro Zone, Industrial Production, Month and 12-Month ∆%
| Month ∆% Jul 2012 | Month ∆% Jun 2012 | 12 Months ∆% Jul 2012 | 12 Months ∆% Jun 2012 | |
| Euro Zone | 0.6 | -0.6 | -2.3 | -2.1 |
| Germany | 1.3 | -0.4 | -1.7 | 0.0 |
| France | 0.3 | -0.1 | -3.3 | -2.8 |
| Netherlands | -0.8 | -0.6 | -2.5 | 0.4 |
| Finland | 0.9 | -0.8 | 1.2 | -0.5 |
| Belgium | NA | -2.1 | NA | -2.1 |
| Portugal | 1.5 | -1.0 | -0.1 | -4.8 |
| Ireland | 1.0 | -0.3 | 5.1 | 4.9 |
| Italy | -0.2 | -1.3 | -7.3 | -7.9 |
| Greece | 1.8 | -0.2 | -5.3 | -0.1 |
| Spain | -0.2 | -0.5 | -5.4 | -6.1 |
| UK | 2.9 | -2.4 | -0.5 | -3.7 |
| European Union | 1.1 | -0.8 | -1.5 | -1.9 |
Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12092012-AP/EN/4-12092012-AP-EN.PDF
© Carlos M. Pelaez, 2010, 2011, 2012
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