CMP Associates Regulation Blog: Duration Dumping and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Unresolved US Balance of Payments Deficits and Fiscal Imbalance, Household Income at 1995 Levels, Forty-six Million in Poverty and Forty-eight Million without Health Insurance, United States Industrial Production, World Economic Slowdown and Global Recession Risk: Part IV

Duration Dumping and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Unresolved US Balance of Payments Deficits and Fiscal Imbalance, Household Income at 1995 Levels, Forty-six Million in Poverty and Forty-eight Million without Health Insurance, 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

IIA Unresolved US Balance of Payments Deficits and Fiscal Imbalance Threatening Risk Premium on Treasury Securities

IIA1 United States Unsustainable Deficit/Debt

IIA2 Unresolved US Balance of Payments Deficits

IIB Household Income at 1995 Levels, 46 Million in Poverty and 48 Million without Health Insurance

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 V-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 IIQ2013 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 0.3 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.2 percent, which is much lower than 5.0 percent in IQ2012. Growth of 3.8 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 3.5 percent and increased 0.3 percent relative to a year earlier. Japan’s GDP grew 0.3 percent in IVQ2012 at the SAAR of 1.1 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 0.3 percent relative to a year earlier. Japan’s GDP increased 0.9 percent in IIQ2013 at the SAAR of 3.8 percent and increased 1.2 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 0.2 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 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 0.5 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 percent and decreased 1.0 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.5 percent relative to a year earlier. Germany’s GDP increased 0.7 percent in IQ2012 and 1.8 percent relative to a year earlier. In IIQ2012, Germany’s GDP decreased 0.1 percent and increased 0.6 percent relative to a year earlier but 1.1 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 0.5 percent in IVQ2012 and increased 0.0 percent relative to a year earlier. In IQ2013, Germany’s GDP increased 0.0 percent and fell 1.6 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.7 percent and 0.9 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.9 percent, at SAAR of 3.7 percent and higher by 3.3 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.2 percent at SAAR and 2.8 percent relative to a year earlier. In IIIQ2012, GDP grew 0.7 percent, 2.8 percent at SAAR and 3.1 percent relative to IIIQ2011. In IVQ2012, GDP grew 0.0 percent, 0.1 percent at SAAR and 2.0 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.1 percent SAAR, 0.3 percent relative to the prior quarter and 1.3 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 2.5 percent in SAAR, 0.6 percent relative to the prior quarter and 1.6 percent relative to IIQ2012 (http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.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. UK GDP increased 0.7 percent in IIQ2013 and 1.5 percent relative to a year earlier. Italy has experienced decline of GDP in eight consecutive quarters from IIIQ2011 to IIQ2013. 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 2.4 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 2.4 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and 2.1 percent relative to a year earlier. France’s GDP changed 0.0 percent in IQ2012 and increased 0.4 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 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 0.5 percent relative to a year earlier. The GDP of France increased 0.5 percent in IIQ2013 and 0.3 percent relative to a year earlier.

Table V-3, Percentage Changes of GDP Quarter on Prior Quarter and on Same Quarter Year Earlier, ∆%

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.9 SAAR: 3.7	3.3
Japan	QOQ: 1.2 SAAR: 5.0	3.4
China	1.5	8.1
Euro Area	-0.1	-0.2
Germany	0.7	1.8
France	0.0	0.4
Italy	-1.0	-1.7
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3 SAAR: 1.2	2.8
Japan	QOQ: -0.3 SAAR: -1.2	3.8
China	2.1	7.6
Euro Area	-0.3	-0.5
Germany	-0.1	0.6 1.1 CA
France	-0.3	0.1
Italy	-0.6	-2.4
United Kingdom	-0.5	0.0
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.7 SAAR: 2.8	3.1
Japan	QOQ: –0.9 SAAR: –3.5	0.3
China	2.0	7.4
Euro Area	-0.1	-0.7
Germany	0.2	0.4
France	0.2	0.0
Italy	-0.3	-2.6
United Kingdom	0.7	0.1
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	2.0
Japan	QOQ: 0.3 SAAR: 1.1	0.4
China	1.9	7.9
Euro Area	-0.5	-1.0
Germany	-0.5	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: 0.3 SAAR: 1.1	1.3
Japan	QOQ: 1.0 SAAR: 4.1	0.3
China	1.6	7.7
Euro Area	-0.2	-1.0
Germany	0.0	-1.6
France	-0.2	-0.5
Italy	-0.6	-2.4
UK	0.3	0.3
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.6 SAAR: 2.5	1.6
Japan	QOQ: 0.9 SAAR: 3.8	1.2
China	1.7	7.5
Euro Area	0.3	-0.5
Germany	0.7	0.9
France	0.5	0.3
Italy	-0.3	-2.1
UK	0.7	1.5

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 (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier 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 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Aug 2013, Japan’s exports grew 14.7 percent in 12 months while imports increased 16.0 percent. The second part of Table V-4 shows that net trade deducted 1.0 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.7 percentage points from GDP growth in IIIQ2012 and deducted 0.2 percentage points from GDP growth in IVQ2012. Net trade added 0.3 percentage points to GDP growth in IQ2012, 1.6 percentage points in IQ2013 and 0.7 percentage points in IIQ2013. In Aug 2013, China exports increased 7.2 percent relative to a year earlier and imports increased 7.1 percent. Germany’s exports decreased 1.1 percent in the month of Jul 2013 and changed 0.0 percent in the 12 months ending in Jul 2013 while imports increased 0.5 percent in the month of Jul and increased 0.9 percent in the 12 months ending in Jul. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.2 percentage points in IQ2012 and added 0.2 percentage points in IIQ2013. 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 and added 0.3 percentage points in IIQ2013. France’s exports increased 1.3 percent in Jul 2013 while imports increased 2.7 percent and net trade added 0.10 percentage points to GDP growth in IIQ2012, 0.10 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 and was neutral in IIQ2013. US exports increased 2.2 percent in Jun 2013 and goods exports increased 0.9 percent in Jan-Jun 2013 relative to a year earlier but net trade deducted 0.03 percentage points to GDP growth in IIIQ2012 and added 0.68 percentage points in IVQ2012. Net trade deducted 0.28 percentage points from US GDP growth in IQ2013 and contributed 0.00 percentage points in IIQ2013. US imports decreased 2.5 percent in Jun 2013 and goods imports decreased 1.7 percent in Jan-Jun 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 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 advanced 0.4 percent in August after having been unchanged in July; the gains in August were broadly based. Following a decrease in July of 0.4 percent, which was steeper than previously reported, manufacturing production rose 0.7 percent in August. The output of mines moved up 0.3 percent, its fifth consecutive monthly increase, and the production of utilities fell 1.5 percent, its fifth consecutive monthly decrease. At 99.4 percent of its 2007 average, total industrial production in August was 2.7 percent above its year-earlier level. “

In the six months ending in Aug 2013, United States national industrial production accumulated increase of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than growth of 2.7 percent in the 12 months ending in Aug 2013. Excluding growth of 0.4 percent in Aug 2013, growth in the remaining five months from Mar 2012 to Jul 2013 accumulated to 0.2 percent or 0.5 percent annual equivalent. Industrial production stagnated in three of the past six months and fell in one. Business equipment accumulated growth of 0.4 percent in the six months from Mar to Aug 2013 at the annual equivalent rate of 0.8 percent, which is much lower than growth of 2.5 percent in the 12 months ending in Aug 2013. Growth of business equipment accumulated minus 0.5 percent from Mar to July 2013 at the annual equivalent rate of minus 1.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector increased 0.2 percentage point in August to 77.8 percent, a rate 0.6 percentage point above its level of a year earlier and 2.4 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating.

Manufacturing increased 0.7 percent in Aug 2013 after decreasing 0.4 percent in Jul 2013 and increasing 0.3 percent in Jul 2013 seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months ending in Aug 2013. Manufacturing grew cumulatively 0.2 percent in the six months ending in Jul 2013 or at the annual equivalent rate of 0.4 percent. Excluding the increase of 0.7 percent in Aug 2013, manufacturing accumulated growth of minus 0.5 percent from Mar 2013 to Jul 2013 or at the annual equivalent rate of minus 1.2 percent.

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	-0.6 Jul	1.6 Jan-Jul	1.6 Jul	-1.4 Jan-Jul
Japan		Aug 2013 14.7 Jul 2013 12.2 Jun 2013 7.4 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		Aug 2013 16.0 Jul 2013 19.6 Jun 2013 11.8 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		7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb		7.1 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb
Euro Area	1.7 12-M Jul	1.5 Jan-Jun	-3.5 12-M Jul	-4.1 Jan-Jun
Germany	-1.1 Jul CSA	0.0 Jul	0.5 Jul CSA	0.9 Jul
France Jul	1.3	-0.6	2.7	1.1
Italy Jul	-2.3	3.0	0.4	-0.3
UK	-4.6 Jul	1.1 May-Jul 13 /May-Jul 12	-0.4 Jul	0.7 May-Jul 13/May-Jul 12
Net Trade % Points GDP Growth	% Points
USA	IIQ2013 0.0 IQ2013 -0.28 IVQ2012 +0.68 IIIQ2012 -0.03 IIQ2012 +0.10 IQ2012 +0.44
Japan	0.3 IQ2012 -1.0 IIQ2012 -2.7 IIIQ2012 -0.2 IVQ2012 1.6 IQ2013 0.7 IIQ2013
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.2 IIQ2013 0.2
France	0.1 IIIQ2012 0.2 IVQ2012 -0.2 IQ2013 0.0 IIQ2013
UK	-0.7 IQ2012 -0.7 IIQ2012 +0.4 IIIQ2012 -0.3 IVQ2012 0.6 IQ2013 0.3 IIQ2013

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

The structure of exports and imports of Japan is in Table V-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 33.8 percent of Japan’s imports and increased 17.5 percent in the 12 months ending in Aug 2013 because of alternating carry trades into commodity futures in accordance with risk aversion. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 13.4 percent of Japan’s exports with increase of 13.5 percent in the 12 months ending in Aug 2013. Machinery contributes 19.1 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Electrical machinery contributes 18.3 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Exports of transport equipment with share of 21.2 percent in total exports increased 15.2 percent in the 12 months ending in Aug 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table V-5 shows increase of the major categories of motor vehicles of 21.0 percent: cars increased 23.4 percent with increase of 6.0 percent in the minor category of buses and trucks, increase of 12.2 percent for parts of motor vehicles, increase of 25.9 percent for motorcycles and decrease of 28.5 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

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

Aug 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,783,712	14.7	6,744,041	16.0
Asia	3,221,175	13.5	2,919,797	15.3
China	1,118,989	15.8	1,423,073	17.6
USA	1,069,528	20.6	574,187	14.0
Canada	71,661	14.8	93,246	16.2
Brazil	53,085	26.3	82,097	22.8
Mexico	69,563	1.5	32,992	22.2
Western Europe	588,220	21.3	685,872	9.9
Germany	150,838	19.9	209,602	20.2
France	48,700	32.0	81,964	-3.7
UK	90,388	25.4	50,242	4.0
Middle East	184,317	10.1	1,313,053	21.2
Australia	139,549	19.2	463,638	5.4

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, increased to 55.2 in Aug from 54.0 in Jul, indicating expansion at a higher rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). This index has remained above the contraction territory of 50.0 during 49 consecutive months and reached in Aug 2013 the highest reading since Feb 2011. The employment index increased from 51.0 in Jul to 52.2 in Aug with input prices rising at a slower rate and new orders and output increasing at higher rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). David Hensley, Director of Global Economics at JP Morgan, finds growth through all sectors (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was higher at 51.7 in Aug from 50.8 in Jul, which is the highest reading Jun 2011 and the eighth consecutive reading above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b34defd79f914b46b82892783a0205ec). David Hensley, Director of Global Economic Coordination at JP Morgan, finds support of acceleration of manufacturing output. The HSBC Brazil Composite Output Index, compiled by Markit, increased marginally from 49.6 in Jul to 49.7 in Aug, indicating moderate contraction in private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). The HSBC Brazil Services Business Activity index, compiled by Markit fell marginally from 50.3 in Jul to 49.7 in Aug, which is the first reading below 50.0 in 12 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the survey data suggest weaker economy and increasing costs of inputs at a higher rate than in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 48.5 in Jul to 49.4 in Aug with another decline in foreign business (http://www.markiteconomics.com/Survey/PressRelease.mvc/027b440eefc443ada76581bbbfe4ed7c). Andre Loes, Chief Economist, Brazil at HSBC, finds mild contraction of manufacturing at slower pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/027b440eefc443ada76581bbbfe4ed7c).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 53.9 in Aug from 53.7 in Jul, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/3098549eef6c47e6a5fafaa84ae66cd8). New export orders registered 52.0 in Aug down from 52.5 in Jul, indicating expansion at slower rate. Chris Williamson, Chief Economist at Markit, finds that the survey data are consistent with continuing moderate growth in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/3098549eef6c47e6a5fafaa84ae66cd8). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 53.1 in Aug from 53.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/2d624187f3e9463196a640620bd19b4c). The index of new exports orders decreased from 52.5 in Jul to 52.0 in Aug while total new orders increased from 55.4 in Jul to 55.7 in Aug. Chris Williamson, Chief Economist at Markit, finds that the index suggests possible deceleration (http://www.markiteconomics.com/Survey/PressRelease.mvc/2d624187f3e9463196a640620bd19b4c). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.3 percentage points from 55.4 in Jul to 55.7 in Aug, which indicates growth at a higher rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 4.9 percentage points from 58.3 in Jul to 63.2 in Aug. The index of exports increased 2.0 percentage point from 53.5 in Jul to 55.5 in Aug, growing at a faster rate. The Non-Manufacturing ISM Report on Business^® PMI increased 2.6 percentage points from 56.0 in Jul to 58.6 in Aug, indicating growth of business activity/production during 49 consecutive months, while the index of new orders increased 2.8 percentage points from 57.7 in Jul to 60.5 in Aug (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Aug 12 months NSA ∆%: 1.5; ex food and energy ∆%: 1.8 Aug month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 9/22/13
Producer Price Index	Aug 12-month NSA ∆%: 1.4; ex food and energy ∆% 1.1 Aug month SA ∆% = 0.3; ex food and energy ∆%: 0.0 Blog 9/15/13 9/22/13
PCE Inflation	Jul 12-month NSA ∆%: headline 1.4; ex food and energy ∆% 1.2 Blog 9/1/13
Employment Situation	Household Survey: Aug Unemployment Rate SA 7.3% Blog calculation People in Job Stress Jul: 28.3 million NSA, 17.4% of Labor Force Establishment Survey: Nov Nonfarm Jobs +169,000; Private +152,000 jobs created Jul 12-month Average Hourly Earnings Inflation Adjusted ∆%: -0.7 Blog 9/8/13
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 Jul 2013 4.518 million lower by 1.037 million than 5555 million in Jul 2006 Blog 9/15/13
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 3.3 IIQ2012/IIQ2011 2.8 IIIQ2012/IIIQ2011 3.1 IVQ2012/IVQ2011 2.0 IQ2013/IQ2012 1.3 IIQ2013/IIQ2012 1.6 IQ2012 SAAR 3.7 IIQ2012 SAAR 1.2 IIIQ2012 SAAR 2.8 IVQ2012 SAAR 0.1 IQ2013 SAAR 1.1 IIQ2013 SAAR 2.5 Blog 9/1/13
Real Private Fixed Investment	SAAR IIQ2013 6.0 ∆% IVQ2007 to IIQ2013: minus 5.0% Blog 9/1/13
Personal Income and Consumption	Jul month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.1 Real Personal Consumption Expenditures (RPCE): 0.0 12-month Jul NSA ∆%: RDPI: 0.8; RPCE ∆%: 1.7 Blog 9/1/13
Quarterly Services Report	IIQ13/IIQ12 SA ∆%: Information 4.1 Financial & Insurance 4.2 Blog 9/8/13
Employment Cost Index	Compensation Private IIQ2013 SA ∆%: 0.5 Jun 13 months ∆%: 1.9 Blog 8/11/13
Industrial Production	Aug month SA ∆%: 0.4 Aug 12 months SA ∆%: 2.7 Manufacturing Aug SA ∆% 0.7 Aug 12 months SA ∆% 2.6, NSA 2.5 Capacity Utilization: 77.6 Blog 9/22/13
Productivity and Costs	Nonfarm Business Productivity IIQ2013∆% SAAE 2.3; IIQ2013/IIQ2012 ∆% 0.3; Unit Labor Costs SAAE IIQ2013 ∆% 0.0; IIQ2013/IIQ2012 ∆%: 1.5 Blog 9/8/2013
New York Fed Manufacturing Index	General Business Conditions From Aug 8.24 to Sep 6.29 New Orders: From Aug 0.27 to Sep 2.35 Blog 9/22/13
Philadelphia Fed Business Outlook Index	General Index from Aug 9.3 to Sep 22.3 New Orders from Aug 5.3 to Sep 21.2 Blog 9/22/13
Manufacturing Shipments and Orders	New Orders SA Jul ∆% -2.4 Ex Transport 1.2 Jan-Jul NSA New Orders 1.9 Ex transport 1.4 Blog 9/8/13
Durable Goods	Jul New Orders SA ∆%: minus 7.3; ex transport ∆%: 0.0 Jan-Jul 13/Jan-Jul 12 New Orders NSA ∆%: 3.3; ex transport ∆% 2.5 Blog 9/1/13
Sales of New Motor Vehicles	Jan-Aug 2013 10,647,486; Jan-Aug 2012 9,711,044. Aug 13 SAAR 16.09 million, Jul 13 SAAR 15.80 million, Aug 2012 SAAR 14.49 million Blog 9/8/13
Sales of Merchant Wholesalers	Jan-Jul 2013/Jan-Jul 2012 NSA ∆%: Total 3.2; Durable Goods: 3.2; Nondurable Goods: 3.3 Blog 9/15/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jul 13/Jun 12 NSA ∆%: Sales Total Business 6.4; Manufacturers 3.6 Retailers 7.7; Merchant Wholesalers 8.4 Blog 9/15/13
Sales for Retail and Food Services	Jan-Aug 2013/Jan-Aug 2012 ∆%: Retail and Food Services 4.3; Retail ∆% 4.4 Blog 9/15/13
Value of Construction Put in Place	Jul SAAR month SA ∆%: 0.6 Jul 12-month NSA: 5.2 Jan-Jul 2013 ∆% 5.6 Blog 9/8/13
Case-Shiller Home Prices	Jun 2013/Jun 2012 ∆% NSA: 10 Cities 11.9; 20 Cities: 12.1 ∆% Jun SA: 10 Cities 1.1 ; 20 Cities: 0.9 Blog 9/1/13
FHFA House Price Index Purchases Only	Jun SA ∆% 0.6; 12 month NSA ∆%: 7.8 Blog 8/25/13
New House Sales	Jul 2013 month SAAR ∆%: minus 13.4 Jan-Jul 2013/Jan-Jul 2012 NSA ∆%: 21.8 Blog 8/25/13
Housing Starts and Permits	Aug Starts month SA ∆%: 0.9 ; Permits ∆%: -3.8 Jan-Aug 2013/Jan-Aug 2012 NSA ∆% Starts 22.6; Permits ∆% 21.2 Blog 9/22/13
Trade Balance	Balance Jul SA -$39,147 million versus Jun -$34,543 million Exports Jul SA ∆%: -0.6 Imports Jul SA ∆%: 1.6 Goods Exports Jan-Jul 2013/2012 NSA ∆%: 1.6 Goods Imports Jan-Jul 2013/2012 NSA ∆%: -1.4 Blog 9/8/13
Export and Import Prices	Aug 12-month NSA ∆%: Imports -0.4; Exports -1.1 Blog 9/15/13
Consumer Credit	Jul ∆% annual rate: Total 4.4; Revolving minus 2.6; Nonrevolving 7.4 Blog 9/15/13
Net Foreign Purchases of Long-term Treasury Securities	Jul Net Foreign Purchases of Long-term US Securities: $33.1 billion Major Holders of Treasury Securities: China $1277 billion; Japan $1083 billion; Total Foreign US Treasury Holdings Jul $5590 billion Blog 9/22/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Aug: Receipts 13.0; Outlays minus 3.7; Individual Income Taxes 15.8 Deficit Fiscal Year 2011 $1,296 billion Deficit Fiscal Year 2012 $1,087 billion Blog 9/15/2013
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt 11,281 B 70.1% GDP 2013 Deficit $642 B, Debt 12,036 B 72.5% GDP Blog 8/26/12 11/18/12 2/10/13 9/22/13
Commercial Banks Assets and Liabilities	Jul 2013 SAAR ∆%: Securities -14.6 Loans 1.4 Cash Assets 44.9 Deposits 8.9 Blog 8/25/13
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	IIQ2013 -178,171 MM %GDP 2.4 Blog 9/22/13

Links to blog comments in Table USA:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

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

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-1. Housing starts increased 0.9 percent in Aug 2013 after increasing 5.7 percent in Jul 2013 and decreasing 9.1 percent in Jun 2013. Housing permits, indicating future activity, decreased 3.8 percent in Aug 2013 after increasing 3.9 percent in Jul 2013 and decreasing 6.8 percent in Jun 2013. While single unit houses starts increased 7.0 percent in Aug 2013, seasonally adjusted, structures with five units or more decreased 9.4 percent. Multifamily residential construction is increasing at a faster rate than single-family construction. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-1.

Table VA-1, US, Housing Starts and Permits SSAR Month ∆%

	Housing Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Aug 2013	891	0.9	918	-3.8
Jul	883	5.7	954	3.9
Jun	835	-9.1	918	-6.8
May	919	7.9	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-Aug not-seasonally adjusted are provided in Table VA-2. Housing starts increased 22.6 percent in Jan-Aug 2013 relative to Jan-Aug 2012 and in the same period new permits increased 21.2 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 49.6 percent in Jan-Aug 2013 relative to Jan-Aug 2006 and fell 53.5 percent relative to Jan-Aug 2005. Housing permits fell 51.7 percent in Jan-Aug 2013 relative to Jan-Aug 2006 and fell 51.4 percent in Jan-Aug 2013 from Jan-Aug 2005.

Table VA-2, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Aug 2013	651.8	650.8
Jan-Aug 2012	502.3	537.0
∆% Jan-Aug 2013/Jan-Aug 2012	22.6	21.2
Jan-Aug 2006	1,292.5	1,346.3
∆% Jan-Aug 2013/Jan-Aug 2006	-49.6	-51.7
Jan-Aug 2005	1,403.2	1,338.0
∆% Jan-Aug 2013/Jan-Aug 2005	-53.5	-51.4

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

Chart VA-1 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. While single unit houses starts increased 3.2 percent in Jan-Aug 2013 relative to a year earlier, not seasonally adjusted, structures with two to four units increased 43.2 percent and with five units or more increased 11.6 percent.

Chart VA-1, US, Total and Single-Family 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-4, New Housing Units Started in the US, Seasonally Adjusted Annual Rates, Thousands of Units

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

Table VA-4 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) from Jan to Aug 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 Jul 2013 with SAAR of 883,000 relative to 741,000 in Jul 2012 and in Aug 2013 with 891,000 relative to 749,000 in Aug 2012.

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
2000	1,636	1,737	1,604	1,626	1,575	1,559	1,463	1,541
2001	1,600	1,625	1,590	1,649	1,605	1,636	1,670	1,567
2002	1,698	1,829	1,642	1,592	1,764	1,717	1,655	1,633
2003	1,853	1,629	1,726	1,643	1,751	1,867	1,897	1,833
2004	1,911	1,846	1,998	2,003	1,981	1,828	2,002	2,024
2005	2,144	2,207	1,864	2,061	2,025	2,068	2,054	2,095
2006	2,273	2,119	1,969	1,821	1,942	1,802	1,737	1,650
2007	1,409	1,480	1,495	1,490	1,415	1,448	1,354	1,330
2008	1,084	1,103	1,005	1,013	973	1,046	923	844
2009	490	582	505	478	540	585	594	586
2010	614	604	636	687	583	536	546	599
2011	630	517	600	554	561	608	623	585
2012	723	713	707	754	711	757	741	749
2013	898	969	1,005	852	919	835	883	891

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

Chart VA-2 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 Aug 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-2, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Aug 2013

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

Table VA-5 provides actual new housing units started in the US, not seasonally adjusted, from Jan to Aug 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 81.2 thousand in Aug 2013 or decline of 59.0 percent. The number of housing units started jumped from 69.0 thousand in Aug 2011 to 81.2 thousand in Aug 2013 or by 17.7 percent and increase of 44.2 percent from 56.3 thousand in Aug 2010.

Table VA-5, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
2000	104.0	119.7	133.4	149.5	152.9	146.3	135.0	141.4
2001	106.4	108.2	133.2	151.3	154.0	155.2	154.6	141.5
2002	110.4	120.4	138.2	148.8	165.5	160.3	155.9	147.0
2003	117.8	109.7	147.2	151.2	165.0	174.5	175.8	163.8
2004	124.5	126.4	173.8	179.5	187.6	172.3	182.0	185.9
2005	142.9	149.1	156.2	184.6	197.9	192.8	187.6	192.0
2006	153.0	145.1	165.9	160.5	190.2	170.2	160.9	146.8
2007	95.0	103.1	123.8	135.6	136.5	137.8	127.9	121.2
2008	70.8	78.4	82.2	89.5	91.7	102.5	86.7	76.4
2009	31.9	39.8	42.7	42.5	52.2	59.1	56.8	52.9
2010	38.9	40.7	54.7	62.0	56.2	53.8	51.5	56.3
2011	40.2	35.4	49.9	49.0	54.0	60.5	57.6	54.5
2012	47.2	49.7	58.0	66.8	67.8	74.7	69.2	69.0
2013	58.7	66.1	83.3	76.3	87.2	80.7	82.4	81.2

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 Aug 2013. There is the same behavior as in Chart VA-2 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 $4346.7 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 3.45 percent of GDP in a year. US GDP in 2012 is estimated at $16,244.6 billion, such that the bailout would be equivalent to cost to taxpayers of about $560.4 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-3, 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/

Chart VA-4 of the US Census Bureau provides single-family houses started without seasonal adjustment. There was sharp increase from 1992 to 2007 followed by sharp decline. The recovery is sluggish.

Chart VA-4, US, Single-family Houses Started, Thousands of Units, NSA

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

Chart VA-5 of the US Census Bureau provides housing units started with five units or more. Construction was stagnant before the drop in the global recession. Recovery is stronger than in the case of single-family units.

Chart VA-5, US, Housing Units Stated in Buildings with Five Units or More, Thousands of Units

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

A longer perspective on residential construction in the US is provided by Table VA-6 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-6, 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	1,747.7
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 increasing from 50.7 in Jul to 51.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). Claudia Tillbrooke, Economist at Markit and author of the report, finds that the survey data suggest continuing growth of the economy of Japan but concern on implementation of the sales tax (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). The Markit Business Activity Index of Services increased from 50.7 in Jul to 51.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). Claudia Tillbrooke, Economist at Markit and author of the report, finds mild acceleration of expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 50.7 in Jul to 52.2 in Aug, which is the highest in six months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fb6254251871456a9bd934997d444b25). New orders grew for a sixth consecutive month. New export orders fell slightly with weak external demand compensating for yen depreciation. Claudia Tillbrooke, Economist at Markit and author of the report, finds manufacturing output expanding output expanding in Aug at the fastest rate in thirty months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fb6254251871456a9bd934997d444b25).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	Aug ∆% +0.3 12 months ∆% 2.4 Blog 9/15/13
Consumer Price Index	Jul NSA ∆% 0.2; Jul 12 months NSA ∆% 0.7 Blog 9/1/13
Real GDP Growth	IIQ2013 ∆%: 0.9 on IQ2013; IIQ2013 SAAR 3.8; ∆% from quarter a year earlier: 1.2 % Blog 6/16/13 8/18/13 9/15/13
Employment Report	Jul Unemployed 2.55 million Change in unemployed since last year: minus 330 thousand Unemployment rate: 3.9 % Blog 9/1/13
All Industry Indices	Jul month SA ∆% 0.5 12-month NSA ∆% 1.7 Blog 9/22/13
Industrial Production	Jul SA month ∆%: 3.2 12-month NSA ∆% 1.6 Blog 9/1/13
Machine Orders	Total Jul ∆% 4.4 Private ∆%: 3.4 Jul ∆% Excluding Volatile Orders 0.0 Blog 9/15/13
Tertiary Index	Jul month SA ∆% -0.4 Jul 12 months NSA ∆% 1.5 Blog 9/15/13
Wholesale and Retail Sales	Jul 12 months: Total ∆%: 1.3 Wholesale ∆%: 2.1 Retail ∆%: -0.3 Blog 9/1/13
Family Income and Expenditure Survey	Jul 12-month ∆% total nominal consumption 1.0, real 0.1 Blog 9/1/13
Trade Balance	Exports Aug 12 months ∆%: 14.7 Imports Aug 12 months ∆% 16.0 Blog 9/22/13

Links to blog comments in Table JPY:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.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 0.9 percent in IIQ2013 (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html), industry increased 1.5 percent, the tertiary sector increased 0.7 percent, government decreased 0.6 percent and construction increased 4.7 percent. The report shows that the all industry index increased 0.9 percent in IIQ2013. Industry added 0.25 percentage points to growth of the all industry index and the tertiary index added 0.47 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/2013/09/recovery-without-hiring-ten-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 IQ2011 and 0.9 percent in IIQ2011. GDP was flat in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-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
IIQ2013	4.7	1.5	0.7	-0.6	1.0	0.9
Cont to IIQ % Change	0.22	0.25	0.47	-0.07
IQ2013	-0.5	0.6	0.2	0.1	0.0	1.0
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	-0.3
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 Jul 2013, the all industry activity index increased 0.5 percent with industry increasing 3.4 percent and services decreasing 0.4 percent while construction increased 1.5 percent and government decreased 0.3 percent. Industry added 0.57 percentage points and services deducted 0.26 percentage points while construction added 0.08 percentage points and government deducted 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, 0.1 percent in Apr 2013 and 1.1 percent in May 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, 0.9 percent in Apr 2013 and 1.9 percent in May 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
Jul 2013	1.5	3.4	-0.4	-0.3	0.5
Cont to Jun % Change	0.08	0.57	-0.26	-0.04
Jun 2013	3.9	-3.0	-0.5	-0.1	-0.7
May	5.2	1.9	1.2	0.1	1.1
Apr	-0.1	0.9	-0.5	0.2	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 increased 0.6 percent in IIQ2013 relative to a year earlier and GDP increased 1.2 percent relative to a year earlier (Table VB-4 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html). Industry decreased 3.1 percent relative to a year earlier while the tertiary sector increased 1.2 percent, adding combined 0.26 percentage points to growth of the all industry activity index of 0.7 percent while construction added 0.36 percentage points and government deducted 0.05 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 2.0 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	2.0
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
IIQ	8.8	-3.1	1.2	-0.4	0.6	1.2
Cont to IIQ % Change	0.36	-0.55	0.81	-0.05
IQ2013	5.4	-7.8	-0.2	0.7	-1.2	0.3
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	0.3
IIQ	4.9	5.5	2.1	0.6	2.6	3.8
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 1.7 percent in Jul 2013 relative to Jul 2012. Industry increased 1.8 percent in Jul 2013 relative to a year earlier, adding 0.32 percentage points to growth of the all industry activity index. The tertiary sector increased 1.5 percent, adding 0.99 percentage points. Construction added 0.59 percentage points to the index and government deducted 0.17 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
Jul 2013	14.1	1.8	1.5	-1.5	1.7
Cont to Jul % Change	0.59	0.32	0.99	-0.17
Jun 2013	11.2	-4.6	0.7	0.1	0.1
May	8.9	-1.0	1.7	-0.4	1.2
Apr	6.3	-3.4	1.3	-0.9	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

The structure of exports and imports of Japan is in Table VB-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 33.8 percent of Japan’s imports and increased 17.5 percent in the 12 months ending in Aug 2013 because of alternating carry trades into commodity futures in accordance with risk aversion. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 13.4 percent of Japan’s exports with increase of 13.5 percent in the 12 months ending in Aug 2013. Machinery contributes 19.1 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Electrical machinery contributes 18.3 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Exports of transport equipment with share of 21.2 percent in total exports increased 15.2 percent in the 12 months ending in Aug 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-5 shows increase of the major categories of motor vehicles of 21.0 percent: cars increased 23.4 percent with increase of 6.0 percent in the minor category of buses and trucks, increase of 12.2 percent for parts of motor vehicles, increase of 25.9 percent for motorcycles and decrease of 28.5 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

Table VB-5, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Aug 2013	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	5,783,712	100.0	14.7	14.7
Foodstuffs	38,404	0.7	35.3	0.2
Raw Materials	92,784	1.6	17.4	0.3
Mineral Fuels	136,073	2.4	42.9	0.8
Chemicals	664,939	11.5	25.9	2.7
Manufactured Goods	776,363	13.4	13.5	1.8
Machinery	1,104,164	19.1	7.3	1.5
Electrical Machinery	1,056,360	18.3	10.7	2.0
Transport Equipment	1,224,313	21.2	15.2	3.2
Motor Vehicles	795,080	13.7	21.0	2.7
Cars	680,393	11.8	23.4	2.6
Buses & Trucks	100,877	1.7	6.0	0.1
Parts of Motor Vehicles	284,943	4.9	12.2	0.6
Motorcycles	16,355	0.3	25.9	0.1
Ships	66,437	1.1	-28.5	-0.5
Other	690,311	11.9	18.4	2.1
Imports	6,744,041	100.0	16.0	16.0
Foodstuffs	545,114	8.1	11.4	1.0
Raw Materials	486,547	7.2	18.5	1.3
Mineral Fuels	2,277,975	33.8	17.5	5.8
Chemicals	511,195	7.6	3.6	0.3
Manufactured Goods	532,351	7.9	16.2	1.3
Machinery	459,914	6.8	21.7	1.4
Electrical Machinery	796,076	11.8	21.9	2.5
Transport Equipment	242,466	3.6	22.7	0.8
Other	892,403	13.2	12.4	1.7

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

Table VB-6 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2012. Exports grew at the average yearly rate of 3.2 percent while imports grew at 3.3 percent per year in the years from 1979 to 2012. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficit in 2012.

Table VB-6, Japan, Exports and Imports Calendar Year 1979-2010 Billion Yen

Years	Exports	Imports	Balance
1950	298	348	-50
1955	723	889	-166
1960	1,459	1,616	-157
1965	3,042	2,940	102
1970	6,954	6,797	157
1975	16,545	17,170	-625
1979	22,531	24,245	-1,714
1980	29,382	31,995	-2,613
1981	33,468	31,464	2,004
1982	34,432	32,656	1,776
1983	34,909	30,014	4,895
1984	40,325	32,321	8,004
1985	41,955	31,084	10,871
1986	35,289	21,550	13,739
1987	33,315	21,736	11,579
1988	33,939	24,006	9,933
1989	37,822	28,978	8,844
1990	41,456	33,855	7,601
1991	42,359	31,900	10,459
1992	43,012	29,527	13,485
1993	40,202	26,826	13,376
1994	40,497	28,104	12,393
1995	41,530	31,548	9,982
1996	44,731	37,993	6,738
1997	50,937	40,956	9,981
1998	50,645	36,653	13,992
1999	47,547	35,268	12,279
2000	51,654	40,938	10,716
2001	48,979	42,415	6,564
2002	52,108	42,227	9,881
2003	54,548	44,362	10,186
2004	61,169	49,216	11,953
2005	65,656	56,949	8,707
2006	75,246	67,344	7,902
2007	83,931	73,135	10,796
2008	81,018	78,955	2,063
2009	54,170	51,499	2,671
2010	67,399	60,764	6,635
2011	65,546	68,111	-2,565
2012	63,748	70,689	-6,941

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for Aug 2013. The share of Asia in Japan’s trade is more than one-half for 55.7 percent of exports and 43.3 percent of imports. Within Asia, exports to China are 19.3 percent of total exports and imports from China 21.1 percent of total imports. While exports to China increased 15.8 percent in the 12 months ending in Aug 2013, imports from China increased 17.6 percent. The second largest export market for Japan in Aug 2013 is the US with share of 18.5 percent of total exports, which is almost equal to that of China, and share of imports from the US of 8.5 percent in total imports. Western Europe has share of 10.2 percent in Japan’s exports and of 10.2 percent in imports. Rates of growth of exports of Japan in Aug 2013 are relatively high for several countries and regions with growth of 20.6 percent for exports to the US, 1.5 for exports to Mexico, 26.3 percent for exports to Brazil and 19.2 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 Aug 2013 are positive for all trading partners with exception of decline of 3.7 percent of imports from France. Imports from Asia increased 15.3 percent in the 12 months ending in Aug 2013 while imports from China increased 17.6 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 VB-7, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Aug 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,783,712	14.7	6,744,041	16.0
Asia	3,221,175	13.5	2,919,797	15.3
China	1,118,989	15.8	1,423,073	17.6
USA	1,069,528	20.6	574,187	14.0
Canada	71,661	14.8	93,246	16.2
Brazil	53,085	26.3	82,097	22.8
Mexico	69,563	1.5	32,992	22.2
Western Europe	588,220	21.3	685,872	9.9
Germany	150,838	19.9	209,602	20.2
France	48,700	32.0	81,964	-3.7
UK	90,388	25.4	50,242	4.0
Middle East	184,317	10.1	1,313,053	21.2
Australia	139,549	19.2	463,638	5.4

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

Table VB-8 provides the trade balance of Japan by countries and regions in Aug 2013. The significantly large deficits of JPY 1,128,736 million with the Middle East, JPY 304,084 million with China, JPY 296,819 million with Australia and JPY 97,652 million with Western Europe do not compensate surpluses of JPY 301,378 million with Asia and JPY 495,341 million with the US.

Table VB-8, Japan, Trade Balance, Millions of Yen

Aug 2013	Millions of Yen
Total	-960,329
Asia	301,378
China	-304,084
USA	495,341
Canada	-21,585
Brazil	-29,012
Mexico	36,571
Western Europe	-97,652
Germany	-58,764
France	-33,264
UK	40,146
Middle East	-1,128,736
Australia	-296,819

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-9 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008, IIIQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.4 percent in IIIQ2011. Net trade added 1.6 percentage points to GDP growth in IQ2013 and 0.7 percentage points in IIQ2013. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-9, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	Net Trade	Exports	Imports
2013
I	1.6	2.2	-0.7
II	0.7	1.7	-1.0
2012
I	0.3	1.6	-1.3
II	-1.0	-0.1	-0.9
III	-2.7	-2.7	0.0
IV	-0.2	-1.6	1.3
2011
I	-1.2	-0.5	-0.7
II	-4.1	-4.5	0.4
III	3.4	5.4	-2.0
IV	-2.8	-1.7	-1.1
2010
I	2.1	3.5	-1.3
II	0.2	2.7	-2.5
III	0.3	1.2	-0.9
IV	-0.3	0.2	-0.5
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.1	5.2	-3.1
IV	2.8	4.2	-1.4
2008
I	1.2	2.2	-1.0
II	0.5	-1.6	2.1
III	-0.1	0.1	-0.1
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.1	-0.7

Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart VB-1 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 106.0 in Aug 2013 for a gain of 12.8 percent relative to Jan 2012 and 1.0 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart VB-1, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart VB-1A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 1.0 percent to 98.9 in Aug 2013 relative to Jun 2009.

Chart VB-1A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart VB-2 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan. The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 121.8 in Aug 2013 or gain of 7.7 percent relative to Apr 2012 and 30.3 percent relative to Jun 2009.

Chart VB-2, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart VB-2A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 112.2 in Aug 2013 or minus 6.1 percent relative to Apr 2012 and gain of 30.2 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 5.3 percent from Jun 2009 to Apr 2012 while the import corporate goods price index increased 38.6 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart VB-2A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Table VB-10 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Aug 2013. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Aug 2013, the export index on the contract currency basis decreased 0.3 percent and decreased 8.2 percent on the yen basis. For the entire period from Jan 2008 to Aug 2013, the import index increased 11.4 percent on the contract currency basis and increased 2.4 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table VB-10, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

Month	Exports Contract Currency	Exports Yen	Imports Contract Currency	Imports Yen
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.2	96.3	118.1	109.9
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.6
2012/08	100.8	94.1	112.4	103.6
2012/09	100.9	94.0	114.7	105.2
2012/10	101.0	94.7	113.8	105.2
2012/11	100.9	95.9	113.3	106.6
2012/12	100.7	98.0	113.6	109.7
2013/01	101.0	102.5	114.0	115.5
2013/02	101.5	105.9	114.9	120.4
2013/03	101.3	106.7	115.2	122.2
2013/04	100.2	107.5	114.3	124.0
2013/05	99.6	109.1	112.7	125.4
2013/06	99.2	106.1	112.2	121.4
2013/07	99.0	107.3	111.8	123.0

2013/08 98.9 106.0 112.2 121.8

Source: Bank of Japan http://www.stat-search.boj.or.jp/index_en.html

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table VB-11. Petroleum and coal with weight of 5.7 percent increased 1.8 percent in Aug 2013 and increased 16.0 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 0.3 percent in Aug 2013 and increased 0.5 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income. There are now inflation effects of the intentional policy of devaluing the yen.

Table VB-11, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Aug 2013	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.3	2.4
Food, Beverages, Tobacco, Feedstuffs	137.5	0.1	1.5
Petroleum & Coal	57.4	1.8	16.0
Production Machinery	30.8	-0.3	0.5
Electronic Components	31.0	-0.4	-1.1
Electric Power, Gas & Water	52.7	0.6	8.5
Iron & Steel	56.6	0.1	-0.8
Chemicals	92.1	0.2	4.9
Transport Equipment	136.4	-0.1	-1.3

Source: Bank of Japan http://www.boj.or.jp/en/

Percentage point contributions to change of the corporate goods price index (CGPI) in Aug 2013 are provided in Table VB-12 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.3 percent in Aug 2013, the energy shock is evident in the contribution of 0.13 percentage points by electric power, gas and water in new carry trades of exposures in commodity futures. The exports CGPI decreased 0.1 percent on the basis of the contract currency with deduction of 0.15 percentage points by electric and electronic products. The imports CGPI increased 0.4 percent on the contract currency basis. Petroleum, coal and natural gas contributed 0.23 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table VB-12, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Aug 2013	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 0.3%
Petroleum & Coal Products	0.13
Electric Power, Gas & Water	0.04
Nonferrous Metals	0.03
Business Oriented Machinery	0.03
Scrap & Waste	0.02
Agriculture, Forestry & Fishery Products	0.02
Chemicals & Related Products	0.02
Electronic Components & Devices	-0.01
B. Export Price Index	Monthly Change: -0.1% contract currency
Electric & Electronic Products	-0.15
Transportation Equipment	-0.03
Chemicals & Related Products	0.04
Other Primary Products & Manufactured Goods	0.03
C. Import Price Index	Monthly Change:0.4 % contract currency basis
Petroleum, Coal & Natural Gas	0.23
General Purpose, Production & Business Oriented Machinery	0.07
Textiles	0.04
Metals & Related Products	0.03
Transportation Equipment	-0.02
Electric & Electronic Products	-0.02

Source: Bank of Japan http://www.boj.or.jp/en/

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1308.pdf

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, rebounding to 54.1 in Jul 2013. The index eased to 53.9 in Aug 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Aug 2013	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	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, rebounding to 54.1 in Jul 2013. The index stabilized at 53.9 in Aug 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 and rebounding to 50.3 in Jul 2013. The index increased to 51.0 in Aug 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 and 50.6 in Jul 2013. The index of new orders increased to 52.4 in Aug 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, increasing to 49.1 in Jul 2013. The index of employment increased to 49.3 in Aug 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Aug 2013	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	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, increasing to 50.3 in Jul 2013. The index increased to 51.0 in Aug 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/6db45ffe4c024d7aadb1e6e701bd9f02) is moving at faster pace. The overall Flash HSBC China Manufacturing PMI^™ increased from 47.7 in Jul to 50.1 in Aug, which is moderately above the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index increased from 48.0 in Jul to 50.6 in Aug, moving into moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the stabilizing index suggests recent stimulus is influencing economic activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/6db45ffe4c024d7aadb1e6e701bd9f02). The HSBC China Services PMI^™, compiled by Markit, shows marginal improvement in business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 49.5 in Jul to 51.8 in Aug, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds support of manufacturing combined with services (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Business Activity index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds the highest reading of services in five months (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 50.1 in Aug from 47.7 in Jul, indicating relatively unchanged manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/ddf3bd97162247348ab421d1f65527fb). New export orders decreased for the fifth consecutive month at slower pace than in the prior month. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds stabilizing conditions in manufacturing with marginal support of new orders and output (http://www.markiteconomics.com/Survey/PressRelease.mvc/ddf3bd97162247348ab421d1f65527fb). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Aug 12-month ∆%: minus 1.6 Aug month ∆%: 0.1 Blog 9/15/13
Consumer Price Index	Aug month ∆%: 0.5 Jul 12 months ∆%: 2.6 Blog 9/15/13
Value Added of Industry	Aug month ∆%: 0.93 Jan-Aug 2013/Jan-Aug 2012 ∆%: 9.5 Aug 12-Month ∆%: 10.4 Blog 9/15/13
GDP Growth Rate	Year IIQ2013 ∆%: 7.5 Quarter IIQ2013 AE ∆%: 7.0 Blog 7/21/13
Investment in Fixed Assets	Total Jan-Aug 2013 ∆%: 20.3 Real estate development: 19.3 Blog 9/15/13
Retail Sales	Aug month ∆%: 1.17 Aug 12 month ∆%: 13.4 Jan-Aug ∆%: 12.8 Blog 9/15/13
Trade Balance	Aug balance $28.52 billion Exports 12M ∆% 7.2 Imports 12M ∆% 7.1 Cumulative Aug: $154.23 billion Blog 9/15/13

Links to blog comments in Table CNY:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

7/21/2013 http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html

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	-1.6
2011	1.5	3.3	2.0	0.4	0.1
2010	2.0	4.0	1.7	1.7	-0.2
2009	-4.4	-5.1	-3.1	-5.5	-3.8
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 50.5 in Jul to 51.7 in Aug, which is a high in 26 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd58998f084a468c8df4ba5b07d4754b). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the euro area is experiencing the fastest growth of business in about two years (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd58998f084a468c8df4ba5b07d4754b). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 50.5 in Jul to 51.5 in Aug in the second consecutive monthly expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). Chris Williamson, Chief Economist at Markit, finds growth in multiple sectors and regions (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). The Markit Eurozone Services Business Activity Index increased from 49.8 in Jul to 51.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). The Markit Eurozone Manufacturing PMI^® increased to 51.4 in Aug from 50.3 in Jul, which is the highest reading since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a5b5d40ce4449c3ab581276d1057282). New orders increased at the fastest pace since May 2011 with strongest growth of new export demand in over two years in Italy, Spain and Austria. Chris Williamson, Chief Economist at Markit, finds recovery indications in Aug with companies enjoying the best conditions in two years and supported by growth of new export orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a5b5d40ce4449c3ab581276d1057282). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2013 ∆% 0.3; IIQ2013/IIQ2012 ∆% -0.5 Blog 9/8/13
Unemployment	Jul 2013: 12.1% unemployment rate Jun 2013: 19.231 million unemployed Blog 9/1/13
HICP	Aug month ∆%: 0.1 12 months Aug ∆%: 1.3 Blog 9/22/13
Producer Prices	Euro Zone industrial producer prices Jul ∆%: 0.3 Jul 12-month ∆%: 0.2 Blog 9/8/13
Industrial Production	Jul month ∆%: -1.5; Jun 12 months ∆%: -2.1 Blog 9/15/13
Retail Sales	Jul month ∆%: 0.1 Jul 12 months ∆%: minus 1.3 Blog 9/8/13
Confidence and Economic Sentiment Indicator	Sentiment 95.2 Aug 2013 Consumer minus 15.6 Aug 2013 Blog 9/1/13
Trade	Jan-Jun 2013/Jan-Jun 2012 Exports ∆%: 1.6 Imports ∆%: -4.2 Jun 2013 12-month Exports ∆% -2.5 Imports ∆% -5.6 Blog 8/18/13

Links to blog comments in Table EUR:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.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 1.7 percent and imports fell 3.5 percent in Jan-Jul 2013 relative to Jan-Jul 2012. The 12-month rate of growth of exports was 2.6 percent in Jul 2013 while imports changed 0.0 percent. In Jun 2013, exports decreased 2.9 percent in 12 months and imports decreased 5.6 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-Jul 2013	1,104.9	1,014.1
Jan-Jul 2012	1,086.4	1,051.3
∆%	1.7	-3.5
Jul 2013	166.8	148.6
Jul 2012	162.5	148.6
∆%	2.6	0.0
Jun 2013	157.3	140.8
Jun 2012	162.0	149.2
∆%	-2.9	-5.6
Trade Balance	Jan-Jul 2013	Jan-Jul 2012
€ Billions	90.8	35.1

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 structure of trade of the euro zone in Jan-Jun 2013 is provided in Table VD-2. Data are still not available for trade structure for Jul 2013. Manufactured exports increased 1.0 percent in Jan-Jun 2013 relative to Jan-Jun 2012 while imports decreased 3.1 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-Jun 2013 but only marginally higher in Jan-Jun 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-Jun 2013 € B	149.1	761.0	28.0	938.1
Jan-Jun 2012 € B	144.3	753.2	26.5	923.9
∆%	3.3	1.0	5.7	1.5
Imports
Jan-Jun 2013 € B	314.0	534.7	16.8	865.5
Jan-Jun 2012 € B	334.6	551.6	16.4	902.7
∆%	-6.2	-3.1	2.4	-4.1
Trade Balance € B
Jan-Jun 2013	-164.9	226.2	11.2	72.6
Jan-Jun 2012	-190.3	201.6	10.0	21.3

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

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 4.0 percent in 2010, 3.3 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	3.3	3.4
2010	4.0	3.8
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/2013/08/PE13_278_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 52.1 in Jul to 53.4 in Aug, for the highest reading in seven months with stronger improvement in manufacturing output at 55.3 in Aug, which is a 26 month high, while services increased to 52.4 for a six-month high (http://www.markiteconomics.com/Survey/PressRelease.mvc/aca6a0c2f9ea4c13a1a33a78a2d4f84f). New export orders for manufacturing increased after five consecutive months of decline. Tim Moore, Senior Economist at Markit, finds that the data is consistent with expansion of the German economy in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/aca6a0c2f9ea4c13a1a33a78a2d4f84f). 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 52.1 in Jul to 53.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). Tim Moore, Senior Economist at Markit and author of the report, finds support in rising performance in manufacturing and services for growth in Germany in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). The Germany Services Business Activity Index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 50.7 in Jul to 51.8 in Aug, in movement away from contraction territory below 50.0 during two consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/1d5523e6508d4b4e8c958321b88f4009). New export orders increased for the first month since Feb. Tim Moore, Senior Economist at Markit and author of the report, finds the fastest growth in manufacturing output since mid-2011 supported by domestic and foreign demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/1d5523e6508d4b4e8c958321b88f4009).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2013 0.7 ∆%; II/Q2013/IIQ2012 ∆% 0.9 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 8/18/13 8/25/13
Consumer Price Index	Aug month NSA ∆%: 0.0 Aug 12-month NSA ∆%: 1.5 Blog 9/15/13
Producer Price Index	Jul month ∆%: -0.1 CSA, 0.3 12-month NSA ∆%: 0.5 Blog 8/25/13
Industrial Production	MFG Jul month CSA ∆%: minus 2.1 12-month NSA: 0.9 Blog 9/8/13
Machine Orders	MFG Jun month ∆%: -2.7 Jun 12-month ∆%: 5.0 Blog 9/8/13
Retail Sales	Jul Month ∆% -1.4 12-Month ∆% 2.3 Blog 9/1/13
Employment Report	Unemployment Rate SA Jul 5.4% Blog 9/1/13
Trade Balance	Exports Jul 12-month NSA ∆%: 0.0 Imports Jul 12 months NSA ∆%: 0.9 Exports Jul month CSA ∆%: minus 1.1; Imports Jul month SA 0.5 Blog 9/8/13

Links to blog comments in Table DE:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.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=26&date=20130814

The Markit Flash France Composite Output Index fell from 49.1 in Jul to 47.9 in Aug for a two-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/547cb0f2e4bd47a791b811e256927034). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest sharper deceleration with encouragement in growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/547cb0f2e4bd47a791b811e256927034). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased marginally from 49.1 in Jul to 48.8 in Aug, indicating contraction of private sector activity in 17 consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds stabilization with services compensating for weakness in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). The Markit France Services Activity index increased from 48.6 in Jul to 48.9 in Aug for the highest reading in 12 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). The Markit France Manufacturing Purchasing Managers’ Index^® changed to 49.7 in Aug from 49.7 in Jul, for the highest reading in eighteen consecutive months below the neutral level of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/53d288d425be43c8b709684c67030d84). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stabilization in French manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/53d288d425be43c8b709684c67030d84). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Aug month ∆% 0.5 12 months ∆%: 0.9 9/15/13
PPI	Jul month ∆%: 0.7 Jul 12 months ∆%: 0.3 Blog 9/8/13
GDP Growth	IIQ2013/IQ2013 ∆%: 0.5 IIQ2013/IIQ2012 ∆%: 0.3 Blog 3/31/13 5/19/12 6/30/13 8/18/13
Industrial Production	Jul ∆%: Manufacturing minus 0.7 12-Month ∆%: Manufacturing minus 2.5 Blog 9/15/13
Consumer Spending	Manufactured Goods Jun ∆%: -0.4 Jun 12-Month Manufactured Goods ∆%: -0.8 Blog 8/11/13
Employment	Unemployment Rate: IIQ2013 10.5% Blog 9/8/13
Trade Balance	Jul Exports ∆%: month 1.3, 12 months -0.6 Jul Imports ∆%: month 2.7, 12 months 1.1 Blog 9/8/13
Confidence Indicators	Historical averages 100 Aug Mfg Business Climate 98 Blog 9/1/13

Links to blog comments in Table FR:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.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, minus 2.4 percent in IQ2013 and minus 2.0 percent in IIQ2013. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIQ2013 than in IQ2013 and the final three quarters of 2012.

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

	GDP	Imports	Consumption	GFCF	Exports
2013
IIQ2013	-2.1	-4.6	-2.4	-5.9	0.2
IQ	-2.4	-5.0	-2.7	-7.1	-0.4
2012
IVQ	-2.8	-6.8	-4.3	-7.9	1.7
IIIQ	-2.6	-8.1	-4.3	-8.1	2.5
IIQ	-2.4	-7.5	-3.8	-8.3	2.5
IQ	-1.7	-8.9	-3.3	-7.6	2.1
2011
IVQ	-0.5	-6.9	-1.8	-3.2	3.1
IIIQ	0.3	0.1	-0.7	-2.1	5.6
IIQ	0.9	3.1	0.6	-0.7	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/98480

The Markit/ADACI Business Activity Index increased from 48.7 in Jul to 48.8 in Aug, indicating marginal contraction of output of Italy’s for 27 consecutive months of decline since Jun 2011 with contraction at moderate rhythm (http://www.markiteconomics.com/Survey/PressRelease.mvc/c06756e0924443d4a8d4891b62748cb9). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index consistent with stagnation in IIIQ2013 but with possible improvement depending on services performance in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/c06756e0924443d4a8d4891b62748cb9). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 50.4 in Jul to 51.3 in Aug, with the Aug reading at the highest level in 27 month and the second consecutive reading above 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/30ee8ab53c0b4bdb87c1469e5152fe40). Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds that manufacturing has been improving by obtaining foreign orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/30ee8ab53c0b4bdb87c1469e5152fe40). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Aug month ∆%: 0.4 Aug 12-month ∆%: 1.2 Blog 9/15/13
Producer Price Index	Jul month ∆%: 0.1 Jul 12-month ∆%: -1.0 Blog 9/1/13
GDP Growth	IIQ2013/IQ2013 SA ∆%: minus 0.3 IIQ2013/IIQ2012 NSA ∆%: minus 2.1 Blog 3/17/13 6/16/13 8/11/13 9/15/13
Labor Report	Jul 2013 Participation rate 63.6% Employment ratio 55.9% Unemployment rate 12.0% Blog 9/1/13
Industrial Production	Jul month ∆%: -1.1 12 months CA ∆%: -4.3 Blog 9/15/13
Retail Sales	Jun month ∆%: -0.2 Jun 12-month ∆%: -3.0 Blog 9/1/13
Business Confidence	Mfg Aug 92.9, Apr 88.2 Construction Aug 76.1, Apr 77.7 Blog 9/1/13
Trade Balance	Balance Jul SA €2115 million versus Jun €2981 Exports Jul month SA ∆%: -2.3; Imports Jul month ∆%: 0.4 Exports 12 months Jul NSA ∆%: 3.0 Imports 12 months NSA ∆%: -0.3 Blog 9/22/13

Links to blog comments in Table IT:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.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 decreased 2.3 percent in Jul 2013 while imports increased 0.4 percent. The SA trade balance decreased from surplus of €3087 million in May 2013 to surplus of €2981 million in Jul 2013.

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

Period	Exports	∆%	Imports	∆%	Balance
IQ2011	92,731	4.8	102,094	3.3	-9,363
IIQ2011	95,106	2.6	102,606	0.5	-7,500
IIIQ2011	95,223	0.1	101,447	-1.1	-6,224
IVQ2011	95,206	0.0	97,483	-3.9	-2,277
2012
IQ2012	96,172	1.0	96,562	-0.9	-390
IIQ2012	97,559	1.4	95,745	-0.8	1,814
IIIQ2012	99,010	1.5	95,524	-0.2	3,486
IVQ2012	98,083	-0.9	92,656	-3.0	5,427
2013
IQ2013	97,667	-0.4	91,075	-1.7	6,592
IIQ2013	98,008	0.3	89,254	-2.0	8,754
2011
Jul	31,694	1.2	33,931	1.9	-2,237
Aug	31,641	-0.2	34,267	1.0	-2,626
Sep	31,888	0.8	33,249	-3.0	-1,361
Oct	31,039	-2.7	32,600	-2.0	-1,561
Nov	31,511	1.5	32,938	1.0	-1,427
Dec	32,656	3.6	31,945	-3.0	711
2012
Jan	31,771	-2.7	32,201	0.8	-430
Feb	32,040	0.8	32,530	1.0	-490
Mar	32,361	1.0	31,831	-2.1	530
Apr	32,392	0.1	32,427	1.9	-35
May	32,946	1.7	32,683	0.8	263
Jun	32,221	-2.2	30,635	-6.3	1,586
Jul	32,795	1.8	31,693	3.5	1,102
Aug	33,484	2.1	32,655	3.0	829
Sep	32,731	-2.2	31,176	-4.5	1,555
Oct	32,697	-0.1	31,245	0.2	1,452
Nov	32,767	0.2	30,460	-2.5	2,307
Dec	32,619	-0.5	30,951	1.6	1,668
2013
Jan	33,082	1.4	30,964	0.0	2,118
Feb	32,112	-2.9	30,060	-2.9	2,052
Mar	32,473	1.1	30,051	0.0	2,422
Apr	32,401	-0.2	29,715	-1.1	2,686
May	32,599	0.6	29,512	-0.7	3,087
Jun	33,008	1.3	30,027	1.7	2,981
Jul	32,259	-2.3	30,144	0.4	2,115

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/98796

Italy’s trade account not seasonally adjusted is in Table VG-2. Values are different because the data are original and not adjusted. Exports increased 3.0 percent in the 12 months ending in Jul 2013 while imports decreased 0.3 percent with actual trade surplus of €5948 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 €3926 million in May 2013 with declines of exports of 1.5 percent and of imports of 10.4 percent. The surplus declined to €3618 million in Jun 2013 with decline of exports of 2.7 percent in 12 months and of imports of 5.6 percent.

Table VG-2, Italy, Exports, Imports and Trade Balance NSA Million Euros and Year-on-Year

Period	Exports	∆%	Imports	∆%	Balance
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
2010
I trim.	76,310	7.5	85,238	12.1	-8,928
II trim.	85,783	17.6	92,633	27.1	-6,850
III trim.	84,334	18.1	89,622	27.0	-5,288
IV trim.	90,918	19.1	99,897	28.0	-8,979
2011
I trim.	90,128	18.1	103,760	21.7	-13,632
II trim.	97,274	13.4	104,303	12.6	-7,029
III trim.	92,567	9.8	96,138	7.3	-3,571
IV trim.	95,935	5.5	97,227	-2.7	-1,292
2012
I trim.	95,285	5.7	99,264	-4.3	-3,979
II trim.	99,999	2.8	96,604	-7.4	3,395
III trim.	94,601	2.2	89,941	-6.4	4,660
IV trim.	99,841	4.1	92,951	-4.4	6,890
2013
I trim.	94,609	-0.7	91,890	-7.4	2,719
II trim.	99,914	-0.1	90,344	-6.5	9,570
2011
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	34,621	-1.5	30,695	-10.4	3,926
Jun	33,425	-2.7	29,806	-5.6	3,619
Jul	38,130	3.0	32,182	-0.3	5,948

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/98796

Growth rates of Italy’s trade and major products are in Table VG-3 for the period Jan-Jul 2013 relative to Jan-Jul 2012. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 15.2 percent and minus 9.9 percent for durable goods. The higher rate of growth of exports of 0.2 percent in Jan-Jul 2013/Jan-Jul 2012 relative to imports of minus 6.0 percent may reflect weak demand in Italy with GDP declining during eight consecutive quarters from IIIQ2011 through IIQ2013 together with softening commodity prices.

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

	Exports Share %	Exports ∆% Jan-Jul 2013/ Jan-Jul 2012	Imports Share %	Imports ∆% Jan-Jul 2013/ Jan-Jul 2012
Consumer Goods	29.3	6.4	25.6	1.2
Durable	5.8	1.4	2.9	-9.9
Non-Durable	23.5	7.7	22.7	2.7
Capital Goods	31.6	1.3	19.5	-7.2
Inter- mediate Goods	33.6	-3.3	32.6	-4.6
Energy	5.5	-18.0	22.3	-15.2
Total ex Energy	94.5	1.2	77.7	-3.4
Total	100.0	0.2	100.0	-6.0

Note: % Share for 2012 total trade.

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98796

Table VG-4 provides Italy’s trade balance by product categories in Jul 2013 and cumulative Jan-Jul 2013. Italy’s trade balance excluding energy generated surplus of €10,928 million in Jul 2013 and €50,616 million cumulative in Jan-Jul 2013 but the energy trade balance created deficit of €4980 million in Jul 2013 and cumulative €32,379 million in Jan-Jul 2013. The overall surplus in Jul 2013 was €5948 million with cumulative surplus of €18,237 million in Jan-Jul 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

	Jul 2013	Cumulative Jan-Jul 2013
Consumer Goods	2,899	13,160
Durable	1,374	7,697
Nondurable	1,524	5,463
Capital Goods	6,255	32,428
Intermediate Goods	1,775	5,028
Energy	-4,980	-32,379
Total ex Energy	10,928	50,616
Total	5,948	18,237

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98796

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-Jul 2013. Exports to the non-European Union area with share of 46.3 percent in Italy’s total exports are growing at 3.2 percent in Jan-Jul 2013 relative to Jan-Jul 2012 while those to EMU are growing at minus 3.2 percent.

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

Jul 2013	Exports % Share	∆% Jan-Jul 2013/ Jan-Jul 2012	Imports % Share	∆% Jan-Jul 2013/ Jan-Jul 2012
EU	54.2	-2.3	53.2	-2.4
EMU 17	40.5	-3.2	42.7	-2.7
France	11.1	-2.4	8.3	-6.0
Germany	12.5	-3.5	14.6	-6.5
Spain	4.7	-7.7	4.4	-2.5
UK	4.9	1.6	2.5	-0.2
Non EU	46.3	3.2	46.8	-10.0
Europe non EU	13.4	0.3	11.0	7.7
USA	6.8	-2.0	3.3	-14.6
China	2.3	9.3	6.5	-9.9
OPEC	5.7	10.7	10.8	-27.5
Total	100.0	0.2	100.0	-6.0

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

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98796

Table VG-6 provides Italy’s trade balance by regions and countries. Italy had trade surplus of €1335 million with the 17 countries of the euro zone (EMU 17) in Jul 2013 and cumulative deficit of €1058 million in Jan-Jul 2013. Depreciation to parity could permit greater competitiveness in improving the trade surplus of 4657 million in Jan-Jul 2013 with Europe non European Union, the trade surplus of €8930 million with the US and trade surplus with non-European Union of €10,497 million in Jan-Jul 2013. There is significant rigidity in the trade deficits in Jan-Jul 2013 of €8066 million with China and €4366 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 Jul 2013 Millions of Euro	Trade Balance Cumulative Jan-Jul 2013 Millions of Euro
EU	3,152	7,739
EMU 17	1,335	-1,058
France	1,640	7,846
Germany	151	-2,286
Spain	153	544
UK	1,083	5,756
Non EU	2,796	10,497
Europe non EU	1,224	4,657
USA	1,336	8,930
China	-1,339	-8,066
OPEC	-368	-4,366
Total	5,948	18,237

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

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98796

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 5.1 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.6 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.2 percent in 2012. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2012, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.0 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2012 was lower by 3.1 percent than in 2007.

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

	∆% on Prior Year
1998	3.5
1999	2.9
2000	4.4
2001	2.1
2002	2.3
2003	3.9
2004	3.3
2005	3.3
2006	2.7
2007	3.4
2008	-0.8
2009	-5.1
2010	1.6
2011	1.1
2012	0.2
Average Growth Rates ∆% per Year
1948-2012	2.6
1950-1959	2.7
1960-1969	3.2
1970-1979	2.5
1980-1989	3.2
1990-1999	2.9
2000-2007	3.0
2007-2012	-3.1%
2000-2012	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from60.2 in Jul to 60.5 in Aug, indicating increase in activity in every month since the beginning of 2013 and at the fastest rate since Dec 2006 with highest reading for new orders since May 1997 (http://www.markiteconomics.com/Survey/PressRelease.mvc/291fe2a94ee040bcb216d84676428f92). Paul Smith, Senior Economist at Markit, finds continuing improvement in the UK’s economy with possible higher growth of GDP in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/291fe2a94ee040bcb216d84676428f92). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 54.8 in Jul to 57.2 in Aug, which is the highest reading in 36 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/89b62348c597490698dae25b0324e7a7). Respondents indicated stronger foreign demand. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing could grow at around 1 percent in IIIQ2013, exceeding growth of -0.7 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/89b62348c597490698dae25b0324e7a7). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Aug month ∆%: 0.4 Aug 12-month ∆%: 2.7 Blog 9/22/13
Output/Input Prices	Output Prices: Aug 12-month NSA ∆%: 1.6; excluding food, petroleum ∆%: 1.0 Input Prices: Aug 12-month NSA ∆%: 2.8 Excluding ∆%: 3.1 Blog 9/22/13
GDP Growth	IIQ2013 prior quarter ∆% 0.7; year earlier same quarter ∆%: 1.5 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13
Industrial Production	Jul 2013/Jul 2012 ∆%: Production Industries minus 1.6; Manufacturing minus 0.7 Blog 9/8/13
Retail Sales	Aug month ∆%: -0.9 Aug 12-month ∆%: 2.1 Blog 9/22/13
Labor Market	May-Jul Unemployment Rate: 7.7%; Claimant Count 4.2%; Earnings Growth 1.1% Blog 9/15/13
Trade Balance	Balance Jul minus ₤3085 million Exports Jul ∆%: -4.6; May-Jul ∆%: 1.1 Imports Jul ∆%: minus 0.4 May-Jul ∆%: 0.7 Blog 9/8/13

Links to blog comments in Table UK:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.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

The volume of retail sales in the UK decreased 0.9 percent in Aug 2013 and increased 2.1 percent in the 12 months ending in Aug 2013, as shown in Table VH-1. Percentage changes of retail sales in 12 months had been positive in several months since Sep 2011 with exceptions such as decline of 2.4 percent in Apr 2012, 0.9 percent in Oct 2012, 0.1 percent in Dec 2012, 0.8 percent in Jan 2013, 0.6 percent in Mar 2013 and 0.6 percent in Apr 2013. The quarter ending in Jul 2013 is quite strong with growth of 1.9 percent in May, 0.2 percent in Jun and 1.1 percent in Jul.

Table VH-1, UK, Volume of Retail Sales ∆%

	Month ∆%	12-Month ∆%
Aug 2013	-0.9	2.1
Jul	1.1	3.0
Jun	0.2	2.0
May	1.9	2.0
Apr	-0.6	1.1
Mar	-0.6	-0.7
Feb	2.2	2.2
Jan	-0.8	-1.1
Dec 2012	-0.1	0.1
Nov	0.1	0.3
Oct	-0.9	0.2
Sep	0.5	2.1
Aug	0.0	2.1
Jul	0.1	1.7
Jun	0.2	1.8
May	1.0	1.5
Apr	-2.4	-1.9
Mar	2.4	2.8
Feb	-1.1	0.3
Jan	0.4	0.6
Dec 2011	0.1	2.4
Nov	0.0	0.2
Oct	0.9	0.5
Sep	0.6	0.1
Aug	-0.4	-1.3
Jul	0.2	-1.0
Jun	0.0	-0.9
May	-2.4	-0.9
Apr	2.2	2.2
Mar	-0.1	-0.2
Feb	-0.8	-0.1
Jan	2.2	3.4

Dec 2010	-2.1	-2.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/august-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 1.6 percent in the 12 months ending in Aug 2013 while that of sales excluding auto fuel increased 1.6 percent. The 12-month increase of the implied deflator of auto fuel in Aug 2012 was 1.5 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 and 2.6 percent in Jul 2013. The percentage change of the implied deflator of sales of food stores at 3.4 percent in Jul 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. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-2, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes, ∆%

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2009	Dec	3.7	2.4	2.2	1.8	17.0

2010	Jan	4.1	2.0	2.7	1.2	23.3
	Feb	3.0	1.0	1.5	0.8	20.5
	Mar	3.6	1.4	2.2	0.9	22.7
	Apr	4.0	2.0	2.9	1.3	23.3
	May	3.4	1.5	2.0	1.1	20.9
	Jun	2.6	1.3	2.1	0.8	14.7

	Jul	2.7	1.6	3.0	0.5	13.5
	Aug	2.6	1.7	3.4	0.4	11.4
	Sep	3.1	2.6	4.3	1.2	8.3
	Oct	3.3	2.5	4.1	1.1	10.8
	Nov	3.6	3.0	4.9	1.4	9.8
	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	1.4	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	-0.1	-2.2
	Jun	1.7	1.7	3.4	0.5	1.3

	Jul	1.8	1.7	3.4	0.3	2.6
	Aug	1.6	1.6	3.4	0.3	1.5

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

UK monthly retail volume of sales is quite volatile, as shown in Table VH-3. Total volume of sales decreased 0.6 percent in Apr 2013 and increased 1.9 percent in May 2013, 0.2 percent in Jun 2013, 1.1 percent in Jul 2013 but decline of 0.9 percent in Aug 2013. There was decrease of 1.0 percent in retail sales excluding auto fuels in Aug 2013 and decrease of 2.7 percent in food stores, increase of 0.3 percent in nonfood stores and decrease of 0.6 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

VH-3, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

		All Retail	All Retail Ex Auto Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Fuel Stores
2011	Jan	2.2	1.4	0.7	2.1	10.3
	Feb	-0.8	-0.9	-0.4	-1.5	-0.3
	Mar	-0.1	-	0.6	-0.1	-0.8
	Apr	2.2	2.3	4.1	0.4	1.8
	May	-2.4	-2.6	-4.6	-1.1	-0.3
	Jun	-	-0.1	-0.2	-0.5	0.3

	Jul	0.2	0.3	0.7	0.1	-0.5
	Aug	-0.4	-0.4	0.1	-1.1	-0.4
	Sep	0.6	0.6	-	1.2	0.3
	Oct	0.9	0.9	0.8	1.1	1.0
	Nov	-	-0.4	-0.5	-1.0	3.1
	Dec	0.1	0.2	-	0.9	-0.8

2012	Jan	0.4	0.5	0.4	0.5	-0.1
	Feb	-1.1	-1.0	-0.3	-1.6	-2.4
	Mar	2.4	2.0	-0.5	4.5	5.8
	Apr	-2.4	-1.1	0.3	-3.1	-12.6
	May	1.0	0.5	-	1.1	5.2
	Jun	0.2	0.5	0.1	1.0	-2.5

	Jul	0.1	-0.1	-	-0.8	2.2
	Aug	-	-0.1	0.4	0.5	0.7
	Sep	0.5	0.5	-0.3	0.5	0.9
	Oct	-0.9	-0.6	-0.9	-0.8	-3.4
	Nov	0.1	0.3	-0.2	0.6	-1.7
	Dec	-0.1	-0.5	-	-1.3	3.1

2013	Jan	-0.8	-0.5	-0.8	-0.6	-3.8
	Feb	2.2	2.1	0.6	3.2	3.0
	Mar	-0.6	-0.6	1.9	-3.4	0.1
	Apr	-0.6	-0.7	-3.6	2.3	-0.1
	May	1.9	1.9	2.6	1.0	1.7
	Jun	0.2	0.2	0.2	0.2	0.2

	Jul	1.1	1.2	2.7	-0.3	0.8
	Aug	-0.9	-1.0	-2.7	0.4	-0.6

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/august-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 2.1 percent in the 12 months ending in Aug 2013 with increase of 2.3 percent in sales excluding auto fuel. Sales of food stores decreased 0.6 percent in the 12 months ending in Aug 2013 while sales of nonfood stores increased 1.6 percent and sales of auto fuel stores decreased 0.1 percent.

Table VH-4, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

		All Retail	All Retail Ex Fuel	Mostly Food Stores	Mostly Nonfood Stores	Mostly Automotive Food Stores
2010	Dec	-2.3	-1.7	-4.3	-0.4	-8.5

2011	Jan	3.4	2.9	-2.5	7.0	7.6
	Feb	-0.1	-0.6	-2.5	-0.4	4.7
	Mar	-0.2	-0.6	-1.5	-0.6	3.6
	Apr	2.2	1.9	2.2	0.4	3.9
	May	-0.9	-1.3	-3.4	-1.0	2.2
	Jun	-0.9	-1.4	-4.1	-1.1	3.2

	Jul	-1.0	-1.4	-1.2	-2.9	2.0
	Aug	-1.3	-1.7	-0.7	-4.0	1.9
	Sep	0.1	-0.2	-0.4	-1.6	3.3
	Oct	0.5	0.3	0.4	-1.1	2.5
	Nov	0.2	-0.4	-1.1	-1.9	5.2
	Dec	2.4	1.2	1.1	0.4	13.9

2012	Jan	0.6	0.3	0.8	-1.2	3.1
	Feb	0.3	0.2	0.9	-1.4	0.9
	Mar	2.8	2.2	-0.1	3.2	7.6
	Apr	-1.9	-1.2	-3.7	-0.4	-7.5
	May	1.5	2.0	1.0	1.7	-2.3
	Jun	1.8	2.6	1.3	3.3	-5.0

	Jul	1.7	2.2	0.6	2.4	-2.5
	Aug	2.1	2.5	0.8	4.1	-1.4
	Sep	2.1	2.4	0.6	3.3	-0.8
	Oct	0.2	0.9	-1.1	1.5	-5.1
	Nov	0.3	1.6	-0.9	3.1	-9.5
	Dec	0.1	0.9	-0.9	0.9	-6.0

2013	Jan	-1.1	-0.1	-2.1	-0.2	-9.4
	Feb	2.2	3.0	-1.2	4.7	-4.4
	Mar	-0.7	0.4	1.2	-3.2	-9.6
	Apr	1.1	0.8	-2.8	2.2	3.3
	May	2.0	2.2	-0.3	2.1	-0.1
	Jun	2.0	1.9	-0.3	1.4	2.6

	Jul	3.0	3.2	2.5	1.8	1.2
	Aug	2.1	2.3	-0.6	1.6	-0.1

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

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

Table VH-5 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 2.1 percent in the 12 months ending in Aug 2013. Sales of predominantly food stores with weight of 41.5 percent decreased 0.6 percent in the 12 months ending in Aug 2013, deducting 0.3 percentage points. Mostly nonfood stores with weight of 41.3 percent increased 1.6 percent with contribution of 0.7 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 28.7 percent and positive contribution of 1.6 percentage points. Automotive fuel with weight of 11.5 percent and growth of minus 0.1 percent contributed 0.0 percentage points. The value of retail sales increased 3.6 percent in the 12 months ending in Aug 2013. There were positive contributions: 0.8 percentage points for predominantly nonfood stores and 1.6 percentage points for non-store retailing. Automotive fuel stores added 0.1 percentage points while food stores added 1.1 percentage points.

Table VH-5, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Aug 2013	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	2.1		3.6
Mostly Food Stores	41.5	-0.6	-0.3	2.8	1.1
Mostly Nonfood Stores	41.3	1.6	0.7	1.9	0.8
Non-store Retailing	5.7	28.7	1.6	28.7	1.6
Automotive Fuel	11.5	-0.1	0.0	1.4	0.1

Cont.: Contribution

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

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