Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages in Fractured Job Market, Collapse of United States Dynamism of Income Growth and Employment Creation, Global Financial Turbulence and World Economic and Trade Slowdown with Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2010, 2011, 2012
Executive Summary
I Twenty Eight Million Unemployed or Underemployed
IA1 Summary of the Employment Situation
IA2 Number of People in Job Stress
IA3 Long-term and Cyclical Comparison of Employment
IA4 Job Creation
II Stagnating Real Wages
III World Financial Turbulence
IIIA Financial Risks
IIIB Appendix on Safe Haven Currencies
IIIC Appendix on Fiscal Compact
IIID Appendix on European Central Bank Large Scale Lender of Last Resort
IIIE Appendix Euro Zone Survival Risk
IIIF Appendix on Sovereign Bond Valuation
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
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
Appendix I The Great Inflation
IIIG Appendix on Deficit Financing of Growth and the Debt Crisis. This section is divided into two subsections. Subsection IIIGA Monetary Policy with Deficit Financing of Economic Growth analyzes proposals to promote economic growth with government deficits financed by monetary policy. Subsection IIIGB Adjustment during the Debt Crisis of the 1980s provides the routes of adjustment of Brazil during the debt crisis after 1983.
IIIGA Monetary Policy with Deficit Financing of Economic Growth. The advice of Bernanke (2000, 159-161, 165) to the Bank of Japan (BOJ) to reignite growth and employment in the economy consisted of zero interest rates and commitment to a high inflation target as proposed by Krugman (1999):
“I agree that this approach would be helpful, in that it would give private decision makers more information about the objectives of monetary policy. In particular, a target in the 3-4 percent range for inflation to be maintained for a number of years, would confirm not only that the BOJ is intent on moving safely away from a deflationary regime but also that it intends to make up some of the ‘price-level gap’ created by 8 years of zero or negative inflation. In stating an inflation target of, say, 3-4 percent, the BOJ would be giving the direction in which it will attempt to move the economy. The important question, of course, is whether a determined Bank of Japan would be able to depreciate the yen. I am not aware of any previous historical episode, including the period of very low interest rates in the 1930s, in which a central bank has been unable to devaluate its currency. There is strong presumption that vigorous intervention by the BOJ, together with appropriate announcements to influence market expectations, could drive down the value of the yen significantly. Further, there seems little reason not to try this strategy. The ‘worst’ that could happen would be that the BOJ would greatly increase its holdings of reserve assets. Perhaps not all of those who cite the beggar-thy-neighbor thesis are aware that it had its origins in the Great Depression, when it was used as an argument against the very devaluations that ultimately proved crucial to world economic recovery. Franklin D. Roosevelt was elected president of the United States in 1932 with the mandate to get the country out of the Depression. In the end, his most effective actions were the same ones that Japan needs to take—namely, rehabilitation of the banking system and devaluation of the currency.”
Bernanke (2002) also finds devaluation to be a powerful policy instrument to move the economy away from deflation and weak economic and financial conditions:
“Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation.”
Krugman (2012Apr24) finds that this advice of then Professor Bernanke (2000) is relevant to current monetary policy in the US. The relevance would be in a target of inflation in the US of 4 percent, which was the rate prevailing in the late years of the Reagan Administration. The liquidity trap is defined by Krugman (1998, 141) “as a situation in which conventional monetary policies have become impotent, because nominal interest rates are at or near zero: injecting monetary base into the economy has no effect, because base and bonds are viewed by the private sector as perfect substitutes.” The adversity of the liquidity trap in terms of weakness in output and employment can be viewed as an economy experiencing deflation that cannot be contained by increases in the monetary base, or currency held by the public plus reserves held by banks at the central bank. The argument of monetary neutrality is that an increase in money throughout all future periods will increase prices by the same proportion. According to Krugman (1998, 142), the liquidity trap occurs because the public does not expect that the central bank will continue the monetary expansion once inflation returns to a certain level. Expectations are critical in explaining the liquidity trap and have been shaped by the continued fight against inflation by central banks during several decades with the possible exception of Japan beginning with the lost decade when deflation became the relevant policy concern. In this framework, monetary policy is ineffectual if perceived by the public as temporary. Credible monetary policy is perceived by the public as permanent deliberate increase in prices or output: “if the central bank can credibly promise to be irresponsible—that is, convince the market that it will in fact allow prices to rise sufficiently—it can bootstrap the economy out of the trap” (Krugman 1998, 161).
Fed Chairman Bernanke (2012Apr25, 7-8) argues that there is no conflict between his advice to the Bank of Japan as Princeton Professor Bernanke (2000) and current monetary policy by the Federal Open Market Committee (FOMC):
“So there’s this view circulating [Princeton Professor Paul Krugman at http://www.nytimes.com/2012/04/29/magazine/chairman-bernanke-should-listen-to-professor-bernanke.html?pagewanted=all] that the views I expressed about 15 years ago on the Bank of Japan are somehow inconsistent with our current policies. That is absolutely incorrect. Our—my views and our policies today are completely consistent with the views that I held at that time. I made two points at that time to the Bank of Japan. The first was that I believe that a determined central bank could and should work to eliminate deflation—that is, falling prices. The second point that I made was that when short-term interest rates hit zero, the tools of a central bank are no longer—are not exhausted, there are still other things that the central bank can do to create additional accommodation. Now, looking at the current situation in United States, we are not in deflation. When deflation became a significant risk in late 2010, or at least a modest risk in late 2010, we used additional balance sheet tools to help return inflation close to the 2 percent target. Likewise, we have been aggressive and creative in using non-federal-funds-rate-centered tools to achieve additional accommodation for the U.S. economy. So the very critical difference between the Japanese situation 15 years ago and the U.S. situation today is that Japan was in deflation, and, clearly, when you’re in deflation and in recession, then both sides of your mandates, so to speak, are demanding additional accommodation. In this case, it’s—we are not in deflation, we have an inflation rate that’s close to our objective. Now, why don’t we do more? Well, first I would again reiterate that we are doing a great deal; policy is extraordinarily accommodative. We—and I won’t go through the list again, but you know all the things that we have done to try to provide support to the economy. I guess the question is, does it make sense to actively seek a higher inflation rate in order to achieve a slightly increased reduction—a slightly increased pace of reduction in the unemployment rate? The view of the Committee is that that would be very reckless. We have—we, the Federal Reserve, have spent 30 years building up credibility for low and stable inflation, which has proved extremely valuable in that we’ve been be able to take strong accommodative actions in the last four or five years to support the economy without leading to an unanchoring of inflation expectations or a destabilization of inflation. To risk that asset for what I think would be quite tentative and perhaps doubtful gains on the real side would be, I think, an unwise thing to do.”
Chairman Bernanke (2012Apr 25, 10-11) explains current FOMC policy:
“So it’s not a ceiling, it’s a symmetric objective, and we attempt to bring inflation close to 2 percent. And in particular, if inflation were to jump for whatever reason—and we don’t have, obviously don’t have perfect control of inflation—we’ll try to return inflation to 2 percent at a pace which takes into account the situation with respect to unemployment. The risk of higher inflation—you say 2½ percent; well, 2½ percent expected change might involve a distribution of outcomes, some of which might be much higher than 2½ percent. And the concern we have is that if inflation were to run well above 2 percent for a protracted period, that the credibility and the well-anchored inflation expectations, which are such a valuable asset of the Federal Reserve, might become eroded, in which case we would in fact have less rather than more flexibility to use accommodative monetary policy to achieve our employment goals. I would cite to you, just as an example, if you look at Vice Chair Yellen’s paper, which she gave—or speech, which she gave a couple of weeks ago, where she described a number of ways of looking at the late 2014 guidance. She showed there some so-called optimal policy rules that come from trying to get the best possible outcomes from our quantitative econometric models, and what you see, if you look at that, is that the best possible outcomes, assuming perfect certainty, assuming perfect foresight—very unrealistic assumptions—still involve inflation staying quite close to 2 percent. So there is no presumption even in our econometric models that you need inflation well above target in order to make progress on unemployment.”
In perceptive analysis of growth and macroeconomics in the past six decades, Rajan (2012FA) argues that “the West can’t borrow and spend its way to recovery.” The Keynesian paradigm is not applicable in current conditions. Advanced economies in the West could be divided into those that reformed regulatory structures to encourage productivity and others that retained older structures. In the period from 1950 to 2000, Cobet and Wilson (2002) find that US productivity, measured as output/hour, grew at the average yearly rate of 2.9 percent while Japan grew at 6.3 percent and Germany at 4.7 percent (see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). In the period from 1995 to 2000, output/hour grew at the average yearly rate of 4.6 percent in the US but at lower rates of 3.9 percent in Japan and 2.6 percent in the US. Rajan (2012FA) argues that the differential in productivity growth was accomplished by deregulation in the US at the end of the 1970s and during the 1980s. In contrast, Europe did not engage in reform with the exception of Germany in the early 2000s that empowered the German economy with significant productivity advantage. At the same time, technology and globalization increased relative remunerations in highly-skilled, educated workers relative to those without skills for the new economy. It was then politically appealing to improve the fortunes of those left behind by the technological revolution by means of increasing cheap credit. As Rajan (2012FA) argues:
“In 1992, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act, partly to gain more control over Fannie Mae and Freddie Mac, the giant private mortgage agencies, and partly to promote affordable homeownership for low-income groups. Such policies helped money flow to lower-middle-class households and raised their spending—so much so that consumption inequality rose much less than income inequality in the years before the crisis. These policies were also politically popular. Unlike when it came to an expansion in government welfare transfers, few groups opposed expanding credit to the lower-middle class—not the politicians who wanted more growth and happy constituents, not the bankers and brokers who profited from the mortgage fees, not the borrowers who could now buy their dream houses with virtually no money down, and not the laissez-faire bank regulators who thought they could pick up the pieces if the housing market collapsed. The Federal Reserve abetted these shortsighted policies. In 2001, in response to the dot-com bust, the Fed cut short-term interest rates to the bone. Even though the overstretched corporations that were meant to be stimulated were not interested in investing, artificially low interest rates acted as a tremendous subsidy to the parts of the economy that relied on debt, such as housing and finance. This led to an expansion in housing construction (and related services, such as real estate brokerage and mortgage lending), which created jobs, especially for the unskilled. Progressive economists applauded this process, arguing that the housing boom would lift the economy out of the doldrums. But the Fed-supported bubble proved unsustainable. Many construction workers have lost their jobs and are now in deeper trouble than before, having also borrowed to buy unaffordable houses. Bankers obviously deserve a large share of the blame for the crisis. Some of the financial sector’s activities were clearly predatory, if not outright criminal. But the role that the politically induced expansion of credit played cannot be ignored; it is the main reason the usual checks and balances on financial risk taking broke down.”
In fact, Raghuram G. Rajan (2005) anticipated low liquidity in financial markets resulting from low interest rates before the financial crisis that caused distortions of risk/return decisions provoking the credit/dollar crisis and global recession from IVQ2007 to IIQ2009. Near zero interest rates of unconventional monetary policy induced excessive risks and low liquidity in financial decisions that were critical as a cause of the credit/dollar crisis after 2007. Rajan (2012FA) argues that it is not feasible to return to the employment and income levels before the credit/dollar crisis because of the bloated construction sector, financial system and government budgets.
Proposals for higher inflation target of 4 percent for FOMC monetary policy are based on the view that interest rates are too high in real terms because the nominal rate is already at zero and cannot be lowered further. Rajan (2012May8) argues that higher inflation targets by the FOMC need not increase aggregate demand as proposed in those policies because of various factors:
· Pension Crisis. Baby boomers close to retirement calculate that their savings are not enough at current interest rates and may simply save more. Many potential retirees are delaying retirement in order to save what is required to provide for comfortable retirement.
· Regional Income and Debt Disparities. Unemployment, indebtedness and income growth differ by regions in the US. It is not feasible to relocate demand around the country such that decreases in real interest rates may not have aggregate demand effects.
· Inflation Expectations. Rajan (2012May) argues that there is not much knowledge about how people form expectations. Increasing the FOMC target to 4 percent could erode control of monetary policy by the central bank. More technical analysis of this issue, which could be merely repetition of inflation surprise in the US Great Inflation of the 1970s, is presented in Appendix IIA.
· Frictions. Keynesian economics is based on rigidities of wages and benefits in economic activities but there may be even more important current inflexibilities such as moving when it is not possible to sell and buy a house.
Thomas J. Sargent and William L. Silber, writing on “The challenges of the Fed’s bid for transparency,” on Mar 20, published in the Financial Times (http://www.ft.com/intl/cms/s/0/778eb1ce-7288-11e1-9c23-00144feab49a.html#axzz1pexRlsiQ), analyze the costs and benefits of transparency by the Fed. In the analysis of Sargent and Silber (2012Mar20), benefits of transparency by the Fed will exceed costs if the Fed is successful in conveying to the public what policies would be implemented and how forcibly in the presence of unforeseen economic events. History has been unkind to policy commitments. The risk in this case is if the Fed would postpone adjustment because of political pressures as has occurred in the past or because of errors of evaluation and forecasting of economic and financial conditions. Both political pressures and errors abounded in the unhappy stagflation of the 1970s also known as the US Great Inflation (see 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; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB). The challenge of the Fed, in the view of Sargent and Silber 2012Mar20), is to convey to the public the need to deviate from the commitment to interest rates of zero to ¼ percent because conditions have changed instead of unwarranted inaction or policy changes. Errors have abounded such as a critical cause of the global recession pointed by Sargent and Silber (2012Mar20): “While no president is known to have explicitly pressurized Mr. Bernanke’s predecessor, Alan Greenspan, he found it easy to maintain low interest rates for too long, fuelling the credit boom and housing bubble that led to the financial crisis in 2008.” Sargent and Silber (2012Mar20) also find need of commitment of fiscal authorities to consolidation needed to attain sustainable path of debt. Further analysis is provided in Appendix IIA Inflation Surprise and Appendix IIB Unpleasant Monetarist Arithmetic at http://cmpassocregulationblog.blogspot.com/2012/05/world-inflation-waves-monetary-policy.html.
According to an influential school of thought, the interrelation of growth and inflation in Latin America is complex, preventing analysis of whether inflation promotes or restricts economic growth (Seers 1962, 191). In this view, there are multiple structural factors of inflation. Successful economic policy requires a development program that ameliorates structural weaknesses. Policy measures in developed countries are not transferable to developing economies.
In extensive research and analysis, Kahil (1973) finds no evidence of the role of structural factors in Brazilian inflation from 1947 to 1963. In fact, Kahil (1973, 329) concludes:
“The immediate causes of the persistent and often violent rise in prices, with which Brazil was plagued from the last month of 1948 to the early months of 1964, are pretty obvious: large and generally growing public deficits, together with too rapid an expansion of bank credit in the first years and, later, exaggerated and more and more frequent increases in the legal minimum wages.”
Kahil (1973, 334) analyzes the impact of inflation on the economy and society of Brazil:
“The real incomes of the various social classes alternately suffered increasingly frequent and sharp fluctuations: no sooner had a group succeeded in its struggle to restore its real income to some previous peak than it witnessed its erosion with accelerated speed; and it soon became apparent to all that the success of any important group in raising its real income, through government actions or by other means, was achieved only by reducing theirs. Social harmony, the general climate of euphoria, and also enthusiasm for government policies, which had tended to prevail until the last months of 1958, gave way in the following years of galloping inflation to intense political and social conflict and to profound disillusionment with public policies. By 1963 when inflation reached its runaway stage, the economy had ceased to grow, industry and transport were convulsed by innumerable strikes, and peasants were invading land in the countryside; and the situation further worsened in the first months of 1964.”
Professor Nathiel H. Leff (1975) at Columbia University identified another important contribution of Kahil (1975, Chapter IV“The supply of capital,” 127-185) of key current relevance to current proposals to promote economic growth and employment by raising inflation targets:
“Contrary to the assertions of some earlier writers on this topic, Kahil concludes that inflation did not lead to accelerated capital formation in Brazil.”
In econometric analysis of Brazil’s inflation from 1947 to 1980, Barbosa (1987) concludes:
“The most important result, based on the empirical evidence presented here, is that in the long run inflation is a monetary phenomenon. It follows that the most challenging task for Brazilian society in the near future is to shape a monetary-fiscal constitution that precludes financing much of the budget deficits through the inflation tax.”
Experience with continuing fiscal deficits and money creation tend to show accelerating inflation. Table III-10 provides average yearly rates of growth of two definitions of the money stock, M1, and M2 that adds also interest-paying deposits. The data were part of a research project on the monetary history of Brazil using the NBER framework of Friedman and Schwartz (1963, 1970) and Cagan (1965) as well as the institutional framework of Rondo E. Cameron (1967, 1972) who inspired the research (Pelaez 1974, 1975, 1976a,b, 1977, 1979, Pelaez and Suzigan 1978, 1981). The data were also used to test the correct specification of money and income following Sims (1972; see also Williams et al. 1976) as well as another test of orthogonality of money demand and supply using covariance analysis. The average yearly rates of inflation are high for almost any period in 1861-1970, even when prices were declining at 1 percent in 19th century England, and accelerated to 27.1 percent in 1945-1970. There may be concern in an uncontrolled deficit monetized by sharp increases in base money. The Fed may have desired to control inflation at 2 percent after lowering the fed funds rate to 1 percent in 2003 but inflation rose to 4.1 percent in 2007. There is not “one hundred percent” confidence in controlling inflation because of the lags in effects of monetary policy impulses and the equally important lags in realization of the need for action and taking of action and also the inability to forecast any economic variable. Romer and Romer (2004) find that a one percentage point tightening of monetary policy is associated with a 4.3 percent decline in industrial production. There is no change in inflation in the first 22 months after monetary policy tightening when it begins to decline steadily, with decrease by 6 percent after 48 months (see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 102). Even if there were one hundred percent confidence in reducing inflation by monetary policy, it could take a prolonged period with adverse effects on economic activity. Certainty does not occur in economic policy, which is characterized by costs that cannot be anticipated.
Table III-10, Brazil, Yearly Growth Rates of M1, M2, Nominal Income (Y), Real Income (y), Real Income per Capita (y/n) and Prices (P)
| M1 | M2 | Y | y | y/N | P | |
| 1861-1970 | 9.3 | 6.2 | 10.2 | 4.6 | 2.4 | 5.8 |
| 1861-1900 | 5.4 | 5.9 | 5.9 | 4.4 | 2.6 | 1.6 |
| 1861-1913 | 4.7 | 4.7 | 5.3 | 4.4 | 2.4 | 0.1 |
| 1861-1929 | 5.5 | 5.6 | 6.4 | 4.3 | 2.3 | 2.1 |
| 1900-1970 | 13.9 | 13.9 | 15.2 | 4.9 | 2.6 | 10.3 |
| 1900-1929 | 8.9 | 8.9 | 10.8 | 4.2 | 2.1 | 6.6 |
| 1900-1945 | 8.6 | 9.1 | 9.2 | 4.3 | 2.2 | 4.9 |
| 1920-1970 | 17.8 | 17.3 | 19.4 | 5.3 | 2.8 | 14.1 |
| 1920-1945 | 8.3 | 8.7 | 7.5 | 4.3 | 2.2 | 3.2 |
| 1920-1929 | 5.4 | 6.9 | 11.1 | 5.3 | 3.3 | 5.8 |
| 1929-1939 | 8.9 | 8.1 | 11.7 | 6.3 | 4.1 | 5.4 |
| 1945-1970 | 30.3 | 29.2 | 33.2 | 6.1 | 3.1 | 27.1 |
Note: growth rates are obtained by regressions of the natural logarithms on time. M1 and M2 definitions of the money stock; Y nominal GDP; y real GDP; y/N real GDP per capita; P prices.
Source: See Pelaez and Suzigan (1978), 143; M1 and M2 from Pelaez and Suzigan (1981); money income and real income from Contador and Haddad (1975) and Haddad (1974); prices by the exchange rate adjusted by British wholesale prices until 1906 and then from Villela and Suzigan (1973); national accounts after 1947 from Fundação Getúlio Vargas.
Chart III-1 shows in semi-logarithmic scale from 1861 to 1970 in descending order two definitions of income velocity, money income, M1, M2, an indicator of prices and real income.
Chart III-1, Brazil, Money, Income and Prices 1861-1970.
Source: © Carlos Manuel Pelaez and Wilson Suzigan. 1981. História Monetária do Brasil Segunda Edição. Coleção Temas Brasileiros. Brasília: Universidade de Brasília, 21.
Table III-11 provides yearly percentage changes of GDP, GDP per capita, base money, prices and the current account in millions of dollars during the acceleration of inflation after 1947. There was an explosion of base money or the issue of money and three waves of inflation identified by Kahil (1973). Inflation accelerated together with issue of money and political instability from 1960 to 1964. There must be a role for expectations in inflation but there is not much sound knowledge and measurement as Rajan (2012May8) argues. There have been inflation waves documented in periodic comments in this blog (http://cmpassocregulationblog.blogspot.com/2012/06/mediocre-recovery-without-jobs.html) . The risk is ignition of adverse expectations at the crest of one of worldwide inflation waves. Lack of credibility of the commitment by the FOMC to contain inflation could ignite such perverse expectations. Deficit financing of economic growth can lead to inflation and financial instability.
Table III-11, Brazil, GDP, GDP per Capita, Base Money, Prices and Current Account of the Balance of Payments, ∆% and USD Millions, 1947-1971
| GDP ∆% | GDP per Capita ∆% | Base Money ∆% | Prices ∆% | Current USD Millions | |
| 1947 | 2.4 | 0.1 | -1.4 | 14.0 | 162 |
| 1948 | 7.4 | 4.9 | 4.6 | 7.6 | -24 |
| 1949 | 6.6 | 4.2 | 14.5 | 4.0 | -74 |
| 1950 | 6.5 | 4.0 | 23.0 | 10.0 | 52 |
| 1951 | 5.9 | 2.9 | 15.3 | 21.9 | -291 |
| 1952 | 8.7 | 5.6 | 17.7 | 10.2 | -615 |
| 1953 | 2.5 | -0.5 | 15.5 | 12.1 | 16 |
| 1954 | 10.1 | 6.9 | 23.4 | 31.0 | -203 |
| 1955 | 6.9 | 3.8 | 18.0 | 14.0 | 17 |
| 1956 | 3.2 | 0.2 | 16.9 | 21.6 | 194 |
| 1957 | 8.1 | 4.9 | 30.5 | 13.9 | -180 |
| 1958 | 7.7 | 4.6 | 26.1 | 10.4 | -253 |
| 1959 | 5.6 | 2.5 | 32.3 | 37.7 | -154 |
| 1960 | 9.7 | 6.5 | 42.4 | 27.6 | -410 |
| 1961 | 10.3 | 7.1 | 54.4 | 36.1 | 115 |
| 1962 | 5.3 | 2.2 | 66.4 | 54.1 | -346 |
| 1963 | 1.6 | -1.4 | 78.4 | 75.2 | -244 |
| 1964 | 2.9 | -0.1 | 82.5 | 89.7 | 40 |
| 1965 | 2.7 | -0.6 | 67.6 | 62.0 | 331 |
| 1966 | 4.4 | 1.5 | 25.8 | 37.9 | 153 |
| 1967 | 4.9 | 2.0 | 33.9 | 28.7 | -245 |
| 1968 | 11.2 | 8.1 | 31.4 | 25.2 | 32 |
| 1969 | 9.9 | 6.9 | 22.4 | 18.2 | 549 |
| 1970 | 8.9 | 5.8 | 20.2 | 20.7 | 545 |
| 1971 | 13.3 | 10.2 | 29.8 | 22.0 | 530 |
Sources: Fundação Getúlio Vargas, Banco Central do Brasil and Pelaez and Suzigan (1981). Carlos Manuel Pelaez, História Econômica do Brasil: Um Elo entre a Teoria e a Realidade Econômica. São Paulo: Editora Atlas, 1979, 94.
IIIGB Adjustment during the Debt Crisis of the 1980s. Economic and financial risks in the euro area are increasingly being dominated by analytical and political disagreement on conflicts of fiscal adjustment, financial stability, economic growth and employment. Political development is beginning to push for alternative paths of policy. Blanchard (2012WEOApr) and Draghi (2012May3) provide analysis of appropriate directions of policy.
Blanchard (2012WEOApr) finds that interest rates close to zero in advanced economies have not induced higher economic growth because of two main factors—fiscal consolidation and deleveraging—that restrict economic growth in the short-term. First, Blanchard (2012WEOApr, XIII) finds that assuming a multiplier of unity of the fiscal deficit on GDP, decrease of the cyclically-adjusted deficit of advanced economies by 1 percent would reduce economic growth by one percentage point. Second, deleveraging by banks, occurring mainly in Europe, tightens credit supply with similar reduction of euro area economic growth by one percentage point in 2012. The baseline of the World Economic Outlook (WEO) of the IMF (2012WEOApr) for Apr 2012 incorporates both effects, which results in weak economic growth, in particular in Europe, and prolonged unemployment. An important analysis by Blanchard (2012WEOApr, XIII) is that “financial uncertainty, together with sharp shifts in risk appetite, has led to volatile capital flows.” Blanchard (2012WEOApr) still finds that the greatest vulnerability is another profound crisis in Europe (ECB). Crisis prevention should buttress the resilience of affected countries during those shifts in risk appetite. The role of the enhanced firewall of the IMF, European Union (EU) and European Central Bank is gaining time during which countries could engage in fiscal consolidation and structural reforms that would diminish the shifts in risk appetite, preventing devastating effects of financial crises. Volatility in capital flows is equivalent to volatility of valuations of risk financial assets. The challenge to the policy mix consists in balancing the adverse short-term effects of fiscal consolidation and deleveraging with the beneficial long-term effects of eliminating the vulnerability to shocks of risk aversion. Blanchard (2012WEOApr) finds that policy should seek short-term credibility while implementing measures that restrict the path of expenditures together with simultaneous development of institutions and rules that constrain deficits and spending in the future. There is similar policy challenge in deleveraging banks, which is required for sound lending institutions, but without causing an adverse credit crunch. Advanced economies face a tough policy challenge of increasing demand and potential growth.
The President of the European Central Bank (ECB) Mario Draghi (2012May3) also outlines the appropriate policy mix for successful adjustment:
“It is of utmost importance to ensure fiscal sustainability and sustainable growth in the euro area. Most euro area countries made good progress in terms of fiscal consolidation in 2011. While the necessary comprehensive fiscal adjustment is weighing on near-term economic growth, its successful implementation will contribute to the sustainability of public finances and thereby to the lowering of sovereign risk premia. In an environment of enhanced confidence in fiscal balances, private sector activity should also be fostered, supporting private investment and medium-term growth.
At the same time, together with fiscal consolidation, growth and growth potential in the euro area need to be enhanced by decisive structural reforms. In this context, facilitating entrepreneurial activities, the start-up of new firms and job creation is crucial. Policies aimed at enhancing competition in product markets and increasing the wage and employment adjustment capacity of firms will foster innovation, promote job creation and boost longer-term growth prospects. Reforms in these areas are particularly important for countries which have suffered significant losses in cost competitiveness and need to stimulate productivity and improve trade performance.
In this context, let me make a few remarks on the adjustment process within the euro area. As we know from the experience of other large currency areas, regional divergences in economic developments are a normal feature. However, considerable imbalances have accumulated in the last decade in several euro area countries and they are now in the process of being corrected.
As concerns the monetary policy stance of the ECB, it has to be focused on the euro area. Our primary objective remains to maintain price stability over the medium term. This is the best contribution of monetary policy to fostering growth and job creation in the euro area.
Addressing divergences among individual euro area countries is the task of national governments. They must undertake determined policy actions to address major imbalances and vulnerabilities in the fiscal, financial and structural domains. We note that progress is being made in many countries, but several governments need to be more ambitious. Ensuring sound fiscal balances, financial stability and competitiveness in all euro area countries is in our common interest.”
Economic policy during the debt crisis of 1983 may be useful in analyzing the options of the euro area. Brazil successfully combined fiscal consolidation, structural reforms to eliminate subsidies and devaluation to parity. Brazil’s terms of trade, or export prices relative to import prices, deteriorated by 47 percent from 1977 to 1983 (Pelaez 1986, 46). Table III-12 provides selected economic indicators of the economy of Brazil from 1970 to 1985. In 1983, Brazil’s inflation was 164.9 percent, GDP fell 3.2 percent, idle capacity in manufacturing reached 24.0 percent and Brazil had an unsustainable foreign debt. US money center banks would have had negative capital if loans to emerging countries could have been marked according to loss given default and probability of default (for credit risk models see Pelaez and Pelaez (2005), International Financial Architecture, 134-54). Brazil’s current account of the balance of payments shrank from $16,310 million in 1982 to $6,837 million in 1983 because of the abrupt cessation of foreign capital inflows with resulting contraction of Brazil’s GDP by 3.2 percent. An important part of adjustment consisted of agile coordination of domestic production to cushion the impact of drastic reduction in imports. In 1984, Brazil had a surplus of $45 million in current account, the economy grew at 4.5 percent and inflation was stabilized at 232.9 percent.
Table III-12, Brazil, Selected Economic Indicators 1970-1985
| Inflation ∆% | GDP Growth ∆% | Idle Capacity in MFG % | BOP Current Account USD MM | |
| 1985 | 223.4 | 7.4 | 19.8 | -630 |
| 1984 | 232.9 | 4.5 | 22.6 | 45 |
| 1983 | 164.9 | -3.2 | 24.0 | -6,837 |
| 1982 | 94.0 | 0.9 | 15.2 | -16,310 |
| 1981 | 113.0 | -1.6 | 12.3 | -11,374 |
| 1980 | 109.2 | 7.2 | 3.5 | -12,886 |
| 1979 | 55.4 | 6.4 | 4.1 | -10,742 |
| 1978 | 38.9 | 5.0 | 3.3 | -6,990 |
| 1977 | 40.6 | 5.7 | 3.2 | -4,037 |
| 1976 | 40.4 | 9.7 | 0.0 | -6,013 |
| 1975 | 27.8 | 5.4 | 3.0 | -6,711 |
| 1974 | 29.1 | 9.7 | 0.1 | -7,122 |
| 1973 | 15.4 | 13.6 | 0.3 | -1,688 |
| 1972 | 17.7 | 11.1 | 6.5 | -1,489 |
| 1971 | 21.5 | 12.0 | 9.8 | -1,307 |
| 1970 | 19.3 | 8.8 | 12.2 | -562 |
Source: Carlos Manuel Pelaez, O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo, Editora Atlas, 1986, 86.
Chart III-2 provides the tortuous Phillips Circuit of Brazil from 1963 to 1987. There were no reliable consumer price index and unemployment data in Brazil for that period. Chart III-2 used the more reliable indicator of inflation, the wholesale price index, and idle capacity of manufacturing as a proxy of unemployment in large urban centers.
Chart III-2, Brazil, Phillips Circuit 1963-1987
Source:
©Carlos Manuel Pelaez, O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo: Editora Atlas, 1986, pages 94-5. Reprinted in: Brazil. Tomorrow’s Italy, The Economist, 17-23 January 1987, page 25.
A key to success in stabilizing an economy with significant risk aversion is finding parity of internal and external interest rates. Brazil implemented fiscal consolidation and reforms that are advisable in explosive foreign debt environments. In addition, Brazil had the capacity to find parity in external and internal interest rates to prevent capital flight and disruption of balance sheets (for analysis of balance sheets, interest rates, indexing, devaluation, financial instruments and asset/liability management in that period see Pelaez and Pelaez (2007), The Global Recession Risk: Dollar Devaluation and the World Economy, 178-87). Table III-13 provides monthly percentage changes of inflation, devaluation and indexing and the monthly percent overnight interest rate. Parity was attained by means of a simple inequality:
Cost of Domestic Loan ≥ Cost of Foreign Loan
This ordering was attained in practice by setting the domestic interest rate of the overnight interest rate plus spread higher than indexing of government securities with lower spread than loans in turn higher than devaluation plus spread of foreign loans. Interest parity required equality of inflation, devaluation and indexing. Brazil devalued the cruzeiro by 30 percent in 1983 because the depreciation of the German mark DM relative to the USD had eroded the competitiveness of Brazil’s products in Germany and in competition with German goods worldwide. The database of the Board of Governors of the Federal Reserve System quotes DM 1.7829/USD on Mar 3 1980 and DM 2.4425/USD on Mar 15, 1983 (http://www.federalreserve.gov/releases/h10/hist/dat89_ge.htm) for devaluation of 37.0 percent. Parity of costs and rates of domestic and foreign loans and assets required ensuring that there would not be appreciation of the exchange rate, inducing capital flight in expectation of future devaluation that would have reversed stabilization. One of the main problems of adjustment of members of the euro area with high debts is that they cannot adjust the exchange rate because of the common euro currency. This is not an argument in favor of breaking the euro area because there would be also major problems of adjustment such as exiting the euro in favor of a new Drachma in the case of Greece. Another hurdle of adjustment in the euro area is that Brazil could have moved swiftly to adjust its economy in 1983 but the euro area has major sovereignty and distribution of taxation hurdles in moving rapidly.
Table III-13, Brazil, Inflation, Devaluation, Overnight Interest Rate and Indexing, Percent per Month, 1984
| 1984 | Inflation IGP ∆% | Devaluation ∆% | Overnight Interest Rate % | Indexing ∆% |
| Jan | 9.8 | 9.8 | 10.0 | 9.8 |
| Feb | 12.3 | 12.3 | 12.2 | 12.3 |
| Mar | 10.0 | 10.1 | 11.3 | 10.0 |
| Apr | 8.9 | 8.8 | 10.1 | 8.9 |
| May | 8.9 | 8.9 | 9.8 | 8.9 |
| Jun | 9.2 | 9.2 | 10.2 | 9.2 |
| Jul | 10.3 | 10.2 | 11.9 | 10.3 |
| Aug | 10.6 | 10.6 | 11.0 | 10.6 |
| Sep | 10.5 | 10.5 | 11.9 | 10.5 |
| Oct | 12.6 | 12.6 | 12.9 | 12.6 |
| Nov | 9.9 | 9.9 | 10.9 | 9.9 |
| Dec | 10.5 | 10.5 | 11.5 | 10.5 |
Source: Carlos Manuel Pelaez, O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo, Editora Atlas, 1986, 86.
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 | 1.4 | 0.5 | 8.1 |
| Japan | 3.5 | -0.4 | -2.1 | 4.3 |
| China | 8.9 | 1.8 | -2.9 | |
| UK | -0.8 | 2.6* | 2.2* output | 8.0 |
| Euro Zone | -0.5 | 2.4 | 1.8 | 11.3 |
| Germany | 1.0 CA | 1.9 | 0.9 | 5.5 |
| France | 0.3 | 2.2 | 1.3 | 10.3 |
| Nether-lands | -0.5 | 2.6 | 2.5 | 5.3 |
| Finland | 0.3 | 3.1 | 0.9 | 7.6 |
| Belgium | -0.4 | 2.0 | 2.7 | 7.2 |
| Portugal | -3.3 | 2.8 | 3.0 | 15.7 |
| Ireland | NA | 2.0 | 1.6 | 14.9 |
| Italy | -2.5 | 3.6 | 2.4 | 10.7 |
| Greece | -6.2 | 0.9 | 4.1 | NA |
| Spain | -1.3 | 2.2 | 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 and earlier http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html http://cmpassocregulationblog.blogspot.com/2012/07/mediocre-economic-growth-united-states.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 7.4 percent in IIIQ2011, increasing at the SAAR of 0.3 percent in IVQ 2011, 5.5 percent in IQ2012 and 1.4 percent in IIQ2012 (see Section VB at http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/06/mediocre-recovery-without-jobs_04.html); 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 VD 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 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), 8.0 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH at 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: 1.4 percent in the US, -0.4 percent for Japan, 1.8 percent for China, 2.4 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/collapse-of-united-states-dynamism-of.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 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 at 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) and continuing job stress of 24 to 30 million people in the US and stagnant wages in a fractured job market (see Section I 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 Aug 1, 2012, revealed the following policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20120801a.htm):
“Release Date: August 1, 2012
For immediate release
Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year. Growth in employment has been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
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 expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Committee also decided to 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. The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
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. Extending Average Maturity of Holdings of Securities. The statement of Apr 25, 2012, invokes the mandate that inflation is subdued but employment below maximum such that further accommodation is required. Accommodation consists of low interest rates. The new “Operation Twist” (http://cmpassocregulationblog.blogspot.com/2011_09_01_archive.html http://cmpassocregulationblog.blogspot.com/2011/09/collapse-of-household-income-and-wealth.html) or restructuring the portfolio of securities of the Fed by selling short-dated securities and buying long-term securities has the objective of reducing long-term interest rates. The FOMC is extending this program until the end of 2012.
3. Continuing Maturity Extension Program. This program is discussed in Section II Twist Again Extension (http://cmpassocregulationblog.blogspot.com/2012/06/recovery-without-hiring-continuance-of_24.html). The statement affirms: “The Committee also decided to 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.
4. Target of Fed Funds Rate. The FOMC continues to maintain the target of fed funds rate at 0 to ¼ percent.
5. Advance Guidance. The FOMC increases transparency by advising on the expectation of the future path of fed funds rate. This guidance is the view that conditions such as “low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
6. Monitoring and Policy Focus. The FOMC reconsiders its policy continuously in accordance with available information: “The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
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 Jun 20, 2012. The Fed releases the data with careful explanations (http://www.federalreserve.gov/newsevents/press/monetary/20120620b.htm). 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 Section I (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/fomcprojtabl20120620.pdf).
It is instructive to focus on 2012, as 2013, 2014 and longer term are too far away, and there is not much information on what will happen in 2013 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC 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 Jun 20, 2012, and the second row “PR” the projection of the Apr 25, 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.
2. 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.
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.
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.
Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, June 2012 and April 2012
| ∆% GDP | UNEM % | ∆% PCE Inflation | ∆% Core PCE Inflation | |
| Central | ||||
| 2012 Apr PR | 1.9 to 2.4 2.4 to 2.9 | 8.0 to 8.2 7.8 to 8.0 | 1.2 to 1.7 1.9 to 2.0 | 1.7 to 2.0 1.8 to 2.0 |
| 2013 | 2.2 to 2.8 | 7.5 to 8.0 | 1.5 to 2.0 | 1.6 to 2.0 1.7 to 2.0 |
| 2014 | 3.0 to 3.5 | 7.0 to 7.7 | 1.5 to 2.0 | 1.6 to 2.0 |
| Longer Run Apr PR | 2.3 to 2.5 2.3 to 2.6 | 5.2 to 6.0 5.2 to 6.0 | 2.0 2.0 | |
| Range | ||||
| 2012 | 1.6 to 2.5 | 7.8 to 8.4 | 1.2 to 2.0 | 1.7 to 2.0 |
| 2013 | 2.2 to 3.5 | 7.0 to 8.1 | 1.5 to 2.1 | 1.4 to 2.1 |
| 2014 | 2.8 to 4.0 | 6.3 to 7.7 | 1.5 to 2.2 | 1.5 to 2.2 |
| Longer Run Apr PR | 2.2 to 3.0 2.2 to 3.0 | 4.9 to 6.3 4.9 to 6.0 | 2.0 2.0 |
Notes: UEM: unemployment; PR: Projection
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120620.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/fomcprojtabl20120620.pdf). There are 16 participants expecting the rate to remain at 0 to ¼ percent in 2012 and only three to be higher. Not much change is expected in 2013 either with 13 participants anticipating the rate at the current target of 0 to ¼ percent and only six expecting higher rates. The rate would still remain at 0 to ¼ percent in 2014 for six participants with five expecting the rate to be in the range of 0.5 to 1 percent and five participants expecting rates from 1 to 2.0 percent but only three with rates exceeding 2.0 percent. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels until late in 2014.
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 | 16 | 3 | ||||
| 2013 | 13 | 2 | 3 | 1 | ||
| 2014 | 6 | 5 | 5 | 3 | ||
| Longer Run | 19 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120620.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 | 3 |
| 2013 | 3 |
| 2014 | 7 |
| 2015 | 6 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120620.pdf
The producer price index of the euro zone increased 0.4 percent in Jul 2012 after decreasing 0.5 percent in both Jun and May 2012, as shown in Table IV-5. In Jan-Mar, producer prices increased cumulatively 2.0 in Jan-Mar or at annual equivalent rate of 8.3 percent. Energy inflation has oscillated with the shocks of risk aversion that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices increased 1.6 percent in Jul 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.4 percent. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Prices of capital goods have barely moved. Prices of durable consumer goods accelerated at annual equivalent rate of 3.3 percent in Jan-Mar 2012 but were flat in every month from Apr to Jun 2012, increasing 0.2 percent in Jul 2012.
Table IV-5, Euro Zone, Industrial Producer Prices Month ∆%
| Jul 2012 | Jun 2012 | May | Apr | Mar 2012 | Feb 2012 | Jan 2012 | |
| Industry ex | 0.4 | -0.5 | -0.5 | 0.0 | 0.5 | 0.6 | 0.9 |
| Industry ex | 0.1 | -0.1 | 0.0 | 0.2 | 0.2 | 0.3 | 0.3 |
| Intermediate | -0.1 | -0.3 | 0.1 | 0.3 | 0.3 | 0.5 | 0.4 |
| Energy | 1.6 | -1.8 | -1.4 | -0.2 | 1.3 | 1.2 | 2.6 |
| Capital Goods | 0.0 | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.3 |
| Durable Consumer Goods | 0.2 | 0.0 | 0.0 | 0.0 | 0.1 | 0.3 | 0.4 |
| Nondurable Consumer Goods | 0.2 | 0.1 | -0.1 | 0.1 | 0.2 | 0.3 | 0.3 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-04092012-AP/EN/4-04092012-AP-EN.PDF
Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-6. The 12-month percentage change of industrial prices excluding construction fell from 4.3 percent in Dec 2011 to 1.8 percent in both Jul and Jun 2012. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.8 percent in the 12 months ending in Jul 2012. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion.
Table IV-6, Euro Zone, Industrial Producer Prices 12-Month ∆%
| Jul | Jun 2012 | May 2012 | Apr | Mar 2012 | Feb 2012 | Jan 2012 | |
| Industry ex | 1.8 | 1.8 | 2.3 | 2.6 | 3.5 | 3.7 | 3.9 |
| Industry ex | 0.9 | 0.9 | 1.1 | 1.3 | 1.6 | 1.7 | 2.0 |
| Intermediate | 0.0 | 0.1 | 0.5 | 0.6 | 0.9 | 1.1 | 1.6 |
| Energy | 4.8 | 4.7 | 6.3 | 6.7 | 9.0 | 9.9 | 9.7 |
| Capital Goods | 1.0 | 1.1 | 1.3 | 1.2 | 1.2 | 1.2 | 1.3 |
| Durable Consumer Goods | 1.9 | 1.9 | 1.9 | 2.0 | 2.3 | 2.4 | 2.3 |
| Nondurable Consumer Goods | 2.1 | 1.9 | 1.9 | 2.3 | 2.8 | 3.0 | 3.1 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-04092012-AP/EN/4-04092012-AP-EN.PDF
/monetarypolicy/files/fomcprojtabl20120620.pdf
Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html), as shown in Table IV-7. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 12.0 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent producer price inflation declined at minus 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.0 percent. In the third wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.8 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 8.3 percent with a high annual equivalent rate of 9.4 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal commodity carry trades with equivalent annual inflation of minus 3.9 percent in Apr-Jun 2012. In the beginning of the seventh wave, inflation in Jul 2012 of 0.4 percent is equivalent to 4.9 percent in a year. The bottom part of Table IV-7 provides 12-month percentage changes from 1999 to 2010. The final row of Table IV-10 provides the average annual rate of producer-price inflation in the euro area at 2.6 percent in Dec from 1999 to 2011.
Table IV-7, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%
| Month ∆% | 12-Month ∆% | |
| Jul 2012 | 0.4 | 1.8 |
| AE ∆% Jul | 4.9 | |
| Jun | -0.5 | 1.8 |
| May | -0.5 | 2.3 |
| Apr | 0.0 | 2.6 |
| AE ∆% Apr-Jun | -3.9 | |
| Mar | 0.5 | 3.5 |
| Feb | 0.6 | 3.7 |
| Jan | 0.9 | 3.9 |
| AE ∆% Jan-Mar | 8.3 | |
| Dec 2011 | -0.2 | 4.3 |
| Nov | 0.3 | 5.4 |
| Oct | 0.1 | 5.5 |
| AE ∆% Oct-Dec | 0.8 | |
| Sep | 0.3 | 5.8 |
| Aug | -0.2 | 5.8 |
| Jul | 0.4 | 6.1 |
| AE ∆% Jul-Sep | 2.0 | |
| Jun | 0.0 | 5.9 |
| May | -0.2 | 6.2 |
| AE ∆% May-Jun | -1.2 | |
| Apr | 0.9 | 6.8 |
| Mar | 0.8 | 6.8 |
| Feb | 0.8 | 6.6 |
| Jan | 1.3 | 5.9 |
| AE ∆% Jan-Apr | 12.0 | |
| Dec 2010 | 0.8 | 5.4 |
| Dec 2009 | -2.9 | |
| Dec 2008 | 1.1 | |
| Dec 2007 | 4.7 | |
| Dec 2006 | 3.8 | |
| Dec 2005 | 4.5 | |
| Dec 2004 | 3.8 | |
| Dec 2003 | 0.8 | |
| Dec 2002 | 1.5 | |
| Dec 2001 | -0.6 | |
| Dec 2000 | 4.6 | |
| Dec 1999 | 2.6 | |
| Average ∆% 1999-2011 | 2.6 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Inflation in the UK is somewhat higher than in many advanced economies, deserving more detailed analysis. Table IV-8 provides 12-month percentage changes of UK output prices for all manufactured products, excluding food, beverage and petroleum and excluding duty. The 12-month rates rose significantly in 2011 in all three categories, reaching 6.3 percent for all manufactured products in Sep 2011 but declining to 5.7 percent in Oct, 5.4 in Nov and down to 1.7 percent in Jul 2012, increasing marginally to 2.2 percent in Aug 2012. Output price inflation is highly sensitive to commodity prices as shown by the increase by 6.7 percent in 2008 when oil prices rose over $140/barrel even in the midst of a global recession driven by the carry trade from zero interest rates to oil futures. The mirage episode of false deflation in 2001 and 2002 is also captured by output prices for the UK, which was originated in decline of commodity prices but was used as an argument for the unconventional monetary policy of zero interest rates and quantitative easing during the past decade.
Table IV-8, UK Output Prices 12 Months ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Aug 2012 | 2.2 | 1.2 | 1.9 |
| Jul | 1.8 | 1.2 | 1.5 |
| Jun | 2.0 | 1.7 | 1.7 |
| May | 2.8 | 2.1 | 2.5 |
| Apr | 3.3 | 2.3 | 3.1 |
| Mar | 3.7 | 2.5 | 3.5 |
| Feb | 4.1 | 3.0 | 4.1 |
| Jan | 4.0 | 2.4 | 4.0 |
| Dec 2011 | 4.8 | 3.0 | 4.8 |
| Nov | 5.4 | 3.1 | 5.6 |
| Oct | 5.7 | 3.3 | 5.9 |
| Sep | 6.3 | 3.7 | 6.4 |
| Aug | 6.0 | 3.5 | 6.2 |
| Jul | 6.1 | 3.4 | 6.2 |
| Jun | 5.8 | 3.2 | 5.9 |
| May | 5.4 | 3.4 | 5.5 |
| Apr | 5.6 | 3.6 | 5.8 |
| Mar | 5.6 | 3.1 | 5.5 |
| Feb | 5.3 | 3.1 | 5.2 |
| Jan | 5.0 | 3.3 | 5.0 |
| Dec 2010 | 4.2 | 2.7 | 4.0 |
| Year ∆% | |||
| 2011 | 5.6 | 3.4 | 5.7 |
| 2010 | 4.2 | 3.0 | 3.9 |
| 2009 | 1.6 | 2.5 | 1.0 |
| 2008 | 6.7 | 3.7 | 6.7 |
| 2007 | 2.3 | 1.4 | 2.1 |
| 2006 | 2.0 | 1.5 | 2.0 |
| 2005 | 1.9 | 1.0 | 1.9 |
| 2004 | 1.0 | -0.3 | 0.6 |
| 2003 | 0.6 | 0.1 | 0.5 |
| 2002 | -0.1 | -0.4 | -0.1 |
| 2001 | -0.3 | -0.6 | -0.3 |
| 2000 | 1.4 | -0.5 | 0.8 |
| 1999 | 0.6 | -1.0 | -0.3 |
| 1998 | 0.0 | -0.9 | -0.9 |
| 1997 | 0.9 | 0.3 | 0.1 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
Monthly and annual equivalent rates of change of output prices are shown in Table IV-9. There are waves of inflation similar to those in other countries (http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html). In the first wave, annual equivalent inflation was 12.0 percent in Jan-Apr 2011 with relaxed risk aversion in commodity markets. In the second wave, intermittent risk aversion resulted in annual equivalent inflation of 2.0 percent in May-Oct 2011. In the third wave, alternation of risk aversion resulted in annual equivalent inflation of 1.6 percent in Nov-Jan. In the fourth wave, the energy commodity shock processed through carry trades caused the jump of annual equivalent inflation to 7.9 percent in Feb-Apr 2012. A fifth wave occurred in May-Jun 2012 with decline of output inflation by 5.3 percent annual equivalent in an environment of risk aversion that caused decline of commodity prices. A sixth wave under commodity shocks induced by carry trades from zero interest rates resulted in annual equivalent inflation of 3.7 percent in Jul-Aug 2012.
Table IV-9, UK Output Prices Month ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Aug 2012 | 0.5 | 0.1 | 0.5 |
| Jul | 0.1 | -0.1 | 0.1 |
| ∆% AE Jul-Aug | 3.7 | 0.0 | 3.7 |
| Jun | -0.6 | -0.2 | -0.6 |
| May | -0.3 | -0.1 | -0.4 |
| ∆% AE May-Jun | -5.3 | -1.8 | -5.8 |
| Apr | 0.7 | 0.6 | 0.5 |
| Mar | 0.6 | 0.1 | 0.5 |
| Feb | 0.6 | 0.5 | 0.6 |
| ∆% AE Feb-Apr | 7.9 | 4.9 | 6.6 |
| Jan | 0.4 | 0.3 | 0.3 |
| Dec 2011 | -0.2 | -0.1 | -0.2 |
| Nov | 0.2 | -0.1 | 0.2 |
| ∆% AE Nov-Jan | 1.6 | 0.4 | 1.2 |
| Oct | 0.0 | -0.1 | 0.1 |
| Sep | 0.3 | 0.3 | 0.2 |
| Aug | 0.0 | 0.1 | 0.1 |
| Jul | 0.3 | 0.4 | 0.3 |
| Jun | 0.2 | 0.2 | 0.2 |
| May | 0.2 | 0.2 | 0.2 |
| ∆% AE May-Oct | 2.0 | 2.2 | 2.2 |
| Apr | 1.1 | 0.8 | 0.9 |
| Mar | 1.1 | 0.5 | 1.1 |
| Feb | 0.5 | 0.0 | 0.5 |
| Jan | 1.1 | 0.8 | 1.1 |
| Jan-Apr | 12.0 | 6.5 | 11.4 |
| Dec 2010 | 0.5 | 0.0 | 0.6 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
Input prices in the UK have been more dynamic than output prices until the current event of risk aversion, as shown by Table IV-10, but with sharp oscillations because of the commodity and raw material content. The 12-month rates of increase of input prices, even excluding food, tobacco, beverages and petroleum, are very high, reaching 18.1 percent in Sep 2011 for materials and fuels purchased and 13.3 percent excluding food, beverages and petroleum. Inflation in 12 months of materials and fuels purchased moderated to 5.4 percent in Mar 2012 and 4.1 percent excluding food, tobacco, beverages and petroleum with the rates falling further in Apr to 1.1 percent for materials and fuels purchased and 2.2 percent excluding food, tobacco, beverages and petroleum. Input-price inflation collapsed in the 12 months ending in Jul 2012 to minus 2.4 percent for materials and fuels purchased and minus 1.5 percent excluding food, beverages and tobacco. Inflation returned at 1.4 percent in the 12 months ending in Aug 2012 but minus 0.4 percent excluding food, tobacco, beverages and petroleum. There is only comparable experience with 22.2 percent inflation of materials and fuels purchased in 2008 and 16.9 percent excluding food, beverages and petroleum followed in 2009 by decline of 3.8 percent by materials and fuels purchased and increase of 1.6 percent for the index excluding items. UK input and output inflation is sensitive to commodity price increases driven by carry trades from zero interest rates. The mirage of false deflation is also observed in input prices in 1997-9 and then again from 2001 to 2003.
Table IV-10, UK, Input Prices 12-Month ∆% NSA
| All Manufacturing Materials and Fuels Purchased | Excluding Food, Tobacco, Beverages and Petroleum | |
| Aug 2012 | 1.4 | -0.4 |
| Jul | -2.4 | -1.5 |
| Jun | -2.2 | -0.3 |
| May | 0.2 | 1.1 |
| Apr | 1.1 | 2.2 |
| Mar | 5.4 | 4.1 |
| Feb | 7.7 | 5.7 |
| Jan | 6.5 | 5.6 |
| Dec 2011 | 8.9 | 7.2 |
| Nov | 13.8 | 10.2 |
| Oct | 14.5 | 11.0 |
| Sep | 18.1 | 13.3 |
| Aug | 16.3 | 13.0 |
| Jul | 18.5 | 13.3 |
| Jun | 16.8 | 12.6 |
| May | 16.3 | 11.4 |
| Apr | 17.9 | 12.2 |
| Mar | 14.8 | 10.3 |
| Feb | 14.9 | 10.7 |
| Jan | 14.2 | 10.5 |
| Dec 2010 | 13.1 | 9.0 |
| Year ∆% | ||
| 2011 | 15.4 | 11.5 |
| 2010 | 9.9 | 5.7 |
| 2009 | -3.8 | 1.6 |
| 2008 | 22.2 | 16.9 |
| 2007 | 2.9 | 2.3 |
| 2006 | 9.8 | 7.3 |
| 2005 | 10.9 | 6.9 |
| 2004 | 3.3 | 1.6 |
| 2003 | 1.2 | -0.6 |
| 2002 | -4.4 | -4.8 |
| 2001 | -1.2 | -1.2 |
| 2000 | 7.4 | 3.7 |
| 1999 | -1.3 | -3.6 |
| 1998 | -9.1 | -4.6 |
| 1997 | -8.2 | -6.3 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
Table IV-11 provides monthly percentage changes of UK input prices for materials and fuels purchased and excluding food, tobacco, beverages and petroleum. There are strong waves of inflation of input prices in the UK similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html). In the first wave, input prices rose at the high annual equivalent rate of 35.6 percent in Jan-Apr 2011, driven by carry trades from unconventional monetary policy into commodity exposures. In the second wave, alternating risk aversion caused annual equivalent inflation of minus 3.1 percent in May-Oct 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 1.2 percent in Nov-Dec 2011. In the fourth wave, annual equivalent inflation of input prices in the UK surged at 18.1 percent in Jan-Mar 2012 under relaxed risk aversion. In the fifth wave, annual equivalent inflation was minus 21.9 percent in Apr-Jun 2012 because of collapse of commodity prices during increasing risk aversion. In the beginning of a sixth wave, annual equivalent inflation of materials and fuels purchased jumped to 15.4 percent in Jul-Aug 2012.
Table IV-11, UK Input Prices Month ∆%
| All Manufacturing Materials and Fuels Purchased NSA | Excluding Food, Tobacco, Beverages and Petroleum SA | |
| Aug 2012 | 2.0 | 1.0 |
| Jul | 0.4 | -0.2 |
| ∆% Jul-Aug | 15.4 | 4.9 |
| Jun | -2.2 | -0.2 |
| May | -2.5 | -0.7 |
| Apr | -1.4 | 0.1 |
| ∆% Apr-Jun | -21.9 | -3.2 |
| Mar | 1.6 | -0.7 |
| Feb | 2.5 | 1.0 |
| Jan | 0.1 | -0.1 |
| ∆% AE Jan-Mar | 18.1 | 0.8 |
| Dec 2011 | -0.6 | -0.7 |
| Nov | 0.4 | 0.1 |
| ∆% AE Nov-Dec | -1.2 | -3.6 |
| Oct | -0.8 | -0.4 |
| Sep | 2.1 | 0.4 |
| Aug | -1.9 | 0.1 |
| Jul | 0.6 | 0.9 |
| Jun | 0.1 | 1.0 |
| May | -1.6 | -0.1 |
| ∆% AE May-Oct | -3.1 | 3.9 |
| Apr | 2.8 | 2.0 |
| Mar | 3.8 | 1.0 |
| Feb | 1.4 | 1.0 |
| Jan | 2.3 | 1.5 |
| ∆% AE Jan-Apr | 35.6 | 17.8 |
| Dec 2010 | 3.9 | 1.9 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of manufactured products, shown in Table IV-12. There are high contributions of 0.34 percentage points by food products, 0.86 percentage points by tobacco and alcohol, 0.27 percentage points by computer, electrical and optical and 0.45 percentage points by other manufactured products. There are diversified sources of contributions to 12 months output price inflation such as 0.24 percentage points by clothing, textile and leather and 0.07 percentage points by transport equipment. In general, contributions by products rich in commodities are the drivers of inflation. There were diversified contributions in percentage points to monthly inflation: 0.04 by tobacco and alcohol, 0.01 percentage points by clothing and 0.01 percentage points by transport equipment. The increase of petroleum prices by 3.2 percent added 0.37 percentage points to monthly inflation of manufactured products and increase of 0.9 percent by chemical and pharmaceutical added 0.08 percentage points.
Table IV-12, Contributions to Month and 12-Month Change in Prices of All Manufactured Products, Percentage Points
| Aug 2012 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total % | 2.2 | 0.5 | ||
| Food Products | 0.34 | 2.2 | 0.01 | 0.1 |
| Tobacco & Alcohol | 0.86 | 8.6 | 0.04 | 0.3 |
| Clothing, Textile & Leather | 0.24 | 2.3 | 0.01 | 0.1 |
| Paper and Printing | -0.03 | -0.7 | -0.01 | -0.1 |
| Petroleum | 0.17 | 1.5 | 0.37 | 3.2 |
| Chemical & Pharmaceutical | -0.18 | -2.1 | 0.08 | 0.9 |
| Metal, Machinery & Equipment | 0.02 | 0.7 | 0.00 | -0.1 |
| Computer, Electrical & Optical | 0.27 | 3.3 | -0.01 | 0.0 |
| Transport Equipment | 0.07 | 0.7 | 0.01 | 0.1 |
| Other Manufactured Products | 0.45 | 2.8 | 0.00 | 0.0 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of input prices, shown in Table IV-13. Crude oil is a large contributor with 1.08 percentage points to the 12-month rate 2/43 percentage points to the monthly rate in Aug. Inflation also transfers to the domestic economy through the prices of imported inputs: imported metals deducted 1.17 percentage points from the 12-month rate and deducted 0.15 percentage points to the Aug rate. Domestic food added 1.34 percentage points to the 12-month rate and deducted 0.21 percentage points from the Aug rate. Reversals of commodity exposures in carry trades during risk aversion are a major source of financial instability.
Table IV-13, UK, Contributions to Month and 12-Month Change in Prices of Inputs, Percentage Points
| Aug 2012 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total | 1.4 | 2.0 | ||
| Fuel | 0.45 | 5.0 | -0.06 | -0.6 |
| Crude Oil | 1.08 | 4.0 | 2.43 | 9.3 |
| Domestic Food Materials | 1.34 | 13.8 | -0.21 | -1.9 |
| Imported Food Materials | 0.24 | 4.5 | 0.03 | 0.5 |
| Other Domestic Produced Materials | 0.00 | 0.0 | -0.01 | -0.2 |
| Imported Metals | -1.17 | -13.8 | -0.15 | -1.9 |
| Imported Chemicals | -0.26 | -2.4 | 0.02 | 0.2 |
| Imported Parts and Equipment | -0.20 | -1.2 | 0.01 | 0.1 |
| Other Imported Materials | -0.09 | -0.9 | -0.05 | -0.5 |
Source: http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html
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 0.3 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 1.4 percent, which is much lower than 5.5 percent in IQ2012. Growth of 3.5 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 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 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 0.7 percent in IIQ2012 and declined 2.5 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: 5.5 | 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 | -1.4 |
| United Kingdom | -0.3 | -0.2 |
| IIQ2012/IQ2012 | IIQ2012/IIQ2011 | |
| United States | QOQ: 0.4 SAAR: 1.5 | 2.3 |
| Japan | QOQ: 0.3 | 3.5 |
| 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 | -0.7 | -2.5 |
| 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. 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. 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 | 1.0 Jul 7.8 Jan-Jul | 2.2 Jul | 4.7 Jul 6.5 Jan-Jul |
| 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 | -1.4 Apr-Jun | -0.7 Jun | 2.2 Apr-Jun |
| 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
The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased from 50.3 in Jun to 51.7 in Jul, indicating expansion at a moderate rate, which is one of the lowest in the current expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9928). This index has remained above the contraction territory of 50.0 during 35 months. Both global manufacturing and services have slowed down considerably with services increasing marginally because of activity in the US while manufacturing deepened its decline. The JP Morgan Global Manufacturing PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, fell to 48.1 in Aug from 48.4 in Jul, for the lowest reading in three years and three consecutive months below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10046). David Hensley, Director of Global Economics Coordination at JPMorgan, finds moderate increase in the rate of contraction of manufacturing originating in weak economic conditions in various economic regions and declining international trade (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10046). The HSBC Brazil Composite Output Index, compiled by Markit, fell from moderate expansion at 51.5 in Jun to moderate contraction at 48.9 in Jul, in the weakest reading in ten months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9912). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the decline of the HSBC Brazil Services Business Activity Index from 53.0 in Jun to 48.9 in Jul withdraws important support present in the first half of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9912). The HSBC Brazil Purchasing Managers’ IndexTM (PMI™) increased slightly to 49.3 in Aug from 48.7 in Jul, indicating modest deterioration of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10005). Andre Loes, Chief Economist, Brazil at HSBC, finds improving output and new orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10005).
VA United States. 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). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® decreased 0.2 percentage points from 49.8 in Jul to 49.6 in Aug, for a third monthly contraction, which are the first since Jul 2009 (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders, indicating future business, decreased 0.9 percentage points from 48.0 in Jul to 47.1 in Aug, for a third consecutive contraction interrupting growth in 37 months since Apr 2009. Bradley J Holcomb, chair of the Institute for Supply Management™ Manufacturing Survey Committee states: “Comments from the panel generally reflect a slowdown in orders and demand, with continuing concern over the uncertain state of global economies” (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of manufacturing exports increased 0.5 percentage points from 46.5 in Jul to 47.0 in Aug but the index of imports fell 1.5 percentage points from 50.5 in Jul to 49.0 in Aug. The Markit US Manufacturing Purchasing Managers’ Index™ (PMI™) increased marginally to 51.5 in Aug from 51.4 in Jul, which is one of the lowest readings since beginning recovery of manufacturing in Oct 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10046). The index of new export orders increased marginally to 48.8 in Aug from 48.6 in Jul for a third consecutive monthly contraction. Mark Wingham, Economist at Markit, finds that unless activity increases in Sep, performance of manufacturing in IIIQ2012 will be among the weakest in the current recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10046). The Non-Manufacturing ISM Report on Business® PMI increased 1.1 percentage points from 52.6 in Jul to 53.7 in Aug while the index of new orders decreased 1.6 percentage points from 57.2 in Jul to 55.6 in Aug (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.
Table USA, US Economic Indicators
| Consumer Price Index | Jul 12 months NSA ∆%: 1.4; ex food and energy ∆%: 2.1 Jul month ∆%: 0.0; ex food and energy ∆%: 0.1 |
| Producer Price Index | Jul 12-month NSA ∆%: 0.5; 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 | Jul month SA ∆%: 0.6 Manufacturing Jul SA ∆% 0.5 Jul 12 months SA ∆% 5.0, NSA 4.6 |
| 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-Jun 2012/Jan-Jun 2011 NSA ∆%: Total 7.0; Durable Goods: 9.2; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Jun 12/Jun 11 NSA ∆%: Sales Total Business 1.5; Manufacturers 1.4 |
| Sales for Retail and Food Services | Jan-Jul 2012/Jan-Jul 2011 ∆%: Retail and Food Services 5.9; 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 Jun SA -$42294 million versus May -$48044 million |
| Export and Import Prices | Jul 12-month NSA ∆%: Imports -4.1; Exports -1.0 |
| Consumer Credit | Jun ∆% annual rate: 3.0 |
| 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-Jul 2012/2011 ∆%: Receipts 6.1; Outlays -0.4; Individual Income Taxes 4.2 Deficit Fiscal Year 2012 Oct-Jul $973,172 million CBO Forecast 2012FY Deficit $1.171 trillion Blog 8/12/2012 |
| 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:
9/2/12 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
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.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
The Bureau of Labor Statistics (BLS) of the Department of Labor provides the quarterly report on productivity and costs. The operational definition of productivity used by the BLS is (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.” The BLS has revised the estimates for productivity and unit costs. Table VA-1 provides revised data for nonfarm business sector productivity and unit labor costs for the final quarter of 2011 and the first two quarters of 2012 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 2.4 percent and of 0.1 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 2.2 percent in IIQ2012, as shown in column 2 “IIQ2012 SAEE.” The increase of labor productivity from IIQ2011 to IIQ2012 was 1.2 percent, reflecting increases in output of 3.0 percent and of hours worked of 1.t percent, as shown in column 3 “IIQ2012 YoY.” Hours worked decreased from 3.2 percent in IQ2011 in SAAE to 0.1 percent in IIQ2012 but output fell from 2.7 percent in IQ2011 to 2.4 percent in IIQ2012 because of the weakening economy. The BLS defines unit labor costs as (http://www.bls.gov/news.release/pdf/prod2.pdf 2): “BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.” Unit labor costs increased at the SAAE rate of 1.5 percent in IIQ2012 and rose 0.9 percent in IIQ2012 relative to IIQ2011. Hourly compensation in IIQ2012 increased at the SAAE rate of 3.7 percent, which deflating by the estimated consumer price increase SAAE rate in IIQ2012 results in increase of real hourly compensation by 2.9 percent. Real hourly compensation increased 0.3 percent in IIQ2012 relative to IIQ2011.
Table VA-1, US, Nonfarm Business Sector Productivity and Costs %
| IIQ | IIQ | IQ 2012 SAAE | IQ 2012 YoY | IVQ 2011 SAAE | IVQ 2011 YoY | |
| Productivity | 2.2 | 1.2 | -0.5 | 1.0 | 2.8 | 0.6 |
| Output | 2.4 | 3.0 | 2.7 | 3.2 | 5.3 | 2.5 |
| Hours | 0.1 | 1.7 | 3.2 | 2.2 | 2.4 | 1.9 |
| Hourly | 3.7 | 2.2 | 5.8 | 1.2 | -0.7 | 2.0 |
| Real Hourly Comp. | 2.9 | 0.3 | 3.3 | -1.6 | -1.9 | -1.3 |
| Unit Labor Costs | 1.5 | 0.9 | 6.4 | 0.2 | -3.3 | 1.4 |
| Unit Nonlabor Payments | 1.9 | 3.0 | -4.0 | 4.7 | 5.0 | 2.6 |
| Implicit Price Deflator | 1.7 | 1.8 | 1.9 | 2.1 | 0.1 | 1.9 |
Notes: SAAE: seasonally adjusted annual equivalent; Comp.: compensation; YoY: Quarter on Same Quarter Year Earlier
Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/
In 2011, productivity increased 0.7 percent in the annual average, as shown in Table VA-2. Increases in productivity were revised to 3.1 percent in the 2010 annual average and 2.9 percent in the 2009 annual average. The contraction period and the recovery period have been characterized by savings of labor inputs. Real hourly compensation fell 0.5 percent in 2011, interrupting increases of 1.8 percent in 2009 and 0.4 percent in 2010. Unit labor costs fell 1.5 percent in 2009 and 1.0 percent in 2010 but increased 2.0 percent in 2011.
Table VA-2, US, Revised Nonfarm Business Sector Productivity and Costs Annual Average, ∆% Annual Average
| 2011 ∆% | 2010 ∆% | 2009 ∆% | 2008 ∆% | 2007 ∆% | |
| Productivity | 0.7 | 3.1 | 2.9 | 0.6 | 1.5 |
| Real Hourly Compensation | -0.5 | 0.4 | 1.8 | -0.4 | 1.1 |
| Unit Labor Costs | 2.0 | -1.0 | -1.5 | 2.8 | 2.4 |
Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/
Productivity jumped in the recovery after the recession from Mar IQ2001 to Nov IVQ2001 (http://www.nber.org/cycles.html). Table VA-3 provides quarter on quarter and annual percentage changes in nonfarm business output per hour, or productivity, from 1999 to 2012. The annual average jumped from 2.9 percent in 2001 to 4.6 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 8.8 percent in the first quarter after the recession in IQ2002. Productivity increases decline later in the expansion period. Productivity increases were mediocre during the recession from Dec IVQ2007 to Jun IIQ2009 (http://www.nber.org/cycles.html) and increased during the first phase of expansion from IIQ2009 to IQ2010, trended lower and collapsed in 2011 and 2012.
Table VA-3, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2012
| Year | Qtr1 | Qtr2 | Qtr3 | Qtr4 | Annual |
| 1999 | 3.9 | 0.3 | 3.3 | 7.1 | 3.3 |
| 2000 | -1.5 | 9.4 | 0.1 | 4.0 | 3.4 |
| 2001 | -1.3 | 7.4 | 2.5 | 5.8 | 2.9 |
| 2002 | 8.8 | 0.5 | 3.8 | -0.2 | 4.6 |
| 2003 | 3.7 | 5.5 | 9.5 | 1.5 | 3.7 |
| 2004 | 0.6 | 3.3 | 0.7 | 0.5 | 2.6 |
| 2005 | 4.2 | -0.8 | 3.1 | -0.2 | 1.6 |
| 2006 | 2.5 | 0.4 | -2.2 | 2.7 | 0.9 |
| 2007 | -0.2 | 3.4 | 4.8 | 1.9 | 1.5 |
| 2008 | -2.6 | 2.4 | -0.8 | -3.4 | 0.6 |
| 2009 | 5.5 | 6.8 | 5.2 | 5.0 | 2.9 |
| 2010 | 2.7 | -0.5 | 3.3 | 1.9 | 3.1 |
| 2011 | -2.0 | 1.2 | 0.6 | 2.8 | 0.7 |
| 2012 | -0.5 | 2.2 |
Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/
Chart VA-1 of the Bureau of Labor Statistics (BLS) provides SAAE rates of nonfarm business productivity from 1999 to 2012. There is a clear pattern in both episodes of economic cycles in 2001 and 2007 of rapid expansion of productivity in the transition from contraction to expansion followed by more subdued productivity expansion. Part of the explanation is the reduction in labor utilization resulting from adjustment of business to the sudden shock of collapse of revenue. Productivity rose briefly in the expansion after 2009 but then collapsed and moved to negative change with some positive changes recently at lower rates.
Chart VA-1, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Percentage changes from prior quarter at SAAE rates and annual average percentage changes of nonfarm business unit labor costs are provided in Table VA-4. Unit labor costs fell during the contractions with continuing negative percentage changes in the early phases of the recovery. Weak labor markets partly explain the decline in unit labor costs. As the economy moves toward full employment, labor markets tighten with increase in unit labor costs. The expansion beginning in IIIQ2009 has been characterized by high unemployment and underemployment. Table VA-4 shows continuing subdued increases in unit labor costs in 2011 but with increase of 6.4 percent in IQ2012 and 1.5 percent in IIQ2012.
Table VA-4, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2012
| Year | Qtr1 | Qtr2 | Qtr3 | Qtr4 | Annual |
| 1999 | 3.0 | 0.5 | 0.1 | 1.6 | 0.9 |
| 2000 | 17.4 | -7.4 | 8.6 | -1.6 | 3.9 |
| 2001 | 10.9 | -5.8 | -1.1 | -1.7 | 1.5 |
| 2002 | -4.1 | 3.4 | -1.6 | 2.2 | -1.3 |
| 2003 | 2.8 | 1.4 | -3.5 | 1.8 | 1.0 |
| 2004 | -2.5 | 2.4 | 5.8 | 2.7 | 0.7 |
| 2005 | -1.0 | 3.5 | 2.6 | 2.6 | 2.3 |
| 2006 | 2.9 | 1.3 | 3.6 | 6.8 | 2.8 |
| 2007 | 4.0 | -1.8 | -1.9 | 4.3 | 2.4 |
| 2008 | 8.7 | -3.4 | 4.3 | 5.7 | 2.8 |
| 2009 | -8.2 | -0.2 | -3.1 | -3.9 | -1.5 |
| 2010 | -1.3 | 3.3 | -1.4 | -1.4 | -1.0 |
| 2011 | 11.3 | -1.3 | -0.6 | -3.3 | 2.0 |
| 2012 | 6.4 | 1.5 |
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Chart VA-2 provides percentage changes quarter on quarter at SAAE rates of nonfarm business unit labor costs. With the exception of 3.3 percent in IIQ2010, a jump of 11.3 percent in IQ2011, 6.4 percent in IQ2012 and 1.5 percent in IIQ2012, changes in nonfarm business unit labor costs have been negative.
Chart VA-2, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2011
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Table VA-5 provides percentage change from prior quarter at annual rates for nonfarm business real hourly worker compensation. The expansion after the contraction of 2001 was followed by strong recovery of real hourly compensation. Real hourly compensation increased at the rate of 4.4 percent in IQ2011 but fell at annual rates of 4.4 percent in IIQ2011, 3.1 percent in IIIQ2011 and 1.9 percent in IVQ2011 but increased at 3.3 percent in IQ2012 and at 2.9 percent in IIQ2012. In 2011, real hourly compensation fell 0.5 percent.
Table VA-5, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2012
| Year | Qtr1 | Qtr2 | Qtr3 | Qtr4 | Annual |
| 1999 | 5.4 | -2.0 | 0.2 | 5.6 | 2.2 |
| 2000 | 11.4 | -1.8 | 4.7 | -0.4 | 4.0 |
| 2001 | 5.4 | -1.5 | 0.2 | 4.5 | 1.6 |
| 2002 | 2.8 | 0.6 | 0.0 | -0.6 | 1.5 |
| 2003 | 2.4 | 7.7 | 2.5 | 1.8 | 2.4 |
| 2004 | -5.2 | 2.6 | 3.7 | -1.1 | 0.6 |
| 2005 | 1.3 | -0.1 | -0.3 | -1.3 | 0.6 |
| 2006 | 3.1 | -1.8 | -2.6 | 11.6 | 0.5 |
| 2007 | -0.2 | -3.0 | 0.3 | 1.3 | 1.1 |
| 2008 | 1.4 | -6.1 | -2.8 | 12.2 | -0.4 |
| 2009 | -0.7 | 4.7 | -1.6 | -2.1 | 1.8 |
| 2010 | 0.5 | 3.1 | 0.4 | -2.4 | 0.4 |
| 2011 | 4.4 | -4.4 | -3.1 | -1.9 | -0.5 |
| 2012 | 3.3 | 2.9 |
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Chart VA-3 provides percentage change from prior quarter at annual rate of nonfarm business real hourly compensation from 1999 to 2012. There are significant fluctuations in quarterly percentage changes oscillating between positive and negative. There is no clear pattern in the two contractions in the 2000s.
Chart VA-3, US, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 2001-2011
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Chart VA-4 provides percentage change from prior quarter at annual rate for nonfarm business output per hour from 1947 to 2012. The average would be represented by a horizontal line above zero. There is an increase in the rate of improvement of productivity in the 1990s (Cobet and Wilson 2002; see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44) that was not continued into the 2000s.
Chart VA-4, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate 1947-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Chart VA-5 provides percentage changes from prior quarter at annual rate for US nonfarm business unit labor costs from 1947 to 2012. The most remarkable period is the 1970s in which stagflation occurred in fluctuating but high positive percentage changes of unit labor costs. There was significant moderation of increases in unit labor costs in the 1980s. Fluctuation has characterized the 2000s.
Chart VA-5, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1947-2012
Source: US bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Chart VA-6 provides percentage changes from the prior quarter at annual rate of nonfarm business real hourly compensation from 1947 to 2012. Negative changes have occurred more frequently and pronounced in the 2000s than during the Great Inflation of the 1970s.
Chart VA-6, US, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1947-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/lpc/home.htm
Motor vehicle sales and production in the US have been in long-term structural change. Table VA-7 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Jan-Aug 2012, light vehicle sales accumulated to 9,711,044, which is higher by 14.7 percent relative to 8,464,450 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally-adjusted annual rate of light vehicle sales in the US reached 14.52 million in Aug 2012, higher than 14.09 million in Jul 2012 and higher than 12.46 million in Aug 2011 (http://motorintelligence.com/m_frameset.html).
Table VA-7, US, New Motor Vehicle Sales and Car Production, Thousand Units
| New Motor Vehicle Sales | New Car Sales and Leases | New Truck Sales and Leases | Domestic Car Production | |
| 1990 | 14,137 | 9,300 | 4,837 | 6,231 |
| 1991 | 12,725 | 8,589 | 4,136 | 5,454 |
| 1992 | 13,093 | 8,215 | 4,878 | 5,979 |
| 1993 | 14,172 | 8,518 | 5,654 | 5,979 |
| 1994 | 15,397 | 8,990 | 6,407 | 6,614 |
| 1995 | 15,106 | 8,536 | 6,470 | 6,340 |
| 1996 | 15,449 | 8,527 | 6,922 | 6,081 |
| 1997 | 15,490 | 8,273 | 7,218 | 5,934 |
| 1998 | 15,958 | 8,142 | 7,816 | 5,554 |
| 1999 | 17,401 | 8,697 | 8,704 | 5,638 |
| 2000 | 17,806 | 8,852 | 8,954 | 5,542 |
| 2001 | 17,468 | 8,422 | 9,046 | 4,878 |
| 2002 | 17,144 | 8,109 | 9,036 | 5,019 |
| 2003 | 16,968 | 7,611 | 9,357 | 4,510 |
| 2004 | 17,298 | 7,545 | 9,753 | 4,230 |
| 2005 | 17,445 | 7,720 | 9,725 | 4,321 |
| 2006 | 17,049 | 7,821 | 9,228 | 4,367 |
| 2007 | 16,460 | 7,618 | 8,683 | 3,924 |
| 2008 | 13,494 | 6,814 | 6.680 | 3,777 |
| 2009 | 10,601 | 5,456 | 5,154 | 2,247 |
| 2010 | 11,772 | 5,729 | 6,044 | 2,840 |
Source: US Census Bureau http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html
Construction spending at seasonally-adjusted annualized rate (SAAR) reached $834.4 billion in Jul, which was lower by 0.9 percent than in the prior month of Jun, as shown in Table VA-8. Residential investment, with $271.2 billion accounting for 32.5 percent of total value of construction, fell 1.6 percent in Jul and nonresidential investment, with $563.2 billion accounting for 67.5 percent of the total, was unchanged. Public construction fell 0.4 percent while private construction fell 1.6 percent. Data in Table VA-8 show that nonresidential construction at $563.2 billion is much higher in value than residential construction at $271.2 billion while total private construction at $558.7 billion is much higher than public construction at $269.1 billion, all in SAAR. Residential and nonresidential construction contributed positively to growth of GDP in the US in IQ2012 and IIQ2012 (http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html).
Table VA-8, US, Value of Construction Put in Place in the United States Seasonally Adjusted Annual Rate Billion Dollars and Month and 12-Month ∆%
| Jul 2012 SAAR $ Billions | Month ∆% | 12-Month ∆% | |
| Total | 834.4 | -0.9 | 9.3 |
| Residential | 271.2 | -1.6 | 17.6 |
| Nonresidential | 563.2 | -0.6 | 5.7 |
| Total Private | 558.7 | -1.2 | 15.0 |
| Private Residential | 264.6 | -1.6 | 19.0 |
| New Single Family | 127.5 | 1.5 | 19.1 |
| New Multi-Family | 21.9 | 2.8 | 44.5 |
| Private Nonresidential | 294.1 | -0.9 | 11.7 |
| Total Public | 275.7 | -0.4 | -0.7 |
| Public Residential | 6.6 | -1.1 | -19.4 |
| Public Nonresidential | 269.1 | -0.3 | -0.2 |
SAAR: seasonally adjusted annual rate; B: billions
Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html
Further information on construction spending is provided in Table VA-9. The original monthly estimates not-seasonally adjusted (NSA) and their 12-month rates of change are provided in the first two columns while the SAAR and their monthly changes are provided in the final two columns. There has been improvement in construction in the US in 2011 but another bump in early 2012. On a monthly basis, construction fell three consecutive months from Dec 2010 to Feb 2011, increasing in ten of the eleven months from Mar 2011 to Jan 2012, with sole decline of 4.2 percent in Jul. Improvement was interrupted in 2012 with decline of 0.5 percent in Feb 2012, further decline of 0.3 percent in Mar and recovery of 0.9 percent in Apr, 1.7 percent in May and 0.4 percent in Jun but declining 0.9 percent in Jul 2012. The 12 months rates of change improved from minus 8.6 percent in Apr 2011 to the first positive 12-month percentage change of 0.7 percent in Nov and further improvement with 9.6 percent in Jul 2012.
Table VA-9, US, Value and Percentage Change in Value of Construction Put in Place, Dollars Millions and ∆%
| Value NSA | 12-Month ∆% NSA | Value | Month ∆% SA* | |
| Jul 2012 | 76,623 | 9.6 | 834384 | -0.9 |
| Jun | 73,368 | 7.1 | 842,224 | 0.4 |
| May | 71,635 | 8.4 | 838,778 | 1.7 |
| Apr | 66,201 | 9.1 | 825,133 | 0.9 |
| Mar | 60,939 | 8.6 | 817,842 | -0.3 |
| Feb | 56,108 | 11.8 | 820,677 | -0.5 |
| Jan | 56,535 | 10.9 | 824,687 | 0.5 |
| Dec 2011 | 62,825 | 4.4 | 820,614 | 2.1 |
| Nov | 68,476 | 0.7 | 804,046 | 1.0 |
| Oct | 73,282 | -0.3 | 795,733 | 0.7 |
| Sep | 73,515 | -1.7 | 790,294 | 0.5 |
| Aug | 75,101 | -1.0 | 786,308 | 3.0 |
| Jul | 69,929 | -4.3 | 763,468 | -4.2 |
| Jun | 71,297 | -3.7 | 796,784 | 2.7 |
| May | 65,845 | -4.4 | 775,837 | 2.7 |
| Apr | 60,682 | -8.6 | 755,420 | 0.3 |
| Mar | 56,130 | -6.8 | 753,433 | 1.0 |
| Feb | 50,184 | -7.1 | 746,056 | -0.9 |
| Jan | 50,971 | -8.3 | 752,638 | -3.5 |
| Dec 2010 | 60,202 | -6.1 | 779,895 | -2.3 |
SAAR: Seasonally-adjusted Annual Rate
*Percentages are calculated with values without numbers and may differ from rounded numbers
Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html
The strong contraction of the value of construction in the US is revealed by Table VA-10. Construction spending in Jan-Jul 2012, not seasonally adjusted, reached $464.4 billion, which is higher by 9.3 percent than $425.0 billion in the same period in 2011. The depth of the contraction is shown by the decline of construction spending from $680.9 billion in Jan-Jul 2006 to only $464.4 billion in the same period in 2012, or decline by minus 31.8 percent. The comparable decline from Jan-Jul 2005 to Jan-Jul 2012 is minus 26.3 percent. Construction spending in Jan-Jul 2012 fell by 8.0 percent relative to the same period in 2003. Construction spending is lower by 11.0 percent in Jan-Jul 2012 relative to the same period in 2009. Construction has been weaker than the economy as a whole.
Table VA-10, US, Value of Construction Put in Place in the United States, Not Seasonally Adjusted, $ Millions and ∆%
| Jan-Jul 2012 $ MM | 464,409 |
| Jan-Jul 2011 $ MM | 425,037 |
| ∆% to 2012 | 9.3 |
| Jan-Jul 2010 $ MM | 451,174 |
| ∆% to 2012 | 2.9 |
| Jan-Jul 2009 $MM | 521,990 |
| ∆% to 2012 | -11.0 |
| Jan-Jul 2006 $ MM | 680,863 |
| ∆% to 2012 | -31.8 |
| Jan-Jul 2005 $ MM | 630,235 |
| ∆% to 2012 | -26.3 |
| Jan-Jul 2003 $ MM | 504,752 |
| ∆% to 2012 | -8.0 |
Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html
Chart VA-7 of the US Census Bureau provides value of construction spending in the US not seasonally adjusted from Jan 2002 to Jul 2012. There are wide oscillations requiring seasonal adjustment to compare adjacent data. There was sharp decline during the global recession followed in recent periods by a stationary series that may be moving upward again.
Chart VA-7, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2012
Source: US Census Bureau http://www.census.gov/const/www/c30index.html
Monthly construction spending in the US in the seven months Jan-Jul not seasonally adjusted is shown in Table VA-11 for the years between 2002 and 2012. The values of $76.6 billion in Jul 2012 and $69.9 billion in Jul 2011 are lower than $78.9 billion in Jul 2002. Construction in Jul 2012 fell by 29.3 percent from the peak of $108.4 billion in Jul 2006 to $76.6 billion in Jul 2012. The data are not adjusted for inflation or changes in quality.
Table VA-11, US, Value of Construction Spending Not Seasonally Adjusted Annual Rate Millions of Dollars
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul |
| 2002 | 59,516 | 58,588 | 63,782 | 69,504 | 73,384 | 77,182 | 78,863 |
| 2003 | 59,877 | 58,526 | 64,506 | 69,638 | 74,473 | 80,377 | 82,971 |
| 2004 | 64,934 | 64,138 | 73,238 | 78,354 | 83,736 | 89,932 | 93,614 |
| 2005 | 71,474 | 72,048 | 81,345 | 85,485 | 92,959 | 99,632 | 103,158 |
| 2006 | 81,058 | 81,478 | 92,855 | 95,324 | 102,495 | 107,607 | 108,423 |
| 2007 | 79,406 | 79,177 | 88,905 | 93,375 | 100,534 | 105,399 | 107,090 |
| 2008 | 77,349 | 77,227 | 82,779 | 87,743 | 92,781 | 96,338 | 98,483 |
| 2009 | 66,944 | 66,296 | 71,624 | 75,187 | 76,808 | 81,429 | 83,379 |
| 2010 | 55,586 | 54,019 | 60,228 | 66,422 | 68,906 | 74,035 | 73,077 |
| 2011 | 50,971 | 50,184 | 56,130 | 60,682 | 65,845 | 71,297 | 69,929 |
| 2012 | 56,535 | 56,108 | 60,939 | 66,201 | 71,635 | 76,368 | 76,623 |
Source: US Census Bureau http://www.census.gov/const/www/c30index.html
Chart VA-8 of the US Census Bureau shows SAARs of construction spending for the US since 1993. Construction spending surged in nearly vertical slope after the stimulus of 2003 combining near zero interest rates and subsequent slow adjustment in 17 doses of increases by 25 basis points between Jun 2004 and Jun 2006 together with other housing subsidies. Construction spending collapsed after subprime mortgages defaulted with the fed funds rate increasing from 1.00 percent in Jun 2004 to 5.25 percent in Jun 2006. Subprime mortgages were programmed for refinancing in two years after increases in homeowner equity in the assumption that fed funds rates would remain low forever or increase in small increments (Gorton 2009EFM see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Price declines of houses or even uncertainty prevented refinancing of subprime mortgages that defaulted, causing the financial crisis that eventually triggered the global recession. Chart VA-8 shows a trend of increase in the final segment but it is difficult to assess if it will be sustained.
Chart VA-8, US, Construction Expenditures SAAR 1993-2012
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr050.html
Construction spending at SAARs in the five months Apr to Jul is shown in Table VA-12 for the years between 2002 and 2012. There is a peak in 2005 to 2006 with subsequent collapse of SAARs and rebound in 2012.
Table VA-12, US, Value of Construction Spending SAAR Millions of Dollars
| Year | Apr | May | Jun | Jul |
| 2002 | 858,240 | 850,935 | 846,777 | 847,129 |
| 2003 | 859,459 | 866,814 | 880,865 | 891,264 |
| 2004 | 967,761 | 974,158 | 983,072 | 1,006,119 |
| 2005 | 1,058,365 | 1,078,586 | 1,089,505 | 1,109,691 |
| 2006 | 1,183,485 | 1,180,059 | 1,172,932 | 1,165,093 |
| 2007 | 1,159,124 | 1,168,195 | 1,166,892 | 1,154,018 |
| 2008 | 1,091,142 | 1,091,008 | 1,074,637 | 1,066,919 |
| 2009 | 929,593 | 911,241 | 901,987 | 899,601 |
| 2010 | 824,008 | 816,318 | 816,302 | 788,524 |
| 2011 | 755,420 | 775,837 | 786,784 | 763,468 |
| 2012 | 825,133 | 838,778 | 842,224 | 834,384 |
http://www.census.gov/const/www/c30index.html
Chart VA-9 of the US Census Bureau provides SAARs of value of construction from Jan 2002 to Jul 2012. There is clear acceleration after 2003 when fed funds rates were fixed in Jun 1.0 percent until Jun 2004. Construction peaked in 2005-2006, stabilizing in 2007 at a lower level and then collapsed in a nearly vertical drop until 2011 with increases into 2012.
Chart VA-9, US, Construction Expenditures SAAR 2002-2012
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr050.html
Annual available data for the value of construction put in place in the US between 1993 and 2011 are provided in Table VA-13. Data from 1993 to 2001 are available for public and private construction with breakdown in residential and nonresidential only for private construction. Data beginning in 2002 provide aggregate residential and nonresidential values. Total construction value put in place in the US increased 60.3 percent between 1993 and 2011 but most of the growth, 65.3 percent, was concentrated in 1993 to 2000 with decline of 3.1 percent between 2000 and 2011. Total value of construction fell 8.2 percent between 2002 and 2011 with value of nonresidential construction increasing 19.4 percent while value of residential construction fell 38.9 percent. Value of total construction fell 31.7 percent between 2005 and 2011, with value of residential construction declining 60.2 percent while value of nonresidential construction rose 9.4 percent. Value of total construction fell 33.3 percent between 2006 and 2011, with value of nonresidential construction decreasing 2.7 percent while value of residential construction fell 60.4 percent. In 2002, nonresidential construction had a share of 52.6 percent in total construction while the share of residential construction was 47.4 percent. In 2011, the share of nonresidential construction in total value rose to 68.4 percent while that of residential construction fell to 31.6 percent.
Table VA-13, Annual Value of Construction Put in Place 1993-2010, Millions of Dollars and ∆%
| Total | Private Nonresidential | Private Residential | |
| 1993 | 485,548 | 150,006 | 208,180 |
| 1994 | 531,892 | 160,438 | 241,033 |
| 1995 | 548,666 | 180,534 | 228,121 |
| 1996 | 599,693 | 195,523 | 257,495 |
| 1997 | 631,853 | 213,720 | 264,696 |
| 1998 | 688,515 | 237,394 | 296,343 |
| 1999 | 744,551 | 249,167 | 326,302 |
| 2000 | 802,756 | 275,293 | 346,138 |
| 2001 | 840,249 | 273,922 | 364,414 |
| Total | Total Nonresidential | Total Private Residential | |
| 2002 | 847,874 | 445,914 | 401,960 |
| 2003 | 891,497 | 440,246 | 451,251 |
| 2004 | 991,356 | 452,948 | 538,408 |
| 2005 | 1,140,136 | 486,629 | 617,507 |
| 2006 | 1,167,222 | 547,408 | 619,814 |
| 2007 | 1,152,351 | 651,883 | 500,468 |
| 2008 | 1,067,564 | 709,818 | 357,746 |
| 2009 | 903,201 | 649,273 | 253,928 |
| 2010 | 804,561 | 555,449 | 249,112 |
| 2011 | 778,238 | 532,552 | 245,686 |
| ∆% 1993-2011 | 60.3 | ||
| ∆% 1993-2000 | 65.3 | ||
| ∆% 2000-2011 | -3.1 | ||
| ∆% 2002-2011 | -8.2 | 19.4 | -38.9 |
| ∆% 2005-2011 | -31.7 | 9.4 | -60.2 |
| ∆% 2006-2011 | -33.3 | -2.7 | -60.4 |
Source: http://www.census.gov/const/www/c30index.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 | Jul ∆% -0.4 |
| Consumer Price Index | Jul NSA ∆% -0.3; Jul 12 months NSA ∆% -0.4 |
| Real GDP Growth | IIQ2012 ∆%: 0.3 on IVQ2011; IIQ2012 SAAR 1.4; |
| 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 Jun ∆% 7.4 Private ∆%: 9.3 |
| Tertiary Index | Jun month SA ∆% 0.1 |
| 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
8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html
8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.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 | Jul 12-month ∆%: minus 2.9 Jul month ∆%: minus 0.8 |
| Consumer Price Index | Jul month ∆%: 0.1 Jul 12 months ∆%: 1.8 |
| Value Added of Industry | Jul month ∆%: 0.76 Jan-Jul 2012/Jan-Jul 2011 ∆%: 10.3 |
| GDP Growth Rate | Year IIQ2012 ∆%: 7.6 |
| Investment in Fixed Assets | Jul month ∆%: 1.42 Total Jan-Jul 2012 ∆%: 20.4 Real estate development: 15.4 |
| Retail Sales | Jul month ∆%: 1.05 Jan-Jul ∆%: 14.2 |
| Trade Balance | Jul balance $25.2 billion Cumulative Jul: $94.5 billion |
Links to blog comments in Table CNY:
8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html
7/15/12 http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million_15.html
VD Euro Area. Table VD-EUR 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 VD-EUR. 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. The rate of unemployment increased in 2011 while the rate of GDP growth fell. EUROSTAT forecasts slightly negative growth of 0.3 percent in 2012 and 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 | 3.2 |
| 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 | Jul month ∆%: -0.5 12 months Jul ∆%: 2.4 |
| Producer Prices | Euro Zone industrial producer prices Jul ∆%: 0.4 |
| Industrial Production | Jun month ∆%: -0.6; Jun 12 months ∆%: -2.8 |
| 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:
9/2/12 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
Table VD-1 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 2.1 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-1, Euro Area, Real GDP Growth Rate
| Year | ∆% |
| 2013 EUROSTAT Forecast | 1.0 |
| 2012 EUROSTAT Forecast | -0.3 |
| 2011 | 1.4 |
| 2010 | 2.1 |
| 2009 | -4.4 |
| 2008 | 0.4 |
| 2007 | 3.0 |
| 2006 | 3.2 |
| 2005 | 1.7 |
| 2004 | 2.2 |
| 2003 | 0.7 |
| 2002 | 0.9 |
| 2001 | 2.0 |
| 2000 | 3.8 |
| 1999 | 2.9 |
| 1998 | 2.8 |
| 1997 | 2.6 |
| 1996 | 1.5 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Table VD-2 provides GDP growth in IIQ2012 and relative to the same quarter a year earlier for the euro zone, European Union, Japan and the US. The GDP of the euro zone fell 0.2 percent in IIQ2012 in IIQ2012 and declined 0.5 percent relative to a year earlier while the GDP of the European Union fell 0.1 percent in IIQ2012 and declined 0.3 percent relative to a year earlier. Growth in IIQ2012 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html) with depressed hiring http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html).
Table VD-2, Euro Zone, European Union, Japan and USA, Real GDP Growth
| ∆% IIQ2012/ IQ2012 | ∆% IIQ2012/ IIQ2011 | |
| Euro Zone | -0.2 | -0.5 |
| European Union | -0.1 | -0.3 |
| Germany | 0.3 | 1.0* |
| France | 0.0 | 0.3 |
| Netherlands | 0.2 | -0.5 |
| Finland | -1.1 | 0.1 |
| Belgium | -0.6 | -0.4 |
| Portugal | -1.2 | -3.3 |
| Ireland | NA | NA |
| Italy | -0.7 | -2.5 |
| Greece | NA | -6.2 |
| Spain | -0.4 | -1.3 |
| United Kingdom | -0.5 | -0.5 |
| Japan | 0.3 | 3.6 |
| USA | 0.4 | 2.3 |
*Calendar adjusted.
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06092012-AP/EN/2-06092012-AP-EN.PDF
Chart VD-1 of EUROSTAT provides growth rates for the euro zone and European Union. There are significant differences in growth experience. Countries in need of fiscal adjustment are growing slowly or contracting.
Chart VD-1, Euro Zone, European Union, Real GDP Growth ∆% on Previous Year
Source: EUROSTAT
Table VD-3 provides growth rates for the euro zone and European Union estimated by EUROSTAT. There is deterioration in the quarterly rates with equal declines of 0.3 percent in IVQ2011, flat performance in IQ2012 and declines of 0.2 percent in IIQ2012 for the euro zone and 0.1 percent for the European Union. The euro area experienced GDP decline of 0.5 percent in IIQ2012 relative to IIQ2011 while the European Union declined 0.3 percent.
Table VD-3, Euro Area and European Union, Growth of Real GDP
| IIIQ2011 | IVQ2011 | IQ2012 | IIQ2012 | |
| ∆% from Prior Quarter | ||||
| EA 17 | 0.1 | -0.3 | 0.0 | -0.2 |
| EU 27 | 0.2 | -0.3 | 0.0 | -0.1 |
| ∆% from Same Quarter Year Earlier | ||||
| EA 17 | 1.3 | 0.6 | 0.0 | -0.5 |
| EA 27 | 1.4 | 0.7 | 0.1 | -0.3 |
Notes: EA: Euro Area; EU: European Union
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-06092012-AP/EN/2-06092012-AP-EN.PDF
Advanced economies are experiencing weak demand. Table VD-4 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Jul 2012. Retail sales decreased 0.2 percent in Jul 2012 and fell 1.7 percent in 12 months. The 12-month rates of growth have become negative since Mar 2011 with exception of 1.0 percent in Apr 2011 and stability in Aug 2011. The lower part of Table VD-4 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 1990. Retail sales fell 2.4 percent in 2009 after falling 0.8 percent in 2008 and fell again by 0.6 percent in 2011. The average yearly rate of increase of retail sales from 1999 to 2007 was 2.0 percent but growth has not recovered. The average yearly rate of increase for the entire period 1999 to 2011 is lower at 1.1 percent.
Table VD-4, Euro Zone, Volume of Retail Sales, Deflated ∆%
| Month ∆% | 12-Month ∆% | |
| Jul 2012 | -0.2 | -1.7 |
| Jun | 0.1 | -0.9 |
| May | 0.9 | -0.7 |
| Apr | -1.3 | -3.5 |
| Mar | 0.1 | -0.1 |
| Feb | -0.1 | -2.0 |
| Jan | 1.2 | -1.1 |
| Dec 2011 | -1.3 | -1.7 |
| Nov | -0.3 | -1.4 |
| Oct | -0.1 | -0.7 |
| Sep | -0.6 | -1.1 |
| Aug | 0.0 | 0.0 |
| Jul | 0.5 | -0.4 |
| Jun | 0.9 | -0.8 |
| May | -1.7 | -1.8 |
| Apr | 1.2 | 1.0 |
| Mar | -1.4 | -1.4 |
| Feb | 0.4 | 1.1 |
| Jan | 0.3 | 0.9 |
| Annual ∆% | ||
| 2011 | -0.6 | |
| 2010 | 0.9 | |
| 2009 | -2.4 | |
| 2008 | -0.8 | |
| 2007 | 1.6 | |
| 2006 | 2.2 | |
| 2005 | 2.0 | |
| 2004 | 1.5 | |
| 2003 | 0.9 | |
| 2002 | 1.2 | |
| 2001 | 2.1 | |
| 2000 | 2.5 | |
| 1999 | 2.3 | |
| Average ∆% 1999-2007 | 2.0 | |
| Average ∆% 1999-2011 | 1.1 |
Source: http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database
Growth rates of retail sales of the euro zone by major segments are in Table VD-5. Total sales in decreased 0.2 percent in Jul 2012 and declined 1.7 percent in the 12 months ending in Jul 2012. All 12-month percentage changes are negative with improvement nonfood products excluding automotive fuels of 0.9 percent in Jul 2012 but decline of food, drinks and tobacco of 0.9 percent.
Table VD-5, Euro Zone, Volume of Retail Sales by Products, ∆%
| Jul 2012 | Month ∆% | 12-Month ∆% |
| Total | -0.2 | -1.7 |
| Food, Drinks, Tobacco | -0.9 | -1.7 |
| Nonfood Products ex Automotive Fuel | 0.9 | -1.0 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-05092012-AP/EN/4-05092012-AP-EN.PDF
Month and 12-month percentage rates of change of retail sales by member countries of the euro zone are shown in Table VD-6 for Jun 2012. Retail sales are weak throughout the euro zone. The 12-month percentage changes are negative for all members in Table VD-5 with the exception of 3.0 percent for France, 0.2 percent for Finland and 0.7 percent for Ireland. The 12-month percentage change for the UK, which is not a member of the euro zone, was 4.4 percent. The European Union’s 12-month percentage change was also negative by 0.2 percent.
Table VD-6, Euro Zone, Volume of Retail Sales by Member Countries, ∆%
| Jun 2012 | Month ∆% | 12-Month ∆% |
| Euro Zone | -0.2 | -1.7 |
| Germany | -0.9 | -1.0 |
| France | 0.9 | 3.0 |
| Netherlands | NA | NA |
| Finland | 0.0 | 0.2 |
| Belgium | 0.7 | -3.4 |
| Portugal | 0.1 | -7.6 |
| Ireland | 1.7 | 0.7 |
| Italy | NA | NA |
| Greece | NA | NA |
| Spain | -1.9 | -7.3 |
| UK | 0.4 | 4.4 |
| European Union | 0.0 | -0.2 |
Source: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-05092012-AP/EN/4-05092012-AP-EN.PDF
VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2011, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economy. The German economy grew at 3.7 percent in 2010 and at 3.0 percent in 2011. Growth slowed in 2011 from 1.3 percent in IQ2011, 0.3 percent in IIQ2011 and 0.6 percent in IIIQ2011 to decline of 0.2 percent in IVQ2011 and growth of 0.5 percent in IQ2012. The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):
“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”
Table VE-DE, Germany, GDP Year ∆%
| Price Adjusted Chain-Linked | Price- and Calendar-Adjusted Chain Linked | |
| 2011 | 3.0 | 3.1 |
| 2010 | 4.2 | 4.0 |
| 2009 | -5.1 | -5.1 |
| 2008 | 1.1 | 0.8 |
| 2007 | 3.3 | 3.4 |
| 2006 | 3.7 | 3.9 |
| 2005 | 0.7 | 0.8 |
| 2004 | 1.2 | 0.7 |
| 2003 | -0.4 | -0.4 |
| 2002 | 0.0 | 0.0 |
| 2001 | 1.5 | 1.6 |
| 2000 | 3.1 | 3.3 |
| 1999 | 1.9 | 1.8 |
| 1998 | 1.9 | 1.7 |
| 1997 | 1.7 | 1.8 |
| 1996 | 0.8 | 0.8 |
| 1995 | 1.7 | 1.8 |
| 1994 | 2.5 | 2.5 |
| 1993 | -1.0 | -1.0 |
| 1992 | 1.9 | 1.5 |
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1
The Markit Germany Composite Output Index of the Markit Germany Services PMI®, combining manufacturing and services with close association with Germany’s GDP, fell from 47.5 in Jul to 47.0 in Aug, which is the lowest level since Jun 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10048). Tim Moore, Senior Economist at Markit and author of the report, finds renewed weakness in joint contraction of services and manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10048). There was marginal deterioration in the Germany Services Business Activity Index from 50.3 in Jul to 48.3 in Aug, which is the lowest since Jul 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10048). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing output, increased from 43.0 in Jul, which is the weakest reading since Jun 2009, to 44.7 in Aug (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10014). Tim Moore, Senior Economist at Markit and author of the report, finds that even with the marginal improvement, manufacturing is experiencing the weakest performance in a quarter in more than three years with export orders falling at the fastest rate since Apr 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10014).Table DE provides the country data table for Germany.
Table DE, Germany, Economic Indicators
| GDP | IIQ2012 0.3 ∆%; II/Q2012/IIQ2011 ∆% 0.5 1.0 CA 2011/2010: 3.0% GDP ∆% 1992-2011 Blog 8/26/12 5/27/12 |
| Consumer Price Index | Aug month NSA ∆%: 0.3 |
| Producer Price Index | Jul month ∆%: -0.1 CSA, 0.0 NSA |
| Industrial Production | Mfg Jul month CSA ∆%: 1.8 |
| Machine Orders | MFG Jul month ∆%: 0.5 |
| Retail Sales | Jul Month ∆% -1.0 12-Month ∆% -0.9 Blog 9/2/12 |
| Employment Report | Unemployment Rate Jul 5.8% |
| Trade Balance | Exports Jul 12-month NSA ∆%: 9.2 Blog 9/9/12 |
Links to blog comments in Table DE:
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
The production industries index of Germany in Table VE-1 shows increase of 1.3 percent in Jul 2012 and increase of 2.0 percent in the 12 months ending in Jul 2012. Germany’s production industries suffered decline of 7.3 percent in Dec 2008 relative to Dec 2007 and decline of 2.3 percent in 2009. Recovery was vigorous with 14.2 percent in the 12 months ending in Dec 2010. The first quarter of 2011 was quite strong when the German economy outperformed the other advanced economies. The performance of Germany’s production industries from 2002 to 2006 was vigorous with average rate of 4.5 percent. Data for the production industries index of Germany fluctuate sharply from month to month and also in 12-month rates.
Table VE-1, Germany, Production Industries, Month and 12-Month ∆%
| 12-Month ∆% NSA | Month ∆% Calendar SA | |
| Jul 2012 | 2.0 | 1.3 |
| Jun | 3.7 | -0.4 |
| May | -6.8 | 1.7 |
| Apr | -1.0 | -2.3 |
| Mar | -0.8 | 2.3 |
| Feb | 1.9 | -0.5 |
| Jan | 4.3 | 0.5 |
| Dec 2011 | 1.2 | -2.0 |
| Nov | 4.6 | 0.1 |
| Oct | 0.4 | 0.5 |
| Sep | 5.5 | -2.2 |
| Aug | 11.3 | -0.3 |
| Jul | 6.5 | 3.0 |
| Jun | 0.0 | -1.0 |
| May | 18.9 | 1.0 |
| Apr | 5.8 | -0.3 |
| Mar | 10.3 | 0.9 |
| Feb | 16.4 | 1.2 |
| Jan | 16.0 | 0.7 |
| Dec 2010 | 14.2 | |
| Dec 2009 | -2.3 | |
| Dec 2008 | -7.3 | |
| Dec 2007 | -0.1 | |
| Dec 2006 | 2.5 | |
| Dec 2005 | 4.9 | |
| Dec 2004 | 5.3 | |
| Dec 2003 | 5.1 | |
| Dec 2002 | 2.0 | |
| Average ∆% per Year | ||
| Dec 1993 to Dec 2011 | 1.4 | |
| Dec 1993 to Dec 2000 | 1.5 | |
| Dec 1993 to Dec 2006 | 1.6 | |
| Dec 2002 to Dec 2006 | 4.5 | |
| Dec 2007 to Dec 2011 | 1.2 |
Source: Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table VE-2 provides monthly percentage changes of the German production industries index by components from Dec 2011 to Jul 2012. There were two sharp declines in the monthly production industries of 2.0 percent in Dec 2011 and 2.3 percent in Apr 2012 and milder declines of 0.5 percent in Feb 2012 and 0.4 percent in Jun 2012 with much milder recoveries in the other months but growth of 1.3 percent in Jul, 1.7 percent in May 2012 and 2.3 percent in Mar 2012. The declines of investment or capital goods were quite sharp with 1.4 percent in Dec 2011, 3.7 percent in Apr 2012 with recovery by 2.2 percent in May 2012 but declines of 1.6 percent in Jul 2012 and 0.2 percent in Aug 2012. Durable goods fell in three of eight months from Dec 2011 to Jul 2012 and nondurable goods fell in six of the eight months from Dec 2011 to Jul 2012.
Table VE-2, Germany, Production Industries, Industry and Components, Month ∆%
| Jul | Jun | May | Apr | Mar | Feb | Jan | Dec | |
| Production | 1.3 | -0.4 | 1.7 | -2.3 | 2.3 | -0.5 | 0.5 | -2.0 |
| Industry | 1.7 | -0.8 | 2.0 | -2.3 | 1.1 | 0.2 | 0.4 | -1.5 |
| Mfg | 1.8 | -0.9 | 2.1 | -2.3 | 1.1 | 0.3 | 0.3 | -1.4 |
| Intermediate Goods | 0.2 | 0.0 | 1.1 | -0.4 | 0.2 | -0.1 | 0.5 | -1.8 |
| Capital | -0.2 | -1.6 | 2.2 | -3.7 | 1.6 | 0.9 | 0.5 | -1.4 |
| Durable Goods | 2.2 | 0.0 | 2.9 | -1.5 | 0.5 | -1.5 | 1.2 | -1.6 |
| Nondurable Goods | -0.9 | -0.6 | 3.8 | -3.9 | 2.6 | -1.0 | -0.9 | -0.7 |
| Energy | -3.7 | 5.8 | -2.4 | -0.2 | -2.0 | 6.7 | 1.1 | -6.8 |
Seasonally Calendar Adjusted
Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table VE-3 provides 12-month unadjusted percentage changes of industry and components in Germany. Although there are sharp fluctuations in the data there is suggestion of deceleration that would be expected from much higher earlier rates. The deceleration is quite evident in single-digit percentage changes from Sep 2011 to Jun 2012 relative to high double-digit percentage changes in Jan-Mar 2011. There are multiple negative 12-month percentage changes across many segments. Growth rates in the recovery from the global recession from IVQ2007 to IIQ2009 were initially very vigorous in comparison with the growth rates before the contraction that are shown in the bottom part of Table VE-3.
Table VE-3, Germany, Industry and Components, 12-Month ∆% Unadjusted
| IND | MFG | INTG | CG | DG | NDG | EN | |
| 2012 | |||||||
| Jul | 1.8 | 1.8 | 0.2 | 4.4 | -3.8 | -0.4 | 0.5 |
| Jun | 3.2 | 3.3 | 1.6 | 5.7 | 6.7 | 0.1 | 5.4 |
| May | -7.3 | -7.1 | -7.1 | -7.0 | -11.4 | -8.1 | 0.0 |
| Apr | -1.3 | -1.2 | -1.6 | 1.0 | -6.4 | -5.9 | 0.7 |
| Mar | -0.5 | -0.4 | -2.3 | 2.7 | -6.5 | -3.3 | -6.3 |
| Feb | 3.2 | 3.3 | 1.4 | 7.1 | -0.7 | -2.1 | 0.0 |
| Jan | 5.9 | 5.7 | 4.2 | 9.5 | 4.3 | 1.1 | -12.0 |
| 2011 | |||||||
| Dec | 1.4 | 1.4 | 2.5 | 1.0 | -0.4 | 0.2 | -16.4 |
| Nov | 4.9 | 5.1 | 3.9 | 7.9 | 1.9 | 0.0 | -4.0 |
| Oct | 1.1 | 1.2 | 0.4 | 3.6 | -2.7 | -2.8 | -7.2 |
| Sep | 6.4 | 6.5 | 6.4 | 8.9 | 3.6 | 0.2 | -6.3 |
| Aug | 12.8 | 12.6 | 10.8 | 20.2 | 4.5 | 1.2 | -3.5 |
| Jul | 8.0 | 8.1 | 6.5 | 13.1 | 7.7 | -0.5 | -8.1 |
| Jun | 0.9 | 0.9 | 1.6 | 2.0 | -10.5 | -2.0 | -7.4 |
| May | 21.4 | 21.4 | 17.7 | 28.3 | 21.7 | 13.4 | -12.0 |
| Apr | 7.4 | 7.5 | 5.9 | 11.1 | 4.9 | 2.2 | -8.2 |
| Mar | 10.7 | 10.9 | 10.0 | 14.9 | 8.5 | 2.1 | 1.2 |
| Feb | 16.8 | 17.0 | 16.1 | 22.4 | 11.0 | 6.1 | -2.2 |
| Jan | 16.8 | 17.1 | 16.7 | 23.2 | 11.2 | 4.2 | -1.8 |
| 2010 | |||||||
| Dec | 17.5 | 17.6 | 14.5 | 26.3 | 9.1 | 2.9 | 4.8 |
| Nov | 13.8 | 13.8 | 13.1 | 19.0 | 7.9 | 3.6 | 2.9 |
| Oct | 9.9 | 10.1 | 10.1 | 13.9 | 6.5 | 0.9 | 0.2 |
| Sep | 9.5 | 9.3 | 12.1 | 10.0 | 7.9 | 1.7 | -2.4 |
| Aug | 17.2 | 17.2 | 19.0 | 20.3 | 19.5 | 6.9 | -2.1 |
| Jul | 9.1 | 8.8 | 12.7 | 8.7 | 7.2 | 0.9 | -0.2 |
| Jun | 16.2 | 16.1 | 20.5 | 16.0 | 20.5 | 5.3 | -2.5 |
| May | 13.3 | 13.3 | 20.2 | 11.6 | 10.7 | 1.7 | 12.8 |
| Apr | 14.9 | 14.8 | 21.8 | 15.3 | 8.5 | 0.0 | 9.9 |
| Mar | 14.2 | 14.5 | 20.4 | 11.7 | 11.8 | 6.4 | 7.2 |
| Feb | 7.1 | 7.5 | 10.8 | 7.0 | 7.4 | -1.2 | 5.4 |
| Jan | 0.6 | 0.9 | 6.7 | -3.4 | -0.4 | -3.9 | 3.3 |
| Dec 2010 | 17.5 | 17.6 | 14.5 | 26.3 | 9.1 | 2.9 | 4.8 |
| Dec 2009 | -3.3 | -3.2 | 3.3 | -9.9 | -0.1 | 1.1 | 3.8 |
| Dec 2008 | -7.6 | -7.4 | -14.4 | -5.5 | -11.2 | 3.7 | -9.0 |
| Dec 2007 | 0.1 | -0.3 | -0.6 | 2.5 | -10.0 | -2.6 | 1.7 |
| Dec 2006 | 3.1 | 3.1 | 5.2 | 2.3 | 8.7 | -1.0 | -5.4 |
| Dec 2005 | 5.8 | 5.8 | 3.5 | 8.9 | 3.2 | 2.2 | 0.6 |
| Dec 2004 | 5.2 | 5.6 | 7.6 | 3.4 | 0.9 | 5.7 | 9.6 |
| Dec 2003 | 5.5 | 5.3 | 5.6 | 6.3 | 1.6 | 4.6 | 0.3 |
| Dec 2002 | 3.7 | 3.4 | 5.3 | 3.4 | -5.9 | 2.2 | -2.6 |
Note: IND: Industry; MFG: Manufacturing; INTG: Intermediate Goods; CG: Capital Goods; DG: Durable Goods; NDG: Nondurable Goods; EN: Energy
Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Broader perspective since 2002 is provided by Chart VE-1 of the Statistisches Bundesamt Deutschland, Federal Statistical Agency of Germany. The index rises by more than one third between 2003 and 2008 with sharp fluctuations and then collapses during the global recession in 2008. Recovery has been in a steep upward trajectory that has recovered at the more recent peaks the losses during the contraction. Recovery was reversed by the drop in Dec with strong rebound into 2012 and another sharp drop in Apr 2012 with recovery in May 2012 and another drop in Jul 2012.
Chart VE-1, Germany, Production Industries, Not Adjusted, 2005=100
Source: Statistiche Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
More detail is provided by Chart VE-2 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2007 to 2012. There could be some flattening in recent months as depicted by trend.
Chart VE-2, Germany, Production Index, Production Industries, Not Adjusted Index and Trend, 2005=100
Source: Statistiche Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table VE-4 provides month and 12-month rates of growth of manufacturing in Germany in 2011 from Jan 2011 to Jul 2012. There are fluctuations in both monthly rates and in the past 12 months. Recovery is strong in Jan-Mar 2012 with cumulative growth of 1.7 percent at the high annual equivalent rate of 7.0 percent but the drop in Apr 2012 of 2.3 percent results in decline of 0.6 percent in the first four months of 2012 that pulls down the 12-month rate of Apr 2012 to minus 1.2 percent. Growth of 2.1 percent in May 2012 is insufficient to prevent decline of 7.1 percent in 12 months because production was quite strong in the first part of 2011. Manufacturing decreased 0.8 percent in Jun 2011 but the 12-month change was 3.3 percent. In Jul 2012, manufacturing grew 1.8 percent in the month and also 1.8 percent in 12 months.
Table VE-4, Germany, Manufacturing Month and 12-Month ∆%
| 12-Month ∆% NSA | Month ∆% SA and Calendar Adjusted | |
| Jul 2012 | 1.8 | 1.8 |
| Jun | 3.3 | -0.9 |
| May | -7.1 | 2.1 |
| Apr | -1.2 | -2.3 |
| Mar | -0.4 | 1.1 |
| Feb | 3.3 | 0.3 |
| Jan | 5.7 | 0.3 |
| Dec 2011 | 1.4 | -1.4 |
| Nov | 5.1 | -0.3 |
| Oct | 1.2 | 0.5 |
| Sep | 6.5 | -2.3 |
| Aug | 12.6 | -0.3 |
| Jul | 8.1 | 3.2 |
| Jun | 0.9 | -1.1 |
| May | 21.4 | 1.4 |
| Apr | 7.5 | 0.4 |
| Mar | 10.9 | 0.7 |
| Feb | 17.0 | 1.4 |
| Jan | 17.1 | -0.6 |
| Dec | 17.6 | 1.9 |
Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-3 of the Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, provides the manufacturing index of Germany from 2007 to 2012. Manufacturing was already flattening in 2007 and fell sharply in 2008 to the beginning of 2010. Manufacturing grew sharply in the initial phase of recovery but has flattened in recent months as revealed by the trend.
Chart VE-3, Germany, Manufacturing Index, Not Adjusted Index and Trend, 2005=100
Source: Statistiche Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Several tables and charts facilitate analysis of machinery orders in Germany. Table VE-5 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany. The same behavior is observed for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and some negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. Total orders increased 0.5 percent in Jul 2012 with increase of 1.0 percent in domestic orders and increase of 0.1 percent of foreign orders. As in other countries, data on orders for manufacturing are highly volatile. All 12-month percentage changes from Jan 2012 to Jul 2012 in Table VE-5, with exception of 0.1 percent for Jan 2012, are negative largely because of the unusual strength of the Germany economy in the beginning of 2011.
Table VE-5, Germany, Volume of Orders Received in Manufacturing, Total, Domestic and Foreign, ∆%
| Total | Total | Foreign 12 M | Foreign M | Home | Home | |
| 2012 | ||||||
| Jul | -1.7 | 0.5 | -0.6 | 0.1 | -3.2 | 1.0 |
| Jun | -5.0 | -1.6 | -7.1 | -1.5 | -1.9 | -1.8 |
| May | -10.5 | 0.8 | -3.1 | 2.6 | -18.4 | -1.4 |
| Apr | -3.4 | -1.2 | -4.0 | -2.7 | -2.5 | 0.6 |
| Mar | -2.0 | 2.7 | -0.9 | 3.7 | -3.3 | 1.3 |
| Feb | -4.5 | 0.6 | -4.9 | 1.7 | -3.9 | -0.8 |
| Jan | -3.1 | -1.4 | -5.7 | -3.8 | 0.1 | 1.7 |
| 2011 | ||||||
| Dec | -0.2 | 0.8 | -0.8 | 3.9 | 0.6 | -2.8 |
| Nov | -4.2 | -3.1 | -7.6 | -5.0 | 0.0 | -0.7 |
| Oct | 0.6 | 2.8 | 2.2 | 4.9 | -1.3 | 0.5 |
| Sep | 2.4 | -4.4 | 1.2 | -5.8 | 3.8 | -2.7 |
| Aug | 6.8 | -0.9 | 4.3 | -0.6 | 10.1 | -1.3 |
| Jul | 5.6 | -2.6 | 5.7 | -6.5 | 5.6 | 2.6 |
| Jun | 3.8 | 1.0 | 8.0 | 11.0 | -1.6 | -9.9 |
| May | 22.7 | 2.6 | 16.2 | -3.5 | 30.2 | 10.2 |
| Apr | 6.9 | 2.0 | 9.9 | 2.2 | 3.4 | 1.8 |
| Mar | 9.1 | -3.1 | 11.9 | -3.1 | 5.8 | -3.2 |
| Feb | 21.5 | 0.5 | 24.8 | -0.5 | 17.8 | 1.9 |
| Jan | 22.4 | 4.5 | 26.5 | 3.7 | 17.6 | 5.5 |
| 2010 | ||||||
| Dec | 22.2 | -3.3 | 27.3 | -3.4 | 15.8 | -3.2 |
| Nov | 21.5 | 5.4 | 26.8 | 8.4 | 15.6 | 1.8 |
| Oct | 14.1 | 1.2 | 17.7 | 0.8 | 10.4 | 1.8 |
| Sep | 13.9 | -2.6 | 16.0 | -5.1 | 11.6 | 0.4 |
| Aug | 23.5 | 3.2 | 31.9 | 5.7 | 14.4 | 0.2 |
| Jul | 14.2 | -1.8 | 21.7 | -2.2 | 6.3 | -1.1 |
| Jun | 28.5 | 3.6 | 32.0 | 5.8 | 24.3 | 1.2 |
| May | 24.4 | 0.5 | 28.9 | 0.9 | 19.9 | -0.1 |
| Apr | 29.3 | 2.3 | 33.0 | 2.3 | 25.2 | 2.2 |
| Mar | 29.4 | 5.6 | 32.3 | 6.1 | 26.4 | 5.0 |
| Feb | 23.4 | -0.4 | 27.6 | -0.4 | 18.6 | -0.4 |
| Jan | 16.7 | 4.5 | 23.6 | 4.4 | 9.7 | 4.8 |
| Dec 2009 | 9.2 | -2.3 | 10.6 | -2.6 | 7.4 | -1.9 |
| Dec 2008 | -28.2 | -7.1 | -31.5 | -9.6 | -23.7 | -4.1 |
| Dec 2007 | 7.1 | -1.7 | 9.1 | -2.5 | 4.5 | -0.6 |
| Dec 2006 | 2.9 | 0.4 | 3.4 | 0.4 | 2.2 | 0.5 |
| Dec 2005 | 4.9 | -0.5 | 10.5 | -0.9 | -1.5 | 0.1 |
| Dec 2004 | 12.7 | 6.6 | 12.9 | 8.4 | 12.7 | 4.9 |
| Dec 2003 | 10.7 | 2.4 | 16.4 | 5.4 | 5.1 | -0.8 |
| Dec 2002 | -0.2 | -3.4 | -0.8 | -6.6 | 0.2 | -0.3 |
| Average ∆% 2003-2007 | 7.6 | 10.4 | 4.5 | |||
| Average ∆% 2003-2011 | 3.6 | 5.1 | 1.9 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Orders for capital goods of Germany are shown in Table VE-6. Total capital goods orders increased 0.5 percent in Jul 2012 with foreign orders decreasing 0.4 percent and domestic orders increasing 2.0 percent. There has been evident deceleration from 2010 and early 2011 with growth rates falling from two digit levels to single digits and multiple negative changes. An important aspect of Germany’s economy shown in Tables VE-5 and VE-6 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007. Germany adopted fiscal and labor market reforms to increase productivity.
Table VE-6, Germany, Volume of Orders Received of Capital Goods Industries, Total, Foreign and Domestic, ∆%
| Total 12 M | Total M | Foreign 12 M | Foreign M | Domestic 12 M | Domestic M | |
| 2012 | ||||||
| Jul | 0.3 | 0.5 | 1.1 | -0.4 | -1.0 | 2.0 |
| Jun | -7.5 | -0.8 | -10.9 | -0.7 | -1.1 | -1.2 |
| May | -11.1 | 0.5 | -1.9 | 2.1 | -22.9 | -2.1 |
| Apr | -2.3 | -2.5 | -3.7 | -4.5 | 0.0 | 1.1 |
| Mar | 1.9 | 5.0 | 3.8 | 8.4 | -1.1 | -0.2 |
| Feb | -5.9 | 1.4 | -7.4 | 1.1 | -3.6 | 1.8 |
| Jan | -3.6 | -4.6 | -6.0 | -5.3 | 0.6 | -3.2 |
| 2011 | ||||||
| Dec | 1.6 | 3.0 | 0.5 | 4.4 | 3.5 | 1.0 |
| Nov | -5.9 | -4.1 | -9.4 | -7.1 | -0.1 | 0.6 |
| Oct | 3.6 | 5.1 | 7.5 | 8.1 | -2.3 | 0.6 |
| Sep | 2.9 | -5.3 | 1.8 | -6.5 | 4.9 | -3.3 |
| Aug | 6.3 | -0.2 | 3.5 | 0.4 | 11.1 | -1.2 |
| Jul | 7.7 | -7.2 | 6.9 | -12.2 | 8.9 | 2.0 |
| Jun | 8.9 | 3.7 | 13.6 | 18.1 | 1.0 | -15.1 |
| May | 26.8 | 4.0 | 18.0 | -5.1 | 40.3 | 19.1 |
| Apr | 11.3 | 3.6 | 14.7 | 4.7 | 6.2 | 1.8 |
| Mar | 11.0 | -5.7 | 13.7 | -5.4 | 7.0 | -6.4 |
| Feb | 29.4 | 2.5 | 33.1 | 1.0 | 23.9 | 4.8 |
| Jan | 26.4 | 3.3 | 32.4 | 3.5 | 17.5 | 2.9 |
| 2010 | ||||||
| Dec | 27.3 | -4.8 | 31.0 | -6.0 | 21.3 | -2.7 |
| Nov | 30.1 | 9.0 | 35.9 | 13.5 | 21.5 | 2.2 |
| Oct | 20.6 | 1.2 | 23.9 | -0.5 | 16.0 | 4.1 |
| Sep | 18.1 | -4.5 | 20.4 | -7.0 | 14.6 | -0.1 |
| Aug | 29.3 | 6.3 | 42.8 | 8.8 | 12.0 | 2.3 |
| Jul | 14.1 | -3.7 | 28.4 | -4.8 | -2.3 | -2.1 |
| Jun | 33.5 | 5.8 | 41.3 | 9.5 | 22.2 | 0.4 |
| May | 25.9 | 1.9 | 35.6 | 1.4 | 13.6 | 2.6 |
| Apr | 30.1 | 1.5 | 40.1 | 2.3 | 17.4 | 0.6 |
| Mar | 26.2 | 7.5 | 33.8 | 8.6 | 16.1 | 5.6 |
| Feb | 20.3 | -1.5 | 30.3 | -0.6 | 8.1 | -2.5 |
| Jan | 16.9 | 4.6 | 29.5 | 2.8 | 2.5 | 7.2 |
| Dec 2009 | 8.1 | -1.4 | 13.6 | -1.5 | 0.5 | -1.2 |
| Dec 2008 | -32.2 | -7.2 | -36.7 | -9.8 | -24.4 | -3.5 |
| Dec 2007 | 9.6 | -0.8 | 11.6 | -2.6 | 6.3 | 2.2 |
| Dec 2006 | 3.6 | 2.3 | 3.8 | 2.8 | 3.1 | 1.4 |
| Dec 2005 | 1.9 | -2.1 | 9.8 | -2.4 | -8.5 | -1.6 |
| Dec 2004 | 19.4 | 11.2 | 18.6 | 12.2 | 20.5 | 9.8 |
| Dec 2003 | 11.7 | 2.1 | 17.2 | 5.0 | 5.4 | -1.6 |
| Dec 2002 | -2.8 | -4.3 | -3.7 | -8.1 | -1.8 | 0.2 |
| Average ∆% 2003-2007 | 9.1 | 12.1 | 4.9 | |||
| Average ∆% 2003-2011 | 4.3 | 5.9 | 2.2 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-4 of the German Statistisches Bundesamt Deutschland shows the sharp upward trend of total orders in manufacturing before the global recession. There is also an obvious upward trend in the recovery from the recession with Germany’s economy being among the most dynamic in the advanced economies until the slowdown beginning in the final months of 2011 and what could be stationary series from late 2011 into 2012.
Chart VE-4, Germany, Volume of Total Orders in Manufacturing, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-5 of the German Statistisches Bundesamt Deutschland provides unadjusted volume of total orders in manufacturing and a trend curve. The final segment on the right could be the beginning of flattening or even decline of the trend curve but it is early to reach conclusions.
Chart VE-5, Germany, Volume of Total Orders in Manufacturing and Trend, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-7. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.4 percent and imports 13.2 percent. In Sep 2011, exports grew 10.5 percent relative to a year earlier and imports grew 12.0 percent. Growth rates in 12 months ending in Oct fell significantly to 3.7 percent for exports and 8.9 percent for imports. Lower prices may explain part of the decline in nominal values. Exports grew 9.2 percent in 12 months ending in Jul 2012 and imports increased 1.9 percent. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.
Table VE-7, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%
| Exports EURO Billions | 12- Month | Imports | 12-Month | |
| Jul | 93.6 | 9.2 | 76.7 | 1.9 |
| Jun | 94.7 | 7.5 | 76.8 | 1.5 |
| May | 92.7 | 0.8 | 77.2 | -0.3 |
| Apr | 87.1 | 3.4 | 72.7 | -1.0 |
| Mar | 98.8 | 0.6 | 81.4 | 2.5 |
| Feb | 91.2 | 8.5 | 76.3 | 5.8 |
| Jan | 86.0 | 9.3 | 72.8 | 6.2 |
| Dec 2011 | 85.0 | 4.9 | 72.1 | 5.4 |
| Nov | 94.8 | 8.2 | 78.9 | 7.0 |
| Oct | 89.2 | 3.7 | 77.9 | 8.9 |
| Sep | 95.0 | 10.5 | 77.8 | 12.0 |
| Aug | 85.1 | 14.4 | 73.5 | 13.2 |
| Jul | 85.7 | 5.3 | 75.3 | 10.0 |
| Jun | 88.1 | 3.3 | 75.6 | 6.2 |
| May | 92.0 | 20.8 | 77.4 | 17.2 |
| Apr | 84.3 | 12.1 | 73.4 | 18.1 |
| Mar | 98.2 | 14.7 | 79.4 | 14.5 |
| Feb | 84.1 | 20.1 | 72.1 | 27.1 |
| Jan | 78.6 | 24.1 | 68.5 | 24.4 |
| Dec 2010 | 81.0 | 20.0 | 68.4 | 24.4 |
| Nov | 87.6 | 21.2 | 73.7 | 30.9 |
| Oct | 86.0 | 18.7 | 71.5 | 19.2 |
| Sep | 86.0 | 21.2 | 69.5 | 17.0 |
| Aug | 74.4 | 23.8 | 64.9 | 27.1 |
| Jul | 81.4 | 15.3 | 68.4 | 24.4 |
| Jun | 85.3 | 27.5 | 71.2 | 33.9 |
| May | 76.2 | 25.6 | 66.1 | 31.3 |
| Apr | 75.2 | 16.7 | 62.2 | 14.4 |
| Mar | 85.6 | 22.0 | 69.3 | 18.0 |
| Feb | 70.0 | 9.7 | 56.8 | 3.2 |
| Jan | 63.4 | -0.3 | 55.1 | -1.9 |
| Dec 2009 | 67.5 | 1.2 | 55.0 | -7.3 |
| Dec 2008 | 66.7 | -8.6 | 59.4 | -5.1 |
| Dec 2007 | 73.0 | -0.6 | 62.5 | -0.1 |
| Dec 2006 | 73.4 | 10.2 | 62.6 | 8.5 |
| Dec 2005 | 66.6 | 11.5 | 57.7 | 18.1 |
| Dec 2004 | 59.7 | 9.2 | 48.9 | 10.8 |
| Dec 2003 | 54.7 | 7.6 | 44.1 | 3.9 |
| Dec 2002 | 50.8 | 5.5 | 42.5 | 6.4 |
| Dec 2001 | 48.2 | -3.7 | 39.9 | -17.5 |
| Dec 2000 | 50.0 | 48.4 |
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/09/PE12_303_51.html;jsessionid=807581660CF67FED0FC729A83F38D5FB.cae2 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table VE-8 provides monthly rates of growth of exports and imports of Germany. Exports increased 0.5 percent in Jul 2012 after declining 1.4 percent in Jun 2012 and imports increased 0.9 percent in Jul after declining 2.9 percent in Jun 2012. Export growth and import growth were vigorous in Jan-Mar 2011 when Germany’s economy outperformed most advanced economies but less dynamic and consistently in following months as world trade weakens.
Table VE-8, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted
| Exports | Imports | |
| Jul 2012 | 0.5 | 0.9 |
| Jun | -1.4 | -2.9 |
| May | 4.2 | 6.2 |
| Apr | -1.7 | -4.9 |
| Mar | 0.8 | 0.9 |
| Feb | 1.5 | 2.9 |
| Jan | 2.4 | 2.8 |
| Dec 2011 | -3.1 | -3.9 |
| Nov | 2.2 | -0.2 |
| Oct | -2.7 | 0.1 |
| Sep | 0.7 | -1.0 |
| Aug | 3.2 | -0.1 |
| Jul | -1.0 | 0.5 |
| Jun | -0.6 | -0.1 |
| May | 2.3 | 2.4 |
| Apr | -3.4 | -0.9 |
| Mar | 5.6 | 2.5 |
| Feb | 1.7 | 2.6 |
| Jan | 0.2 | 4.0 |
| Dec 2010 | 0.1 | -2.6 |
Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/09/PE12_303_51.html;jsessionid=807581660CF67FED0FC729A83F38D5FB.cae2 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-6 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that could be flattening.
Chart VE-6, Germany, Exports Original Value and Trend 2007-2012
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-7 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend that could be flattening.
Chart VE-7, Germany, Imports Original Value and Trend 2007-2012
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-8 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2007. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization followed by stronger trend in recent months.
Chart VE-8, Germany, Trade Balance Original and Trend 2007-2012
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
There is extremely important information in Table VE-9 for the current sovereign risk crisis in the euro zone. Table VE-9 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Jul 2012. German exports to other European Union (EU) members are 55.3 percent of total exports in Jul 2012 and 57.6 percent in Jan-Jul 2012. Exports to the euro area are 36.4 percent in Jul and 38.2 percent in Jan-Jul. Exports to third countries are 44.7 percent of the total in Jul and 42.4 percent in Jan-Jul. There is similar distribution for imports. Exports to non-euro countries are growing at 6.9 percent in Jul 2012 and 4.8 percent in Jan-Jul 2012 while exports to the euro area are growing 3.2 percent in Jul and decreasing 0.6 percent in Jan-Jul 2012. Price competitiveness through devaluation could improve export performance and growth. Economic performance in Germany is closely related to its high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone. Germany could benefit from depreciation of the euro because of its high share in exports to countries not in the euro zone but breakdown of the euro zone raises doubts on the region’s economic growth that could affect German exports to other member states.
Table VE-9, Germany, Structure of Exports and Imports by Region, € Billions and ∆%
| Jul 2012 | Jul 12-Month | Jan–Jul 2012 € Billions | Jan-Jul 2012/ | |
| Total | 93.6 | 9.2 | 644.1 | 5.4 |
| A. EU | 51.8 % 55.3 | 4.4 | 370.9 % 57.6 | 1.2 |
| Euro Area | 34.1 % 36.4 | 3.2 | 246.0 % 38.2 | -0.6 |
| Non-euro Area | 17.6 % 18.8 | 6.9 | 124.9 % 19.4 | 4.8 |
| B. Third Countries | 41.8 % 44.7 | 15.9 | 273.2 % 42.4 | 11.8 |
| Total Imports | 76.7 | 1.9 | 533.8 | 2.3 |
| C. EU Members | 49.3 % 64.3 | 5.6 | 340.0 % 63.7 | 2.5 |
| Euro Area | 34.7 % 45.2 | 6.7 | 239.5 % 44.9 | 2.2 |
| Non-euro Area | 14.6 % 19.0 | 3.3 | 100.5 % 18.8 | 3.3 |
| D. Third Countries | 27.4 % 35.7 | -4.2 | 193.8 % 36.3 | 1.9 |
Notes: Total Exports = A+B; Total Imports = C+D
Source:
Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/09/PE12_303_51.html;jsessionid=807581660CF67FED0FC729A83F38D5FB.cae2 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IIQ1949 to IIQ2012 is quite high at 3.3 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.1 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.8 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using second quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.
Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012
| Period | Average ∆% |
| 1949-2012* | 3.3 |
| 2000-2012* | 1.1 |
| 2000-2011 | 1.1 |
| 2000-2007 | 1.7 |
| 1990-1999 | 1.8 |
| 1980-1989 | 2.6 |
| 1970-1979 | 3.8 |
| 1960-1969 | 5.7 |
| 1950-1959 | 4.2 |
*Second Quarter on Second Quarter
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814
The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, was virtually unchanged from 47.9 in Jul to 48.0 in Aug, indicating contraction of private sector activity at a more moderate rate and the highest reading in five months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10049). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI®, finds fragility in French private sector services and labor markets (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10049). The Markit France Services Activity index fell from 50.0 in Jul to 49.2 in Aug for the weakest reading in two months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10049). The Markit France Manufacturing Purchasing Managers’ Index® rebounded to 46.0 in Aug from 43.4 in Jun, which was the sharpest decline of the manufacturing economy since May 2009 that softened in Aug (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10007). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds continuing deterioration in manufacturing with weakening new domestic orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10007). Table FR provides the country data table for France.
Table FR, France, Economic Indicators
| CPI | Jul month ∆% -0.4 |
| PPI | Jun month ∆%: -1.1 Blog 8/5/12 |
| GDP Growth | IIQ2012/IQ2012 ∆%: 0.0 |
| Industrial Production | Jun SA ∆%: |
| Consumer Spending | Jun Manufactured Goods |
| Employment | IIQ2012 Unemployed 2.785 million |
| Trade Balance | Jul Exports ∆%: month 0.8, 12 months 3.6 Jul Imports ∆%: month -3.5, 12 months -1.9 Blog 9/9/12 |
| Confidence Indicators | Historical averages 100 Aug Mfg Business Climate 90 Blog 9/2/12 |
Links to blog comments in Table FR:
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
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html
8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html
The number of unemployed in France rose from 2.091 million in IV2007, for a rate of unemployment of 7.5 percent, to 2.785 million in IIQ2012, for a rate of unemployment of 9.7 percent, as shown in Table VF-1. At the same time, the rate of employment fell from 64.6 percent in IV2007 to 63.9 percent in IIQ2012.
Table VF-1, France, Metropolitan France, Employment Rate, Unemployed and Unemployment Rate, Millions and %
| Unemployed | Unemployed Percent | Employment Rate | |
| IIQ2012 | 2.785 | 9.7 | 63.9 |
| IQ2012 | 2.733 | 9.6 | 63.8 |
| IVQ2011 | 2.675 | 9.4 | 63.9 |
| IIIQ2011 | 2.607 | 9.2 | 63.8 |
| IIQ2011 | 2.573 | 9.1 | 63.9 |
| IQ2011 | 2.594 | 9.2 | 63.9 |
| IVQ2010 | 2.626 | 9.2 | 63.8 |
| IIIQ2010 | 2.625 | 9.3 | 63.9 |
| IIQ2010 | 2.635 | 9.3 | 63.9 |
| IQ2010 | 2.672 | 9.4 | 63.9 |
| IVQ2009 | 2.707 | 9.6 | 63.7 |
| IIIQ2009 | 2.585 | 9.2 | 63.9 |
| IIQ2009 | 2.598 | 9.2 | 64.1 |
| IQ2009 | 2.414 | 8.6 | 64.4 |
| IVQ2008 | 2.176 | 7.7 | 64.8 |
| IIIQ2008 | 2.065 | 7.4 | 64.8 |
| IIQ2008 | 2.033 | 7.3 | 64.8 |
| IQ2008 | 1.983 | 7.1 | 64.9 |
| IV2007 | 2.091 | 7.5 | 64.6 |
| IIIQ2007 | 2.220 | 8.0 | 64.4 |
| IIQ2007 | 2.254 | 8.1 | 64.1 |
| IQ2007 | 2.336 | 8.4 | 63.9 |
| IVQ2006 | 2.318 | 8.4 | 63.9 |
| IVQ2005 | 2.486 | 9.1 | 63.5 |
| IVQ2004 | 2.428 | 8.9 | 63.7 |
| IVQ2003 | 2.370 | 8.8 | 63.8 |
| IVQ2002 | 2.143 | 8.0 | |
| IVQ2001 | 2.067 | 7.8 | |
| IVQ2000 | 2.158 | 8.0 | |
| IVQ1999 | 2.476 | 9.5 | |
| IVQ1995 | 2.546 | 10.0 | |
| IVQ1990 | 1.958 | 7.9 | |
| IVQ1985 | 2.173 | 8.9 | |
| IVQ1980 | 1.331 | 5.6 | |
| IVQ1975 | 0.847 | 3.7 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/fr/themes/info-rapide.asp?id=14&date=20120906
Chart VF-1 of the Institut National de la Statistique et des Études Économiques provides an excellent view of the unemployment rate in France. The rate of unemployment rose from 2003 to 2006 and then fell sharply in 2007. The global recession caused sharp increase in the French rate of unemployment that has declined from the peak, stabilized at a high level and is climbing again.
Chart VF-1, France, Unemployment Rate International Labor Organization Criterion, Seasonally Adjusted Average over Quarter, Percent
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/fr/themes/info-rapide.asp?id=14&date=20120906
France has been running a trade deficit fluctuating around €6,000 million, as shown in Table VF-2. Exports increased 0.8 percent in Jul 2012 while imports decreased 3.5 percent, resulting in increase of the trade deficit from revised €6065 million in Jun 2012 to €4271 million in Jul 2012.
Table VF-2, France, Exports, Imports and Trade Balance, € Millions
| Exports | Imports | Trade Balance | |
| Jul 2012 | 36,579 | 40,850 | -4,271 |
| Jun | 36,273 | 42,338 | -6,065 |
| May | 37,156 | 42,781 | -5,625 |
| Apr | 36,484 | 42,687 | -6,203 |
| Mar | 36,129 | 41,821 | -5,692 |
| Feb | 36,751 | 43,134 | -6,383 |
| Jan | 36,453 | 42,214 | -5,761 |
| Dec 2011 | 36,058 | 41,523 | -5,465 |
| Nov | 37,003 | 41,628 | -4,625 |
| Oct | 35,775 | 41,869 | -6,094 |
| Sep | 35,676 | 42,273 | -6,597 |
| Aug | 37,590 | 42,316 | -4,726 |
| Jul | 35,312 | 41,633 | -6,321 |
| Jun | 34,909 | 40,126 | -5,217 |
| May | 34,670 | 41,422 | -6,752 |
| Apr | 34,508 | 41,378 | -6,870 |
| Mar | 35,091 | 41,406 | -6,315 |
| Feb | 34,597 | 41,060 | -6,463 |
| Jan | 34,299 | 41,037 | -6,738 |
| Dec 2010 | 33,880 | 39,555 | -5,675 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp
Monthly and 12-month rates of growth of exports and imports of France are provided in Table VF-3. Exports increased 0.8 percent in Jul and increased 3.6 percent in the 12 months ending in Jul. Imports decreased 3.5 percent in Jul and decreased 1.9 percent in 12 months. Growth of exports and imports has fluctuated in 2011 and 2012 as a result of price surges of commodities and raw materials.
Table VF-3, France, Exports and Imports, Month and 12-Month ∆%
| Exports | Exports | Imports | Imports 12-Month ∆% | |
| Jul 2012 | 0.8 | 3.6 | -3.5 | -1.9 |
| Jun | -2.4 | 3.9 | -1.0 | 5.5 |
| May | 1.8 | 7.2 | 0.2 | 3.3 |
| Apr | 1.0 | 5.7 | 2.1 | 3.2 |
| Mar | -1.7 | 2.9 | -3.0 | 1.0 |
| Feb | 0.8 | 6.2 | 2.2 | 5.1 |
| Jan | 1.1 | 6.3 | 1.7 | 2.9 |
| Dec 2011 | -2.6 | 6.4 | -0.3 | 5.0 |
| Nov | 3.4 | 7.2 | -0.6 | 4.5 |
| Oct | 0.3 | 8.6 | -1.0 | 14.6 |
| Sep | -5.1 | 7.6 | -0.1 | 11.1 |
| Aug | 6.5 | 10.7 | 1.6 | 8.6 |
| Jul | 1.2 | 1.9 | 3.8 | 9.0 |
| Jun | 0.7 | 3.5 | -3.1 | 8.6 |
| May | 0.5 | 15.7 | 0.1 | 16.5 |
| Apr | -1.7 | 7.7 | 0.1 | 14.3 |
| Mar | 1.4 | 11.4 | 0.8 | 15.0 |
| Feb | 0.9 | 13.8 | 0.1 | 22.1 |
| Jan | 1.2 | 13.9 | 3.7 | 20.9 |
| Dec 2011 | 6.4 | 5.0 | ||
| Dec 2010 | 14.3 | 15.0 | ||
| Dec 2009 | -9.9 | -1.7 | ||
| Dec 2008 | -7.3 | -11.1 | ||
| Dec 2007 | 5.8 | 8.3 | ||
| Dec 2006 | 6.7 | 6.7 | ||
| Dec 2005 | 11.2 | 15.0 | ||
| Dec 2004 | -3.7 | 6.1 | ||
| Dec 2003 | 7.1 | 1.6 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp
Annual data for France’s exports, imports and trade balance are provided in Table VF-4. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €71,898 million in 2011. Annual growth rates of exports have not been sufficiently high to compensate for growth of imports driven in part by commodity price increases.
Table VF-4, France, Exports, Imports and Balance Year € Millions and ∆%
| Exports € Millions | ∆% | Imports € Millions | ∆% | Balance € Millions | |
| Jul 2012 12 Months | 437,858 | 505,930 | -68,072 | ||
| Year | |||||
| 2011 | 426,965 | 8.3 | 498,863 | 11.7 | -71,898 |
| 2010 | 394,187 | 13.8 | 446,626 | 14.0 | -52,439 |
| 2009 | 346,352 | -17.1 | 391,722 | -17.3 | -45,370 |
| 2008 | 417,634 | 2.7 | 473,853 | 5.5 | -56,219 |
| 2007 | 406,487 | 3.0 | 448,981 | 5.8 | -42,494 |
| 2006 | 394,621 | 9.5 | 424,549 | 10.4 | -29,928 |
| 2005 | 360,376 | 4.4 | 384,588 | 9.6 | -24,212 |
| 2004 | 345,256 | 5.4 | 350,996 | 7.0 | -5,740 |
| 2003 | 327,653 | 327,884 | -231 |
Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp
VG Italy. The Markit/ADACI Business Activity Index increased from 43.0 in Jul to 44.0 in Aug, indicating sharp contraction of output of Italy’s services sector in 15 consecutive months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10045). Phil Smith, economist at Markit and author of the Italy Services PMI®, finds that the rate of contraction in services moderated in Aug but continues at very weak relative levels in the history of the index (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10045). The Markit/ADACI Purchasing Managers’ Index® (PMI®), fell from 44.3 in Jul to 43.6 in Aug for 11 consecutive months of contraction of Italy’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10011). Phil Smith, economist at Markit and author of the Italian Manufacturing PMI®, finds deeper fall in Italy’s manufacturing with the second worst reading in more than three years, affecting GDP (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10011). Table IT provides the country data table for Italy.
Table IT, Italy, Economic Indicators
| Consumer Price Index | Aug month ∆%: 0.4 |
| Producer Price Index | Jul month ∆%: 0.4 Blog 9/2/12 |
| GDP Growth | IIQ2012/IQ2012 SA ∆%: minus 0.7 |
| Labor Report | Jul 2012 Participation rate 64.0% Employment ratio 57.1% Unemployment rate 10.7% Blog 9/2/12 |
| Industrial Production | Jun month ∆%: -1.4 |
| Retail Sales | Jun month ∆%: 0.4 Jun 12-month ∆%: -0.5 Blog 9/2/12 |
| Business Confidence | Mfg Aug 87.2, Apr 89.3 Construction Aug 82.0, Apr 83.8 Blog 9/2/12 |
| Trade Balance | Balance Jun SA €1592 million versus May €343 |
Links to blog comments in Table IT:
9/2/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html
VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.0 percent in 2009 after dropping 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 0.8 percent in 2011. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.7 percent on average between 1948 and 2011, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.3 percent as advanced economies struggle with weak internal demand and world trade.
Table VH-UK, UK, Gross Domestic Product, ∆%
| ∆% on Prior Year | |
| 1998 | 3.5 |
| 1999 | 3.2 |
| 2000 | 4.2 |
| 2001 | 2.9 |
| 2002 | 2.4 |
| 2003 | 3.8 |
| 2004 | 2.9 |
| 2005 | 2.8 |
| 2006 | 2.6 |
| 2007 | 3.6 |
| 2008 | -1.0 |
| 2009 | -4.0 |
| 2010 | 1.8 |
| 2011 | 0.8 |
| Average ∆% per Year | |
| 1948-2011 | 2.7 |
| 1948-1959 | 2.9 |
| 1960-1969 | 3.3 |
| 1970-1979 | 2.5 |
| 1980-1989 | 3.2 |
| 1990-1999 | 2.6 |
| 2000-2011 | 1.7 |
| 2000-2007 | 3.0 |
| 2009-2011 | 1.3 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2012/index.html
The Business Activity Index of the Markit/CIPS UK Services PMI® increased from 51.0 in Jul to 53.7 in Aug with growth during 20 consecutive months, increasing at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10047). Chris Williamson, Chief Economist at Markit, finds rising activity in services increases hopes for positive reading of GDP in IIIQ2012 after decline of 0.5 percent in IIQ2012 but with remaining uncertainty on construction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10047). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) increased from 45.2 in Jul to 49.5 in Aug, for the highest reading in four months and approaching the expansion barrier at 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10013). The decline of 4.3 points in May is the second sharpest decline in the history of 20 years of the index. Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI®, finds that weakness in Europe and lower world economic growth could affect manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10013).
Table UK provides the country data table for the United Kingdom.
Table UK, UK Economic Indicators
| CPI | Jul month ∆%: 0.1 |
| Output/Input Prices | Output Prices: |
| GDP Growth | IIQ2012 prior quarter ∆% minus 0.5; year earlier same quarter ∆%: minus 0.5 |
| Industrial Production | Jul 2012/Jul 2011 NSA ∆%: Production Industries minus 0.8; Manufacturing minus 0.5 |
| Retail Sales | Jul month ∆%: 0.3 |
| Labor Market | Apr-Jun Unemployment Rate: 8.0%; Claimant Count 4.9%; Earnings Growth 1.6% |
| Trade Balance | Balance Jun minus ₤4308 million |
Links to blog comments in Table UK:
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
8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html
The UK Office for National Statistics provides the output of production industries with revisions. Table VH-1 incorporates the revisions released on Oct 11, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2011/index.html) and the latest available data for Jul 2012. Manufacturing accounts for 67.0 percent of the production industries of the UK and decreased 0.5 percent in the 12 months ending in Jul. Capital goods industries grew at 6.8 percent in the 12 months ending in Jul 2012 and had been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 11.7 percent in the 12 months ending in Feb 2011. Mining and quarrying fell 2.4 percent in the 12 months ending in Jul 2012. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Apr 2011 to Jul 2012. Energy and mining have been drivers of decline. The lower part of Table VH-1 provides rates of change of yearly values. Manufacturing output fell 9.7 percent in 2009 after falling 2.5 percent in 2008 but grew at 3.8 percent in the initial phase of the recovery in 2010 and 2.0 percent in 2011.
Table VH-1, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, 12-Month ∆%
| PROD | MNG | MFG | ENGY | CON | CON | CAP | |
| 2012 | |||||||
| Jul | -0.8 | -2.4 | -0.5 | -2.3 | -1.4 | -4.5 | 6.8 |
| Jun | -3.8 | -6.0 | -3.9 | -4.5 | -7.4 | -5.8 | 1.8 |
| May | -1.5 | -8.6 | -1.2 | -3.3 | -3.1 | -5.3 | 3.7 |
| Apr | -2.1 | -14.1 | -1.4 | -5.8 | -1.8 | -5.5 | 3.7 |
| Mar | -2.6 | -8.8 | -1.2 | -8.1 | -6.0 | -2.0 | 1.3 |
| Feb | -2.2 | -8.8 | -1.9 | -4.2 | -6.3 | -0.9 | -0.5 |
| Jan | -3.8 | -20.8 | -0.4 | -15.0 | -6.0 | 0.7 | 3.4 |
| 2011 | |||||||
| Dec | -2.7 | -14.5 | 0.7 | -14.6 | -4.0 | -0.6 | 6.3 |
| Nov | -3.2 | -13.9 | -1.3 | -11.9 | 0.3 | -1.4 | 4.4 |
| Oct | -2.5 | -13.3 | -0.8 | -11.3 | -1.7 | -2.0 | 4.1 |
| Sep | -1.6 | -16.7 | 0.6 | -11.3 | -1.6 | -1.1 | 6.4 |
| Aug | -1.3 | -15.2 | 0.6 | -9.6 | -1.3 | 0.6 | 3.7 |
| Jul | -0.9 | -15.6 | 1.9 | -10.4 | 2.1 | 3.3 | 3.6 |
| Jun | -0.3 | -15.4 | 2.9 | -9.8 | 7.5 | 1.4 | 7.3 |
| May | -0.9 | -20.5 | 3.5 | -13.0 | 2.0 | 3.4 | 6.1 |
| Apr | -0.9 | -14.5 | 2.7 | -11.2 | 1.1 | 4.1 | 5.3 |
| Mar | 0.1 | -16.2 | 3.5 | -10.6 | 2.4 | 0.5 | 10.0 |
| Feb | 2.0 | -11.5 | 5.1 | -7.3 | 1.0 | 1.0 | 11.7 |
| Jan | 3.6 | -3.3 | 5.6 | -3.1 | 4.0 | -0.6 | 10.3 |
| 2011/ 2010 | -0.7 | -14.2 | 2.0 | -10.3 | 1.0 | 0.7 | 6.5 |
| 2010/ | 2.1 | -4.3 | 3.8 | -3.0 | -4.1 | -0.5 | 10.2 |
| 2009/ 2008 | -9.1 | -9.0 | -9.7 | -6.6 | -6.7 | -0.8 | -10.2 |
| 2008/ 2007 | -2.8 | -6.2 | -2.5 | -3.1 | -5.6 | -1.6 | -3.0 |
| 2007/2006 | -0.5 | -2.7 | 0.9 | -1.5 | 1.1 | -1.6 | 2.6 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Energy; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Good
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/july-2012/index.html
Percentage changes in the production industries and major components in a month relative to the prior month are shown in Table VH-2. There was sharp recovery in Jul 2012 with high rates for all components such as 2.9 percent for the production index, 3.2 percent for manufacturing and 3.7 percent for capital goods. Manufacturing fell in all months from Jun 2011 to Nov 2011 with the exception of no growth in Sep 2011. Manufacturing fell in four of the six months from Nov 2011 to Apr 2012. After growing 1.2 percent in May 2012, manufacturing fell 2.9 percent in Jun 2012 but rebounded with growth of 3.2 percent in Jul 2012. In Dec 2011, manufacturing grew 1.2 percent but decreased 0.3 percent in Jan 2012 and 1.2 percent in Feb 2012, growing 1.0 percent in Mar 2012 and declining 1.0 percent in Apr 2012 but growing 1.4 percent in May 2012. Growth was stronger in the first five months to May 2011 with the exception of decline by 0.8 percent in Apr. The decline of manufacturing by 2.9 percent in Jun 2012 is the sharpest monthly decline for manufacturing in Table VH-2 but was followed by growth of 3.2 percent in Jul 2012.
Table VH-2, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, Latest Month on Previous Month ∆%
| PROD | MNG | MFG | ENGY | CON | CON | CAP | |
| 2012 | |||||||
| Jul | 2.9 | 4.9 | 3.2 | 2.2 | 3.8 | 1.8 | 3.7 |
| Jun | -2.4 | 2.8 | -2.9 | -1.0 | -3.1 | -1.0 | -1.4 |
| May | 1.2 | 0.9 | 1.4 | 1.5 | -0.2 | 0.5 | 2.5 |
| Apr | -0.7 | -5.0 | -1.0 | 0.8 | 2.2 | -2.8 | -0.8 |
| Mar | -0.3 | -1.6 | 1.0 | -4.7 | 1.3 | -0.2 | 2.9 |
| Feb | 0.3 | 4.0 | -1.2 | 5.4 | -1.6 | -0.8 | -2.0 |
| Jan | -0.5 | -2.8 | -0.2 | -1.8 | 1.4 | -0.1 | -0.9 |
| 2011 | |||||||
| Dec | 0.6 | -2.6 | 1.2 | -1.3 | -0.8 | 1.2 | 0.7 |
| Nov | -0.4 | -1.7 | -0.3 | -0.8 | 1.4 | -0.4 | 1.4 |
| Oct | -1.2 | 0.0 | -1.1 | -1.6 | -0.5 | -0.5 | -1.4 |
| Sep | -0.1 | -1.2 | 0.0 | -1.1 | -2.9 | -2.0 | 2.2 |
| Aug | -0.2 | 0.4 | -0.5 | 0.4 | -2.1 | -0.2 | -0.1 |
| Jul | -0.2 | 0.9 | -0.3 | -0.1 | -2.6 | 0.4 | -1.2 |
| Jun | 0.0 | 0.0 | -0.2 | 0.2 | 1.5 | -0.4 | 0.4 |
| May | 0.6 | -5.1 | 1.2 | -1.1 | 1.0 | 0.3 | 2.4 |
| Apr | -1.1 | 0.7 | -0.8 | -1.7 | -2.1 | 0.8 | -3.0 |
| Mar | 0.1 | -1.5 | 0.3 | -0.7 | 0.9 | 0.9 | 1.1 |
| Feb | -1.3 | -9.7 | 0.3 | -6.5 | -1.2 | 0.8 | 1.9 |
| Jan | 0.6 | 4.9 | 0.8 | -1.3 | 3.5 | -1.4 | 1.9 |
| 2010 | |||||||
| Dec | 0.1 | -1.9 | -0.8 | 1.9 | 3.6 | 0.4 | -1.2 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Electricity, Gas and Water Supply; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/july-2012/index.html
The weights of components of the production index and contributions by components to the monthly and 12-month percentage changes of volume are provided in Table VH-3. The 12-month rate of output of the production industries of minus 0.8 percent was driven by negative contribution of 0.29 percentage points of the general component of mining with the subcomponent of oil and gas contributing negative 0.40 percentage points. Manufacturing deducted 0.38 percentage points to growth of the production industries index. The contribution of manufacturing is strong because of its share of 67.0 percent in the production index with growth of minus 0.5 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing increased 3.2 percent in Jul, adding 2.24 percentage points. Increase of mining by 4.9 percent contributed 0.58 percentage points.
Table VH-3, UK, Weights of Components, Volume 12-Month and Month ∆% and Percentage Point Contributions of Production Industries by Components
| Weight % | Volume 12-Month ∆% Ending in Jul 2012 | % Point | Volume | % Point | |
| PROD | 100.0 | -0.8 | -0.76 | 2.9 | 2.93 |
| MNG | 15.4 | -2.4 | -0.29 | 4.9 | 0.58 |
| MNG 06 | 12.6 | -4.3 | -0.40 | 5.7 | 0.50 |
| MFG | 67.0 | -0.5 | -0.38 | 3.2 | 2.24 |
| ELEC | 9.6 | 0.1 | 0.01 | -0.2 | -0.02 |
| WATER | 8.0 | -1.2 | -0.10 | 1.6 | 0.13 |
Notes: Contrib: Contribution; PROD IND: Index of Production; MNG: Mining and Quarrying (of which 14.4 percent of the total weight in oil and gas extraction); MNG 06: Subdivision of Mining including oil and gas extraction; MFG: Manufacturing; ELEC: Electricity, gas, steam and air conditioning; WATER & SEW: water supply, sewerage and waste management
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/july-2012/index.html
Table VH-4 provides the breakdown of manufacturing 12-month and monthly growth and percentage contributions. Several negative contributions to 12-month growth were by: CF basic pharmaceutical products and preparations (CF), deducting 0.24 percentage points with 12-month growth of 5.2 percent; manufacture of food products, beverages and tobacco (CA) deducted 0.32 percentage points with 12-month growth of minus 2.5 percent; and wood products (CC) deducted 0.44 percentage points with growth of minus 8.4 percent in 12 months. The highest positive contribution was 1.25 percentage points by transport equipment (CL), growing 16.9 percent in 12 months. Electrical products (CJ) added 0.24 percentage points with growth of 3.9 percent in 12 months.
Table VH-4, UK, Growth Rates of Manufacturing and Percentage Point Contributions to the Index of Production
| Sub-sector | % of production | Jul 2012 12-Month Growth % | Contribution to production (% points) | Jul 2012 Month on month growth (%) | Contribution to production (% points) |
| CA | 11.9 | -2.5 | -0.32 | 0.4 | 0.05 |
| CB | 2.0 | -5.3 | -0.11 | 0.8 | 0.02 |
| CC | 5.5 | -8.4 | -0.44 | 7.1 | 0.33 |
| CD | 0.8 | -5.1 | -0.04 | -3.7 | -0.03 |
| CE | 6.1 | -8.0 | -0.50 | 1.4 | 0.08 |
| CF | 6.1 | -5.1 | -0.24 | 5.2 | 0.24 |
| CG | 4.7 | -7.3 | -0.34 | 4.2 | 0.18 |
| CH | 8.6 | 1.7 | 0.15 | 6.2 | 0.56 |
| CI | 4.3 | -2.9 | -0.12 | 3.9 | 0.16 |
| CJ | 2.1 | 11.2 | 0.24 | 2.2 | 0.05 |
| CK | 4.8 | 3.9 | 0.24 | -0.1 | -0.01 |
| CL | 5.7 | 16.9 | 1.25 | 6.3 | 0.53 |
| CM | 4.5 | -3.2 | -0.15 | 1.8 | 0.09 |
Notes:
CA Manufacture of food products, beverages and tobacco; CB Textiles, wearing apparel and leather products; CC Wood and paper products and printing; CD Coke and refined petroleum products; CE Chemicals and chemical products; CF Basic pharmaceutical products and preparations; CG Rubber and plastic products and nonmetallic mineral products; CH Basic metals and metal products; CI Computer, electronic and optical products; CJ Electrical equipment; CK Machinery and equipment not elsewhere classified; CL Transport equipment; CM Other manufacturing and repair.
Source: http://www.ons.gov.uk/ons/rel/iop/index-of-production/july-2012/index.html
© Carlos M. Pelaez, 2010, 2011, 2012
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