CMP Associates Regulation Blog: Tapering Quantitative Easing Policy and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, World Economic Slowdown and Global Recession Risk: Part III

Tapering Quantitative Easing Policy and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

Executive Summary

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IA1 Theory

IA2 Policy

IA3 Evidence

IA4 Unwinding Strategy

IB United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History and Monetary Policy Based on Fear of Deflation

II United States Industrial Production

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

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

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The IMF provides an update of the macroeconomic forecast of the world (http://www.imf.org/external/pubs/ft/weo/2013/update/02/). The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the global recession that affected the US economy from IVQ2007 (Dec) to IIQ2009 (Jun) (http://www.nber.org/cycles.html). A new fact is slowing growth in emerging and developing economies. The IMF has lowered its forecast of the world economy to 3.1 percent in 2013 but accelerating to 3.8 percent in 2014 with the unmodified earlier forecasts of 4.4 percent in 2015 and 4.5 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,932 billion of world output of $71,707 billion, or 47.3 percent, but are projected to grow at much lower rates than world output, 1.2 percent in 2013 and 2.1 percent in 2014 and 2.1 on average from 2013 to 2016 in contrast with 3.9 percent for the world as a whole. While the world would grow 16.8 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.6 percent. The difference in dollars of 2012 is rather high: growing by 16.8 percent would add $12.0 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,964 but growing by 8.6 percent would add $6.2 trillion of output to the world, or about the output of Japan in 2012. 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 2012 of $27,290 billion, or 38.1 percent of world output. The EMDEs would grow cumulatively 24.5 percent or at the average yearly rate of 5.6 percent, contributing $6.7 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,227 billion of China in 2012. The final four countries in Table 1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,470 billion, or 20.2 percent of world output, which is equivalent to 42.6 percent of the combined output of the major advanced economies of the G7.

The IMF explains the major factors of the change in forecast (http://www.imf.org/external/pubs/ft/weo/2013/update/02/):

“Global growth is projected to remain subdued at slightly above 3 percent in 2013, the same as in 2012. This is less than forecast in the April 2013 World Economic Outlook (WEO), driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area. Downside risks to global growth prospects still dominate: while old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, especially given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals. Stronger global growth will require additional policy action. Specifically, major advanced economies should maintain a supportive macroeconomic policy mix, combined with credible plans for reaching medium-term debt sustainability and reforms to restore balance sheets and credit channels. Many emerging market and developing economies face a tradeoff between macroeconomic policies to support weak activity and those to contain capital outflows. Macroprudential and structural reforms can help make this tradeoff less stark.”

Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth

	GDP USD 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016
World	71,707	3.1	3.8	4.4	4.5
G7	33,932	1.2	2.1	2.5	2.5
Canada	1,819	1.7	2.2	2.5	2.4
France	2,609	-0.2	0.8	1.5	1.7
DE	3,401	0.3	1.3	1.3	1.3
Italy	2,014	-1.8	0.7	1.2	1.4
Japan	5,964	2.0	1.2	1.1	1.2
UK	2,441	0.9	1.5	1.8	1.9
US	15,685	1.7	2.7	3.6	3.4
Euro Area	12,198	-0.3	1.1	1.4	1.6
DE	3,401	0.3	1.3	1.3	1.3
France	2,609	-0.2	0.8	1.5	1.7
Italy	2,014	-1.8	0.7	1.2	1.4
POT	213	-2.3	0.6	1.5	1.8
Ireland	210	1.1	2.2	2.7	2.7
Greece	249	-4.2	0.6	2.9	3.7
Spain	1,352	-1.6	0.7	1.4	1.5
EMDE	27,290	5.0	5.4	6.0	6.1
Brazil	2,396	2.5	3.2	4.1	4.2
Russia	2,022	2.5	3.3	3.7	3.6
India	1,825	5.6	6.3	6.6	6.9
China	8,227	7.8	7.7	8.5	8.5

Notes; 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/2013/01/weodata/index.aspx http://www.imf.org/external/pubs/ft/weo/2013/update/02/

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx). Table I-2 is constructed with the WEO database to provide rates of unemployment from 2012 to 2016 for major countries and regions. In fact, unemployment rates for 2012 in Table I-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: 15.7 percent for Portugal (POT), 14.7 percent for Ireland, 24.2 percent for Greece, 25.0 percent for Spain and 10.6 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.4 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 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016
World	NA	NA	NA	NA	NA
G7	7.4	7.4	7.3	7.0	6.6
Canada	7.3	7.3	7.2	7.1	7.0
France	10.2	11.2	11.6	11.4	10.9
DE	5.5	5.6	5.7	5.6	5.6
Italy	10.6	12.0	12.4	12.0	11.2
Japan	4.4	4.1	4.1	4.1	4.1
UK	8.0	7.8	7.8	7.4	6.9
US	8.1	7.7	7.5	6.9	6.3
Euro Area	11.4	12.3	12.3	11.9	11.4
DE	5.5	5.6	5.7	5.6	5.6
France	10.2	11.2	11.6	11.4	10.9
Italy	10.6	12.0	12.4	12.0	11.2
POT	15.7	18.3	18.5	18.1	17.5
Ireland	14.7	14.2	13.8	12.9	11.9
Greece	24.2	27.0	26.1	24.0	21.0
Spain	25.0	27.0	26.5	25.6	24.7
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	6.0	6.5	6.5	6.5
Russia	6.0	5.5	5.5	5.5	5.5
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries)

Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IQ2013 available now for all countries. Growth is weak throughout most of the world. Japan’s GDP increased 1.2 percent in IQ2012 and 3.4 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 fell 0.2 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 0.6 percent, which is much lower than 4.8 percent in IQ2012. Growth of 3.9 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. Japan’s GDP contracted 0.9 percent in IIIQ2012 at the SAAR of minus 3.6 percent and increased 0.2 percent relative to a year earlier. Japan’s GDP grew 0.3 percent in IVQ2012 at the SAAR of 1.2 percent and increased 0.4 percent relative to a year earlier. Japan grew 1.0 percent in IQ2013 at the SAAR of 4.1 percent and 0.4 percent relative to a year earlier. China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.6 percent, which annualizes at 6.6 percent and 7.7 percent relative to a year earlier. In IIQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.5 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2013. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.1 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. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.7 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.6 percent relative to the prior quarter and fell 0.9 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.3 percent and decreased 1.1 percent relative to a year earlier. Germany’s GDP increased 0.6 percent in IQ2012 and 1.8 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.2 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. In IIIQ2012, Germany’s GDP increased 0.2 percent and 0.4 percent relative to a year earlier. Germany’s GDP contracted 0.7 percent in IVQ2012 and increased 0.0 percent relative to a year earlier. In IQ2013, Germany’s GDP increased 0.1 percent and fell 1.4 percent relative to a year earlier. 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 0.5 percent in IQ2012 at the SAAR of 2.0 percent and grew 2.4 percent relative to a year earlier. US GDP increased 0.3 percent in IIQ2012, 1.3 percent at SAAR and 2.1 percent relative to a year earlier. In IIIQ2012, GDP grew 0.8 percent, 3.1 percent at SAAR and 2.6 percent relative to IIIQ2011. In IVQ2012, GDP grew 0.0 percent, 0.4 percent at SAAR and 1.7 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.8 percent SAAR, 0.4 percent relative to the prior quarter and 1.6 percent relative to the same quarter in 2013 (http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html) with weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html). In IQ2012, UK GDP changed 0.0 percent, increasing 0.6 percent relative to a year earlier. UK GDP fell 0.5 percent in IIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.7 percent in IIIQ2012 and increased 0.1 percent relative to a year earlier. UK GDP fell 0.2 percent in IVQ2012 relative to IIIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.3 percent in IQ2013 and 0.3 percent relative to a year earlier. Italy has experienced decline of GDP in seven consecutive quarters from IIIQ2011 to IQ2013. Italy’s GDP fell 1.0 percent in IQ2012 and declined 1.7 percent relative to IQ2011. Italy’s GDP fell 0.6 percent in IIQ2012 and declined 2.5 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.3 percent and declined 2.6 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.8 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.6 percent and fell 2.3 percent relative to a year earlier. France’s GDP changed 0.0 percent in IQ2012 and increased 0.3 percent relative to a year earlier. France’s GDP decreased 0.2 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.1 percent and increased 0.0 percent relative to a year earlier. France’s GDP fell 0.2 percent in IVQ2012 and declined 0.3 percent relative to a year earlier. In IQ2013, France GDP fell 0.2 percent and declined 0.4 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: 1.2 SAAR: 4.8	3.4
China	1.5	8.1
Euro Area	-0.1	-0.1
Germany	0.6	1.8
France	0.0	0.3
Italy	-1.0	-1.7
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ:0.3 SAAR: 1.3	2.1
Japan	QOQ: -0.2 SAAR: -0.6	3.9
China	2.1	7.6
Euro Area	-0.2	-0.5
Germany	0.2	0.5 1.0 CA
France	-0.2	0.1
Italy	-0.6	-2.5
United Kingdom	-0.5	0.0
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.8 SAAR: 3.1	2.6
Japan	QOQ: –0.9 SAAR: –3.6	0.2
China	2.0	7.4
Euro Area	-0.1	-0.7
Germany	0.2	0.4
France	0.1	0.0
Italy	-0.3	-2.6
United Kingdom	0.7	0.1
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.1 SAAR: 0.4	1.7
Japan	QOQ: 0.3 SAAR: 1.2	0.4
China	1.9	7.9
Euro Area	-0.6	-0.9
Germany	-0.7	0.0
France	-0.2	-0.3
Italy	-0.9	-2.8
United Kingdom	-0.2	0.0
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.4 SAAR: 1.8	1.6
Japan	QOQ: 1.0 SAAR: 4.1	0.4
China	1.6	7.7
Euro Area	-0.3	-1.1
Germany	0.1	-1.4
France	-0.2	-0.4
Italy	-0.6	-2.4
UK	0.3	0.3
	IIQ2013/IQ2013	IIQ2013/IIQ2012
China	1.7	7.5

QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate

Source: Country Statistical Agencies http://www.bea.gov/national/index.htm#gdp

There is evidence of deceleration of growth of world trade and even contraction in 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 (http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP Section VB and earlier http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). In May 2013, Japan’s exports grew 10.1 percent in 12 months while imports increased 10.0 percent. The second part of Table V-4 shows that net trade deducted 1.1 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.8 percentage points from GDP growth in IIIQ2012 and deducted 0.6 percentage points from GDP growth in IVQ2012. In Jun 2013, China exports decreased 3.1 percent relative to a year earlier and imports fell 0.7 percent. Germany’s exports decreased 2.4 percent in the month of May 2013 and decreased 4.8 percent in the 12 months ending in May 2013 while imports increased 1.7 percent in the month of May and decreased 2.6 percent in the 12 months ending in May. Net trade contributed 0.4 percentage points to growth of GDP in IQ2012, contributed 1.3 percentage points in IIQ2012, contributed 1.4 percentage points in IIIQ2012, contributed 0.7 percentage points in IVQ2012 and contributed 1.0 percentage points in 2012. Net trade deducted 0.1 percentage points from Germany’s GDP growth. Net trade deducted 0.7 percentage points from UK value added in IQ2012, deducted 0.7 percentage points in IIQ2012, added 0.4 percentage points in IIIQ2012 and subtracted 0.3 percentage points in IVQ2012. In IQ2013, net trade added 0.6 percentage points to UK’s growth of value added. France’s exports decreased 4.3 percent in May 2013 while imports decreased 0.2 percent and net trade added 0.1 percentage points to GDP growth in IIQ2012, adding 0.1 percentage points in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.2 percentage points from France’s GDP growth in IQ2013. US exports decreased 1.2 percent in Apr 2013 and goods exports increased 0.8 percent in Jan-Apr 2013 relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012 and added 0.33 percentage points in IVQ2012. In IQ2013, net trade deducted 0.09 percentage points from US GDP growth. US imports increased 2.4 percent in Apr 2013 and goods imports decreased 1.9 percent in Jan-Apr 2013 relative to a year earlier. Industrial production increased 0.3 percent in Jun 2013 after changing 0.0 percent in May 2013 and falling 0.3 percent in Apr 2013, as shown in Table II-1, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production increased 0.3 percent in June after having been unchanged in May. For the second quarter as a whole, industrial production moved up at an annual rate of 0.6 percent. In June, manufacturing production rose 0.3 percent following an increase of 0.2 percent in May. The output at mines advanced 0.8 percent in June, while the output of utilities decreased 0.1 percent. At 99.1 percent of its 2007 average, total industrial production was 2.0 percent above its year-earlier level.”

In the six months ending in Jun 2013, United States national industrial production accumulated increase of 0.9 percent at the annual equivalent rate of 1.8 percent, which is lower than growth of 2.0 percent in 12 months. Excluding growth of 0.7 in Feb 2013, growth in the remaining five months from Jan 2012 to Jun 2013 accumulated to 0.2 percent or 0.5 percent annual equivalent. Industrial production stagnated in two of the past six months and fell in one. Business equipment accumulated growth of 0.9 percent in the six months from Dec 2012 to May 2013 at the annual equivalent rate of 1.8 percent, which is much lower than growth of 2.2 percent in 12 months. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The rate of capacity utilization for total industry edged up 0.1 percentage point to 77.8 percent, a rate that was 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972–2012) average.” United States industry is apparently decelerating.

Manufacturing increased 0.3 percent in Jun 2013 after increasing 0.2 percent in May 2013 and decreasing 0.3 percent in Apr 2013 seasonally adjusted, increasing 1.7 percent not seasonally adjusted in 12 months ending in Jun 2013, as shown in Table II-2. Manufacturing grew cumulatively 0.5 percent in the six months ending in Jun 2013 or at the annual equivalent rate of 1.0 percent. Excluding the increase of 0.7 percent in Feb 2012, manufacturing accumulated growth of minus 0.2 percent from Jan 2013 to Jun 2013 or at the annual equivalent rate of minus 0.5 percent. Manufacturing output fell by 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 16.8 percent from the trough in Apr 2009 to Dec 2012. Manufacturing grew 21.8 percent from the trough in Apr 2009 to Jun 2013. Manufacturing output in Jun 2013 is 4.8 percent below the peak in Jun 2007.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 M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	-0.3 May	0.9 Jan-May	1.9 May	-1.7 Jan-May
Japan		May 2013 10.1 Apr 2013 3.8 Mar 2013 1.1 Feb 2013 -2.9 Jan 2013 6.4 Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		May 2013 10.0 Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		-3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb		-0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb
Euro Area	-0.1 12-M May	2.5 Jan-May	-5.7 12-M May	-3.9 Jan-May
Germany	-2.4 May CSA	-4.8 May	1.7 May CSA	-2.6 May
France May	-4.3	-4.4	-0.2	-2.2
Italy Apr	0.0	4.4	-0.9	-2.6
UK	-1.3 Apr	0.3 Feb-Apr 13 /Feb-Apr 12	-2.7 Apr	-0.9 Feb-Apr 13/Feb-Apr 12
Net Trade % Points GDP Growth	% Points
USA	IQ2013 -0.09 IVQ2012 +0.33 IIIQ2012 +0.38 IIQ2012 +0.23 IQ2012 +0.06
Japan	-1.1 IIQ2012 -2.8 IIIQ2012 -0.6 IVQ2012
Germany	0.4 IQ2012 1.3 IIQ2012 1.4 IIIQ2012 0.7 IVQ2012 1.0 2012 IQ2013 -0.1
France	0.1 IIQ2012 0.1 IIIQ2012 0.1 IVQ2012 -0.2 IQ2013
UK	-0.7 IQ2012 -0.7 IIQ2012 +0.4 IIIQ2012 -0.3 IVQ2012 0.6 IQ2013

Sources: Country Statistical Agencies http://www.census.gov/foreign-trade/ http://www.bea.gov/iTable/index_nipa.cfm

The geographical breakdown of exports and imports of Japan with selected regions and countries is in Table VB-5 for May 2013. The share of Asia in Japan’s trade is more than one-half for 55.5 percent of exports and 44.1 percent of imports. Within Asia, exports to China are 18.1 percent of total exports and imports from China 21.5 percent of total imports. While exports to China increased 8.3 percent in the 12 months ending in May 2013, imports from China increased 14.6 percent. The largest export market for Japan in May 2013 is the US with share of 18.1 percent of total exports, which is almost equal to that of China, and share of imports from the US of 9.1 percent in total imports. Western Europe has share of 9.4 percent in Japan’s exports and of 9.9 percent in imports. Rates of growth of exports of Japan in May 2013 are relatively high for several countries and regions with growth of 16.3 percent for exports to the US, 13.0 for exports to Mexico, 27.1 percent for exports to Brazil and 23.6 percent for exports to Australia. 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. Growth rates of imports in the 12 months ending in May 2013 are positive for all trading partners. Imports from Asia increased 9.7 percent in the 12 months ending in May 2013 while imports from China increased 14.6 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table V-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yens

May 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,767,644	10.1	6,761,560	10.0
Asia	3,199,236	11.1	2,981,223	9.7
China	1,046,464	8.3	1,456,429	14.6
USA	1,041,261	16.3	614,143	10.2
Canada	69,274	11.7	111,621	18.9
Brazil	46,286	27.1	107,740	24.9
Mexico	79,321	13.0	38,810	18.3
Western Europe	540,295	-4.4	668,524	8.2
Germany	135,169	-6.5	179,691	6.6
France	48,414	16.6	87,713	11.9
UK	88,823	-0.2	60,459	10.5
Middle East	193,783	8.0	1,230,780	11.5
Australia	149,932	23.6	449,571	7.0

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from revised 3.1 percent in 2013 and 5.4 percent in 2014 to 6.1 percent in 2015 and 5.7 percent in 2018. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would more challenging with lower growth of world trade.

Table V-6, IMF, Projections of World Trade, ∆%

	2013	2014	2015	Average ∆% 2013-2018
World Trade Volume (Goods and Services)	3.1	5.4	6.1	5.7
Oil Price USD/Barrel	102.60	97.58	NA	NA
Commodity Price Index	181.84	174.06	NA	NA
Commodity Industrial Inputs Price 2005=100	170.04	164.66	NA	NA
Imports Goods & Services
G7	1.4	4.3	4.7	4.3
EMDE	6.0	7.3	7.9	7.5
Exports Goods & Services
G7	2.4	4.7	4.9	4.5
EMDE	4.3	6.3	7.6	7.1

Notes: Commodity Price Index includes Fuel and Non-fuel Prices; Commodity Industrial Inputs Price includes agricultural raw materials and metal prices; Oil price is average of WTI, Brent and Dubai

Source: International Monetary Fund World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx http://www.imf.org/external/pubs/ft/weo/2013/update/02/

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, decreased to 51.4 in Jun from 52.9 in May, indicating expansion at a moderate rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/6c45a62f0c5a427c8ecdcf4ffffb6688). This index has remained above the contraction territory of 50.0 during 47 consecutive months but the reading in Jun is the slowest in a year. The employment index increased from 50.3 in May to 51.7 in Jun with input prices rising at higher rate and new orders and output increasing at slower rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/6c45a62f0c5a427c8ecdcf4ffffb6688). David Hensley, Director of Global Economic Coordination at JP Morgan, finds that the index fell below trend in Jun with services slowing especially in the US (http://www.markiteconomics.com/Survey/PressRelease.mvc/6c45a62f0c5a427c8ecdcf4ffffb6688). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was unchanged at 50.6 in Jun from 50.6 in May, which is the sixth consecutive reading above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/3104066a480f4276bbcefe12f0387391). New export business fell sharply in Jun for the US and China while total new orders increased from 51.3 in May to 51.5 in Jun. The HSBC Brazil Composite Output Index, compiled by Markit, decreased marginally from 51.2 in May to 51.1 in Jun, indicating moderate increase in private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6238894628a42bcb1c8ab6ce970cee0). The HSBC Brazil Services Business Activity index, compiled by Markit, was unchanged from 51.0 in May to 51.0 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6238894628a42bcb1c8ab6ce970cee0). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the survey data suggest weakness in growth in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d6238894628a42bcb1c8ab6ce970cee0). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) was unchanged from 50.4 in May, which was the weakest reading in seven months, to 50.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/84c2905cbe394285bcc24f85a426ca6d). Andre Loes, Chief Economist, Brazil at HSBC, finds that companies are facing the fastest rate of growth of input prices since Mar 2011 with the quarterly average of the index of 50.5 at the slowest reading since IIIQ2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/84c2905cbe394285bcc24f85a426ca6d).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased marginally to 52.2 in Jun from 52.3 in May, for the lowest reading in eight months (http://www.markiteconomics.com/Survey/PressRelease.mvc/c96fce226f8442bbb3b355ca5d4f168c).New export orders registered 47.5 in Jun down from 49.8 in Apr, indicating contraction at a faster rate while output fell from 56.6 in Mar to 53.6 in Apr. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with growth at only 2.4 percent annual rhythm in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c96fce226f8442bbb3b355ca5d4f168c). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 51.9 in Jun from 52.3 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/61c3e275eedf42b5abc0566f4adf015e). The index of new exports orders fell from 49.8 in May to 46.3 in Jun while total new orders increased from 53.3 in May to 53.4 in Jun. Chris Williamson, Chief Economist at Markit, finds further decline in manufacturing impulse with weak internal demand and contraction of export orders at the sharpest rate since the worst point of the global recession in mid 2009 (http://www.markiteconomics.com/Survey/PressRelease.mvc/61c3e275eedf42b5abc0566f4adf015e). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 1.9 percentage points from 49.0 in May to 50.9 in Jun, which indicates growth in change of direction from contraction (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 3.1 percentage points from 48.8 in May to 51.9 in Jun. The index of exports increased 3.5 percentage points from 51.0 in May to 54.5 in Jun, advancing in expansion territory. The Non-Manufacturing ISM Report on Business^® PMI decreased 1.5 percentage points from 53.7 in May to 52.2 in Jun, indicating growth of business activity/production during 47 consecutive months, while the index of new orders decreased 5.2 percentage points from 56.0 in May to 50.8 in Jun (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	Jun 12 months NSA ∆%: 1.8; ex food and energy ∆%: 1.6 Jun month SA ∆%: 0.5; ex food and energy ∆%: 0.2 Blog 7/21/13
Producer Price Index	Jun 12-month NSA ∆%: 2.5; ex food and energy ∆% 1.7 Jun month SA ∆% = 0.8; ex food and energy ∆%: 0.2 Blog 7/21/13
PCE Inflation	May 12-month NSA ∆%: headline 1.0; ex food and energy ∆% 1.1 Blog 6/30/13
Employment Situation	Household Survey: May Unemployment Rate SA 7.6% Blog calculation People in Job Stress Jun: 28.7 million NSA, 17.5% of Labor Force Establishment Survey: Nov Nonfarm Jobs +195,000; Private +202,000 jobs created May 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.2 Blog 7/7/13
Nonfarm Hiring	Nonfarm Hiring fell from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million Private-Sector Hiring May 2013 4.964 million lower by 1.022 million than 5.986 million in May 2007 Blog 7/14/13
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2011 2.6 IVQ2012/IVQ2011 1.7 IQ2013/IQ2012 1.6 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 3.1 IVQ2012 SAAR 0.4 IQ2013 SAAR 1.8 Blog 6/30/13
Real Private Fixed Investment	SAAR IQ2013 3.0 ∆% IVQ2007 to IIIQ2012: minus 9.1% Blog 6/30/13
Personal Income and Consumption	May month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.5 Real Personal Consumption Expenditures (RPCE): 0.2 12-month May NSA ∆%: RDPI: 1.1; RPCE ∆%: 1.8 Blog 6/30/13
Quarterly Services Report	IQ13/IQ12 SA ∆%: Information 4.3 Financial & Insurance 1.8 Blog 6/9/13
Employment Cost Index	Compensation Private IQ2013 SA ∆%: 0.3 Jan 13 months ∆%: 1.7 Blog 5/5/13
Industrial Production	Jun month SA ∆%: 0.3 Jun 12 months SA ∆%: 2.0 Manufacturing Jun SA ∆% 0.3 Jun 12 months SA ∆% 1.8, NSA 1.7 Capacity Utilization: 77.6 Blog 7/21/13
Productivity and Costs	Nonfarm Business Productivity IQ2013∆% SAAE 0.5; IQ2013/IQ2012 ∆% 0.9; Unit Labor Costs SAAE IQ2013 ∆% -4.3; IQ2013/IQ2012 ∆%: 1.1 Blog 6/9/2013
New York Fed Manufacturing Index	General Business Conditions From Jun 7.84 to Jul 9.46 New Orders: From Jun -6.69 to Jul 3.77 Blog 7/21/13
Philadelphia Fed Business Outlook Index	General Index from Jun 12.5 to Jul 19.8 New Orders from Jun 16.6 to Jul 10.2 Blog 7/21/13
Manufacturing Shipments and Orders	New Orders SA May ∆% 2.1 Ex Transport 0.6 Jan-May NSA New Orders 0.9 Ex transport 0.4 Blog 7/7/13
Durable Goods	May New Orders SA ∆%: 3.6; ex transport ∆%: 0.7 Jan-May 13/Jan-May 12 New Orders NSA ∆%: 2.1; ex transport ∆% 1.2 Blog 6/30/13
Sales of New Motor Vehicles	Jan-Jun 2013 7,829,141; Jan-Jun 2012 7,272,160. Jun 13 SAAR 15.96 million, May 13 SAAR 15.31 million, Jun 2012 SAAR 14.38 million Blog 7/7/13
Sales of Merchant Wholesalers	Jan-May 2013/Jan-May 2012 NSA ∆%: Total 2.4; Durable Goods: 2.6; Nondurable Goods: 2.2 Blog 7/14/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	May 13/May 12 NSA ∆%: Sales Total Business 3.3; Manufacturers 1.3 Retailers 5.0; Merchant Wholesalers 4.0 Blog 7/21/13
Sales for Retail and Food Services	Jan-Jun 2013/Jan-Jun 2012 ∆%: Retail and Food Services 3.7; Retail ∆% 3.7 Blog 7/21/13
Value of Construction Put in Place	May SAAR month SA ∆%: 0.5 May 12-month NSA: 5.4 Jan-May 2013 ∆% 6.2 Blog 7/7/13
Case-Shiller Home Prices	Apr 2013/Apr 2012 ∆% NSA: 10 Cities 11.6; 20 Cities: 12.1 ∆% Apr SA: 10 Cities 1.8 ; 20 Cities: 1.7 Blog 6/30/13
FHFA House Price Index Purchases Only	Apr SA ∆% 0.7; 12 month NSA ∆%: 7.4 Blog 6/30/13
New House Sales	May 2013 month SAAR ∆%: 2.1 Jan-May 2013/Jan-Apr 2012 NSA ∆%: 29.2 Blog 6/30/13
Housing Starts and Permits	Jun Starts month SA ∆%: minus 9.9 ; Permits ∆%: minus 7.5 Jan-Jun 2013/Jan-Jun 2012 NSA ∆% Starts 24.3; Permits ∆% 23.7 Blog 7/21/13
Trade Balance	Balance May SA -$45,027 million versus Apr -$40,149 million Exports May SA ∆%: -0.3 Imports May SA ∆%: 1.9 Goods Exports Jan-May 2013/2012 NSA ∆%: 0.9 Goods Imports Jan-May 2013/2012 NSA ∆%: -1.7 Blog 7/7/13
Export and Import Prices	Jun 12-month NSA ∆%: Imports 0.2; Exports -0.8 Blog 7/14/13
Consumer Credit	May ∆% annual rate: 8.3 Blog 7/14/13
Net Foreign Purchases of Long-term Treasury Securities	Apr Net Foreign Purchases of Long-term US Securities: minus $37.3 billion Major Holders of Treasury Securities: China $1265 billion; Japan $1100 billion; Total Foreign US Treasury Holdings Feb $5671 billion Blog 6/16/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Jun: Receipts 14.4; Outlays -4.8; Individual Income Taxes 18.0 Deficit Fiscal Year 2011 $1,296 billion Deficit Fiscal Year 2012 $1,087 billion Blog 7/14/2013
CBO Budget and Economic Outlook	2012 Deficit $1089 B 7.0% GDP Debt 11,280 B 72.5% GDP 2013 Deficit $845 B, Debt 12,229 B 76.3% GDP Blog 8/26/12 11/18/12 2/10/13
Commercial Banks Assets and Liabilities	May 2013 SAAR ∆%: Securities -3.1 Loans 5.1 Cash Assets 73.4 Deposits 1.6 Blog 6/23/13
Flow of Funds	IQ2013 ∆ since 2007 Assets +$2612.8 MM Real estate -$2733.8 MM Financial +4799.7 MM Net Worth +$3487.4 MM Blog 6/16/13
Current Account Balance of Payments	IQ2013 -83,219 MM %GDP 2.7 Blog 6/16/13

Links to blog comments in Table USA:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

6/9/13 http://cmpassocregulationblog.blogspot.com/2013/06/twenty-eight-million-unemployed-or.html

5/5/13 http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html

2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

Growth rates and levels of sales in millions of dollars of manufacturers, retailers and merchant wholesalers are provided in Table VA-1. Total business sales increased 1.1 percent in May after changing 0.0 percent in Apr and increased 3.3 percent in the 12 months ending in May 2013. Sales of manufacturers increased 1.0 percent in May after decreasing 0.7 percent in Apr and increased 1.3 percent in the 12 months ending in May. Retailers’ sales increased 0.7 percent May, after increasing 0.1 percent in Apr and increased 5.0 percent in 12 months ending in May. Sales of merchant wholesalers increased 1.6 percent in May, 0.7 percent in Apr and increased 4.0 percent in 12 months ending in May. These data are not adjusted for price changes such that they reflect increases in both quantities and prices.

Table VA-1, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers

	May 13/ Apr 13 ∆% SA	May 2013 Millions of Dollars NSA	Apr 13/ Mar 13 ∆% SA	May 13/ May 12 ∆% NSA
Total Business	1.1	1,345,348	0.0	3.3
Manufacturers	1.0	501,494	-0.7	1.3
Retailers	0.7	396,048	0.1	5.0
Merchant Wholesalers	1.6	447,806	0.7	4.0

Source: US Census Bureau http://www.census.gov/mtis/

Chart VA-1 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and recovery in the final segment above the peak before the global recession. Data are not adjusted for price changes.

Chart VA-1, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-May 2013

US Census Bureau

http://www.census.gov/mtis/

Chart VA-2 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment with monthly marginal strength.

Chart VA-2, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-May 2013

US Census Bureau

http://www.census.gov/mtis/

Businesses added cautiously to inventories to replenish stocks. Retailers added 0.6 percent to inventories in May and 0.5 percent in Apr 2013 with growth of 6.3 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.1 percent in May, 0.2 percent in Apr and 3.8 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.30 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

Table VA-2, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios

Inventory Change	May 13 Millions of Dollars NSA	May 13/ Apr 13 ∆% SA	Apr 13/ Mar 13 ∆% SA	May 13/ May 12 ∆% NSA
Total Business	1,651,899	0.1	0.2	3.8
Manufacturers	632,196	0.0	0.1	2.1
Retailers	524,124	0.6	0.5	6.3
Merchant Wholesalers	495,579	-0.5	-0.1	3.4
Inventory/ Sales Ratio NSA	May 13 Billions of Dollars NSA	May 2013 SA	Apr 2013 SA	Mar 2012 SA
Total Business	1,651,899	1.29	1.30	1.28
Manufacturers	632,196	1.30	1.31	1.29
Retailers	524,124	1.41	1.41	1.38
Merchant Wholesalers	495,579	1.18	1.21	1.19

Source: US Census Bureau http://www.census.gov/mtis/

Chart VA-3 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to May 2013. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.

Chart VA-3, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-May 2013

US Census Bureau

http://www.census.gov/mtis/

Chart VA-4 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to May 2013 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are higher than in the peak before the global recession.

Chart VA-4, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Apr 2013

US Census Bureau

http://www.census.gov/mtis/

Inventories follow business cycles. When recession hits sales inventories pile up, declining with expansion of the economy. In a fascinating classic opus, Lloyd Meltzer (1941, 129) concludes:

“The dynamic sequences (I) through (6) were intended to show what types of behavior are possible for a system containing a sales output lag. The following conclusions seem to be the most important:

(i) An economy in which business men attempt to recoup inventory losses will always undergo cyclical fluctuations when equilibrium is disturbed, provided the economy is stable.

This is the pure inventory cycle.

(2) The assumption of stability imposes severe limitations upon the possible size of the marginal propensity to consume, particularly if the coefficient of expectation is positive.

(3) The inventory accelerator is a more powerful de-stabilizer than the ordinary acceleration principle. The difference in stability conditions is due to the fact that the former allows for replacement demand whereas the usual analytical formulation of the latter does not. Thus, for inventories, replacement demand acts as a de-stabilizer. Whether it does so for all types of capital goods is a moot question, but I believe cases may occur in which it does not.

(4) Investment for inventory purposes cannot alter the equilibrium of income, which depends only upon the propensity to consume and the amount of non-induced investment.

(5) The apparent instability of a system containing both an accelerator and a coefficient of expectation makes further investigation of possible stabilizers highly desirable.”

Chart VA-5 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012 and beginning of 2013.

Chart VA-5, Total Business Inventories/Sales Ratios 2002 to 2013

Source: US Census Bureau

http://www2.census.gov/retail/releases/historical/mtis/img/mtisbrf.gif

Sales of retail and food services increased 0.4 percent in Jun 2013 after increasing 0.5 percent in May 2013 seasonally adjusted (SA), growing 3.7 percent in Jan-Jun 2013 relative to Jan-Jun 2012 not seasonally adjusted (NSA), as shown in Table VA-3. Excluding motor vehicles and parts, retail sales changed 0.0 percent in Jun 2013, increasing 0.3 percent in May 2013 SA and increasing 3.0 percent NSA in Jan-Jun 2013 relative to a year earlier. Sales of motor vehicles and parts increased 1.8 percent in Jun 2013 after increasing 1.4 percent in May 2013 SA and increasing 7.2 percent NSA in Jan-Jun 2013 relative to a year earlier. Gasoline station sales increased 0.7 percent SA in Jun 2013 after increasing 0.4 percent in May 2013 in oscillating prices of gasoline that are moderating, changing 0.0 percent in Jan-Jun 2013 relative to a year earlier.

Table VA-3, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

	Jun/May ∆% SA	May/ Apr ∆% SA	Jan-Jun 2013 Million Dollars NSA	Jan-Jun 2013 from Jan-Jun 2012 ∆% NSA
Retail and Food Services	0.4	0.5	2,467,971	3.7
Excluding Motor Vehicles and Parts	0.0	0.3	1,993,989	3.0
Motor Vehicles & Parts	1.8	1.4	473,982	7.2
Retail	0.6	0.7	2,194,201	3.7
Building Materials	-2.2	1.2	156,185	5.3
Food and Beverage	-0.1	0.5	317,283	2.3
Grocery	-0.2	0.5	284,703	2.0
Health & Personal Care Stores	0.2	0.5	139,503	0.3
Clothing & Clothing Accessories Stores	0.7	-0.1	114,708	3.6
Gasoline Stations	0.7	0.4	272,570	0.0
General Merchandise Stores	0.1	0.5	311,886	0.4
Food Services & Drinking Places	-1.2	-0.6	273,770	3.9

Source: US Census Bureau http://www.census.gov/retail/

Chart VA-6 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been increasing monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.

Chart VA-6, US, Percentage Change of Retail and Food Services Sales

Source: US Census Bureau

http://www2.census.gov/retail/releases/historical/marts/img/martsbrf.gif

Chart VA-7 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jun 2013 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.

Chart VA-7, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jun 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Chart VA-8 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jun 2013. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.

Chart VA-8, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jun 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-4. Housing starts decreased 9.9 percent in Jun 2013 after increasing 8.9 percent in May 2013 and decreasing 15.3 percent in Apr 2013. Housing permits, indicating future activity, decreased 7.5 percent in Jun 2013 after decreasing 2.9 percent in May 2013 and increasing 12.9 percent in Apr 2013. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-4.

Table VA-4, US, Housing Starts and Permits SSAR Month ∆%

	Housing Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Jun 2013	836	-9.9	911	-7.5
May	928	8.9	985	-2.0
Apr	852	-15.2	1005	12.9
Mar	1005	3.7	890	-6.5
Feb	969	7.9	952	4.0
Jan	898	-8.6	915	-3.0
Dec 2012	983	16.7	943	1.1
Nov	842	-2.5	933	2.8
Oct	864	1.2	908	-1.4
Sep	854	14.0	921	11.4
Aug	749	1.1	827	-1.4
Jul	741	-2.1	839	6.9
Jun	757	6.5	785	-2.6
May	711	-5.7	806	7.6
Apr	754	6.6	749	-4.6
Mar	707	-0.8	785	6.2
Feb	713	-1.4	739	3.5
Jan	723	4.2	714	2.4
Dec 2011	694	-2.4	697	-1.3
Nov	711	16.6	706	5.2
Oct	610	-6.2	671	10.0
Sep	650	11.1	610	-5.7
Aug	585	-6.1	647	4.2
Jul	623	2.5	621	-2.4
Jun	608	8.4	636	2.9
May	561	1.3	618	6.4
Apr	554	-7.7	581	-0.3
Mar	600	16.1	583	7.6
Feb	517	-17.9	542	-5.9
Jan	630	16.9	576	-8.9
Dec 2010	539	-1.1	632	12.9
Nov	545	0.4	560	0.4
Oct	543	-8.6	558	-0.9
Sep	594	-0.8	563	-2.9

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Jun not-seasonally adjusted are provided in Table VA-5. Housing starts increased 24.3 percent in Jan-Jun 2013 relative to Jan-Jun 2012 and in the same period new permits increased 23.7 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 54.0 percent in Jan-Jun 2013 relative to Jan-Jun 2006 and fell 55.8 percent relative to Jan-Jun 2005. Housing permits fell 54.1 percent in Jan-Jun 2013 relative to Jan-Jun 2006 and fell 55.9 percent in Jan-Jun 2013 from Jan-Jun 2005.

Table VA-5, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Jun 2013	452.7	476.2
Jan-Jun 2012	364.2	385.0
∆% Jan-Jun 2013/Jan-Jun 2012	24.3	23.7
Jan-Jun 2006	984.9	1,036.9
∆% Jan-Jun 2013/Jan-Jun 2006	-54.0	-54.1
Jan-Jun 2005	1,023.6	1,079.1
∆% Jan-Jun 2013/Jan-Jun 2005	-55.8	-55.9

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-9 of the US Census Bureau shows the sharp increase in construction of new houses from 2000 to 2006. Housing construction fell sharply through the recession, recovering from the trough around IIQ2009. The right-hand side of Chart VA-1 shows a mild downward trend or stagnation from mid-2010 to the present in single-family houses with a recent mild upward trend in recent months in the category of two or more units but marginal decline in recent months.

Chart VA-9, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Table VA-6 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) from Jan to Jun of the year from 2000 to 2013. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 707,000 in Mar 2012 to 983,000 in Dec 2012 and 1,005,000 in Mar 2013, which is an improvement over the range of 517,000 in Feb 2011 to 708,000 in Nov 2011. There is improvement in May 2013 with SAAR of 928,000 relative to 711,000 in May 2012 and in Jun 2013 with 836,000 relative to 757,000 in Jun 2012.

Table VA-6, New Housing Units Started in the US, Seasonally Adjusted Annual Rates, Thousands of Units

	Jan	Feb	Mar	Apr	May	Jun
2000	1,636	1,737	1,604	1,626	1,575	1,559
2001	1,600	1,625	1,590	1,649	1,605	1,636
2002	1,698	1,829	1,642	1,592	1,764	1,717
2003	1,853	1,629	1,726	1,643	1,751	1,867
2004	1,911	1,846	1,998	2,003	1,981	1,828
2005	2,144	2,207	1,864	2,061	2,025	2,068
2006	2,273	2,119	1,969	1,821	1,942	1,802
2007	1,409	1,480	1,495	1,490	1,415	1,448
2008	1,084	1,103	1,005	1,013	973	1,046
2009	490	582	505	478	540	585
2010	614	604	636	687	583	536
2011	630	517	600	554	561	608
2012	723	713	707	754	711	757
2013	898	969	1,005	852	928	836

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-10 of the US Census Bureau provides construction of new housing units started in the US at seasonally adjusted annual rate (SAAR) from Jan 1959 to Jun 2013 that help to analyze in historical perspective the debacle of US new house construction. There are three periods in the series. (1) There is stationary behavior with wide fluctuations from 1959 to the beginning of the decade of the 1970s. (2) There is sharp upward trend from the 1990s to 2006 propelled by the US housing subsidy, politics of Fannie Mae and Freddie Mac and unconventional monetary policy of near zero interest rates from Jun 2003 to Jun 2004 and suspension of the auction of 30-year Treasury bonds intended to lower mortgage rates. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html . (3) Housing construction dropped vertically during the global recession. There was initial stability followed by some recovery in recent months.

Chart VA-10, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Jun 2013

Source: US Census Bureau http://www.census.gov/construction/nrc/

Table VA-7 provides actual new housing units started in the US, not seasonally adjusted, from Jan to Jun in the years from 2000 to 2013. The number of housing units started fell from the peak of 197.9 thousand in May 2005 to 80.4 thousand in Jun 2013 or decline of 59.4 percent. The number of housing units started jumped from 74.7 thousand in Jun 2011 to 80.4 thousand in Jun 2013 or by 7.6 percent and increase of 49.4 percent from 53.8 thousand in Jun 2010.

Table VA-7, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

	Jan	Feb	Mar	Apr	May	Jun
2000	104.0	119.7	133.4	149.5	152.9	146.3
2001	106.4	108.2	133.2	151.3	154.0	155.2
2002	110.4	120.4	138.2	148.8	165.5	160.3
2003	117.8	109.7	147.2	151.2	165.0	174.5
2004	124.5	126.4	173.8	179.5	187.6	172.3
2005	142.9	149.1	156.2	184.6	197.9	192.8
2006	153.0	145.1	165.9	160.5	190.2	170.2
2007	95.0	103.1	123.8	135.6	136.5	137.8
2008	70.8	78.4	82.2	89.5	91.7	102.5
2009	31.9	39.8	42.7	42.5	52.2	59.1
2010	38.9	40.7	54.7	62.0	56.2	53.8
2011	40.2	35.4	49.9	49.0	54.0	60.5
2012	47.2	49.7	58.0	66.8	67.8	74.7
2013	58.7	66.1	83.3	76.3	88.1	80.4

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-3 of the US Census Bureau provides new housing units started in the US not seasonally adjusted (NSA) from Jan 1959 to Jun 2013. There is the same behavior as in Chart VA-10 SA but with sharper fluctuations in the original series without seasonal adjustment. There are the same three periods. (1) The series is virtually stationary with wide fluctuations from 1959 to the late 1980s. (2) There is downward trend during the savings and loans crisis of the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $5482.1 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 2.74 percent of GDP in a year. US GDP in 2012 is estimated at $15,684.8 billion, such that the bailout would be equivalent to cost to taxpayers of about $429.8 billion in current GDP terms. A major difference with the Troubled Asset Relief Program (TARP) for private-sector banks is that most of the costs were recovered with interest gains whereas in the case of savings and loans there was no recovery. (3) There is vertical drop of new housing construction in the US during the global recession from (Dec) IVQ2007 to (Jun) IIQ2009 (http://www.nber.org/cycles/cyclesmain.html). The final segment shows upward trend but it could be simply part of yet another fluctuation. Marginal improvement in housing in the US should not obscure the current depressed levels relative to earlier periods.

Chart VA-11, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Jun 2013

Source: US Census Bureau http://www.census.gov/construction/nrc/

A longer perspective on residential construction in the US is provided by Table VA-8 with annual data from 1960 to 2012. Housing starts fell 62.3 percent from 2005 to 2012, 50.2 percent from 2000 to 2012 and 45.4 percent relative to the average from 1959 to 1963. Housing permits fell 61.5 percent from 2005 to 2012, 47.9 percent from 2000 to 2012 and 28.4 percent from the average of 1969-1963 to 2012. Housing starts rose 31.8 from 2000 to 2005 while housing permits grew 35.4 percent. From 1990 to 2000, housing starts increased 31.5 percent while permits increased 43.3 percent.

Table VA-8, US, Annual New Privately Owned Housing Units Authorized by Building Permits in Permit-Issuing Places and New Privately Owned Housing Units Started, Thousands

	Starts	Permits
2012	780.6	829.7
∆% 2012/2011	28.2	32.9
∆% 2012/2010	33.0	37.2
∆% 2012/2005	-62.3	-61.5
∆% 2012/2000	-50.2	-47.9
∆% 2012/Av 1959-1963	-45.4	-28.4
2011	608.8	624.1
∆% 2011/2005	-70.6	-71.0
∆% 2011/2000	-61.2	-60.8
∆% 2011/Av 1959-1963	-57.4	-46.1
2010	586.9	604.6
2009	554.0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889.2
2002	1,704.9	1,747.2
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
Average 1959-63	1,429.7	1,158.2

Source: US Census Bureau http://www.census.gov/construction/nrc/

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/announcements/release_2013/k130711a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.5 and 3.0 percent, with the all items CPI less fresh food of 0.5 to 0.8 percent. The critical difference is forecast of the CPI excluding fresh food of 2.7 to 3.6 percent in 2014 and 1.6 to 2.9 percent in 2015. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.

The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.

Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”

The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”

Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:

Monetary Base Control. Most central banks in the world pursue interest rates instead of monetary aggregates, injecting bank reserves to lower interest rates to desired levels. The Bank of Japan (BOJ) has shifted back to monetary aggregates, conducting money market operations with the objective of increasing base money, or monetary liabilities of the government, at the annual rate of 60 to 70 trillion yen. The BOJ estimates base money outstanding at “138 trillion yen at end-2012) and plans to increase it to “200 trillion yen at end-2012 and 270 trillion yen at end 2014” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
Maturity Extension of Purchases of Japanese Government Bonds. Purchases of bonds will be extended even up to bonds with maturity of 40 years with the guideline of extending the average maturity of BOJ bond purchases from three to seven years. The BOJ estimates the current average maturity of Japanese government bonds (JGB) at around seven years. The BOJ plans to purchase about 7.5 trillion yen per month (http://www.boj.or.jp/en/announcements/release_2013/rel130404d.pdf). Takashi Nakamichi, Tatsuo Ito and Phred Dvorak, wiring on “Bank of Japan mounts bid for revival,” on Apr 4, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323646604578401633067110420.html ), find that the limit of maturities of three years on purchases of JGBs was designed to avoid views that the BOJ would finance uncontrolled government deficits.
Seigniorage. The BOJ is pursuing coordination with the government that will take measures to establish “sustainable fiscal structure with a view to ensuring the credibility of fiscal management” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
Diversification of Asset Purchases. The BOJ will engage in transactions of exchange traded funds (ETF) and real estate investment trusts (REITS) and not solely on purchases of JGBs. Purchases of ETFs will be at an annual rate of increase of one trillion yen and purchases of REITS at 30 billion yen.

Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
Apr 2013	+2.4 to +3.0 [+2.9]	+0.4 to +0.8 [+0.7]
2014
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
Apr 2013	+1.0 to +1.5 [+1.4]	+2.7 to +3.6 [+3.4]	+0.7 to +1.6 [+1.4]
2015
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Apr 2013	+1.4 to +1.9 [+1.6]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]

Figures in brackets are the median of forecasts of Policy Board members

Source: Policy Board, Bank of Japan

http://www.boj.or.jp/en/announcements/release_2013/k130711a.pdf

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index decreasing from the high of the series at 54.1 in May to 52.3 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5f4daed191042f198cf2cdb41e04285). Paul Smith, economist at Markit and author of the report, finds that the survey data suggest continuing growth of the economy of Japan with accelerating performance of the economy of Japan in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5f4daed191042f198cf2cdb41e04285). The Markit Business Activity Index of Services decreased from the record high of 54.8 in May to 52.1 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5f4daed191042f198cf2cdb41e04285). Paul Smith, Senior Economist at Markit and author of the report, finds continuing optimism in services and manufacturing companies in Japan with positive outlook for the economy (http://www.markiteconomics.com/Survey/PressRelease.mvc/c5f4daed191042f198cf2cdb41e04285). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 51.5 in Apr to 52.3 in Jun, which is the highest reading in 28 months, indicating solid growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/07f08c5d1667427d93cb8bfd767d581d). New orders grew at rapid pace with higher strength in domestic demand while export orders increased for a fourth consecutive month but at slower pace. Paul Smith, Senior Economist at Markit and author of the report, finds manufacturing expanding at an annual rate of 5 percent in IIQ2013 that should contribute to GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/07f08c5d1667427d93cb8bfd767d581d).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 Blog 8/9/11 Table 26
Corporate Goods Prices	Jun ∆% +0.1 12 months ∆% 1.2 Blog 7/14/13
Consumer Price Index	May NSA ∆% 0.1; May 12 months NSA ∆% -0.3 Blog 6/30/13
Real GDP Growth	IQ2013 ∆%: 1.0 on IVQ2012; IQ2013 SAAR 4.1; ∆% from quarter a year earlier: 0.4 % Blog 6/16/13
Employment Report	May Unemployed 2.79 million Change in unemployed since last year: minus 180 thousand Unemployment rate: 4.1% Blog 6/30/13
All Industry Indices	May month SA ∆% 1.1 12-month NSA ∆% 1.2 Blog 7/21/13
Industrial Production	May SA month ∆%: 2.0 12-month NSA ∆% -1.0 Blog 6/30/13
Machine Orders	Total May ∆% 12.0 Private ∆%: 12.4 May ∆% Excluding Volatile Orders 10.5 Blog 7/14/13
Tertiary Index	May month SA ∆% 1.2 May 12 months NSA ∆% 1.7 Blog 7/14/13
Wholesale and Retail Sales	May 12 months: Total ∆%: 0.5 Wholesale ∆%: 0.3 Retail ∆%: 0.8 Blog 6/30/13
Family Income and Expenditure Survey	May 12-month ∆% total nominal consumption -1.8, real -1.6 Blog 6/30/13
Trade Balance	Exports May 12 months ∆%: 10.1 Imports May 12 months ∆% 10.0 Blog 6/23/13

Links to blog comments in Table JPY:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.html

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 1.0 percent in IQ2013 (Table VB-6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html), industry increased 0.6 percent, the tertiary sector increased 0.2 percent, government increased 0.1 percent and construction decreased 0.5 percent. The report shows that the all industry index changed 0.0 percent in IQ2013. Industry added 0.10 percentage points to growth of the all industry index and the tertiary index added 0.13 percentage points. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.3 percent (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html), when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 2.0 percent in IQ2012 and 0.8 percent in IIQ2011. GDP was flat in IQ2011 relative to a year earlier and fell 1.6 percent in IIQ2011 relative to a year earlier (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

Table VB-1, Japan, Indices of All Industry Activity Percentage Change from Prior Quarter SA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2013
IQ2013	-0.5	0.6	0.2	0.1	0.0	1.0
Cont to IQ % Change	-0.02	0.10	0.13	0.01
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	0.3
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.9
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.2
IQ	2.0	1.6	0.0	0.2	0.1	1.2

AG: indices of agriculture, forestry and fisheries has weight of 1.4% and is not included in official report or in this table; CON: indices of construction industry activity; IND: indices of industrial production; TERT: indices of tertiary industry activity; GOVT: indices of government services, etc.; ALL IND: indices of all industry activity

Source: http://www.meti.go.jp/english/statistics/index.html

There are more details in Table VB-2. In May 2013, the all industry activity index increased 1.1 percent with industry growing 1.9 percent and services 1.2 percent while construction increased 5.2 percent and government increased 0.3 percent. Industry contributed 0.33 percentage points and services 0.80 percentage points while construction added 0.25 percentage points and government added 0.04 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.4 percent in Mar 2013 and 0.1 percent in Apr 2013. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.1 percent in Mar 2013 and 0.9 percent in Apr 2013. The highest risk to Japan is if weakening world growth would affect Japanese exports.

Table VB-2, Japan, Indices of All Industry Activity Percentage Change from Prior Month SA ∆%

	CON	IND	TERT	GOVT	ALL IND
May 2013	5.2	1.9	1.2	0.3	1.1
Cont to May % Change	0.25	0.33	0.80	0.04
Apr 2013	-0.1	0.9	-0.5	-0.1	0.1
Mar	0.6	0.1	0.2	-0.9	0.4
Feb	-1.3	0.9	1.3	-0.2	0.4
Jan	-1.4	-0.7	-0.8	0.6	-0.7
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

Sources: http://www.meti.go.jp/english/statistics/index.html

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index decreased 1.2 percent in IQ2013 relative to a year earlier and GDP increased 0.4 percent relative to a year earlier (Table VB-4 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html). Industry decreased 7.8 percent relative to a year earlier while the tertiary sector decreased 0.2 percent, deducting combined 1.56 percentage points from growth of the all industry activity index of minus 1.2 percent while construction added 0.25 percentage points and government added 0.07 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 1.2 percent in 2012 and real GDP increased 1.9 percent. Industry increased 0.1 percent, adding 0.02 percentage points, while the tertiary sector increased 1.4 percent, adding 0.94 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

Table VB-3, Japan, Indices of All Industry Activity Percentage Change from Earlier Calendar Year and Same Quarter Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2012	3.2	0.1	1.4	0.3	1.2	1.9
Cont to 2012 % Change	0.15	0.02	0.94	0.04
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.6
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2013
IQ	5.4	-7.8	-0.2	0.7	-1.2	0.4
Cont to IQ % Change	0.25	-1.43	-0.13	0.08
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	0.4
IIIQ	3.1	-4.2	0.5	0.4	-0.2	0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.9
IQ	-1.1	6.2	2.4	0.3	2.6	3.4

Source: http://www.meti.go.jp/english/statistics/index.html

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index increased 1.2 percent in May 2013 relative to May 2012. Industry fell 1.0 percent in May 2013 relative to a year earlier, subtracting 0.18 percentage points to growth of the all industry activity index. The tertiary sector increased 1.7 percent, adding 1.09 percentage points. Construction added 0.36 percentage points to the index and government deducted 0.04 percentage points.

Table VB-4, Japan, Indices of All Industry Activity Percentage Change from Same Month Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND
May 2013	8.9	-1.0	1.7	-0.3	1.2
Cont to May % Change	0.36	-0.18	1.09	-0.04
Apr 2013	6.3	-3.4	1.3	-1.2	0.4
Mar	5.4	-7.1	0.7	0.1	-0.7
Feb	4.3	-10.1	-1.6	1.9	-2.4
Jan	6.8	-6.1	0.1	-0.1	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

Source: http://www.meti.go.jp/english/statistics/index.html

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. 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 and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012. Improvement continued with 56.1 in Dec 2012 and 56.2 in Jan 2013, declining marginally to 54.5 in Feb 2013 and 55.6 in Mar 2013. The index fell to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013.

Table CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, %, Seasonally Adjusted

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jun 2013	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
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/

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. 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 and sharper drop to 53.7 in Sep 2012, rebounding to 55.5 in Oct 2012, 55.6 in Nov 2012, 56.1 in Dec 2012 and 55.6 in Mar 2013. The index fell again to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013.

Chart CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, Seasonally Adjusted

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Table CIPMMFG 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 and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct, 50.6 in Nov-Dec 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013. The index increased to 50.8 in May 2013, falling to 50.1 in Jun 2013. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul and 48.7 in Aug, climbing above 50.0, 51.2 in Nov 2012-Dec 2012, 52.3 in Mar 2013 and 51.7 in Apr 2013. The index of new orders increased to 51.8 in May 2013, falling to 50.4 in Jun 2013. The index of employment also fell from 51.0 in Apr to 49.1 in Aug and further down to 48.7 in Nov 2012, 49.9 in Dec 2012, 49.8 in Mar 2013 and 49.0 in Apr 2013. The index of employment fell to 48.8 in May 2013 and 48.7 in Jun 2013.

Table CIPMMFG, China, Manufacturing Index of Purchasing Managers, %, Seasonally Adjusted

	IPM	PI	NOI	INV	EMP	SDEL
Jun 2013	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
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/

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. 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 and improved to 49.8 in Sep with movement to 50.2 in Oct 2012, 50.6 in Nov 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013 above the neutral zone of 50.0. The index increased to 50.8 in May 2013 and fell to 50.1 in Jun 2013.

Chart CIPMMFG, China, Manufacturing Index of Purchasing Managers, Seasonally Adjusted

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Cumulative growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.6 percent, as shown in Table VC-GDP. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in IQ2013 and construction with the remaining 6.2 percent in the first three quarters of 2012. Tertiary industry accounts for 45.3 percent of cumulative GDP in IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-1 provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.2 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent and to 7.0 percent in IIQ2013.

Table VC-GDP, China, Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%

Cumulative GDP IIQ2013	Value Current CNY 100 Million	2013 Year-on-Year Constant Prices ∆%
GDP	248009	7.6
Primary Industry	18622	3.0
Farming	18622	3.0
Secondary Industry	117037	7.6
Industry	101601	7.3
Construction	15436	9.6
Tertiary Industry	112350	8.3
Transport, Storage, Post	12995	6.8
Wholesale, Retail Trades	23291	10.2
Hotel & Catering Services	4824	4.7
Financial Intermediation	16036	10.8
Real Estate	16127	7.5
Other	39077	7.4
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IIQ2013	1.7	7.0
IQ2013	1.6	6.6
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.5	6.2
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.5 percent, as shown in Table VC-GDPA. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in cumulative IIQ2013 and construction with the remaining 7.5 percent in the first two quarters of 2013. Tertiary industry accounts for 45.3 percent of GDP in the cumulative to IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013 and 7.5 percent in IIQ2013.

Table VC-GDPA, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013	IIQ 2013
GDP	7.7	7.5
Primary Industry	3.4	3.0
Secondary Industry	7.8	7.6
Tertiary Industry	8.3	8.3
GDP ∆% Relative to a Prior Quarter	1.6	1.7
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ 2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.4	2.3	1.8	1.6	1.9	2.1	2.0
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-GDP of the National Bureau of Statistics of China provides annual value and growth rates of GDP. China’s GDP growth in 2012 is still high at 7.8 percent but at the lowest rhythm in five years

Chart VC-GDP, China, Gross Domestic Product, Million Yuan and ∆%, 2008-2012

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2ffa599067442d492b2baadc42da5d5) is moving at slower pace. The overall Flash HSBC China Manufacturing PMI^™ decreased from 49.2 in May to 48.3 in Jun, which is moderately below the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index decreased from 50.7 in May to 48.8 in Jun, moving into moderate contraction territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the economy of China is confronting weak internal and external demand together with reduction of stocks, suggesting weaker growth in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2ffa599067442d492b2baadc42da5d5). The HSBC China Services PMI^™, compiled by Markit, shows marginal weakness in business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 50.9 in May to 49.8 in Jun with the first output reduction in ten months (http://www.markiteconomics.com/Survey/PressRelease.mvc/cae4f011435d4230b6cfb98dcde4e488). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest downward effects on growth from both manufacturing and services (http://www.markiteconomics.com/Survey/PressRelease.mvc/cae4f011435d4230b6cfb98dcde4e488). The HSBC Business Activity index increased from 51.2 in May to 51.3 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/cae4f011435d4230b6cfb98dcde4e488). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds slowing services (http://www.markiteconomics.com/Survey/PressRelease.mvc/cae4f011435d4230b6cfb98dcde4e488). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased to 48.2 in Jun from 49.2 in May, indicating moderate contraction in manufacturing for the second consecutive month after six prior consecutive months of improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/43d33bc53a2142e8b5c3dde180f3b9d4). New export orders decreased for the third consecutive month at the fastest rate since Sep 2012. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weakening manufacturing because of declining orders and increasing inventories with weak lending because of the credit squeeze (http://www.markiteconomics.com/Survey/PressRelease.mvc/43d33bc53a2142e8b5c3dde180f3b9d4). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jun 12-month ∆%: minus 2.7 Jun month ∆%: -0.6 Blog 7/14/13
Consumer Price Index	Jun month ∆%: 0.0 Jun 12 months ∆%: 2.7 Blog 7/14/13
Value Added of Industry	Jun month ∆%: 0.68 Jan-Jun 2013/Jan-Jun 2012 ∆%: 9.3 Blog 7/21/13
GDP Growth Rate	Year IIQ2013 ∆%: 7.5 Quarter IIQ2013 AE ∆%: 7.0 Blog 7/21/13
Investment in Fixed Assets	Jun month ∆%: 1.51 Total Jan-Jun 2013 ∆%: 20.1 Real estate development: 20.3 Blog 7/21/13
Retail Sales	Jun month ∆%: 1.26 Jun 12 month ∆%: 13.3 Jan-Jun ∆%: 12.7 Blog 7/21/13
Trade Balance	Jun balance $27.13 billion Exports 12M ∆% -3.1 Imports 12M ∆% -0.7 Cumulative Jun: $108.55 billion Blog 7/14/13

Links to blog comments in Table CNY:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

Cumulative growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.6 percent, as shown in Table VC-1. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in IQ2013 and construction with the remaining 6.2 percent in the first three quarters of 2012. Tertiary industry accounts for 45.3 percent of cumulative GDP in IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-1 provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.2 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent and to 7.0 percent in IIQ2013.

Table VC-1, China, Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%

Cumulative GDP IIQ2013	Value Current CNY 100 Million	2013 Year-on-Year Constant Prices ∆%
GDP	248009	7.6
Primary Industry	18622	3.0
Farming	18622	3.0
Secondary Industry	117037	7.6
Industry	101601	7.3
Construction	15436	9.6
Tertiary Industry	112350	8.3
Transport, Storage, Post	12995	6.8
Wholesale, Retail Trades	23291	10.2
Hotel & Catering Services	4824	4.7
Financial Intermediation	16036	10.8
Real Estate	16127	7.5
Other	39077	7.4
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IIQ2013	1.7	7.0
IQ2013	1.6	6.6
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.5	6.2
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.5 percent, as shown in Table VC-2. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in cumulative IIQ2013 and construction with the remaining 7.5 percent in the first two quarters of 2013. Tertiary industry accounts for 45.3 percent of GDP in the cumulative to IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013 and 7.5 percent in IIQ2013.

Table VC-2, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013	IIQ 2013
GDP	7.7	7.5
Primary Industry	3.4	3.0
Secondary Industry	7.8	7.6
Tertiary Industry	8.3	8.3
GDP ∆% Relative to a Prior Quarter	1.6	1.7
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ 2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.4	2.3	1.8	1.6	1.9	2.1	2.0
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Cumulative and 12-months rates of value added of industry in China are provided in Table VC-3. Value added in total industry in Jan-Jun 2013 increased 9.3 percent relative to a year earlier. Heavy industry (manufacturing) had been the driver of growth with a cumulative rate of 10.0 percent relative to a year earlier in Jan-Mar 2012 that declined to 10.5 percent in Jan-Apr 2012 relative to the same period a year earlier and further down to 10.1 percent in Jan-Jun 2012, 9.9 percent in Jan-Jul 2012, 9.8 percent in Jan-Aug 2012, 9.7 percent in Jan-Sep 2012, 9.7 percent in Jan-Oct 2012, 9.8 percent in Jan-Nov 2012, 9.9 percent in Jan-Dec 2012, 10.2 percent in Jan-Feb 2013, 9.8 percent in Jan-Mar 2013, 9.7 percent in Jan-Apr 2013, 9.7 percent in Jan-May 2013 and 10.0 percent in Jan-Jun 2013. Light industry (mining and quarrying) grew 7.3 percent in Jan-Jun 2013 relative to a year earlier. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 9.3 percent in Jan-Jun 2013.

Table VC-3, China, Growth Rate of Value Added of Industry ∆%

	Industry	Light Industry*	Heavy Industry*	State Owned	Joint-Stock
2013
Jan-Jun	9.3	7.3	10.0	5.2	10.9
12M Jun	8.9	5.8	9.6	6.3	10.5
Jan-May	9.4	8.5	9.7	4.9	11.0
12M May	9.2	8.0	9.8	4.4	10.7
Jan-Apr	9.4	8.6	9.7	4.9	11.1
12 M Apr	9.3	8.5	9.6	4.3	10.9
Jan-Mar	9.5	8.7	9.8	5.2	11.3
12 M Mar	8.9	8.2	9.1	4.3	11.0
Jan-Feb	9.9	9.1	10.2	5.8	11.4
2012
Jan-Dec 2012	10.0	10.1	9.9	6.4	11.8
12 M Dec	10.3	9.6	10.6	8.0	12.1
Jan-Nov	10.0	10.2	9.8	6.3	11.8
12 M Nov	10.1	9.2	10.5	7.2	11.8
Jan-Oct	10.0	10.3	9.7	6.4	11.8
12 M Oct	9.6	9.1	9.7	7.0	11.7
Jan-Sep	10.0	10.4	9.7	6.3	11.8
12 M Sep	9.2	9.0	9.3	6.3	11.0
Jan-Aug	10.1	10.5	9.8	6.3	15.4
12 M Aug	8.9	8.6	9.0	5.3	14.3
Jan-Jul	10.3	10.8	9.9	6.6	12.1
12 M Jul	9.2	10.1	8.8	4.8	10.9
Jan-Jun	10.5	11.1	10.1	7.0	12.4
12 M Jun	9.5	9.0	9.6	6.5	11.5
Jan-May	10.7	11.5	10.3	6.7	12.4
12 M May	9.6	9.1	9.8	6.6	11.0
Jan-Apr	11.0	12.3	10.5	6.6	12.9
12 M Apr	9.3	10.3	8.9	4.3	10.7
Jan-Mar	11.6	13.2	11.0	7.2	13.8
12 M Mar	11.9	13.9	11.2	8.0	13.7
Jan-Feb	11.4	12.7	10.9	7.3	13.9
2011
Jan-Dec	13.9	13.0	14.3	9.9	15.8
12 M Dec	12.8	12.6	13.0	9.2	14.7
Jan-Nov	14.0	13.0	14.4	9.9	16.0
12 M Nov	12.4	12.4	12.4	7.8	14.4
Jan-Oct	14.1	13.0	14.5	10.1	9.1
12 M Oct	13.2	12.1	13.7	8.9	15.1
Jan-Sep	14.2	13.1	14.6	10.4	16.1
12 M Sep	13.8	12.8	14.3	9.9	16.0
Jan-Aug	14.2	13.1	14.6	10.4	16.1
12 M Aug	13.5	13.4	13.5	9.4	15.5
Jan-Jul	14.3
12 M Jul	14.0	12.8	14.5	9.5
Jan-Jun	14.3	13.1	14.7	10.7	19.7
12 M Jun	15.1	13.9	15.6	10.7	20.8
Jan-May	14.0	12.9	14.4	10.7	19.3
12 M May	13.3	12.9	13.5	8.9	18.7
Jan-Apr	14.2	12.9	14.7	11.2	19.5
12 M Apr	13.4	11.9	14.0	10.4	18.0
Jan-Mar	14.4	13.1	14.9	11.4	19.8
12 M Mar	14.8	12.8	15.6	12.9	19.2
12 M Feb	14.9	13.1	15.6	10.5	21.7
Jan-Feb	14.1	13.3	14.4	10.6	20.3

*After Jun 2013 Heavy Industry is Manufacturing and Light Industry is Mining and Quarrying

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-3 provides 12-month percentage changes of value added of industry in 2011 and from Jan to Dec 2012. Growth rates of value added of industry in the first five months of 2010 were higher than in 2011 as would be expected in an earlier phase of recovery from the global recession. Growth rates have converged in the second half of 2011 to lower percentages with further decline into 2012 to single digit percentage changes, 10.3 percent in Dec 2012, 8.9 percent in Mar 2013 and 9.3 percent in Apr 2013. The growth rate eased to 9.2 percent in May 2013 and 8.9 percent in Jun 2013.

Chart VC-3, China, Growth Rate of Total Value Added of Industry, 12-Month ∆%

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-4. Rates from Jan to Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Dec 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 12-month growth of 13.5 percent for pig iron and 16.7 percent for nonferrous metals. In Jan-Jun 2013, many segments grew at rates exceeding 10 percent with exception of electricity at 4.4 percent, crude oil at 4.1 percent and pig iron at 5.7 percent. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012 but declining to 1.5 percent in Sep 2012, increasing to 3.9 percent in Oct 2012, 7.9 percent in Nov 2012 and 7.6 percent in Dec 2012. Electricity grew 4.4 percent in Jan-Jun 2013 relative to a year earlier.

Table VC-4, China, Industrial Production Operation ∆%

	Elec- tricity	Pig Iron	Cement	Crude Oil	Non- ferrous Metals	Autos
2013
Jan-Jun	4.4	5.7	9.7	4.1	10.0	15.2
12 M Jun	6.0	2.9	8.8	10.8	6.7	13.5
Jan-May	4.0	10.8	8.9	2.9	10.9	15.4
12 M May	4.1	11.3	8.5	2.4	7.5	15.7
Jan-Apr	3.8	10.5	8.4	3.2	11.4	15.4
12 M Apr	6.2	8.1	8.7	2.5	10.3	18.3
Jan-Mar	2.9	12.3	8.2	4.3	10.6	13.5
12 M Mar	2.1	9.2	6.9	5.5	9.9	12.4
Jan-Feb	3.4	14.2	10.8	3.0	13.5	12.4
2012
Jan-Dec	4.7	7.7	7.4	3.7	9.3	6.3
12 M Dec	7.6	13.5	5.4	8.4	16.7	5.3
Jan-Nov	4.4	7.2	7.5	3.2	8.4	6.5
12 M Nov	7.9	16.5	9.4	9.1	15.2	3.9
Jan-Oct	3.9	6.3	6.7	2.6	7.7	6.9
12 M Oct	6.4	11.7	11.5	6.7	14.0	3.8
Jan-Sep	3.6	5.7	6.7	2.2	7.1	7.3
12 M Sep	1.5	4.9	12.0	7.0	7.1	6.3
Jan-Aug	3.8	-0.5	8.7	2.5	13.8	10.4
12 M Aug	4.8	2.6	5.9	-0.4	13.8	9.7
Jan-Jul	3.8	6.1	5.3	1.6	6.7	7.4
12M Jul	2.1	6.5	6.1	1.1	4.1	12.3
Jan-Jun	3.7	6.1	5.5	1.7	6.7	6.7
12 M Jun	0.0	6.7	6.5	-0.6	5.8	13.8
Jan-May	4.7	6.3	5.0	2.2	5.1	6.2
12 M May	2.7	6.3	4.3	0.7	6.6	18.5
Jan-Apr	5.0	6.2	5.5	2.9	4.6	3.1
12 M Apr	0.7	7.9	4.9	-0.3	2.3	10.7
Jan-Mar	7.1	6.5	7.3	3.1	5.8	0.0
12 M Mar	7.2	10.2	7.9	2.0	3.3	5.1
Jan-Feb	7.1	4.6	4.8	4.0	8.4	-1.8
2011
Jan-Dec	12.0	8.4	16.1	4.9	10.6	3.0
12 M Dec	9.7	3.7	7.0	4.0	13.2	-6.5
Jan-Nov	12.0	13.1	17.2	5.3	10.2	3.9
12 M Nov	8.5	7.8	11.2	3.2	8.2	-1.3
Jan-Oct	12.3	13.7	18.0	5.4	10.4	5.2
12 M Oct	9.3	13.4	16.5	-0.9	3.7	1.3
Jan-Sep	12.7	13.9	18.1	6.0	11.2	5.5
12 M Sep	11.5	18.8	15.7	1.5	13.9	2.5
Jan-Aug	13.0	13.1	18.4	6.6		4.7
12 M Aug	10.0	12.9	12.8	4.5	15.6	9.5
Jan-Jul	13.3	13.0	19.2	6.9	9.9	4.0
12 M Jul	13.2	14.9	16.8	5.9	9.8	-1.3
12 M Jun	16.2	14.8	19.9	-0.7	9.8	3.6
12 M May	12.1	10.6	19.2	6.0	14.2	-1.9
12 M Apr	11.7	8.3	22.4	6.8	6.1	-1.6
12 M Mar	14.8	13.7	29.8	8.0	11.6	9.9
12 M Feb	11.7	14.5	9.1	10.9	14.4	10.3
12 M Jan	5.1	3.5	16.4	12.2	1.4	23.9
12 M Dec 2010	5.6	4.6	17.3	10.3	-1.9	27.6

M: month

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Monthly growth rates of industrial production in China are provided in Table VC-5. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.25 percent in Mar 2012. The rate of 0.33 percent in Apr 2012 is the lowest in the monthly series from Feb 2011 to Jun 2013. Monthly sales growth remained below 1 percent in all the fourteen months from Jan 2012 to Jun 2013 with the exception of Mar 2012.

Table VC-5, China, Industrial Production Operation, Month ∆%

2011	Month ∆%
Feb	0.93
Mar	0.99
Apr	1.32
May	0.79
Jun	1.30
Jul	0.82
Aug	0.85
Sep	0.95
Oct	0.71
Nov	0.68
Dec	0.94
Jan 2012	0.50
Feb	0.61
Mar	1.25
Apr	0.33
May	0.89
Jun	0.80
Jul	0.69
Aug	0.72
Sep	0.79
Oct	0.78
Nov	0.79
Dec	0.81
Jan 2013	0.58
Feb	0.77
Mar	0.65
Apr	0.86
May	0.61
Jun	0.68

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Table VC-6 provides cumulative growth of investment in fixed assets in China in 2011 relative to 2010, Jan-Dec 2012 and Jan-Jun 2013 relative to a year earlier. Total fixed investment had grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent but rates have declined significantly to still quite high percentages. In Jan-Jun 2013, investment in fixed assets in China grew 20.1 percent relative to a year earlier and 20.3 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Jun 2013.

Table VC-6, China, Investment in Fixed Assets ∆% Relative to a Year Earlier

	Total	State	Real Estate Development
Jan-Jun 2013	20.1	17.5	20.3
Jan-May	20.4	17.7	20.6
Jan-Apr	20.6	18.1	21.1
Jan-Mar	20.9	18.7	20.2
Jan-Feb	21.2	16.9	22.8
Jan-Dec 2012	20.6	14.7	16.2
Jan-Nov	20.7	14.5	16.7
Jan-Oct	20.7	14.2	15.4
Jan-Sep	20.5	13.6	15.4
Jan-Aug	20.2	12.9	15.6
Jan-Jul	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-2 provides cumulative fixed asset investment in China relative to a year earlier in all months for 2011 and 2012. Growth rose to 25.8 percent in Jan-May 2011 and then fell back to 24.9 percent in Sep and Oct 2011, declining further to 24.5 percent in Nov and 23.8 percent in Dec 2011 with deeper drop in Jan-Feb 2012 to 21.5 percent, 20.9 percent in Jan-Mar, 20.2 percent in Jan-Apr 2012, 20.1 percent in Jan-Apr 2012, 20.4 percent in both Jan-Jun 2012 and Jan-Jul 2012, 20.2 percent in Jan-Aug 2012, 20.5 percent in Jan-Sep 2012, 20.7 percent in Jan-Oct 2012, 20.7 percent in Jan-Nov 2012, 20.6 percent in Jan-Dec 2012, 21.2 percent in Jan-Feb 2013, 20.9 percent in Jan-Mar 2013, 20.6 in Jan-Apr 2013 and 20.4 percent in Jan0May 2013. The rate eased to 20.1 percent in Jan-Jun 2013. Rates in 2012 and 2012 have fallen from higher gains in 2011.

Chart VC-2, China, Investment in Fixed Assets, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Monetary policy has been used in China in the form of increases in interest rates and required reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 35.2 percent in Jan-Feb 2011 to 31.1 percent in Jan-Oct 2011, 29.9 percent in Jan-Nov 2011, 27.9 percent in Jan-Dec 2011, 27.8 percent in Jan-Feb 2012 and sharper decline to 23.5 percent in Jan-Mar 2012, 18.7 percent in Jan-Apr 2012 and 18.5 percent in Jan-May 2012. The trend of decline continued with 16.6 percent in Jan-Jun 2012, 15.4 percent in Jan-Jul 2012, 15.6 percent in Jan-Aug 2012, 15.4 percent in Jan-Sep 2012, 16.7 percent in Jan-Oct 2012, 16.7 percent in Jan-Nov 2012, 16.2 percent in Jan-Dec 2012, 22.8 percent in Jan-Feb 2013, 20.2 percent in Jan-Mar 2013, 21.1 percent in Jan-Apr 2013 and 20.6 percent in Jan-May 2013. The rate eased to 20.3 percent in Jan-Jun 2013.

Chart VC-3, China, Investment in Real Estate Development, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Table VC-7 provides monthly growth rates of investment in fixed assets in China from Feb 2011 to Jun 2013. Rates increased moderately after Apr 2012. The celebrations of the New Year affect sales in the first two months of the year. Monthly investment rebounded in Mar-Jun 2013.

Table VC-7, China, Investment in Fixed Assets, Month ∆%

	Month ∆%
Feb 2011	-0.23
Mar	2.45
Apr	2.22
May	1.68
Jun	1.48
Jul	1.58
Aug	1.62
Sep	1.88
Oct	1.42
Nov	1.43
Dec	1.52
Jan 2012	1.70
Feb	1.84
Mar	1.16
Apr	1.00
May	1.03
Jun	1.87
Jul	1.32
Aug	1.27
Sep	1.93
Oct	1.97
Nov	1.01
Dec	1.38
Jan 2013	1.82
Feb	0.72
Mar	1.84
Apr	1.37
May	1.43
Jun	1.51

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Growth rates of retail sales in 12 months and cumulative relative to a year earlier are in Table VC-6. There is decline of growth rates to cumulative 14.7 percent in Feb 2012, 14.8 percent in Mar, 14.7 percent in Apr, 14.5 percent in May, 14.4 percent in Jun, 14.2 percent in Jul, 14.1 percent in Aug to Oct 2012, 14.2 percent in Nov 2012 and 14.3 percent in Dec 2012. Percentage growth rates have declined in Jan-Dec 2012 relative to earlier months in 2011. The rate of retail sales growth was even lower at 12.3 percent in Feb 2013 with influence from the celebration of the New Year followed by 12.4 percent in Mar 2013 and 12.5 percent in Apr 2013. The rate of retail growth was 12.9 percent in the 12 months ending in May 2013 and 12.6 percent in Jan-May relative to a year earlier. Growth strengthened with 13.3 percent in the 12 months ending in Jun 2013 and 12.7 percent in the cumulative to Jun 2013 relative to a year earlier.

Table VC-8, China, Total Retail Sales of Consumer Goods ∆%

	12-Month ∆%	Cumulative ∆%/ Cumulative Year Earlier
2013
Jun	13.3	12.7
May	12.9	12.6
Apr	12.8	12.5
Mar	12.6	12.4
Feb	12.3	12.3
2012
Dec	15.2	14.3
Nov	14.9	14.2
Oct	14.5	14.1
Sep	14.2	14.1
Aug	13.2	14.1
Jul	13.1	14.2
Jun	13.7	14.4
May	13.8	14.5
Apr	14.1	14.7
Mar	15.2	14.8
Feb	14.7	14.7
Jan
2011
Dec	18.1	17.1
Nov	17.3	17.0
Oct	17.2	17.0
Sep	17.7	17.0
Aug	17.0	16.9
Jul	17.2	16.8
Jun	17.7	16.8
May	16.9	16.6
Apr	17.1	16.5
Mar	17.4	17.4
Feb	11.6	15.8
Jan	19.9	19.9

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales in 2011 and 2012. There is again a drop into 2013 with the lowest percentages in Chart VC-4 followed by moderate increases.

Chart VC-4, China, Total Retail Sales of Consumer Goods 12-Month ∆%

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/

Table VC-9 provides monthly percentage changes of retail sales in China. Although the rate of 0.19 percent in Jan 2012 is the lowest in Table VC-9, the rate of 1.36 percent in Sep 2012 is relatively high and 1.30 percent in Dec 2012 is closer to rates in 2011. Sales are lower in Jan-Feb 2013 because of the New Year celebrations, rebounding in Mar-Jun 2013.

Table VC-9, China, Retail Sales, Month ∆%

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.50
Sep	1.33
Oct	1.36
Nov	1.26
Dec	1.41
2012
Jan	0.19
Feb	0.99
Mar	1.21
Apr	0.93
May	1.11
Jun	1.12
Jul	1.09
Aug	1.10
Sep	1.36
Oct	1.17
Nov	1.18
Dec	1.30
Jan 2013	0.19
Feb	0.97
Mar	1.29
Apr	1.24
May	1.15
Jun	1.26

Source: National Bureau of Statistics of China http://www.stats.gov.cn/english/

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.5 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.6 percent in 2012 and minus 0.4 percent in 2013 but 1.2 percent in 2014.

Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment 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	1.5
2012*	2.5	11.4	-0.6
2013*			-0.4
2014*			1.2

*EUROSTAT forecast Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

The GDP of the euro area in 2011 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $13,114.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France is $2778.1 billion with the GDP of Germany of $3607.4 billion, Italy of $2198.7 billion and Spain $1479.6 billion is $10,063.8 billion or 76.7 percent of total euro area GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013 and 2014 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

Table VD-EUR1, Euro Area, Real GDP Growth Rate, ∆%

	Euro Area	Germany	France	Italy	Spain
2014*	1.2	1.8	1.1	0.7	0.9
2013*	-0.4	0.4	-0.1	-1.3	-1.5
2012	-0.6	0.7	0.0*	-2.4	-1.4*
2011	1.5	3.0	2.0	0.4	0.4
2010	2.0	4.2	1.7	1.7	-0.3
2009	-4.4	-5.1	-3.1	-5.5	-3.7
2008	0.4	1.1	-0.1	-1.2	0.9
2007	3.0	3.3	2.3	1.7	3.5
2006	3.2	3.7	2.5	2.2	4.1
2005	1.7	0.7	1.8	0.9	3.6
2004	2.2	1.2	2.5	1.7	3.3
2003	0.7	-0.4	0.9	0.0	3.1
2002	0.9	0.0	0.9	0.5	2.7
2001	2.0	1.5	1.8	1.9	3.7
2000	3.8	3.1	3.7	3.7	5.0
1999	2.9	1.9	3.3	1.5	4.7
1998	2.8	1.9	3.4	1.4	4.5
1997	2.6	1.7	2.2	1.9	3.9
1996	1.5	0.8	1.1	1.1	2.5

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 47.7 in May to 48.9 in May, for seventeen consecutive contractions but with deceleration of the rate of contraction to the lowest pace since Mar 2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/899f6d7cc57342b487bd764ce5610c18). The average for IIQ2013 of 47.8 is marginally higher than 47.7 in IQ2013, suggesting recession in the euro area during seventeen consecutive months. Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with the seventh quarterly contraction of economic conditions in the region at a likely rate of decline of 0.2 percent in IIQ2013 but at slower pace in France with moderate growth in Germany and slower decline in other members (http://www.markiteconomics.com/Survey/PressRelease.mvc/899f6d7cc57342b487bd764ce5610c18). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 47.7 in May to 48.7 in Jun with aggregate output declining during 17 consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/609476644add42bcb8c486547e55cf4d). Chris Williamson, Chief Economist at Markit, finds that the data are consistent GDP falling in IIQ2012 at 0.2 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/609476644add42bcb8c486547e55cf4d). The Markit Eurozone Services Business Activity Index increased from 47.2 in May to 48.3 in Jun, indicating contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/609476644add42bcb8c486547e55cf4d). The Markit Eurozone Manufacturing PMI^® increased marginally to 48.8 in Jun from 48.3 in May, which indicates contraction for the twenty-third consecutive month since Aug 2011 but at the highest reading in 16 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/2bc1f71d2a9f427183cd528a3ed7832a). New orders fell at the slowest rate since Jun 2011 with marginal decline in export orders and lower rate of decline internal orders. Chris Williamson, Chief Economist at Markit, finds the survey data consistent with growth in IIIQ2013 if the trend of improvement continues (http://www.markiteconomics.com/Survey/PressRelease.mvc/2bc1f71d2a9f427183cd528a3ed7832a). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IQ2013 ∆% -0.3; IQ2013/IQ2012 ∆% -1.1 Blog 7/7/13
Unemployment	May 2013: 12.1% unemployment rate May 2013: 19.992 million unemployed Blog 7/7/13
HICP	Jun month ∆%: 0.1 12 months Apr ∆%: 1.6 Blog 7/21/13
Producer Prices	Euro Zone industrial producer prices May ∆%: -0.3 May 12-month ∆%: -0.1 Blog 7/7/13
Industrial Production	May month ∆%: -0.3; May 12 months ∆%: -1.3 Blog 7/14/13
Retail Sales	May month ∆%: 1.0 May 12 months ∆%: minus 0.1 Blog 7/7/13
Confidence and Economic Sentiment Indicator	Sentiment 91.3 Jun 2013 Consumer minus 18.8 Jun 2013 Blog 6/30/13
Trade	Jan-Apr 2013/Jan-Apr 2012 Exports ∆%: 3.2 Imports ∆%: -3.6 Apr 2013 12-month Exports ∆% 9.1 Imports ∆% 1.2 Blog 6/23/13

Links to blog comments in Table EUR:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

Euro zone trade growth continues to be relatively strong as shown in Table VD-1 but with deceleration at the margin. Exports grew at 2.5 percent and imports fell 3.9 percent in Jan-May 2013 relative to Jan-May 2012. The 12-month rate of growth of exports was minus 0.1 percent in May 2013 while imports decreased 5.7 percent. In Apr 2013, exports increased 8.9 percent in 12 months and imports increased 1.6 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-1, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-May 2013	780.9	723.7
Jan-May 2012	761.9	753.4
∆%	2.5	-3.9
May 2013	159.0	143.8
May 2012	159.1	152.5
∆%	-0.1	-5.7
Apr 2013	161.0	147.0
Apr 2012	147.9	144.7
∆%	8.9	1.6
Trade Balance	Jan-May 2013	Jan-May 2012
€ Billions	57.1	8.6

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

The structure of trade of the euro zone in Jan-Apr 2013 is provided in Table VD-2. Data are still not available for trade structure for May 2013. Manufactured exports increased 2.7 percent in Jan-Apr 2013 relative to Jan-Apr 2012 while imports decreased 1.7 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-Apr 2013 but only marginally higher in Jan-Apr 2012 partly because of the commodity shock caused by carry trades.

Table VD-2, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-Apr 2013 € B	99.2	503.5	19.2	621.9
Jan-Apr 2012 € B	95.0	490.5	17.4	602.9
∆%	4.4	2.7	10.3	3.2
Imports
Jan-Apr 2013 € B	212.1	357.0	10.9	580.0
Jan-Apr 2012 € B	226.7	363.3	10.9	600.9
∆%	-6.4	-1.7	0.0	-3.5
Trade Balance € B
Jan-Apr 2013	-112.9	146.5	8.3	41.9
Jan-Apr 2012	-131.7	127.2	6.5	2.0

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, 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 economies. The German economy grew at 4.2 percent in 2010, 3.0 percent in 2011 and 0.7 percent in 2012.

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
2012	0.7	0.9
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 (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/02/PE13_066_811.html;jsessionid=59DE7E440F9F7393B12C16FDA63BEB66.cae1

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 50.2 in May to 50.9 in Jun, with stronger improvement in services at 51.3 with unchanged manufacturing at 50.1 (http://www.markiteconomics.com/Survey/PressRelease.mvc/19df23bd5faf42a884b89501e2e69a15). New export orders for manufacturing decreased at the highest rate in 2013. Andrew Hacker, Senior Economist at Markit, finds limited growth impulse in Germany’s manufacturing and services in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/19df23bd5faf42a884b89501e2e69a15). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 50.2 in May to 50.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/fff41c347a20425bb0c0e63f4a8fe8f6). Tim Moore, Senior Economist at Markit and author of the report, finds risks of standstill in the economy of Germany with minor increases in output and concerned outlook (http://www.markiteconomics.com/Survey/PressRelease.mvc/fff41c347a20425bb0c0e63f4a8fe8f6). The Germany Services Business Activity Index increased from 49.7 in May to 50.4 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/fff41c347a20425bb0c0e63f4a8fe8f6). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 49.4 in May to 48.6 in Jun, in very moderate contraction territory below 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/1923f6df3e784218afce4dde78ee6c2f). New export orders fell at the fastest rate in 2013 with declines in Asia and Europe. Tim Moore, Senior Economist at Markit and author of the report, finds restrain from weakness in markets, especially in exports, even with reduction of sales prices at the fastest rate in more than three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/1923f6df3e784218afce4dde78ee6c2f).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IQ2013 0.1 ∆%; I/Q2013/IQ2012 ∆% -1.4 2012/2011: 0.7% GDP ∆% 1992-2012 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13
Consumer Price Index	Jun month NSA ∆%: 0.1 Jun 12-month NSA ∆%: 1.8 Blog 7/14/13
Producer Price Index	Jun month ∆%: 0.0 CSA, 0.3 12-month NSA ∆%: 0.6 Blog 7/21/13
Industrial Production	MFG Apr month CSA ∆%: minus 0.7 12-month NSA: minus 2.9 Blog 7/14/13
Machine Orders	MFG May month ∆%: -1.3 May 12-month ∆%: -4.0 Blog 7/7/13
Retail Sales	May Month ∆% 0.4 12-Month ∆% 0.8 Blog 6/30/13
Employment Report	Unemployment Rate SA May 5.4% Blog 6/30/13
Trade Balance	Exports May 12-month NSA ∆%: minus 4.8 Imports May 12 months NSA ∆%: minus 2.6 Exports May month CSA ∆%: minus 2.4; Imports Apr month SA 1.7 Blog 7/14/13

Links to blog comments in Table DE:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.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 IVQ1949 to IVQ2012 is quite high at 3.2 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 4.0 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. The growth rate from 2000 to 2012 is 1.0 percent. 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	3.2
2000-2012	1.0
2000-2011	1.1
2000-2007	1.7
1990-1999	1.9
1980-1989	2.5
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130626

The Markit Flash France Composite Output Index increased from 44.6 in May to 46.8 in Jun for the highest reading in ten months (http://www.markiteconomics.com/Survey/PressRelease.mvc/474f97906cf6429aafb0aff2e364c243). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest slower rate of output contraction in IIQ2013 in both manufacturing and services (http://www.markiteconomics.com/Survey/PressRelease.mvc/474f97906cf6429aafb0aff2e364c243).

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 44.6 in May to 47.2 in Jun, indicating contraction of private sector activity at the slowest rate of deterioration in 2013 and the highest reading in ten months (http://www.markiteconomics.com/Survey/PressRelease.mvc/a1f570072f9a426a9ec90e289936095c). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that composite data for manufacturing and services indicate movement toward stability away from sharper contraction in IQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a1f570072f9a426a9ec90e289936095c). The Markit France Services Activity index increased from 44.3 in May to 47.2 in Jun for the highest reading in ten months (http://www.markiteconomics.com/Survey/PressRelease.mvc/a1f570072f9a426a9ec90e289936095c). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 48.4 in Jun from 46.4 in May, for the highest reading in sixteen consecutive months below the neutral level of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/4951772002d4429881c48fda4cafcae5). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds slower decline in manufacturing but that the current period of 16 consecutive months of deterioration is the longest since beginning of the survey in 1998 (http://www.markiteconomics.com/Survey/PressRelease.mvc/4951772002d4429881c48fda4cafcae5). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jun month ∆% 0.2 12 months ∆%: 0.9 7/14/13
PPI	May month ∆%: -1.2 May 12 months ∆%: -0.2 Blog 6/30/13
GDP Growth	IQ2013/IQ2012 ∆%: -0.4 IVQ2012/IVQ2011 ∆%: -0.3 Blog 3/31/13 5/19/12 6/30/13
Industrial Production	May ∆%: Manufacturing minus 1.1 12-Month ∆%: Manufacturing minus 0.8 Blog 6/16/13
Consumer Spending	Manufactured Goods May ∆%: 1.0 May 12-Month Manufactured Goods ∆%: 0.0 Blog 7/7/13
Employment	Unemployment Rate: 10.4% Blog 6/9/13
Trade Balance	May Exports ∆%: month -4.3, 12 months -4.4 May Imports ∆%: month -0.2, 12 months -2.2 Blog 7/7/13
Confidence Indicators	Historical averages 100 Jun Mfg Business Climate 93 Blog 6/30/13

Links to blog comments in Table FR:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

6/9/13 http://cmpassocregulationblog.blogspot.com/2013/06/twenty-eight-million-unemployed-or.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.5 percent in IVQ2011 to minus 2.8 percent in IVQ2012 and minus 2.4 percent in IQ2013. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates.

Table VG-IT, Italy, GDP and Expenditure Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier

	GDP	Imports	Consumption	GFCF	Exports
2013
IQ	-2.4	-5.2	-2.7	-7.5	-0.2
2012
IVQ	-2.8	-6.7	-4.2	-7.8	1.8
IIIQ	-2.6	-8.1	-4.3	-8.2	2.5
IIQ	-2.5	-7.5	-3.9	-8.3	2.5
IQ	-1.7	-8.9	-3.3	-7.6	2.1
2011
IVQ	-0.5	-6.9	-1.8	-3.3	3.1
IIIQ	0.3	0.1	-0.7	-2.1	5.6
IIQ	0.9	3.1	0.6	-0.6	7.0
IQ	1.3	8.8	0.9	0.6	10.9
2010
IVQ	2.0	15.3	1.1	0.8	13.2
IIIQ	1.8	13.2	1.3	2.4	12.0
IIQ	1.9	13.5	0.8	1.1	12.0
IQ	1.1	7.2	0.8	-2.0	7.3
2009
IVQ	-3.4	-6.4	0.2	-7.8	-9.3
IIIQ	-4.9	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.5	-13.6	-21.4
IQ	-7.0	-17.2	-1.7	-12.6	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/92338

The Markit/ADACI Business Activity Index decreased from 46.5 in May to 45.8 in Jun, indicating contraction of output of Italy’s services sector for 25 consecutive months of decline since Jun 2011 with contraction sharp relative to the history of the index (http://www.markiteconomics.com/Survey/PressRelease.mvc/5bd5c06b053d42a3a8c527b6d68f4a9b). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds acceleration of contraction in May and Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/5bd5c06b053d42a3a8c527b6d68f4a9b). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 47.3 in May to 49.1 in Jun for 23 consecutive months of contraction of Italy’s manufacturing below 50.0 with the Jun at the highest in five months, indicating only marginal deterioration of overall business while output increased for the first time in 23 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/675369f0f11f4232a9cd0a1dc5c63c8f). Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds that manufacturing has been improving by obtaining foreign orders with internal demand still weak (http://www.markiteconomics.com/Survey/PressRelease.mvc/675369f0f11f4232a9cd0a1dc5c63c8f). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jun month ∆%: 0.3 Jun 12-month ∆%: 1.2 Blog 7/14/13
Producer Price Index	May month ∆%: -0.1 May 12-month ∆%: -1.1 Blog 6/30/13
GDP Growth	IQ2013/IVQ2012 SA ∆%: minus 0.6 IQ2013/IQ2012 NSA ∆%: minus 2.4 Blog 3/17/13 6/16/13
Labor Report	Apr 2013 Participation rate 63.8% Employment ratio 56.0% Unemployment rate 12.0% Blog 6/2/13
Industrial Production	May month ∆%: 0.1 12 months CA ∆%: -4.2 Blog 7/14/13
Retail Sales	Apr month ∆%: -0.1 Apr 12-month ∆%: -2.9 Blog 6/30/13
Business Confidence	Mfg Jun 90.2, Feb 88.6 Construction Jun 71.0, Feb 81.1 Blog 6/30/13
Trade Balance	Balance May SA €3155 million versus Apr €2683 Exports May month SA ∆%: 0.6; Imports May month ∆%: -0.9 Exports 12 months May NSA ∆%: -1.5 Imports 12 months NSA ∆%: -10.3 Blog 7/21/13

Links to blog comments in Table IT:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

Exports and imports of Italy and monthly growth rates SA are in Table VG-1. There have been significant fluctuations. Seasonally adjusted exports increased 0.6 percent in May 2013 while imports decreased 0.9 percent. The SA trade balance improved from surplus of €2683 million in Apr 2013 to surplus of €3155 million in May 2013.

Table VG-1, Italy, Exports, Imports and Trade Balance SA Million Euros and Month SA ∆%

	Exports	∆%	Imports	∆%	Balance
2011
May	32,296	2.7	34,882	1.6	-2,586
Jun	31,429	-2.7	33,355	-4.4	-1,926
Jul	31,638	0.7	33,969	1.8	-2,331
Aug	31,651	0.0	34,294	1.0	-2,643
Sep	31,902	0.8	33,278	-3.0	-1,376
Oct	31,058	-2.6	32,612	-2.0	-1,554
Nov	31,517	1.5	32,941	1.0	-1,424
Dec	32,665	3.6	31,949	-3.0	716
2012
Jan	31,769	-2.7	32,188	0.7	-419
Feb	32,012	0.8	32,489	0.9	-477
Mar	32,342	1.0	31,795	-2.1	547
Apr	32,354	0.0	32,382	1.8	-28
May	32,919	1.7	32,626	0.8	293
Jun	32,408	-1.6	30,679	-6.0	1,729
Jul	32,684	0.9	31,752	3.5	932
Aug	33,507	2.5	32,683	2.9	824
Sep	32,766	-2.2	31,212	-4.5	1,554
Oct	32,695	-0.2	31,264	0.2	1,431
Nov	32,769	0.2	30,470	-2.5	2,299
Dec	32,627	-0.4	30,944	1.6	1,683
2013
Jan	33,066	1.3	30,943	0.0	2,123
Feb	32,073	-3.0	30,033	-2.9	2,040
Mar	32,445	1.2	30,045	0.0	2,400
Apr	32,340	-0.3	29,657	-1.3	2,683
May	32,531	0.6	29,376	-0.9	3,155

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

Italy’s trade account not seasonally adjusted is in Table VG-2. Values are different because the data are original and not adjusted. Exports decreased 1.5 percent in the 12 months ending in May 2013 while imports decreased 10.3 percent with actual trade surplus of €3895 million. Twelve-month rates of growth picked up again in Aug 2011 with 15.2 percent for exports and 12.6 percent for imports. In Sep 2011, exports grew 10.2 percent relative to a year earlier while imports grew only 3.6 percent. In Oct 2011, exports grew 4.5 percent while imports fell 0.2 percent. In Nov 2011, exports grew 6.5 percent in 12 months while imports grew 0.5 percent. Exports continued to growth of 7.2 percent in the 12 months ending in Aug 2012 while imports fell 2.7 percent. The actual or not seasonally adjusted trade balance deficit fell from €2948 million in Aug 2011 to surplus of €1407 million in Dec 2011 but turned into deficit of €4574 million in Jan 2012. The deficit improved to lower deficit of €1195 million in Feb 2012 and surplus of €1792 million in Mar 2012, returning to deficit of €250 million in Apr and surplus of €867 million in May. In Jun 2012, the actual surplus was €2780 million and then €4733 million in Jul 2012, which was the highest in 2012 but deteriorated to actual deficit of €483 million in Aug 2012. Exports fell 20.9 percent and imports 22.1 percent during the global recession in 2009. Growth of exports of 12.0 percent in the 12 months ending in Oct 2012 while imports increased 1.0 percent increased the trade surplus to €2420 million. The trade surplus was €2105 million in Dec 2012 with growth of exports of minus 3.6 percent in 12 months while imports fell 6.0 percent. The trade balance deteriorated to deficit of €1614 million in Jan 2013 even with growth of exports of 8.7 percent in 12 months while imports fell 1.8 million. The trade balance returned to surplus of €1092 million in Feb 2013 with decline of exports by 2.8 percent and decrease of exports by 9.7 percent. The surplus widened to €3240 million in Mar 2013 with exports declining 6.0 percent and imports falling 10.6 percent. The surplus shrank to €2025 million in Apr 2013 with growth of exports of 4.5 and decline of imports of 3.0 percent. The surplus increased to €3895 million in May 2013 with declines of exports of 1.5 percent and of imports of 10.3 percent.

Table VG-2, Italy, Exports, Imports and Trade Balance NSA Million Euros and 12 Month ∆%

2010	337,346	15.6	367,390	23.4	-30,044
2011	375,904	11.4	401,428	9.3	-25,524
2012	389,725	3.7	378,759	-5.6	10,966

2011
May	33,545	19.9	35,853	18.8	-2,308
Jun	32,649	8.1	34,481	2.1	-1,832
Jul	35,327	6.0	34,058	7.1	1,269
Aug	24,245	15.2	27,193	12.6	-2,948
Sep	32,996	10.2	34,886	3.6	-1,890
Oct	32,131	4.5	33,245	-0.2	-1,114
Nov	32,440	6.5	34,025	0.5	-1,585
Dec	31,364	5.6	29,957	-8.5	1,407
2012
Jan	27,429	4.8	32,003	-1.7	-4,574
Feb	31,787	7.3	32,982	0.9	-1,195
Mar	36,070	5.0	34,278	-11.0	1,792
Apr	30,510	-1.8	30,760	-9.4	-250
May	35,132	4.7	34,265	-4.4	867
Jun	34,358	5.2	31,578	-8.4	2,780
Jul	37,019	4.8	32,286	-5.2	4,733
Aug	25,979	7.2	26,462	-2.7	-483
Sep	31,602	-4.2	31,193	-10.6	409
Oct	35,997	12.0	33,577	1.0	2,420
Nov	33,593	3.6	31,230	-8.2	2,363
Dec	30,250	-3.6	28,145	-6.0	2,105
2013
Jan	29,824	8.7	31,438	-1.8	-1,614
Feb	30,890	-2.8	29,798	-9.7	1,092
Mar	33,894	-6.0	30,654	-10.6	3,240
Apr	31,868	4.5	29,843	-3.0	2,025
May	34,616	-1.5	30,721	-10.3	3,895

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

Growth rates of Italy’s trade and major products are in Table VG-3 for the period Jan-May 2013 relative to Jan-May 2012. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 19.4 percent and minus 11.4 percent for durable goods. The higher rate of growth of exports of 0.1 percent in Jan-May 2013/Jan-May 2012 relative to imports of minus 7.2 percent may reflect weak demand in Italy with GDP declining during seven consecutive quarters from IIIQ2011 through IQ2013 together with softening commodity prices.

Table VG-3, Italy, Exports and Imports % Share of Products in Total and ∆%

	Exports Share %	Exports ∆% Jan-May 2013/ Jan-May 2012	Imports Share %	Imports ∆% Jan-May 2013/ Jan-May 2012
Consumer Goods	29.3	7.1	25.6	0.6
Durable	5.8	1.4	2.9	-11.4
Non-Durable	23.5	8.6	22.7	2.2
Capital Goods	31.6	0.1	19.5	-8.3
Inter- mediate Goods	33.6	-3.0	32.6	-4.0
Energy	5.5	-16.6	22.3	-19.4
Total ex Energy	94.5	1.1	77.7	-3.7
Total	100.0	0.1	100.0	-7.2

Note: % Share for 2012 total trade.

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

Table VG-4 provides Italy’s trade balance by product categories in May 2013 and cumulative Jan-May 2013. Italy’s trade balance excluding energy generated surplus of €7807 million in May 2013 and €31,731 million cumulative in Jan-May 2013 but the energy trade balance created deficit of €3911 million in May 2013 and cumulative €22,731 million in Jan-May 2013. The overall surplus in May 2013 was €3895 million with cumulative surplus of €8640 million in Jan-May 2013. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

Table VG-4, Italy, Trade Balance by Product Categories, € Millions

	May 2013	Cumulative Jan-May 2013
Consumer Goods	1,712	8,244
Durable	1,125	5,168
Nondurable	587	3,076
Capital Goods	5,366	20,753
Intermediate Goods	729	2,374
Energy	-3,911	-22,731
Total ex Energy	7,807	31,731
Total	3,895	8,640

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table VG-5 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 40.5 percent of the total in Jan-May 2013. Exports to the non-European Union area with share of 46.3 percent in Italy’s total exports are growing at 4.2 percent in Jan-May 2013 relative to Jan-May 2012 while those to EMU are growing at minus 4.0 percent.

Table VG-5, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

Apr 2013	Exports % Share	∆% Jan-May 2013/ Jan-May 2012	Imports % Share	∆% Jan-May 2013/ Jan-May 2012
EU	53.7	-3.2	52.9	-3.0
EMU 17	40.5	-4.0	42.7	-3.0
France	11.1	-2.8	8.3	-6.5
Germany	12.5	-4.7	14.6	-7.5
Spain	4.7	-8.2	4.4	-2.2
UK	4.9	-0.2	2.5	-2.2
Non EU	46.3	4.2	47.1	-11.8
Europe non EU	13.9	1.4	11.3	7.4
USA	6.8	-1.3	3.3	-19.1
China	2.3	5.0	6.5	-8.2
OPEC	5.7	13.0	10.8	-27.2
Total	100.0	0.1	100.0	-7.2

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

Table VG-6 provides Italy’s trade balance by regions and countries. Italy had trade deficit of €454 million with the 17 countries of the euro zone (EMU 17) in May 2013 and cumulative deficit of €2065 million in Jan-May 2013. Depreciation to parity could permit greater competitiveness in improving the trade surplus of €2687 million in Jan-May 2013 with Europe non European Union, the trade surplus of €6260 million with the US and trade surplus with non-European Union of €5526 million in Jan-May 2013. There is significant rigidity in the trade deficits in Jan-May 2013 of €5821 million with China and €3683 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table VG-6, Italy, Trade Balance by Regions and Countries, Millions of Euro

Regions and Countries	Trade Balance May 2013 Millions of Euro	Trade Balance Cumulative Jan-May 2013 Millions of Euro
EU	890	3,114
EMU 17	-454	-2,065
France	1,042	5,127
Germany	-342	-2,049
Spain	53	369
UK	762	3,599
Non EU	3,005	5,526
Europe non EU	738	2,687
USA	1,817	6,260
China	-1,116	-5,821
OPEC	-64	-3,683
Total	3,895	8,640

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/95677

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 5.2 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.7 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.2 percent in 2012.

Table VH-UK, UK, Gross Domestic Product, ∆%

	∆% on Prior Year
1998	3.6
1999	2.9
2000	4.4
2001	2.2
2002	2.3
2003	3.9
2004	3.2
2005	3.2
2006	2.8
2007	3.4
2008	-0.8
2009	-5.2
2010	1.7
2011	1.1
2012	0.2

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q1-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 54.9 in May to 56.9 in Jun, indicating increase in activity in every month since the beginning of 2013 and at the fastest rate since 27 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/d8b5be871614424e84c8dcd2e5573427). Chris Williamson, Chief Economist at Markit, finds continuing improvement in the UK’s economy that depending on Jun could result in growth of GDP of 0.5 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d8b5be871614424e84c8dcd2e5573427). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 51.5 in May to 52.5 in Jun, which is the highest rate of improvement in 25 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/c853fab910d9425083c5eee0326d3fe3). Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds manufacturing improving at the highest rates since the beginning of 2011 with improving domestic demand and supporting foreign orders, suggesting growth of output of manufacturing by 0.5 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c853fab910d9425083c5eee0326d3fe3). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators


CPI	Jun month ∆%: -0.2 Jun 12-month ∆%: 2.9 Blog 7/21/13
Output/Input Prices	Output Prices: Jun 12-month NSA ∆%: 2.0; excluding food, petroleum ∆%: 1.0 Input Prices: Jun 12-month NSA ∆%: 4.2 Excluding ∆%: 2.1 Blog 7/21/13
GDP Growth	IQ2013 prior quarter ∆% 0.3; year earlier same quarter ∆%: 0.3 Blog 3/31/13 4/28/13 5/26/13 7/7/13
Industrial Production	May 2013/May 2012 ∆%: Production Industries minus 2.3; Manufacturing minus 2.9 Blog 7/14/13
Retail Sales	Jun month ∆%: 0.2 Jun 12-month ∆%: 2.2 Blog 7/21/13
Labor Market	Mar-May Unemployment Rate: 7.8%; Claimant Count 4.4%; Earnings Growth 1.7% Blog 7/21/13
Trade Balance	Balance Apr minus ₤2579 million Exports May ∆%: 0.6; Mar-May ∆%: 1.6 Imports May ∆%: 1.4 Mar-May ∆%: -0.6 Blog 7/14/13

Links to blog comments in Table UK:

7/14/13 http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/23/13 http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html

4/28/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

4/28/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

Labor market statistics of the UK for the quarter Mar-May 2013 are provided in Table VH-1. The unemployment rate decreased to 7.8 percent and the number unemployed decreased 72,000 in the year, reaching 2.505 million. The employment rate is 71.4 percent. Earnings growth including bonuses was 1.7 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 4.4 percent, down 0.1 percentage points on the month and down 0.4 percentage points on the year.

Table VH-1, UK, Labor Market Statistics

	Quarter Mar-May 2013
Unemployment Rate	7.8% down 0.2 on quarter and down 0.3 from year earlier
Number Unemployed	(1) Down 57,000 on quarter and down 72,000 from year earlier to reach 2.505 million (2) Unemployment rate 16 to 24 years of age 20.7% of that age group (3) Unemployed 16 to 24 years excluding those in full-time education 667,000 (292,000 in full-time education) down 3,000 on quarter; unemployment rate 19.3% +0.3 % Points
Number Unemployed > one and two years	(1) Number unemployed over one year: 915,000, up 32,000 on quarter (2) Number unemployed over two years: 474,000, up 11,000 on quarter
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.5%, up 0.2 % points on quarter, down 0.4 on year (2) Economically inactive 16-64 years up 87,000 on quarter and down 144,000 on year to 9.036 million
Employment Rate	71.4%, down 0.1 on quarter, up 0.6 % points on year
Number Employed	(1) Up 16,000 on quarter, +336,000 on year to 29.714 million (2) Number of employees up 34,000 on quarter to 25.27 million (3) Self-employed rose 21,000 on quarter to 4.20 million (4) Full-time 21.68 million, up 28,000 on quarter, up 60,000 on year
Earnings Growth Rates Year on Year	(1) Total +1.7% (including bonuses) over year earlier; regular 1.0%; private sector 1.9% on year earlier, public sector rose 1.3% on year earlier (2) Regular private 1.1 % (excluding bonuses); regular public 1.3% on year earlier
Full-time and Part-time	(1) Number full-time 21.65 million, up 197,000 on quarter (2) Number part-time 8.08 million, down 43,000 on quarter
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 1.479 million; down 21,200 in month, down 117,000 on year earlier (2) Claimant count 4.4%, down 0.1 on month and down 0.4 % points on year
Labor Productivity	(1) Output per worker changed 0.0% from IVQ2012 to IQ2013 (2) Unit labor costs fell 0.4% from IVQ2012 to IQ2013

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/july-2013/index.html

Table VH-2 provides indicators of the labor force survey of the UK for Mar-May 2013 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 8.1 percent in Mar-May 2012 to 7.8 percent in Mar-May 2013.

Table VH-2, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Mar-May 2011	40,136	29,248	70.7	2,470	7.8
Mar-May 2012	40,184	29,378	70.8	2,577	8.1
Jun-Aug 2012	40,193	29,590	71.3	2,528	7.9
Sep-Nov 2012	40,209	29,700	71.5	2,493	7.7
Dec-Feb 2013	40,226	29,698	71.4	2,563	7.9
Mar-May 2013	40,242	29,714	71.4	2,505	7.8

Notes: LFHP: Labor Force Household Population Ages 16 to 64 in thousands; EMP: Employed Ages 16 and over in thousands; PART: Employment as % of Population Ages 16 to 64; UNE: Unemployed Ages 16 and over in thousands; Rate: Number Unemployed Ages 16 and over as % of Employed plus Unemployed

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/july-2013/index.html

The volume of retail sales in the UK increased 0.2 percent in Jun 2013 and increased 2.2 percent in the 12 months ending in Jun 2013, as shown in Table VH-3. Percentage changes of retail sales in 12 months had been positive in several months since Sep 2011 with exceptions such as decline of 2.5 percent in Apr 2012, 0.7 percent in Jan 2013, 0.4 percent in Mar 2013 and 1.0 percent in Apr 2013.

Table VH-3, UK, Volume of Retail Sales ∆%

	Month ∆%	12-Month ∆%
Jun 2013	0.2	2.2
May	2.1	2.1
Apr	-1.0	1.0
Mar	-0.4	-0.5
Feb	2.1	2.3
Jan	-0.7	-0.8
Dec 2012	-0.1	0.1
Nov	0.1	0.4
Oct	-0.9	0.3
Sep	0.5	2.1
Aug	-0.1	2.1
Jul	0.4	1.7
Jun	0.1	1.8
May	1.0	1.5
Apr	-2.5	-1.9
Mar	2.4	2.8
Feb	-1.0	0.3
Jan	0.3	0.5
Dec 2011	0.2	2.4
Nov	0.0	0.2
Oct	0.9	0.5
Sep	0.6	0.1
Aug	-0.5	-1.3
Jul	0.4	-1.0
Jun	-0.2	-0.9
May	-2.4	-1.0
Apr	2.2	2.1
Mar	0.0	0.0
Feb	-0.9	-0.1
Jan	2.2	3.4

Dec 2010	-2.0	-2.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

Retail sales in the UK struggle with oscillating and relatively high inflation. Table VH-2 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales increased 1.7 percent in the 12 months ending in Jun 2013 while that of sales excluding auto fuel increased 1.7 percent. The 12-month increase of the implied deflator of auto fuel sales rose to 17.0 percent in Sep 2011, which is the highest 12-month increase in 2011, but then declined to 0.3 percent in Dec 2012 and minus 0.2 percent in Jan 2013 but decreased 2.2 percent in May 2013, increasing 1.3 percent in Jun 2013. The percentage change of the implied deflator of sales of food stores at 3.4 percent in May 2013 is higher than for total retail sales. Increases in fuel prices at the retail level have occurred throughout most years since 2005 with exception of the decline of 9.5 percent in 2008 when commodity carry trades were reversed in the panic of the financial crisis, as shown in Table VH-15. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-4, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes, ∆%

		All Retail	Ex Auto Fuel	Food	Nonfood	Auto Fuel
2010	Dec	3.7	3.2	5.2	1.4	12.4

2011	Jan	4.4	3.3	5.4	1.4	14.5
	Feb	4.9	3.8	5.6	2.2	15.1
	Mar	4.3	3.0	4.3	1.9	14.9
	Apr	4.2	3.3	4.8	1.9	12.3
	May	4.6	3.5	5.6	1.8	13.2
	Jun	4.7	3.4	6.2	1.2	14.5

	Jul	5.1	3.9	6.0	2.2	14.5
	Aug	5.4	4.0	6.0	2.4	16.2
	Sep	5.1	3.7	6.2	1.7	17.0
	Oct	4.7	3.5	5.1	2.3	14.8
	Nov	4.0	3.0	4.7	1.7	12.6
	Dec	3.3	2.4	4.3	1.0	9.1

2012	Jan	2.6	2.2	3.6	1.1	5.3
	Feb	2.8	2.4	4.0	0.9	5.4
	Mar	3.0	2.7	4.5	1.1	4.9
	Apr	2.3	2.0	3.8	0.4	5.2
	May	1.4	1.5	3.1	0.2	1.2
	Jun	0.6	0.9	2.3	-0.2	-1.2

	Jul	0.4	0.7	2.0	-0.2	-1.4
	Aug	0.5	0.6	2.1	-0.8	0.4
	Sep	0.9	0.7	2.1	-0.4	2.9
	Oct	1.1	1.0	2.8	-0.4	2.6
	Nov	0.7	0.7	3.1	-1.0	1.3
	Dec	0.9	1.0	3.0	-0.3	0.3

2013	Jan	1.1	1.3	3.8	-0.7	-0.2
	Feb	0.9	1.0	3.2	-0.7	1.1
	Mar	0.9	1.1	3.1	-0.7	0.5
	Apr	0.6	1.1	3.4	-0.7	-3.0
	May	1.0	1.5	3.5	-0.2	-2.2
	Jun	1.7	1.7	3.4	0.4	1.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

UK monthly retail volume of sales is quite volatile, as shown in Table VH-3. Total volume of sales decreased 1.0 percent in Apr 2013 and increased 2.1 percent in May 2013 and 0.2 percent in Jun 2013. There was increase of 0.2 percent in retail sales excluding auto fuels in Jun 2013 and decrease of 0.1 percent in food stores, increase of 0.7 percent in nonfood stores and change of 0.0 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

VH-5, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

		All Retail	All Retail Ex Auto Fuel	Food	Nonfood	Auto Fuel
2011	Jan	2.2	1.4	0.7	1.9	10.4
	Feb	-0.9	-0.9	-0.4	-1.4	-0.4
	Mar	-	0.1	0.6	-0.2	-0.9
	Apr	2.2	2.2	3.7	0.7	1.7
	May	-2.4	-2.6	-4.5	-1.2	-0.4
	Jun	-0.2	-0.2	-0.4	-0.6	0.2

	Jul	0.4	0.5	1.2	0.2	-0.2
	Aug	-0.5	-0.5	-0.1	-1.3	-0.6
	Sep	0.6	0.6	0.1	1.2	0.2
	Oct	0.9	0.9	0.8	1.1	1.1
	Nov	-	-0.4	-0.5	-1.0	3.1
	Dec	0.2	0.3	-	1.1	-0.8

2012	Jan	0.3	0.3	0.3	0.2	-
	Feb	-1.0	-0.9	-0.2	-1.5	-2.5
	Mar	2.4	2.0	-0.4	4.4	5.7
	Apr	-2.5	-1.2	0.1	-2.9	-12.6
	May	1.0	0.5	0.1	0.9	5.2
	Jun	0.1	0.4	-0.1	1.0	-2.6

	Jul	0.4	0.1	0.6	-0.7	2.7
	Aug	-0.1	-0.1	0.1	0.4	0.4
	Sep	0.5	0.5	-0.1	0.5	0.8
	Oct	-0.9	-0.6	-0.9	-0.6	-3.3
	Nov	0.1	0.3	-0.3	0.6	-1.7
	Dec	-0.1	-0.4	0.2	-1.4	3.1

2013	Jan	-0.7	-0.3	-0.7	-0.4	-3.6
	Feb	2.1	2.0	0.3	3.3	2.8
	Mar	-0.4	-0.4	1.8	-3.3	0.3
	Apr	-1.0	-1.1	-4.0	2.5	-0.2
	May	2.1	2.1	3.0	0.9	1.8
	Jun	0.2	0.2	-0.1	0.6	0.0

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

Percentage growth in 12 months of retail sales volume by component groups in the UK is provided in Table VH-4. Total retail sales increased 2.2 percent in the 12 months ending in Jun 2013 with increase of 2.1 percent in sales excluding auto fuel. Sales of food stores decreased 0.4 percent in the 12 months ending in Jun 2013 while sales of nonfood stores increased 2.2 percent and sales of auto fuel stores increased 2.9 percent.

Table VH-6, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

		All Retail	All Retail Ex Auto Fuel	Food	Nonfood	Auto Fuel
2010	Dec	-2.3	-1.7	-4.2	-0.5	-8.5

2011	Jan	3.4	2.9	-2.4	7.0	7.6
	Feb	-0.1	-0.6	-2.5	-0.4	4.7
	Mar	-	-0.4	-1.3	-0.6	3.6
	Apr	2.1	1.9	2.3	0.4	3.9
	May	-1.0	-1.3	-3.4	-1.0	2.1
	Jun	-0.9	-1.4	-4.1	-1.1	3.1

	Jul	-1.0	-1.4	-1.1	-2.9	2.1
	Aug	-1.3	-1.7	-0.7	-4.0	1.9
	Sep	0.1	-0.2	-0.3	-1.6	3.3
	Oct	0.5	0.3	0.4	-1.1	2.5
	Nov	0.2	-0.4	-1.1	-1.8	5.2
	Dec	2.4	1.3	1.0	0.5	13.9

2012	Jan	0.5	0.2	0.7	-1.2	3.1
	Feb	0.3	0.2	0.9	-1.3	0.9
	Mar	2.8	2.2	-0.1	3.2	7.6
	Apr	-1.9	-1.2	-3.7	-0.5	-7.5
	May	1.5	2.0	1.0	1.7	-2.4
	Jun	1.8	2.6	1.3	3.3	-5.1

	Jul	1.7	2.2	0.7	2.3	-2.3
	Aug	2.1	2.5	0.8	4.1	-1.4
	Sep	2.1	2.4	0.6	3.3	-0.8
	Oct	0.3	1.0	-1.1	1.6	-5.1
	Nov	0.4	1.6	-0.9	3.2	-9.5
	Dec	0.1	0.9	-0.7	0.7	-6.0

2013	Jan	-0.8	0.2	-1.7	0.1	-9.3
	Feb	2.3	3.1	-1.2	4.9	-4.4
	Mar	-0.5	0.6	0.9	-2.8	-9.2
	Apr	1.0	0.7	-3.2	2.6	3.6
	May	2.1	2.3	-0.4	2.5	0.2
	Jun	2.2	2.1	-0.4	2.2	2.9

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

Table VH-7 provides the analysis of the UK Office for National Statistics of contributions to 12-month percentage changes of value and volume of retail sales in the UK. The volume of retail sales seasonally adjusted increased 2.2 percent in the 12 months ending in Jun 2013. Sales of predominantly food stores with weight of 41.5 percent decreased 0.4 percent in the 12 months ending in Jun 2013, subtracting 0.2 percentage points. Mostly nonfood stores with weight of 41.3 percent increased 2.2 percent with contribution of 0.9 percentage points. Positive contribution to 12-month percentage changes of volume was made by non-store retailing with weight of 5.7 percent, growth of 18.4 percent and positive contribution of 1.1 percentage. Automotive fuel with weight of 11.5 percent and growth of 2.9 percent added 0.4 percentage points. The value of retail sales increased 3.8 percent in the 12 months ending in Jun 2013. There were positive contributions: 1.1 percentage points for predominantly nonfood stores and 1.1 percentage points for non-store retailing. Automotive fuel stores added 0.5 percentage points while food stores added 1.1 percentage points.

Table VH-7, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Jun 2013	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	2.2		3.8
Mostly Food Stores	41.5	-0.4	-0.2	2.7	1.1
Mostly Nonfood Stores	41.3	2.2	0.9	2.6	1.1
Non-store Retailing	5.7	18.4	1.1	18.3	1.1
Automotive Fuel	11.5	2.9	0.4	4.4	0.5

Cont.: Contribution

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/june-2013/index.html

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Sunday, July 21, 2013

Tapering Quantitative Easing Policy and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, United States Industrial Production, World Economic Slowdown and Global Recession Risk: Part III

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