World Inflation Waves, Loss of Dynamism of the United States Economy, Financial Risks and World Economic Slowdown with Global Recession Risk: Part II

 

World Inflation Waves, Loss of Dynamism of the United States Economy, Financial Risks and World Economic Slowdown with Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2010, 2011, 2012

Executive Summary

I World Inflation Waves

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IAi Theory

IAii Policy

IAiii Evidence

IAiv Unwinding Strategy

II United States Inflation

IIA Long-term US Inflation

IIB Current US Inflation

III World Financial Turbulence

IIIA Financial Risks

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendix I The Great Inflation

Executive Summary

 

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx) to show GDP in dollars in 2010 and the growth rate of real GDP of the world and selected regional countries from 2011 to 2014. The IMF revised some of the projections in its World Economic Outlook Update released on Jul 16, 2012 (http://www.imf.org/external/pubs/ft/weo/2012/update/02/index.htm). Table V-1 incorporates these revisions with lines “Rev” where appropriate. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 3.5 percent in 2012 but accelerating to 3.9 percent in 2013 instead of 4.1 percent in the earlier projection, 4.4 percent in 2014 and 4.5 percent in 2015. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,670 billion of world output of $69,660 billion, or 48.3 percent, but are projected to grow at much lower rates than world output, 2.0 percent on average from 2012 to 2015 in contrast with 4.1 percent for the world as a whole, incorporating the revisions. While the world would grow 17.3 percent in the four years from 2012 to 2015, the G7 as a whole would grow 8.4 percent. The difference in dollars of 2011 is rather high: growing by 17.3 percent would add $12.1 trillion of output to the world economy, or roughly two times the output of the economy of Japan of $5,869 but growing by 8.4 percent would add $5.9 trillion of output to the world, or about the output of Japan in 2011. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2011 of $25,237 billion, or 36.2 percent of world output. The EMDEs would grow cumulatively 26.3 percent or at the average yearly rate of 6.0 percent, contributing $6.6 trillion from 2012 to 2015 or the equivalent of somewhat less than the GDP of $7,298 billion of China in 2011. The final four countries in Table 1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,317 billion, or 19.1 percent of world output, which is equivalent to 39.6 percent of the combined output of the major advanced economies of the G7.

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

	GDP USD 2011	Real GDP ∆% 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015
World Rev	69,660	3.5	4.1 3.9	4.4	4.5
G7 Rev	33,670	1.5 1.4	1.9 1.9	2.3	2.5
Canada	1,737	2.1	2.2	2.4	2.4
France Rev	2,776	0.5 0.3	1.1 0.8	1.9	1.9
DE Rev	3,577	0.6 1.0	1.5 1.4	1.3	1.3
Italy	2,199	-1.9	-0.3	0.5	1.0
Japan Rev	5,869	2.0 2.4	1.7 1.5	1.5	1.3
UK	2,418	0.8	2.0	2.5	2.6
US Rev	15,094	2.1 0.2	2.4 1.4	2.9	3.3
Euro Area Rev	13,115	-0.3	0.9 0.7	1.4	1.6
DE Rev	3,577	0.6 1.0	1.5 1.4	1.3	1.3
France Rev	2,776	0.5 0.3	1.1 0.8	1.9	1.9
Italy	2,199	-1.9	-0.3	0.5	1.0
POT	239	-3.3	0.3	2.1	1.9
Ireland	218	0.5	2.1	2.5	2.8
Greece	303	-4.7	0.0	2.5	3.1
Spain Rev	1,494	-1.8 -1.5	0.1 -0.6	1.6	1.6
EMDE Rev	25,237	5.7 5.6	6.0 5.9	6.2	6.3
Brazil Rev	2,493	3.0 2.5	4.2 4.6	4.0	4.1
Russia	1,850	4.0	3.9	3.9	3.9
India Rev	1,676	6.9 6.1	7.3 6.5	7.5	7.7
China Rev	7,298	8.2 8.0	8.8 8.5	8.7	8.7

Notes: Rev: Revision of July 19, 2012; DE: Germany; EMDE: Emerging and Developing Economies (150 countries); POT: Portugal

Source: IMF World Economic Outlook databank

http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/index.aspx

http://www.imf.org/external/pubs/ft/weo/2012/update/02/index.htm

Table V-2 is constructed with the WEO database to provide rates of unemployment from 2011 to 2015 for major countries and regions. In fact, unemployment rates for 2011 in Table ESV-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high for the countries with sovereign debt difficulties in Europe: 12.7 percent for Portugal (POT), 14.4 percent for Ireland, 17.3 percent for Greece, 21.6 percent for Spain and 8.4 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.7 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

Table V-2, IMF World Economic Outlook Database Projections of Unemployment Rate as Percent of Labor Force

	% Labor Force 2011	% Labor Force 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015
World	NA	NA	NA	NA	NA
G7	7.7	7.4	7.3	7.0	6.7
Canada	7.5	7.4	7.3	7.1	6.9
France	9.7	9.9	10.1	9.8	9.4
DE	6.0	5.6	5.5	5.3	5.3
Italy	8.4	9.5	9.7	9.8	9.5
Japan	4.5	4.5	4.4	4.3	4.2
UK	8.0	8.3	8.2	7.8	7.4
US	8.9	8.2	7.9	7.5	6.9
Euro Area	10.1	10.9	10.8	10.5	10.1
DE	6.0	5.6	5.5	5.3	5.3
France	9.7	9.9	10.1	9.8	9.4
Italy	8.4	9.5	9.7	9.8	9.5
POT	12.7	14.3	13.9	13.2	12.4
Ireland	14.4	14.5	13.8	12.9	12.0
Greece	17.3	19.4	19.4	18.2	16.8
Spain	21.6	24.2	23.9	22.8	21.9
EMDE	NA	NA	NA	NA	NA
Brazil	6.0	6.0	6.5	7.0	7.0
Russia	7.5	6.5	6.0	6.0	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.0	4.0	4.0	4.0

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

Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2012/01/weodata/weoselgr.aspx

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog for IQ2012 and IIQ2012. Growth is weak throughout most of the world. Japan’s GDP increased 1.3 percent in IQ2012 and 2.9 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP grew 0.3 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 1.4 percent, which is much lower than 5.5 percent in IQ2012. Growth of 3.5 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. China grew at 1.8 percent in IIQ2012, which annualizes to 7.4 percent. Xinhuanet informs that Premier Wen Jiabao considers the need for macroeconomic stimulus, arguing that “we should continue to implement proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). Premier Wen elaborates that “the country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). China’s GDP grew 7.6 percent in IIQ2012 relative to IQ2011. Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2012. GDP was flat in the euro area in IQ2012 and also in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.4 percent relative to a year earlier. Germany’s GDP increased 0.5 percent in IQ2012 and 1.7 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.3 percent and 0.5 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 2.0 percent at SAAR and 2.2 percent relative to a year earlier (Section I Mediocre and Decelerating United States Economic Growth http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html) but with substantial underemployment and underemployment (Section I http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html) and weak hiring (Section I http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million.html). UK GDP fell 0.7 percent in IIQ2012, declining 0.8 percent relative to IIQ2011. In IQ2011, UK GDP fell 0.3 percent, declining 0.2 percent relative to a year earlier. Italy has experienced decline of GDP in four consecutive quarters from IIIQ2011 to IIQ2012. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.5 percent relative to IIQ2011.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.5        SAAR: 2.0	2.4
Japan	QOQ: 1.3 SAAR: 5.5	2.9
China	1.8	8.1
Euro Area	0.0	0.0
Germany	0.5	1.7
France	0.0	0.3
Italy	-0.8	-1.4
United Kingdom	-0.3	-0.2
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.4         SAAR: 1.5	2.2
Japan	QOQ: 0.3 SAAR: 1.4	3.5
China	1.8	7.6
Euro Area	-0.2	-0.4
Germany	0.3	0.5
France	0.0	0.3
Italy	-0.7	-2.5
United Kingdom	-0.7	-0.8

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

Source: Country Statistical Agencies

http://www.bea.gov/national/index.htm#gdp http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html http://www.stats.gov.cn/enGliSH/

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased from 50.3 in Jun to 51.7 in Jul, indicating expansion at a moderate rate, which is one of the lowest in the current expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9928). This index has remained above the contraction territory of 50.0 during 35 months. Both global manufacturing and services have slowed down considerably with services increasing marginally because of activity in the US while manufacturing deepened its decline. The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, fell to 48.4 in Jul from 49.1 in Jun, for the lowest reading in three years in two consecutive months below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9899). David Hensley, Director of Global Economics Coordination at JPMorgan, finds that inventory adjustment is the driver of deeper contraction in the beginning of IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9899). The HSBC Brazil Composite Output Index, compiled by Markit, fell from moderate expansion at 51.5 in Jun to moderate contraction at 48.9 in Jul, in the weakest reading in ten months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9912). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the decline of the HSBC Brazil Services Business Activity Index from 53.0 in Jun to 48.9 in Jul withdraws important support present in the first half of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9912). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased slightly to 48.7 in Jul from 48.5 in Jun, indicating modest deterioration of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9876). Andre Loes, Chief Economist, Brazil at HSBC, finds that moderate improvement in the index suggests that drivers of the drop of activity are moderating (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9876).

VA United States. The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.1 percentage points from 49.7 in Jun to 49.8 in Jun, for a second monthly contraction, which are the first since Jul 2009 (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 0.2 percentage points from 47.8 in Jun to 48.0 in Jul, for a second consectuvie contraction interrupting growth in 37 months since Apr 2009. The Non-Manufacturing ISM Report on Business^® PMI increased 0.5 percentage points from 52.1 in Jun to 52.6 in Jul while the index of new orders increased 1.0 percentage points from 53.3 in Jun to 54.3 in Jul (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Jul 12 months NSA ∆%: 1.4; ex food and energy ∆%: 2.1 Jul month ∆%: 0.0; ex food and energy ∆%: 0.1 Blog 08/19/12
Producer Price Index	Jul 12-month NSA ∆%: 0.5; ex food and energy ∆% 2.5 Jul month SA ∆% = 0.3; ex food and energy ∆%: 0.4 Blog 8/19/12
PCE Inflation	Jun 12-month NSA ∆%: headline 1.5; ex food and energy ∆% 1.8 Blog 8/5/12
Employment Situation	Household Survey: Jul Unemployment Rate SA 8.3% Blog calculation People in Job Stress Jul: 28.7 million NSA Establishment Survey: Jul Nonfarm Jobs +163,000; Private +172,000 jobs created  Jun 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.3% Blog 8/5/12
Nonfarm Hiring	Nonfarm Hiring fell from 69.4 million in 2004 to 50.1 million in 2011 or by 19.3 million Private-Sector Hiring Jun 5057 4.796 million lower by 1.082 million than 6.139 million in Jun 2006 Blog 8/12//12
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.2 J]IQ2011 SAAR 2.0 IIQ2012 SAAR 1.5 Blog 7/29/12
Personal Income and Consumption	Jun month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 Real Personal Consumption Expenditures (RPCE): -0.1 12-month Jun NSA ∆%: RDPI: 1.7; RPCE ∆%: 2.0 Blog 8/5/2012
Quarterly Services Report	IQ12/IQ11 SA ∆%: Information 3.8 Professional 10.3 Administrative 4.9 Hospitals 5.2 Blog 6/10/12
Employment Cost Index	IIQ2012 SA ∆%: 0.5 Jun 12 months ∆%: 1.7 Blog 8/5/12
Industrial Production	Jul month SA ∆%: 0.6 Jul 12 months SA ∆%: 4.4 Manufacturing Jul SA ∆% 0.5 Jul 12 months SA ∆% 5.0, NSA 4.6 Capacity Utilization: 79.3 Blog 8/19/12
Productivity and Costs	Nonfarm Business Productivity IIQ2012∆% SAAE 1.6; IIQ2012/IIQ2011 ∆% 1.1; Unit Labor Costs SAAE IIQ2012 ∆% 1.7; IIQ2012/IIQ2011 ∆%: 0.8 Blog 8/12/2012
New York Fed Manufacturing Index	General Business Conditions From Jul 7.39 to Aug -5.85 New Orders: From Jul -2.69 to Aug -5.50 Blog 8/19/12
Philadelphia Fed Business Outlook Index	General Index from Jul minus 12.9 to Aug minus 7.1 New Orders from Jul minus 6.9 to Aug minus 5.5 Blog 8/19/12
Manufacturing Shipments and Orders	Jun New Orders SA ∆%: -0.5; ex transport ∆%: -1.8 Jan-Jun New Orders NSA ∆%: 5.2; ex transport ∆% 4.3 Blog 8/5/12
Durable Goods	Jun New Orders SA ∆%: 1.6; ex transport ∆%: 1.1 Jan-Jun 12/Jan-Jun 11 NSA New Orders ∆%: 7.9; ex transport ∆% : 6.6 Blog 7/29/12
Sales of New Motor Vehicles	Jul 2012 8,425,842; Jun 2011 7,392,167. Jul SAAR 14.09 million, Jun SAAR 14.38 million, Jun 2011 SAAR 12.40 million Blog 8/5/12
Sales of Merchant Wholesalers	Jan-Jun 2012/Jan-Jun 2011 NSA ∆%: Total 7.0; Durable Goods: 9.2; Nondurable Goods 5.3 Blog 8/12/12
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jun 12/Jun 11 NSA ∆%: Sales Total Business 1.5; Manufacturers 1.4 Retailers 2.7; Merchant Wholesalers 0.5 Blog 8/19/12
Sales for Retail and Food Services	Jan-Jul 2012/Jan-Jul 2011 ∆%: Retail and Food Services 5.9; Retail ∆% 5.6 Blog 8/19/12
Value of Construction Put in Place	Jun SAAR month SA ∆%: 0.4 Jun 12-month NSA: 6.5 Blog 8/5/12
Case-Shiller Home Prices	May 2012/Apr 2011 ∆% NSA: 10 Cities minus 2.3; 20 Cities: minus 0.7 ∆% May SA: 10 Cities 0.9 ; 20 Cities: 0.9 Blog 8/5/12
FHFA House Price Index Purchases Only	May SA ∆% 0.8; 12 month ∆%: 3.8 Blog 7/29/12
New House Sales	Jun 2012 month SAAR ∆%: -8.4 Jan-Jun 2012/Jan-Jun 2011 NSA ∆%: 20.3 Blog 7/29/12
Housing Starts and Permits	Jul Starts month SA ∆%: -1.1 ; Permits ∆%: 6.8 Jan-Jul 2012/Jan-Jul 2011 NSA ∆% Starts 25.7; Permits  ∆% 31.0 Blog 8/19/12
Trade Balance	Balance Jun SA -$42294 million versus May -$48044 million Exports Jun SA ∆%: 0.9 Imports Jun SA ∆%: -1.5 Goods Exports Jan-Jun 2012/2011 NSA ∆%: 7.1 Goods Imports Jan-Jun 2011/2011 NSA ∆%: 6.0 Blog 8/12/12
Export and Import Prices	Jul 12-month NSA ∆%: Imports -4.1; Exports -1.0 Blog 8/12/12
Consumer Credit	Jun ∆% annual rate: 3.0 Blog 8/12/12
Net Foreign Purchases of Long-term Treasury Securities	Jun Net Foreign Purchases of Long-term Treasury Securities: $9.3 billion Major Holders of Treasury Securities: China $1164 billion; Japan $1119 billion; Total Foreign US Treasury Holdings Jun $5292 billion Blog 8/19/12
Treasury Budget	Fiscal Year Oct-Jul 2012/2011 ∆%: Receipts 6.1; Outlays -0.4; Individual Income Taxes 4.2 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 Oct-Jul $973,172 million CBO Forecast 2012FY Deficit $1.171 trillion Blog 8/12/2012
Flow of Funds	IQ2012 ∆ since 2007 Assets -$4113B Real estate -$4916B Financial $367.3MM Net Worth -$3300B Blog 6/17/12
Current Account Balance of Payments	IQ2012 -$137B %GDP 3.6 Blog 06/17/12

Links to blog comments in Table USA: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

7/29/12 http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html

6/17/12 http://cmpassocregulationblog.blogspot.com/search?updated-min=2012-01-01T00:00:00-08:00&updated-max=2013-01-01T00:00:00-08:00&max-results=48

6/10/12 http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities_10.html

Industrial production increased 0.6 percent in Jul, as shown in Table VA-1, with all data seasonally adjusted. In the six months ending in Jul, industrial production accumulated growth of 1.4 percent at the annual equivalent rate of 2.8 percent, which is substantially lower than 4.4 percent in 12 months. Business equipment fell 1.1 percent in Jun, growing 12.3 percent in the 12 months ending in Jul and at the annual equivalent rate of 10.2 percent in the six months ending in Jul. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/current/): “Capacity utilization for total industry moved up 0.4 percentage point to 79.3 percent, a rate 1.0 percentage points below its long-run (1972-2011) average.”

Table VA-1, US, Industrial Production and Capacity Utilization, SA, ∆%, % 

2012	Jul	Jun	May	Apr	Mar	Feb	Jun  12/ Jun  11
Total	0.6	0.1	0.1	0.8	-0.7	0.5	4.4
Market Groups
Final Products	0.5	0.2	0.6	0.8	-0.8	0.8	4.5
Consumer Goods	0.6	-0.4	0.9	0.8	-1.2	0.4	1.8
Business Equipment	-0.1	1.9	0.3	1.2	0.1	1.5	12.3
Non Industrial Supplies	0.0	-0.3	-0.3	0.9	-0.9	1.2	2.3
Construction	-0.5	-0.6	-1.6	0.8	-1.1	2.2	2.6
Materials	1.0	0.2	-0.2	0.8	-0.5	0.0	4.9
Industry Groups
Manufacturing	0.5	0.5	-0.5	0.7	-0.7	0.9	5.0
Mining	1.2	0.5	0.1	0.5	-0.3	-1.9	6.0
Utilities	1.3	-3.3	5.4	2.3	-0.6	1.1	-2.4
Capacity	79.3	78.9	78.9	78.9	78.4	79.0	1.4

Sources: http://www.federalreserve.gov/releases/g17/current/

Manufacturing increased 0.5 percent in Jul seasonally adjusted, increasing 4.6 percent not seasonally adjusted in 12 months, and grew 1.4 percent in the six months ending in Jul or at the annual equivalent rate of 2.8 percent. A longer perspective of manufacturing in the US is provided by Table VA-2. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 as shown by 12 months rates of growth but growth rates may be increasing again closer to 5 percent. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.4 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appear to be returning to the levels at 3 percent or higher in the annual rates before the recession.

Table VA-2, US, Monthly and 12-Month Rates of Growth of Manufacturing ∆%

	Month SA ∆%	12-Month NSA ∆%
Jul 2012	0.5	4.6
Jun	0.5	5.3
May	-0.5	5.1
Apr	0.7	5.6
Mar	-0.7	4.3
Feb	0.9	5.9
Jan	1.1	4.9
Dec 2011	1.5	4.4
Nov	0.0	4.0
Oct	0.5	4.3
Sep	0.4	4.0
Aug	0.2	3.4
Jul	0.8	3.2
Jun	0.1	3.1
May	0.2	2.9
Apr	-0.6	4.1
Mar	0.7	6.0
Feb	0.3	6.3
Jan	0.4	6.3
Dec 2010	1.0	6.6
Nov	0.2	5.5
Oct	0.1	6.6
Sep	0.3	6.7
Aug	0.0	7.1
Jul	0.8	7.3
Jun	0.0	9.0
May	1.4	8.3
Apr	1.1	6.5
Mar	1.1	4.2
Feb	0.2	0.6
Jan	1.0	0.5
Dec 2009	0.1	-3.7
Nov	0.9	-6.6
Oct	0.0	-9.4
Sep	0.7	-10.7
Aug	1.1	-13.7
Jul	1.3	-15.3
Jun	-0.4	-17.8
May	-1.2	-17.8
Apr	-0.7	-18.4
Mar	-1.9	-17.5
Feb	0.0	-16.3
Jan	-2.9	-16.6
Dec 2008	-3.3	-14.1
Nov	-2.4	-11.4
Oct	-0.6	-9.1
Sep	-3.5	-8.8
Aug	-1.4	-5.3
Jul	-1.1	-3.8
Jun	-0.6	-3.2
May	-0.5	-2.5
Apr	-1.1	-1.3
Mar	-0.4	-0.7
Feb	-0.4	0.8
Jan	-0.4	2.1
Dec 2007	0.2	1.9
Nov	0.5	3.2
Oct	-0.4	2.7
Sep	0.5	2.9
Aug	-0.4	2.6
Jul	0.3	3.4
Jun	0.3	2.9
May	-0.2	3.1
Apr	0.8	3.6
Mar	0.7	2.5
Feb	0.6	1.7
Jan	-0.5	1.4
Dec 2006		2.8
Dec 2005		3.4
Dec 2004		4.0
Dec 2003		1.8
Dec 2002		2.3
Dec 2001		-5.5
Dec 2000		0.4
Dec 1999		5.4
Average ∆% Dec 1986-Dec 2011		2.3
Average ∆% Dec 1986-Dec 1999		4.3
Average ∆% Dec 1999-Dec 2006		1.3
Average ∆% Dec 1999-Dec 2011		0.2

Source: http://www.federalreserve.gov/releases/g17/download.htm

Chart VA-1 of the Board of Governors of the Federal Reserve System provides industrial production, manufacturing and capacity since the 1970s. There was acceleration of growth of industrial production, manufacturing and capacity in the 1990s because of rapid growth of productivity in the US (Cobet and Wilson (2002); see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes of the curves flatten in the 2000s. Production and capacity have not recovered to the levels before the global recession.

Chart VA-1, US, Industrial Production, Capacity and Utilization

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/current/ipg1.gif

The modern industrial revolution of Jensen (1993) is captured in Chart VA-2 of the Board of Governors of the Federal Reserve System (for the literature on M&A and corporate control see Pelaez and Pelaez, Regulation of Banks and Finance (2009a), 143-56, Globalization and the State, Vol. I (2008a), 49-59, Government Intervention in Globalization (2008c), 46-49). The slope of the curve of total industrial production accelerates in the 1990s to a much higher rate of growth than the curve excluding high-technology industries. Growth rates decelerate into the 2000s and output and capacity utilization have not recovered fully from the strong impact of the global recession. Growth in the current cyclical expansion has been more subdued than in the prior comparably deep contractions in the 1970s and 1980s. Chart VA-2 shows that the past recessions after World War II are the relevant ones for comparison with the recession after 2007 instead of common comparisons with the Great Depression (http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html ). The bottom left-hand part of Chart VA-2 shows the strong growth of output of communication equipment, computers and semiconductor that continued from the 1990s into the 2000s. Output of semiconductors has already surpassed the level before the global recession.

Chart VA-2, US, Industrial Production, Capacity and Utilization of High Technology Industries

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/current/ipg3.gif

Additional detail on industrial production and capacity utilization is provided in Chart VA-3 of the Board of Governors of the Federal Reserve System. Production of consumer durable goods fell sharply during the global recession by more than 30 percent and is still around 5 percent below the level before the contraction. Output of nondurable consumer goods fell around 10 percent and is some 5 percent below the level before the contraction. Output of business equipment fell sharply during the contraction of 2001 but began rapid growth again after 2004. An important characteristic is rapid growth of output of business equipment in the cyclical expansion after sharp contraction in the global recession. Output of defense and space only suffered reduction in the rate of growth during the global recession and surged ahead of the level before the contraction. Output of construction supplies collapsed during the global recession and is well below the level before the contraction. Output of energy materials was stagnant before the contraction but has recovered sharply above the level before the contraction.

Chart VA-3, US, Industrial Production and Capacity Utilization

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/current/ipg2.gif

Table I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.7 percent in US national income. Most of US national income is in the form of services. In Jul 2012, there were 132.9 million nonfarm jobs in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/pdf/empsit.pdf Table B-1, 28). Total private jobs of 112.2 million NSA in Jul 2012 accounted for 84.4 percent of total nonfarm jobs of 132.9 million, of which 12.1 million, or 10.8 percent of total private jobs and 9.1 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 93.5 million NSA in Jul 2012, or 70.4 percent of total nonfarm jobs and 83.3 percent of total private-sector jobs. Manufacturing has share of 10.4 in US national income, as shown in Table I-13. Most income and employment in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table VA-3, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IQ2012	% Total
National Income WCCA	13,693.0	100.0
Domestic Industries	13,516.2	98.7
Private Industries	11,863.4	86.7
Agriculture	130.8	1.0
Mining	184.0	1.3
Utilities	190.9	1.4
Construction	560.1	4.1
Manufacturing	1419.9	10.4
Durable Goods	817.3	6.0
Nondurable Goods	602.5	4.4
Wholesale Trade	795.0	5.8
Retail Trade	932.0	6.8
Transportation & WH	385.2	2.8
Information	474.4	3.5
Finance, insurance, RE	2563.5	18.7
Professional, BS	1919.3	14.0
Education, Health Care	1382.3	10.1
Arts, Entertainment	519.9	3.8
Other Services	537.4	3.9
Government	1652.8	12.1
Rest of the World	176.8	1.3

Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

http://www.bea.gov/iTable/index_nipa.cfm

The index of general business conditions of the Federal Reserve Bank of New York Empire State Manufacturing Survey has fluctuated with decline to contraction territory at minus 5.85 in Aug 2012, as shown in Table VA-4. The index had been registering negative changes in the five months from Jun to Oct 2011. The new orders segment fell to minus 5.50 in Aug, indicating mild contraction. There is declining reading in shipments decreasing to 4.09 in Aug. The segment of number of employees eased to 16.47 in Aug. Number of weekly hours worked fell to neutral at zero in Jul 2012 and increased marginally to 3.53 in Aug. Expectations for the next six months of the general business conditions index peaked at 54.87 in Jan 2012, declining to 15.20 in Aug. Expectations of new orders also peaked at 53.85 in Jan 2012, declining to 2.35 in Aug 2012. There is a similar pattern of strong recovery in shipments with decline to 8.24 in Aug 2012. Number of employees fell sharply to 3.53 in Aug 2012. Hours worked collapsed to minus 8.24 in Aug, indicating expected contraction.

Table VA-4, US, New York Federal Reserve Bank Empire State Manufacturing Survey Index SA

	General Index	New Orders	Shipments	# Workers	Average Work-week
Current
Aug 2012	-5.85	-5.50	4.09	16.47	3.53
Jul	7.39	-2.69	10.28	18.52	0.00
Jun	2.29	2.18	4.81	12.37	3.09
May	17.09	8.32	24.14	20.48	12.05
Apr	6.56	6.48	6.41	19.28	6.02
Mar	20.21	6.84	18.21	13.58	18.52
Feb	19.53	9.73	22.79	11.76	7.06
Jan	13.48	13.70	21.69	12.09	6.59
Dec 2011	8.19	5.99	20.06	2.33	-2.33
Nov	0.80	-0.82	11.70	-3.66	2.44
Oct	-7.22	-0.26	2.89	3.37	-4.49
Sep	-7.43	-7.52	-8.28	-5.43	-2.17
Six Months
Aug 2012	15.20	2.35	8.24	3.53	-8.24
Jul	20.20	13.58	14.81	6.17	-4.94
Jun	23.13	15.46	12.37	16.49	2.06
May	29.26	30.12	25.30	12.05	8.43
Apr	43.12	45.78	44.58	27.71	10.84
Mar	47.50	41.98	43.21	32.10	20.99
Feb	50.38	44.71	49.41	29.41	18.82
Jan	54.87	53.85	52.75	28.57	17.58
Dec 2011	45.61	54.65	51.16	24.42	22.09
Nov	32.06	35.37	36.59	14.63	8.54
Oct	13.99	12.36	17.98	6.74	-2.25
Sep	22.93	13.04	13.04	0.00	-6.52

Source: http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

The Philadelphia Business Outlook Survey in Table VA-5 provides an optimistic reading in Oct 2011 with the movement to 10.8 away from the contraction zone of minus 12.7 in Sep and recovered to 12.5 in Mar from the decline to 3.1 in Nov but then fell to 8.5 in Apr and back to contraction territory at minus 5.8 in May and even sharper contraction at minus 16.6 in Jun, easing to minus 12.9 in Jul 2012 with contraction at minus 7.1 in Aug. New orders were signaling increasing future activity, rising from contraction at minus 5.5 in Sep 2011 to positive reading but registered only 3.3 in Mar 2012 and fell further to 2.7 in Apr and into contraction reading at minus 1.2 in May and sharp contraction at 18.8 in Jun, with milder contraction at minus 5.5 in Aug 2012. There is similar behavior in shipments as in new orders. Employment or number of employees fell to contraction at minus 8.6 in Aug 2012. The average work week also fell to sharp contraction at minus 19.1 in Jun 2012 and 14.6 in Aug 2012. Most indexes of expectations for the next six months are showing sharp increases but interruptions from May to Aug 2012 for the general index. Employment increased from Jan to Apr 2012, deteriorating in May and further deterioration in Aug while the average work week weakened in Apr and contracted at minus 1.1 in May and minus 0.8 in Jun but recovery at 14.5 in Jul, declining to 4.8 in Aug. With most US workers on hourly remuneration, contraction of the workweek means reduction of labor income, which can affect consumption. Personal consumption expenditures have share of 71.0 percent of GDP in IIQ2012 (see Table I-10 at http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html).

Table VA-5, FRB of Philadelphia Business Outlook Survey Diffusion Index SA

	General Index	New Orders	Ship-ments	# Workers	Average Work-week
Current
Aug 12	-7.1	-5.5	-11.3	-8.6	-14.6
Jul	-12.9	-6.9	-8.6	-8.4	-17.3
Jun	-16.6	-18.8	-16.6	1.8	-19.1
May	-5.8	-1.2	3.5	-1.3	-5.4
Apr	8.5	2.7	2.8	17.9	-2.3
Mar	12.5	3.3	3.5	6.8	2.7
Feb	10.2	11.7	15.0	1.1	10.1
Jan	7.3	6.9	5.7	11.6	5.0
Dec 11	6.8	10.7	9.1	11.5	2.8
Nov	3.1	3.5	6.0	10.6	7.1
Oct	10.8	8.5	13.6	5.0	4.2
Sep	-12.7	-5.5	-16.6	7.3	-6.2
Aug	-22.7	-22.2	-8.9	-0.9	-11.2
Jul	6.2	0.5	8.2	9.5	-3.9
Future
Aug 12	12.5	18.5	11.7	10.8	4.8
Jul	19.3	26.1	19.0	11.3	14.5
Jun	19.5	38.2	38.0	18.7	-0.8
May	15.0	26.3	20.8	10.6	-1.1
Apr	33.8	35.4	31.0	27.8	7.5
Mar	32.9	36.4	31.3	21.8	11.2
Feb	33.3	32.5	29.0	22.5	10.8
Jan	49.0	49.7	48.2	19.1	9.2
Dec 11	40.0	44.1	36.4	10.8	4.5
Nov	37.7	36.9	35.5	25.2	4.0
Oct	28.8	28.1	29.0	15.5	8.4
Sep	25.2	24.6	27.1	14.0	6.8
Aug	6.3	20.6	18.4	11.2	-0.7
Jul	25.8	31.2	26.1	12.9	6.6

Source: Federal Reserve Bank of Philadelphia http://www.philadelphiafed.org/index.cfm

Chart VA-4 of the Federal Reserve Bank of Philadelphia is very useful, providing current and future general activity indexes from Jan 1995 to Jun 2012. The shaded areas are the recession cycle dates of the National Bureau of Economic Research (NBER) (http://www.nber.org/cycles.html). The Philadelphia Fed index dropped during the initial period of recession and then led the recovery, as industry overall. There was a second decline of the index into 2011 followed now by what hopefully could be renewed strength from late 2011 into Jan 2012 but marginal weakness in Feb 2012 with stability in Mar and Apr followed by sharp decline in May and Jun with marginal recovery in Jul and further drop in Aug.

Chart VA-4, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Activity Indexes

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Chart VA-5 of the Federal Reserve Bank of Philadelphia provides the index of new orders of the Business Outlook Survey. Strong growth in the beginning of 2011 was followed by a bump after Mar that lasted until Oct 2011. The strength of the first quarter of 2011 has not been recovered with weakness in Apr-Aug 2012 moving into contraction territory.

Chart VA-5, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current New Orders Diffusion Index

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Growth rates and levels of sales in millions of dollars of manufacturers, retailers and merchant wholesalers are provided in Table VA-6. Total business sales fell 1.1 percent in Jun 2012 and 0.3 percent in May 2012 and were up 1.5 percent in Jun 2012 relative to Jun 2011. Sales of manufacturers decreased 1.1 percent in Jun, increasing 0.3 percent in May and increasing 1.4 percent in the 12 months ending in Jun 2012. Retailers’ sales fell 0.8 percent in Jun, falling 0.1 percent in May and increased 2.7 percent in 12 months ending in Jun. Sales of merchant wholesalers fell 1.4 percent in Jun, falling 1.1 percent in May and increasing 0.5 percent in 12 months ending in Jun. These data are not adjusted for price changes such that they reflect increases in both quantities and prices.

Table VA-6, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers

	Jun 12/   May 12 ∆% SA	Jun 2012 Millions of Dollars NSA	May 12/ Apr 12  ∆% SA	Jun 12/ Jun 11 ∆% NSA
Total Business	-1.1	1,261,835	-0.3	1.5
Manufacturers	-1.1	491,877	0.3	1.4
Retailers	-0.8	360,422	-0.1	2.7
Merchant Wholesalers	-1.4	409,536	-1.1	0.5

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

Chart VA-6 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline in the final segment. Data are not adjusted for price changes.

Chart VA-6, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jun 2012

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

Chart VA-7 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes.

Chart VA-7, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2012

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

Businesses added cautiously to inventories to replenish stocks. Retailers added 0.6 percent to inventories in Jun 2012 and 1.1 percent in May with growth of 7.0 percent in 12 months, as shown in Table VA-7. Total business increased inventories by 0.1 percent in Jun, 0.3 percent in May and 5.1 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.24 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

Table VA-7, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios

Inventory Change	Jun 12 Millions of Dollars NSA	Jun 12/ May  12 ∆% SA	May 12/  Apr 12 ∆% SA	Jun 12/   Jun 11 ∆% NSA
Total Business	1,569,056	0.1	0.3	5.1
Manufacturers	603,561	0.1	-0.1	3.3
Retailers	487,881	0.6	1.1	7.0
Merchant Wholesalers	477,614	-0.2	0.0	5.5
Inventory/ Sales Ratio NSA	Jun 12 Billions of Dollars NSA	Jun 2012 SA	Jun 2012 SA	Jun 2011 SA
Total Business	1,569,056	1.24	1.21	1.20
Manufacturers	603,561	1.23	1.24	1.20
Retailers	487,881	1.35	1.29	1.30
Merchant Wholesalers	477,614	1.17	1.11	1.11

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

Chart VA-8 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Jun 2012. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Data are not adjusted for price changes.

Chart VA-8, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jun 2012

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

Chart VA-9 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Jun 2012 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions.

Chart VA-9, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2012

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

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

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

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

This is the pure inventory cycle.

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

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

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

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

Chart VA-10 shows the increase in the inventory/sales ratios during the recessions of 2001 and 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012.

Chart VA-10, Total Business Inventories/Sales Ratios 2002 to 2011

Source: US Census Bureau

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

Sales of retail and food services increased 0.8 percent in Jul after falling 0.7 percent in Jun seasonally adjusted (SA), growing 5.9 percent in Jan-Jul 2012 relative to Jan-Jul 2011 not seasonally adjusted (NSA), as shown in Table VA-8. Excluding motor vehicles and parts, retail sales increased 0.8 percent in Jul 2012, falling 0.8 percent in Jun 2012 SA, increasing 5.4 percent NSA in Jan-Jul 2012 relative to a year earlier. Sales of motor vehicles and parts increased 0.8 percent in Jul 2012 after falling 0.5 percent in Jun SA and increasing 8.2 percent NSA in Jan-Jul 2012 relative to a year earlier. Gasoline station sales increased 0.5 percent SA in Jul 2012 after decreasing 3.4 percent in Jun 2012 in declining prices of gasoline, increasing 3.8 percent in Jan-Jul 2012 relative to a year earlier.

Table VA-8, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

	Jul/ Jun ∆% SA	Jun/May ∆% SA	Jan-Jul 2012 Million Dollars NSA	Jan-Jul 2012 from Jan-Jul 2011 ∆% NSA
Retail and Food Services	0.8	-0.7	2,787,000	5.9
Excluding Motor Vehicles and Parts	0.8	-0.8	2,264,394	5.4
Motor Vehicles & Parts	0.8	-0.5	522,606	8.3
Retail	0.8	-0.8	2,478,925	5.6
Building Materials	1.0	-2.3	173,379	7.2
Food and Beverage	0.3	0.1	364,480	3.5
Grocery	0.4	0.2	328,093	3.3
Health & Personal Care Stores	1.1	-1.5	159,632	2.0
Clothing & Clothing Accessories Stores	0.8	0.4	127,462	6.1
Gasoline Stations	0.5	-3.4	316,747	3.8
General Merchandise Stores	0.7	-0.2	352,471	2.1
Food Services & Drinking Places	0.8	-0.2	308,075	8.1

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

Chart VA-11 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been strongly monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.

Chart VA-11, US, Percentage Change of Retail and Food Services Sales

Source: US Census Bureau

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

Chart VA-12 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jul 2012 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series. Data are not adjusted for price changes.

Chart VA-12, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jul 2012, Millions of Dollars

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

Chart VA-13 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jul 2012. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level.

Chart VA-13, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jul 2012, Millions of Dollars

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

Twelve-month rates of growth of US sales of retail and food services in Jul from 2000 to 2012 are shown in Table VA-9. Nominal sales have been dynamic in 2012, 2011 and 2010 after decline of 9.3 percent in 2009 and increase of only 1.5 percent in 2008. It is difficult to separate price and quantity effects in these nominal data.

Table VA-9, US, Percentage Change in 12-Month Sales for Retail and Food Services, ∆% NSA

Jul	12 Months ∆%
2012	4.1
2011	9.1
2010	4.4
2009	-9.3
2008	1.5
2007	2.7
2006	3.5
2005	9.0
2004	5.2
2003	4.3
2002	3.9
2001	2.5
2000	7.8

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

Seasonally-adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-10. Housing starts decreased 1.1 percent in Jul 2012 after increasing 6.8 percent in Jun 2012. Housing permits, indicating future activity, increased 6.8 percent in Jul 2012 after declining 3.1 percent in Jun. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-10.

Table VA-10, US, Housing Starts and Permits SSAR Month ∆%

	Housing  Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Jul 2012	746	-1.1	812	6.8
Jun	754	6.8	760	-3.1
May	706	-5.5	784	8.4
Apr	747	5.8	723	-6.0
Mar	706	-1.7	769	8.8
Feb	718	-0.3	707	3.4
Jan	720	3.3	684	-2.4
Dec 2011	697	-1.6	701	-1.1
Nov	708	12.4	709	6.3
Oct	630	-2.6	667	8.3
Sep	647	11.4	616	-4.5
Aug	581	-5.4	645	2.9
Jul	614	-0.2	627	-0.9
Jun	615	11.6	633	1.4
May	551	-0.2	624	7.9
Apr	552	-8.0	578	-2.0
Mar	600	15.8	590	10.1
Feb	518	-18.0	536	-5.3
Jan	632	17.3	566	-10.4
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	-3.0

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau

http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Jul not-seasonally adjusted are provided in Table VA-11. Housing starts increased 25.7 percent in Jan-Jul 2012 relative to Jan-Jul 2011 and in the same period new permits increased 31.0 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 61.9 percent in Jan-Jul 2012 relative to Jan-Jul 2006 and fell 64.0 percent relative to Jan-Jul 2005. Housing permits fell 61.7 percent in Jan-Jul 2012 relative to Jan-Jul 2006 and fell 64.1 percent in Jan-Jul 2012 from Jan-Jul 2005.

Table VA-11, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Jul 2012	435.9	453.5
Jan-Jul 2011	346.7	346.1
∆% Jan-Jul 2012/Jan-Jul 2011	25.7	31.0
Jan-Jul 2006	1145.8	1185.1
∆% Jan-Jul 2012/	-61.9	-61.7
Jan-Jul 2005	1211.2	1264.1
∆%/ Jan-Jul 2012	-64.0	-64.1

Source: http://www.census.gov/construction/nrc/

Chart VA-14 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-14 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 Mar-Jul 2012.

Chart VA-14, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

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

Table VA-12 provides new housing units started in the US at seasonally adjusted annual rates (SAAR) in the first seven months of the year from 2000 to 2012. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 706,000 to 754,000 in 2012, which is an improvement over the range of 551,000 to 632,000 in Jan-Jul 2011.

Table VA-12, New Housing Units Started in the US, Seasonally Adjusted Annual Rates, Thousands of Units

	Jan	Feb	Mar	Apr	May	Jun	Jul
2000	1,636	1,737	1,604	1,626	1,575	1,559	1,463
2001	1,600	1,625	1,590	1,649	1,605	1,636	1,670
2002	1,698	1,829	1,642	1,592	1,764	1,717	1,655
2003	1,853	1,629	1,726	1,643	1,751	1,867	1,897
2004	1,911	1,846	1,998	2,003	1,981	1,828	2,002
2005	2,144	2,207	1,864	2,061	2,025	2,068	2,054
2006	2,273	2,119	1,969	1,821	1,942	1,802	1,737
2007	1,409	1,480	1,495	1,490	1,415	1,448	1,354
2008	1,084	1,103	1,005	1,013	973	1,046	923
2009	490	582	505	478	540	585	594
2010	614	604	636	687	583	536	546
2011	632	518	600	552	551	615	614
2012	720	718	706	747	706	754	746

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

Chart VA-15 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 Jul 2012 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 and suspension of the auction of 30-year Treasury bonds from Jun 2003 to Jun 2004. 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-15, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Jul 2012 

Source: US Census Bureau

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

Table VA-13 provides actual new housing units started in the US, or not seasonally adjusted, in Jan-Jul from 2000 to 2012. The number of housing units started fell from the peak of 197.9 thousand in May 2005 to 67.8 thousand in May 2012 or 65.7 percent. The number of housing units started fell from 187.6 thousand in Jul 2005 to 71.7 thousand in Jul 2012 or by 61.8 percent. The number of housing units started jumped from 57.6 thousand in Jul 2011 to 71.7 thousand in Jul 2012 or by 24.5 percent.

Table VA-13, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

	Jan	Feb	Mar	Apr	May	Jun	Jul
2000	104.0	119.7	133.4	149.5	152.9	146.3	135.0
2001	106.4	108.2	133.2	151.3	154.0	155.2	154.6
2002	110.4	120.4	138.2	148.8	165.5	160.3	155.9
2003	117.8	109.7	147.2	151.2	165.0	174.5	175.8
2004	124.5	126.4	173.8	179.5	187.6	172.3	182.0
2005	142.9	149.1	156.2	184.6	197.9	192.8	187.6
2006	153.0	145.1	165.9	160.5	190.2	170.2	160.9
2007	95.0	103.1	123.8	135.6	136.5	137.8	127.9
2008	70.8	78.4	82.2	89.5	91.7	102.5	86.7
2009	31.9	39.8	42.7	42.5	52.2	59.1	56.8
2010	38.9	40.7	54.7	62.0	56.2	53.8	51.5
2011	40.2	35.4	49.9	49.0	54.0	60.5	57.6
2012	47.2	49.7	58.0	66.8	67.8	74.7	71.7

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

Chart VA-16 of the US Census Bureau provides new housing units started in the US not seasonally adjusted (NSA) from Jan 1959 to Jul 2012. There is the same behavior as in Chart VA-15 SA but with sharper fluctuations in the original series without seasonal adjustment. There are the same three periods. (1) The series is virtually stationary with wide fluctuations from 1959 to the late 1980s. (2) There is downward trend during the savings and loans crisis of the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $5482.1 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 2.74 percent of GDP in a year. US GDP in 2011 is estimated at $15,075.7 billion, such that the bailout would be equivalent to cost to taxpayers of about $412.5 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-16, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Jul 2012 

Source: US Census Bureau

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

A longer perspective on residential construction in the US is provided by Table VA-13 with annual data from 1960 to 2011. Housing starts fell 70.6 percent from 2005 to 2011, 61.2 percent from 2000 to 2011 and 51.4 percent relative to 1960. Housing permits fell 71.7 percent from 2005 to 2011, 60.8 percent from 2000 to 2011 and 37.4 percent from 1960 to 2011. 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-14, 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
2011	608.8	624.1
∆% 2011/2010	3.7	3.2
∆% 2011/2005	-70.6	-71.0
∆% 2011/2000	-61.2	-60.8
∆% 2011/1960	-51.4	-37.4
2010	586.9	604.6
∆% 2010/2005	-71.6	-71.9
∆% 2010/2000	-62.6	-62.0
∆% 2010/1960	-53.1	-39.4
2009	554,0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889,2
2002	1,704.9	1,747.2
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
1960	1,252.2	997.6

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

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting at the moment from risk flight to US dollar denominated assets. Net foreign purchases of US long-term securities (row C in Table VA-15) decreased from $55.9 billion in May 2012 to $9.3 billion in Jun 2012. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-15) in May of $50.9 billion decreased to $5.5 billion in Jun 2012. Net US (residents) purchases of long-term foreign securities (row B in Table VA-15) decreased from $4.9 billion in May to $3.9 billion in Jun. In Jun,

C = A + B = $5.5 billion + $3.9 billion = $9.3 billion

There is decreasing demand in Table VA-12 in Jun in A1 private purchases by residents overseas of US long-term securities of minus $1.4 billion of which increases in A11 Treasury securities of $11.2 billion, increase in A12 of $14.0 billion in agency securities, decrease by $19.4 billion of corporate bonds and decrease of $7.1 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $6.8 billion with increase of Treasury securities of $21.3 billion, which is marginally higher than $20.8 billion in May. Official purchases of agency securities fell $14.6 billion. Row D shows decrease in Jun in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills decreased $0.7 billion (row D11) with foreign official holdings increasing $2.4 billion while the category other decreased $2.7 billion. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses.

Table VA-15, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Jun 2011 12 Months	Jun 2012 12 Months	May 2012	Jun 2012
A Foreign Purchases less Sales of US LT Securities	759.2	474.5	50.9	5.5
A1 Private	573.1	296.2	20.8	-1.4
A11 Treasury	335.3	317.8	25.1	11.2
A12 Agency	79.7	76.4	3.8	14.0
A13 Corporate Bonds	18.9	-66.8	-8.7	-19.4
A14 Equities	139.2	-31.1	0.5	-7.1
A2 Official	186.1	178.3	30.2	6.8
A21 Treasury	213.7	177.1	20.8	21.3
A22 Agency	-27.1	-4.9	8.6	-14.6
A23 Corporate Bonds	-3.3	0.7	0.5	-2.7
A24 Equities	2.7	5.4	0.4	2.8
B Net US Purchases of LT Foreign Securities	-193.3	18.9	4.9	3.9
B1 Foreign Bonds	-97.4	59.1	14.4	10.6
B2 Foreign Equities	-95.9	-40.2	-9.5	-6.7
C Net Foreign Purchases of US LT Securities	565.9	493.5	55.9	9.3
D Increase in Foreign Holdings of Dollar Denominated Short-term	-75.0	-42.8	0.7	-1.0
D1 US Treasury Bills	-85.5	-12.7	8.3	1.7
D11 Private	-42.2	36.2	-5.8	-0.7
D12 Official	-43.3	-48.9	14.1	2.4
D2 Other	10.5	-30.1	-7.6	-2.7

C = A + B;

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

D1 = D11 + D12

Sources: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticpress.aspx#1

Table VA-16 provides major foreign holders of US Treasury securities. China is the largest holder with $1164.3 billion in Jun 2012, decreasing 10.9 percent from $1307.0 billion in Jun 2011. Japan increased its holdings from $881.5 billion in Jun 2011 to $1119.3 billion in Jun 2012 or by 27.0 percent likely in part by intervention to buy dollars against the yen to depreciate the overvalued yen/dollar rate that diminishes the competitiveness of Japan. Total foreign holdings of Treasury securities rose from $4690.6 billion in Jun 2011 to $5292.3 billion in Jun 2012, or 12.8 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

The current real value of government debt plus monetary liabilities depends on the expected discounted values of future primary surpluses or difference between tax revenue and government expenditure excluding interest payments (Cochrane 2011Jan, 27, equation (16)). There is a point when adverse expectations about the capacity of the government to generate primary surpluses to honor its obligations can result in increases in interest rates on government debt.

Table VA-16, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Jun 2012	May 2012	Jun 2011
Total	5292.3	5258.1	4690.6
China	1164.3	1164.0	1307.0
Japan	1119.3	1108.9	881.5
Oil Exporters	261.3	255.7	242.6
Brazil	242.8	245.8	216.2
Caribbean Banking Centers	240.2	242.3	196.3
Taiwan	191.9	190.0	146.6
Switzerland	165.7	154.9	118.1
Russia	157.8	156.3	151.7
UK	139.1	136.2	135.7
Hong Kong	135.5	143.8	112.4
Luxembourg	134.3	130.9	121.7
Belgium	131.9	132.0	88.8

Source: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticsec2.aspx#ussecs

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/gor1204a.pdf

http://www.boj.or.jp/en/mopo/outlook/gor1204b.pdf). For fiscal 2012, the forecast is of growth of GDP between 2.1 and 2.4 percent, with domestic producer price inflation (Corporate Goods Price Index, CGPI) in the range of 0.4 to 0.7 percent and the all items CPI less fresh food of 0.1 to 0.4 percent.

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

Fiscal Year Date of Forecast	Real GDP	Domestic CGPI	CPI All Items Less Fresh Food
2011
Apr 2012	-0.2 to –0.2 [-0.2]	+1.7	0.0
Jan 2012	-0.4 to –0.3 [-0.4]	+1.8 to +1.9 [+1.8]	-0.1 to 0.0 [-0.1]
2012
Apr 2012	+2.1 to +2.4 [+2.3]	+0.4 to +0.7 [+0.6]	+0.1 to +0.4 [+0.3]
Jan 2012	+1.8 to +2.1 [+2.0]	-0.1 to +0.2 [+0.1]	0.0 to +0.2 [+0.1]
2013
Apr 2012	+1.6 to +1.8 [+1.7]	+0.7 to +0.9 [+0.8]	+0.5 to +0.7 [+0.7]
Jan 2012	+1.4 to +1.7 [+1.6]	+0.6 to 1.0 [+0.8]	+0.4 to +0.5 [+0.5]

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

Source: Policy Board, Bank of Japan

http://www.boj.or.jp/en/mopo/outlook/gor1204a.pdf

http://www.boj.or.jp/en/mopo/outlook/gor1204b.pdf

Private-sector activity in Japan contracted at a moderate rate with the Markit Composite Output PMI^™ Index declining from 49.1 in Jun to 47.4 in Jul for the sharpest reduction in private-sector activity since Sep 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9919). Alex Hamilton, economist at Markit and author of the report, finds deceleration of the economy in the beginning of the second half of 2012 in both manufacturing and services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9919). The Markit Business Activity Index of Services decreased from 49.3 in Jun to 47.5 in Jul, also showing slower pace and the lowest reading in ten months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9919). The Markit/JMMA Purchasing Managers’ Index^™, seasonally adjusted, fell from 49.9 in Jun to 47.9 in Jul, indicating moderate reducuction of private-sector manufacturing activity (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9858). Alex Hamilton, economist at Markit and author of the report, finds deterioration in all segments of output, new orders and exports (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9858).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	Jul ∆% -0.4 12 months ∆% minus 2.1 Blog 8/12/12
Consumer Price Index	Jun NSA ∆% -0.5; Jun 12 months NSA ∆% -0.2 Blog 7/29/12
Real GDP Growth	IIQ2012 ∆%: 0.3 on IVQ2011;  IIQ2012 SAAR 1.4; ∆% from quarter a year earlier: 3.5 % Blog 8/19/12
Employment Report	Jun Unemployed 2.88 million Change in unemployed since last year: minus 260 thousand Unemployment rate: 4.3% Blog 8/5/12
All Industry Indices	May month SA ∆% -0.3 12-month NSA ∆% 3.2 Blog 7/22/12
Industrial Production	Jun SA month ∆%: -0.1 12-month NSA ∆% -2.0 Blog 8/5/12
Machine Orders	Total Jun ∆% 7.4 Private ∆%: 9.3 Jun ∆% Excluding Volatile Orders 5.6 Blog 8/12/12
Tertiary Index	Jun month SA ∆% 0.1 Jun 12 months NSA ∆% 0.8 Blog 8/19/12
Wholesale and Retail Sales	Jun 12 months: Total ∆%: -2.8 Wholesale ∆%: -2.8 Retail ∆%: +0.2 Blog 7/29/12
Family Income and Expenditure Survey	Jun 12-month ∆% total nominal consumption 1.5, real 1.6 Blog 8/5/12
Trade Balance	Exports Jun 12 months ∆%: -2.3 Imports Jun 12 months ∆% -2.2 Blog 7/29/12

Links to blog comments in Table JPY: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

7/29/12 http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html

7/22/12 http://cmpassocregulationblog.blogspot.com/2012/07/world-inflation-waves-financial_22.html

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

Japan’s GDP increased 0.3 percent in IIQ2012 relative to IQ2011, seasonally adjusted, as shown in Table VB-1 that incorporates the latest revisions. IQ2012 GDP growth was revised to 1.3 percent. The economy of Japan had already weakened in IVQ2010 when GDP was virtually flat at 0.1 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell in IQ2011 by 2.0 percent and fell again 0.5 percent in IIQ2011 as a result of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP growth fell to 0.8 percent in IIIQ2012 and was flat in IVQ2010. The deepest quarterly contractions in the recession were 3.2 percent in IVQ2008 and 4.0 percent in IQ2009.

Table VB-1, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2012	1.3	0.3
2011	-2.0	-0.5	1.8	0.1
2010	1.3	1.3	0.8	0.0
2009	-4.0	1.6	0.0	1.9
2008	0.7	-1.2	-1.1	-3.2
2007	1.0	0.1	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.4	0.2
2004	1.1	-0.1	0.2	-0.3
2003	-0.5	1.2	0.4	1.0
2002	-0.2	1.0	0.7	0.4
2001	0.7	-0.2	-1.1	-0.1
2000	1.7	0.2	-0.3	0.7
1999	-0.9	0.4	-0.1	0.4

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

Table VB-2 provides contributions to real GDP at seasonally-adjusted annual rates (SAAR). The SAAR of GDP in IIQ2012 was 1.4 percent: 0.3 from growth of personal consumption expenditures (PC) plus 1.2 percent of gross fixed capital formation (CFCF), less 0.3 of net trade (exports less imports), less 0.2 percentage points of private inventory investment (PINV) plus 0.2 percentage points of government consumption. The SAAR of GDP in IQ2012 was revised upward to 5.5 percent: 3.0 percentage points from growth of personal consumption expenditures (PC) less 0.4 percentage points from gross fixed capital formation (GFCF) plus 0.6 percentage points from government consumption (GOVC) plus net trade (exports less imports) of 0.6 percentage points plus 1.4 percentage point of private inventory change plus 0.8 percentage points of government consumption (GOVC). The SAAR of GDP in IIIQ2011 was revised to a high 7.4 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 2.7 percentage points in IIIQ2011. Growth in 2011 and IQ2012 has been driven by personal consumption expenditures.

Table VB-2, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	GDP	PC	GFCF	Trade	PINV	GOVC
2012
I	5.5	3.0	-0.4	0.6	1.4	0.8
II	1.4	0.3	1.2	-0.3	-0.2	0.2
2011
I	-7.7	-3.5	-0.6	-1.0	-2.8	0.2
II	-1.9	1.3	0.4	-3.7	-0.6	0.5
III	7.4	2.8	0.5	2.7	1.2	0.2
IV	0.3	1.7	2.7	-2.9	-1.5	0.3
2010
I	5.2	1.4	0.3	2.0	1.8	-0.4
II	5.5	0.7	1.2	0.7	1.6	1.3
III	3.1	1.2	0.8	-0.4	1.4	0.3
IV	0.0	0.6	-0.7	-0.4	0.1	0.3
2009
I	-15.0	-2.2	-1.9	-4.4	-7.3	0.9
II	6.7	4.0	-3.2	7.7	-2.3	0.5
III	-0.1	0.3	-1.4	1.7	-1.6	0.9
IV	7.9	3.5	0.3	2.9	0.8	0.4
2008
I	2.6	1.3	0.5	1.1	-0.3	0.0
II	-4.7	-3.4	-2.4	0.7	1.2	-0.9
III	-4.3	-0.1	-0.9	-0.4	-2.9	-0.1
IV	-12.2	-2.8	-4.5	-11.3	5.9	0.4
2007
I	4.1	0.8	0.6	1.1	1.3	0.4
II	0.6	0.4	-1.6	0.9	0.2	0.5
III	-1.6	-0.7	-1.7	1.8	-0.9	-0.2
IV	3.7	0.3	0.2	1.5	1.1	0.6

Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption

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

Long-term economic growth in Japan was significantly improved by increasing competitiveness in world markets. Net trade of exports and imports in an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions help to cushion the economy of Japan from the global recession. Net trade has deducted from GDP growth in six of the eight quarters from IIIQ2010 IIQ2012. The only strong contribution of net trade was 2.7 percent in IIIQ2011. Private consumption has assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	Net Trade	Export	Imports
2012
I	0.6	2.0	-1.4
II	-0.3	0.7	-1.0
2011
I	-1.0	-0.2	-0.8
II	-3.7	-3.6	0.0
III	2.7	4.7	-2.0
IV	-2.9	-2.3	-0.6
2010
I	2.0	3.3	-1.2
II	0.7	3.6	-2.9
III	-0.4	0.7	-1.1
IV	-0.4	-0.1	-0.2
2009
I	-4.4	-16.5	12.0
II	7.7	5.2	2.5
III	1.7	4.8	-3.2
IV	2.9	4.0	-1.1
2008
I	1.1	1.5	-0.5
II	0.9	1.8	-1.0
III	1.8	1.3	0.5
IV	1.5	2.0	-0.5
2007
I	1.1	1.5	-0.5
II	0.9	1.8	-1.0
III	1.8	1.3	0.5
IV	1.5	2.0	-0.5

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

Japan’s quarterly growth of GDP not seasonally-adjusted relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.3 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions in 2001-2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 relative to the same quarter a year earlier and decline of 1.8 percent in IIQ2011. GDP fell 0.6 percent in IIIQ2011 relative to a year earlier and fell 0.7 percent in IVQ2011 relative to a year earlier. Growth resumed with 2.9 percent in IQ2012 relative to a year earlier. Growth of 3.5 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen that erode the country’s competitiveness in world markets.

Table VB-4, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%

	IQ	IIQ	IIIQ	IVQ
2012	2.9	3.5
2011	0.0	-1.8	-0.6	-0.7
2010	4.8	4.5	5.6	3.2
2009	-9.3	-6.6	-5.6	-0.5
2008	1.4	-0.1	-0.6	-4.7
2007	2.8	2.3	2.0	1.6
2006	2.6	1.3	0.9	2.0
2005	0.4	1.4	1.5	1.9
2004	4.0	2.6	2.2	0.7
2003	1.7	1.8	1.5	1.8
2002	-1.6	-0.2	1.4	1.6
2001	1.6	0.9	0.0	-1.0
2000	2.7	2.4	2.2	1.8
1999	-0.3	0.1	-0.1	-0.5

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

The tertiary activity index of Japan increased 0.1 percent SA in Jun 2012 and 0.8 percent NSA in the 12 months ending in Jun 2012, as shown in Table VB-5. The tertiary activity index of Japan seasonally adjusted fell at the annual equivalent rate of minus 4.1 percent in Jan-Apr 2012 for cumulative decline of 1.4 percent but increased 2.6 percent not seasonally adjusted in the 12 months ending in Apr 2012, as shown in Table VB-5. In the first half of 2012, the tertiary activity index fell 0.4 percent or at the annual equivalent rate of 0.8 percent. There was strong impact from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in the decline of the tertiary activity index by 5.4 percent in Mar 2011 and 3.4 percent in 12 months. The performance of the tertiary sector in the quarter Jul-Sep 2011 was weak: increase of 0.4 percent in Jul, increase of 0.1 percent in Aug and decline of 0.2 percent in Sep, after increasing 1.2 percent in Jun. The not seasonally adjusted index increased 4.2 percent in the 12 months ending in Mar 2012. Most of the growth occurred in the quarter from Apr to Jun 2011 with gain of 4.3 percent or at annual equivalent rate of 18.1 percent.

Table VB-5, Japan, Tertiary Activity Index, ∆%

	Month ∆% SA	12 Months ∆% NSA
Jun 2012	0.1	0.8
May	0.9	3.2
Apr	-0.2	2.6
Mar	-0.6	4.2
Feb	0.0	2.4
Jan	-0.6	0.4
Dec 2011	1.6	1.2
Nov	-0.8	-0.3
Oct	0.6	0.9
Sep	-0.2	0.1
Aug	0.1	0.8
Jul	0.4	0.1
Jun	1.2	1.0
May	0.9	-0.2
Apr	2.1	-2.3
Mar	-5.4	-3.4
Feb	0.3	2.0
Jan	0.5	1.0
Dec 2010	-0.2	1.8
Nov	0.6	2.5
Oct	0.2	0.5
Sep	-0.4	1.3
Aug	0.1	2.3
Jul	0.7	1.6
Jun	0.1	1.0
May	-0.3	1.2
Dec 2009		-5.2
Dec 2008		-3.3
Dec 2007		-0.3
Dec 2006		0.6
Dec 2005		2.6
Dec 2004		1.6
Calendar Year
2011		0.1
2010		1.3
2009		-5.2

Source: http://www.meti.go.jp/english/statistics/index.html http://www.meti.go.jp/statistics/tyo/sanzi/result/pdf/hv37903_201206j.pdf

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Jun are provided in Table VB-6. Electricity, gas, heat supply and water declined 1.8 percent in Jun and decreased 3.2 percent in the 12 months ending in Jun. Wholesale and retail trade increased 0.3 percent in the month of Jun and fell 1.4 percent in 12 months. Information and communications increased 0.6 percent in Jun and 0.7 percent in 12 months.

Table VB-6, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%

Jun 2012	Weight	Month ∆% SA	12 Months ∆% NSA
Tertiary Index	10,000.0	0.1	0.8
Electricity, Gas, Heat Supply & Water	372.9	-1.8	-3.2
Information & Communications	951.2	0.6	0.7
Wholesale & Retail Trade	2,641.2	0.3	-1.4
Finance & Insurance	971.1	2.4	2.2
Real Estate & Goods Rental & Leasing	903.4	0.5	-0.2
Scientific Research, Professional & Technical Services	551.3	-4.1	1.5
Accommodations, Eating, Drinking	496.0	1.4	4.2
Living-Related, Personal, Amusement Services	552.7	0.7	4.8
Learning Support	116.9	0.1	2.3
Medical, Health Care, Welfare	921.1	-0.3	3.5
Miscellaneous ex Government	626.7	1.3	0.2

Source: http://www.meti.go.jp/english/statistics/index.html http://www.meti.go.jp/statistics/tyo/sanzi/result/pdf/hv37903_201206j.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/t20120803_402824426.htm). Table CIPMNM provides this index and components from Jan to Jul 2012. The index fell from 57.3 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

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

Notes: Interm.: Intermediate; Subs: Subscription; Exp: Business Expectations

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20120803_402824426.htm

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Jun 2011 to Jun 2012. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012.

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20120803_402824426.htm

Table CIPMNMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul. The index of employment also fell from 51.0 in Apr to 49.5 in Jul.

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

	IPM	PI	NOI	INV	EMP	SDEL
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

IPM: Index of Purchasing Managers; PI: Production Index; NOI: New Orders Index; EMP: Employed Person Index; SDEL: Supplier Delivery Time Index

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20120801_402823727.htm

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20120801_402823727.htm). Chart CIPMM provides the index from Jul 2011 to Jul 2012. There is deceleration from 51.2 in Sep 2011 to marginal contraction at 49.0 in Nov 2011. Manufacturing activity recovered to 53.3 in Apr 2012 but then declined to 50.4 in May 2012 and 50.1 in Jun 2012, which is the lowest in a year with exception of contraction at 49.0 in Nov 2011.

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20120801_402823727.htm

The HSBC China Services PMI^™, compiled by Markit, shows improving business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 50.6 in Jun to 51.9 in Jul with both manufacturing and services growing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9920). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds stabilizing economy in China, suggesting that with lower inflation there is room for further stimulus (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9920). The HSBC Business Activity index increased from 52.3 in Jun to 53.1 with improving activity in services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9920). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 49.3 in Jul from 49.3 in May, indicating moderate reduction of activity (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9882). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that improving economic slowdown in China still requires further easing of policy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9721).

Wang Xiaotian, writing on China Daily, on “China cuts its reserve ratio again,” published by Xinhuanet on May 13, 2012 (http://news.xinhuanet.com/english/china/2012-05/13/c_131584252.htm), informs that the People’s Bank of China (PBC) (http://www.pbc.gov.cn/publish/english/963/index.html) reduced the reserve requirement imposed on Chinese lenders by 50 basis points with the objective of injecting liquidity to strengthen the economy. This is the second such reduction of reserve requirements in 2012. The reduction is estimated to release CNY 400 in China’s money market. The reserve requirement will be 20 percent for larger banks and 16.5 percent for smaller banks. The measures are intended to strengthen the economy. Xinhuanet, writing on “China announces surprise rate cuts amid economic downshift,” on Jun 5, 2012 (http://news.xinhuanet.com/english/china/2012-07/05/c_131697843.htm), informs that the central bank of China People’s Bank of China reduced the one year deposit rate by 25 basis points and the one year lending rate by 31 basis points effective Jun 6, 2012. The People’s Bank of China posts the new rates (http://www.pbc.gov.cn/publish/english/955/2012/20120608171005950734495/20120608171005950734495_.html). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jul 12-month ∆%: minus 2.9 Jul month ∆%: minus 0.8 Blog 8/12/12
Consumer Price Index	Jul month ∆%: 0.1 Jul 12 months ∆%: 1.8 Blog 8/12/12
Value Added of Industry	Jul month ∆%: 0.76 Jan-Jul 2012/Jan-Jul 2011 ∆%: 10.3 Blog 8/12/12
GDP Growth Rate	Year IIQ2012 ∆%: 7.6 Quarter IIQ2012 ∆%: 1.8 Blog 7/15/12
Investment in Fixed Assets	Jul month ∆%: 1.42 Total Jan-Jul 2012 ∆%: 20.4 Real estate development: 15.4 Blog 8/19/12
Retail Sales	Jul month ∆%: 1.05 Jul 12 month ∆%: 13.1 Jan-Jul ∆%: 14.2 Blog 8/19/12
Trade Balance	Jul balance $25.2 billion Exports ∆% 1.0 Imports ∆% 4.7 Cumulative Jul: $94.5 billion Blog 8/12/12

Links to blog comments in Table CNY: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

7/15/12 http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million_15.html

Table VC-1 provides cumulative growth of investment in fixed assets in China in 2011 relative to 2010 and in Jan-Jul 2012 relative to a year earlier. Total fixed investment has grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent. In Jan-Jul 2012 investment in fixed assets in China grew 20.4 percent relative to a year earlier and 15.4 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Jul 2012.

Table VC-1, China, Investment in Fixed Assets ∆% Relative to a Year Earlier

	Total	State	Real Estate Development
Jan-Jul 2012	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

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

Chart VC-1 provides cumulative fixed asset investment in China relative to a year earlier. Growth rose to 25.8 percent in Jan-May 2011 and then fell back to 24.9 percent in Sep and Oct 2011, declining further to 24.5 percent in Nov and 23.8 percent in Dec 2011 with deeper drop in Jan-Feb 2012 to 21.5 percent, 20.9 percent in Jan-Mar, 20.2 percent in Jan-Apr 2012, 20.1 percent in Jan-Apr 2012 and 20.4 percent in both Jan-Jun 2012 and Jan-Jul 2012.

Chart VC-1, China, Investment in Fixed Assets, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

http://www.stats.gov.cn:82/

Monetary policy has been used in China in the form of increases in interest rates and required reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-2 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 35.2 percent in Jan-Feb 2011 to 31.1 percent in Jan-Oct 2011, 29.9 percent in Jan-Nov 2011, 27.9 percent in Jan-Dec 2011, 27.8 percent in Jan-Feb 2012 and sharper decline to 23.5 percent in Jan-Mar 2012, 18.7 percent in Jan-Apr 2012 and 18.5 percent in Jan-May 2012. The trend of decline continued with 16.6 percent in Jan-Jun 2012 and 15.4 percent in Jan-Jun 2012.

Chart VC-2, China, Investment in Real Estate Development, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

http://www.stats.gov.cn:82/tjfx/jdfx/t20120809_402826323.htm

Table VC-2 provides monthly growth rates of investment in fixed assets in China from Feb 2011 to May 2012. Growth rates moderated from Nov 2011 to May 2012. The rate of 0.86 percent in Mar 2012 is the lowest for any month after Mar 2011 but rates rebounded to 1.76 percent in May 2012, 1.71 percent in Jun and 1.42 in Jul 2012.

Table VC-2, China, Investment in Fixed Assets, Month ∆%

	Month ∆%
Feb 2011	-0.23
Mar	2.45
Apr	2.22
May	1.68
Jun	1.48
Jul	1.58
Aug	1.41
Sep	1.94
Oct	1.84
Nov	1.12
Dec	1.47
Jan 2012	1.12
Feb	1.98
Mar	0.86
Apr	1.18
May	1.76
Jun	1.71
Jul	1.42

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

Growth rates of retail sales in China monthly, 12 months and cumulative relative to a year earlier are in Table VC-3. There is still insufficient data to assess if the decline of growth rates to cumulative 14.7 percent in Feb 2012, 14.8 percent in Mar, 14.7 percent in Apr, 14.5 percent in May, 14.4 percent in Jun and 14.2 in Jul constitutes the beginning of irreversible downward trend but percentage growth rates have declined in Jan-Jul 2012 relative to earlier months.

Table VC-3, China, Total Retail Sales of Consumer Goods ∆%

	Month ∆%	12-Month ∆%	Cumulative ∆%/ Cumulative Year Earlier
2012
Jul	1.05	13.1	14.2
Jun	1.29	13.7	14.4
May	1.37	13.8	14.5
Apr	0.62	14.1	14.7
Mar	1.13	15.2	14.8
Feb	1.27	14.7	14.7
Jan	0.07
2011
Dec	1.62	18.1	17.1
Nov	1.40	17.3	17.0
Oct	1.34	17.2	17.0
Sep	1.57	17.7	17.0
Aug	1.41	17.0	16.9
Jul	1.57	17.2	16.8
Jun	1.49	17.7	16.8
May	1.39	16.9	16.6
Apr	1.30	17.1	16.5
Mar	1.26	17.4	17.4
Feb	1.35	11.6	15.8
Jan		19.9	19.9

Note: there are slight revisions of month relative to earlier month data but not of the month on the same month year earlier or cumulative relative to cumulative year earlier in the databank

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

Chart VC-3 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales in 2011. There is again a drop into 2012 with the lowest percentages in Chart VC-3.

Chart VC-3, China, Total Retail Sales of Consumer Goods 12-Month ∆%

Source: National Bureau of Statistics of China

http://www.stats.gov.cn:82/tjfx/jdfx/t20120809_402826324.htm

Table VC-4 provides monthly percentage changes of retail sales in China. Although the rate of 0.07 percent in Jan 2012 is the lowest in Table VC-4, the rate of 1.37 percent in May is relatively high and 1.13 percent in Mar is also relatively low followed by lower 0.62 percent in Apr and 1.05 percent in Jul 2012.

Table VC-4, China, Retail Sales, Month ∆%

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.41
Sep	1.57
Oct	1.34
Nov	1.40
Dec	1.62
2012
Jan	0.07
Feb	1.27
Mar	1.13
Apr	0.62
May	1.37
Jun	1.29
Jul	1.05

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

VD Euro Area. Table VD-EUR provides inflation, unemployment and real GDP growth in the euro area yearly from 1999 to 2011 together with growth forecasts of EUROSTAT for 2012 and 2013. Inflation in the euro zone remained subdued around 2 percent in the first five years of the euro zone from 1999 to 2004, as shown in Table VD-EUR. Inflation climbed above 2.0 percent after 2005, peaking at 3.3 percent in 2008 with the surge in commodity prices but falling to 0.3 percent in 2009 with the collapse of commodity prices. Inflation climbed back to 1.6 percent in 2010 and 2.7 percent in 2011. Under the regime of zero interest rates inflation returns worldwide during relaxation of risk aversion. The rate of unemployment increased in 2011 while the rate of GDP growth fell. EUROSTAT forecasts slightly negative growth of 0.3 percent in 2012 and growth of 1.0 percent in 2013.

Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment Rate and GDP, ∆%

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.3
2007	2.1	7.6	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.4
2010	1.6	10.1	2.0
2011	2.7	10.2	1.5
2012*			-0.3
2013*			1.0

*EUROSTAT forecast

The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 46.4 in Jun to 46.5 in Jul, which is the tenth contraction in the past eleven months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9888) in the deepest contraction in three years. Chris Williamson, Chief Economist at Markit, finds that the data are consistent with decline of GDP at a quarterly rate of 0.6 percent IIQ2012, which could result in a consecutive quarterly contraction of euro area GDP (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9888). The Markit Eurozone Manufacturing PMI^® fell from 45.1 in Jun to 44.0 in Jul, which indicates the sharpest deteriorating activity in 37 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9854). Chris Williamson, Chief Economist at Markit, finds that the index suggests manufacturing in the euro area declined at a quarterly rate of about 1 percent, exerting pressure on GDP (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9854). Table EUR provides the regional data table for the euro area.

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

Table EUR, Euro Area Economic Indicators

GDP	IIQ2012 ∆% -0.2; IIQ2012/IIQ2011 ∆% -0.4 Blog 8/19/12
Unemployment	Jun 2012: 11.2% unemployment rate Jun 2012: 17.801 million unemployed Blog 8/5/12
HICP	Jul month ∆%: -0.5 12 months Jul ∆%: 2.4 Blog 8/19/12
Producer Prices	Euro Zone industrial producer prices Jun ∆%: -0.5 Jun 12-month ∆%: 1.8 Blog 8/5/12
Industrial Production	Jun month ∆%: -0.6; Jun 12 months ∆%: -2.8 Blog 8/19/12
Retail Sales	Jun month ∆%: 0.1 Jun 12 months ∆%: -1.2 Blog 8/5/12
Confidence and Economic Sentiment Indicator	Sentiment 87.9 Jul 2012 Confidence minus 21.5 Jul 2012 Blog 8/5/12
Trade	Jan-Jun 2012/Jan-Jun 2011 Exports ∆%: 8.3 Imports ∆%: 2.4 Jun 2012 12-month Exports ∆% 12.3 Imports ∆% 2.1 Blog 8/19/12

Links to blog comments in Table EUR:

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

Table VD-1 provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.3 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 0.3 percent in 2012 but growth of 1.0 percent in 2013.

Table VD-1, Euro Area, Real GDP Growth Rate

Year	∆%
2013 EUROSTAT Forecast	1.0
2012 EUROSTAT Forecast	-0.3
2011	1.5
2010	2.0
2009	-4.4
2008	0.4
2007	3.0
2006	3.3
2005	1.7
2004	2.2
2003	0.7
2002	0.9
2001	2.0
2000	3.8
1999	2.9
1998	2.8
1997	2.6
1996	1.5

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

Table VD-2 provides GDP growth in IVQ2011 and relative to the same quarter a year earlier for the euro zone, European Union, Japan and the US. Both the euro zone and the European Union experienced decline of GDP of 0.2 percent in IIQ2012 relative to IQ2012. Euro zone GDP fell 0.4 percent in IIQ2012 relative to IIQ2011 while GDP of the European Union fell 0.2 percent. Growth in IIQ2012 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html) with depressed hiring http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html).

Table VD-2, Euro Zone, European Union, Japan and USA, Real GDP Growth

	∆% IIQ2012/ IQ2012	∆% IIQ2012/ IIQ2011
Euro Zone	-0.2	-0.4
European Union	-0.2	-0.2
Germany	0.3	1.0*
France	0.0	0.3
Netherlands	0.2	-0.5
Finland	-1.0	0.6
Belgium	-0.6	-0.4
Portugal	-1.2	-3.3
Ireland	NA	NA
Italy	-0.7	-2.5
Greece	NA	-6.2
Spain	-0.4	-1.0
United Kingdom	-0.7	-0.8
Japan	0.3	3.6
USA	0.4	2.2

*Calendar adjusted.

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-14082012-BP/EN/2-14082012-BP-EN.PDF

Chart VD-1 of EUROSTAT provides growth rates for the euro zone and European Union. There are significant differences in growth experience. Countries in need of fiscal adjustment are growing slowly or contracting.

Chart VD-1, Euro Zone, European Union, Real GDP Growth ∆% on Previous Year

Source: EUROSTAT

http://epp.eurostat.ec.europa.eu/tgm/graph.do?tab=graph&plugin=1&pcode=tec00115&language=en&toolbox=type

Table VD-3 provides growth rates for the euro zone and European Union estimated by EUROSTAT. There is deterioration in the quarterly rates with equal declines of 0.3 percent in IVQ2011, flat performance in IQ2012 and declines of 0.2 percent in IIQ2012. The euro area experienced GDP decline of 0.4 percent in IIQ2012 relative to IIQ2011 while the European Union declined 0.2 percent.

Table VD-3, Euro Area and European Union, Growth of Real GDP

	IIIQ2011	IVQ2011	IQ2012	IIQ2012
∆% from Prior Quarter
EA 17	0.1	-0.3	0.0	-0.2
EU 27	0.2	-0.3	0.0	-0.2
∆% from Same Quarter Year Earlier
EA 17	1.3	0.7	0.0	-0.4
EA 27	1.4	0.8	0.1	-0.2

Notes: EA: Euro Area; EU: European Union http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-14082012-BP/EN/2-14082012-BP-EN.PDF

Industrial production in the euro area decreased 0.6 percent in Jun 2012, declining in six of eight months from Nov 2011 to Jun 2012, as shown in Table VD-4 with revised estimates by EUROSTAT. Energy was the only segment decreasing in May. Improved weather caused decline of energy by 8.4 percent in Mar that drove down the rate of growth of total industry to minus 0.1 percent. All segments of industrial production fell in Dec. Industrial production is highly volatile in the euro zone.

Table VD-4, Euro Zone, Industrial Production Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Jun 2012	-0.6	-0.4	0.4	-1.3	0.2	-0.7
May	0.9	0.5	-1.7	1.2	0.6	2.0
Apr	-1.1	-1.3	5.6	-2.9	-0.8	-1.7
Mar	-0.1	1.0	-8.4	1.2	0.0	1.6
Feb	0.7	-1.3	8.0	0.9	-1.5	-1.2
Jan	-0.2	0.6	0.8	-1.0	0.0	-0.7
Dec 2011	-0.8	-1.0	-2.8	-0.3	0.2	0.0
Nov	-0.4	-0.1	0.2	0.1	0.3	-1.6

Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14082012-AP/EN/4-14082012-AP-EN.PDF

Table VD-5 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. Industrial production decreased 2.1 percent in the 12 months ending in Jun. All segments fell in 12 months ending in Jun 2012 with multiple declines in Jun with exception of increase of energy by 0.4 percent and durable consumer goods by 0.2 percent.

Table VD-5, Euro Zone, Industrial Production 12-Month ∆%

2012	Jun Month ∆%	Jun 12-Month ∆%
Total	-0.6	-2.8
Intermediate Goods	-0.4	-3.9
Energy	0.4	-1.6
Capital Goods	-1.3	-1.9
Durable Consumer Goods	0.2	-6.4
Nondurable Consumer Goods	-0.7	-2.1

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14082012-AP/EN/4-14082012-AP-EN.PDF

There has been significant decline in percentage changes of industrial production and major categories in 12-month rates throughout 2011 and into 2012 as shown in Table VD-6. The 12-month rate of growth in Nov 2011 of 0.0 percent has fallen to minus 2.1 percent in Jun 2012. Trend is difficult to identify because of significant volatility. Capital goods were growing at 4.7 percent in the 12 months ending in Nov 2011 and at minus 0.9 percent in the 12 months ending in Jun 2012.

Table VD-6, Euro Zone, Industrial Production 12-Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Jun 2012	-2.1	-3.7	-0.4	-0.9	-2.0	-2.0
May	-2.6	-3.8	-0.8	-1.8	-6.0	-2.1
Apr	-2.6	-4.5	2.7	-1.0	-6.9	-3.8
Mar	-1.7	-2.7	-6.3	2.5	-6.1	-1.9
Feb	-1.8	-4.6	3.8	1.0	-5.7	-4.5
Jan	-1.8	-1.9	-7.3	1.6	-3.1	-1.9
Dec 2011	-1.7	-0.1	-12.2	2.1	-2.9	-0.5
Nov	0.0	-0.6	-5.4	4.7	-3.1	-1.7

Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14082012-AP/EN/4-14082012-AP-EN.PDF

Blanchard (2011WEOSep) analyzes the difficulty of fiscal consolidation efforts during periods of weak economic growth. Table VD-7 provides monthly and 12-month percentage changes of industrial production in the euro zone for various members and the UK, which is not a member. The only positive growth rate of industrial production in the 12 months ending in Jun 2012 is 9.5 percent for Ireland with Greece showing flat growth.

Table VD-7, Euro Zone, Industrial Production, Month and 12-Month ∆%

	Month ∆% Jun 2012	Month ∆% May 2012	12 Months ∆% Jun 2012	12 Months ∆% May 2012
Euro Zone	-0.6	0.9	-2.1	-2.6
Germany	-0.8	-1.6	-0.4	-0.5
France	-0.1	-2.2	-2.6	-4.4
Netherlands	-0.5	0.8	-0.1	0.8
Finland	-1.1	0.7	-1.1	-2.4
Belgium	NA	4.8	NA	-7.5
Portugal	-0.9	-4.2	-4.4	-6.7
Ireland	2.7	1.5	9.5	4.5
Italy	-1.4	1.0	-8.2	-6.7
Greece	-0.3	0.5	0.0	-3.1
Spain	-0.6	0.8	-6.3	-6.5
UK	-2.5	1.0	-4.6	-1.7
European Union	-0.9	0.8	-2.2	-2.2

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-14082012-AP/EN/4-14082012-AP-EN.PDF

Euro zone trade growth continues to be relatively strong as shown in Table VD-8. Exports grew at 8.3 percent and imports at 2.4 percent in Jan-Jun 2012 relative to Jan-Jun 2011. The 12-month rate of growth of exports was 12.3 percent in Jun 2012 while imports increased 2.1 percent. In May 2012, exports increased 5.8 percent in 12 months and imports increased 0.4 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-8, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-Jun 2012	921.5	895.3
Jan-Jun 2011	851.2	874.2
∆%	8.3	2.4
Jun 2012	161.5	146.6
Jun 2011	143.8	143.6
∆%	12.3	2.1
May 2012	158.1	151.0
May 2011	149.5	150.4
∆%	5.8	0.4
Trade Balance	Jan-Jun 2012	Jan-Jun 2011
€ Billions	26.2	-23.0

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-17082012-AP/EN/6-17082012-AP-EN.PDF http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home

The structure of trade of the euro zone in Jan-May 2012 is provided in Table VD-9. Data are still not available for trade structure for Jun 2012. Manufactured exports increased 6.5 percent in Jan-May 2012 relative to Jan-May 2011 while imports fell 1.6 percent. The trade surplus in manufactured products was marginally higher than the trade deficit in primary products in Jan-May 2012 but lower in Jan-May 2011 largely because of the commodity shock caused by carry trades.

Table VD-9, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-May 2012 € B	119.3	618.8	22.0	760.0
Jan-May 2011 € B	107.5	581.0	18.9	707.4
∆%	11.0	6.5	16.4	7.7
Imports
Jan-May 2012 € B	278.7	457.1	12.9	748.7
Jan-May 2011  € B	255.2	464.4	11.0	730.7
∆%	9.2	-1.6	17.3	2.5
Trade Balance € B
Jan-May 2012	-159.4	161.7	9.0	11.4
Jan-May 2011	-147.7	116.6	7.9	-23.2

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-17082012-AP/EN/6-17082012-AP-EN.PDF http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2011, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economy. The German economy grew at 3.7 percent in 2010 and at 3.0 percent in 2011. Growth slowed in 2011 from 1.3 percent in IQ2011, 0.3 percent in IIQ2011 and 0.6 percent in IIIQ2011 to decline of 0.2 percent in IVQ2011 and growth of 0.5 percent in IQ2012. The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”

Table VE-DE, Germany, GDP Year ∆%

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2011	3.0	3.1
2010	4.2	4.0
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.8
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5

Source: Statistiche Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/05/PE12_178_811.html https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_277_811.html;jsessionid=AC1B4EF769378CEEE6D2B8F209FB2664.cae2

The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, fell from 48.1 in Jun to 47.5 in Jul, which is the lowest level since Jun 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9923). Tim Moore, Senior Economist at Markit and author of the report, finds that the economy of Germany is beginning the third quarter from a weaker base since the global recession (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9923). There was marginal improvement in the Germany Services Business Activity Index from 49.9 in Jun to 50.3 in Jul (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9923). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, fell from 45.0 in Jun to 43.0 in Jul, which is the weakest reading since Jun 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9890). Tim Moore, Senior Economist at Markit and author of the report, finds that Germany’s manufacturing output is showing the sharpest drop in about three years with contracting orders from export markets and lack of new work (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9890 ).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2012 0.5 ∆%; II/Q2012/IIQ2011 ∆% 1.7 2011/2010: 3.0% GDP ∆% 1992-2011 Blog 8/19/12 5/27/12
Consumer Price Index	Jul month NSA ∆%: 0.4 Jul 12-month NSA ∆%: 1.7 Blog 8/12/12
Producer Price Index	Jul month ∆%: -0.1 CSA, 0.0 NSA 12-month NSA ∆%: 0.9 Blog 8/19/12
Industrial Production	Mfg Jun month SA ∆%: -1.1 12-month NSA: 3.1 Blog 8/12/12
Machine Orders	MFG Jun month ∆%: -1.7 Jun 12-month ∆%: -5.4 Blog 8/12/12
Retail Sales	Jun Month ∆% -0.1 12-Month ∆% 2.9 Blog 8/5/12
Employment Report	Unemployment Rate Jun 5.2% Blog 8/5/12
Trade Balance	Exports Jun 12-month NSA ∆%: 7.4 Imports Jun 12 months NSA ∆%: -1.5 Exports Jun month SA ∆%: -1.5; Imports Jun month SA -3.0 Blog 8/12/12

Links to blog comments in Table DE: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

5/27 http://cmpassocregulationblog.blogspot.com/2012_05_01_archive.html

Table VE-1 provides percentage change of Germany’s GDP in one quarter relative to the prior quarter from 2003 to 2012. Germany’s GDP contracted during four consecutive quarters from IIQ2008 to IQ2009. The deepest contraction was 4.1 percent in IQ2009. Growth was quite strong from IIIQ2009 to IQ2011 for cumulative growth of 7.3 percent in seven quarters or at the average rate of 0.9 percent per quarter, which is equivalent to 4.1 percent per year. Economic growth decelerated in IIQ2011 to 0.5 percent but rebounded to 0.7 percent in IIIQ2011. The economy contracted mildly by 0.1 percent in IVQ2011 and grew 0.5 percent in IQ2012 and 0.3 percent in IIQ2012.

Table VE-1, Germany Quarter GDP ∆% Relative to Prior Quarter, Seasonally and Calendar Adjusted 

	IQ	IIQ	IIIQ	IV
2012	0.5	0.3
2011	1.2	0.5	0.4	-0.1
2010	0.7	2.2	0.7	0.6
2009	-4.1	0.2	0.8	0.9
2008	1.0	-0.4	-0.4	-2.0
2007	0.7	0.6	0.9	0.3
2006	1.2	1.5	1.0	1.2
2005	-0.1	0.7	0.8	0.3
2004	0.0	0.3	-0.2	0.0
2003	-0.8	-0.1	0.5	0.4

Seasonal and calendar adjusted

Source: Statistiche Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_277_811.html;jsessionid=AC1B4EF769378CEEE6D2B8F209FB2664.cae2

Table VE-2 provides percentage changes of Germany’s GDP in a quarter relative to the same quarter a year earlier. Growth was weak in the recovery from the recession of 2001 through 2005, as in most of the euro area (see Pelaez and Pelaez, The Global Recession Risk (2007), 116-46). Germany’s economy then grew robustly in 2006 and 2007 until the global recession after 2007. Germany recovered with strong growth in 2010 and vigorous 5.2 percent in IQ2011. The economy decelerated in the final three quarter of 2011, growing 1.7 percent in IQ2012 relative to IQ2011. Growth decelerated further to 0.5 percent in IIQ2012 without calendar adjustment and 1.0 percent with calendar adjustment.

Table VE-2, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Calendar and Price Adjusted NSA 

	IQ	IIQ	IIIQ	IV
2012	1.7	0.5
2011	5.2	3.1	2.6	1.4
2010	2.8	5.0	4.5	4.2
2009	-6.5	-7.4	-5.0	-1.6
2008	2.1	3.1	1.1	-1.9
2007	4.3	3.4	3.3	2.2
2006	4.3	2.4	3.5	4.6
2005	-0.8	1.2	1.2	1.0
2004	1.5	1.6	0.6	0.9
2003	0.0	-1.1	-0.5	0.1

Calendar and price adjusted NSA

Source: Statistiche Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_277_811.html;jsessionid=AC1B4EF769378CEEE6D2B8F209FB2664.cae2

Table VE-3 provides yearly growth rates of the German economy from 1992 to 2011, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economy. The German economy grew at 3.7 percent in 2010 and at 3.0 percent in 2011. Growth slowed in 2011 from 1.3 percent in IQ2011, 0.3 percent in IIQ2011 and 0.6 percent in IIIQ2011 to decline of 0.2 percent in IVQ2011 and growth of 0.5 percent in IQ2012. The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”

Table VE-3, Germany, GDP Year ∆%

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2011	3.0	3.1
2010	4.2	4.0
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.8
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5

Source: Statistiche Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/05/PE12_178_811.html https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_277_811.html;jsessionid=AC1B4EF769378CEEE6D2B8F209FB2664.cae2

Chart VE-1 of the Statistiche Bundesamt Deutschland (Federal Statistics Agency of Germany) provides GDP at current prices from 2003 to 2012. The German economy is productive with significant dynamism over the long term. There are fluctuations in an increasing trend since 2009.

Chart VE-1, Germany, GDP, Current Prices, Billion Euro

Source: Statistiche Bundesamt Deutschland

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-2 of the Statistiche Bundesamt Deutschland (Federal Statistics Agency of Germany) provides the index of price-adjusted chain-linked GDP of Germany from 2007 to 2012. Germany was growing rapidly before the global contraction and rebounded with significant strength along a strong upward trend.

Chart VE-2, Germany, Index of Price-Adjusted Chain-Linked GDP, 2000=100

Source: Statistiche Bundesamt Deutschland

https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IIQ1949 to IIQ2012 is quite high at 3.3 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.1 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.8 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using second quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012

Period	Average ∆%
1949-2012*	3.3
2000-2012*	1.1
2000-2011	1.1
2000-2007	1.7
1990-1999	1.8
1980-1989	2.6
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

*Second Quarter on Second Quarter

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 47.3 in Jun to 47.9 in Jun, indicating contraction of private sector activity at a more moderate rate and the highest reading in four months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9887). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that improving activity in services was compensated by deeper decline in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9887). The Markit France Services Activity index rose from 47.9 in Jun to 50.0 in Jul for the highest reading in four months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9887). The Markit France Manufacturing Purchasing Managers’ Index^® fell to 43.4 in Jul from 45.2 in Jun, which was the sharpest decline of the manufacturing economy since May 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9864). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds continuing deterioration in manufacturing with weakening new orders and adversities at home and abroad (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9864). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Jul month ∆% -0.4 12 months ∆%: 1.9 8/19/12
PPI	Jun month ∆%: -1.1 Jun 12 months ∆%: 2.2 Blog 8/5/12
GDP Growth	IIQ2012/IQ2012 ∆%: 0.0 IIQ2012/IIQ2011 ∆%: 0.3 Blog 8/19/12
Industrial Production	Jun SA ∆%: Manufacturing 0.1 YOY NSA ∆%: Manufacturing -2.6 Blog 8/12/12
Consumer Spending	Jun Manufactured Goods ∆%: 0.5 Jun 12-Month Manufactured Goods ∆%: 0.3 Blog 8/5/12
Employment	IQ2012 Unemployed 2.746 million Unemployment Rate: 9.6% Employment Rate: 63.8% Blog 6/10/12
Trade Balance	Jun Exports ∆%: month -1.9, 12 months 4.3 Jun Imports ∆%: month -0.4, 12 months 5.8 Blog 8/12/12
Confidence Indicators	Historical averages 100 Jul Mfg Business Climate 90 Blog 7/29/12

Links to blog comments in Table FR: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

7/29/12 http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html

6/10/12 http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities_10.html

Table VF-1 provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IIQ1949 to IIQ2012 is quite high at 3.3 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.1 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.8 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using second quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

Table VF-1, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012

Period	Average ∆%
1949-2012*	3.3
2000-2012*	1.1
2000-2011	1.1
2000-2007	1.7
1990-1999	1.8
1980-1989	2.6
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

*Second Quarter on Second Quarter

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

Growth of GDP in a quarter relative to the prior quarter is provided for France in Table VF-2. GDP growth in IIQ2012 was flat for a third consecutive quarter since IVQ2011. The French economy was flat in IIQ2011 but grew 0.3 percent in IIIQ2011. Growth in the twelve quarters of expansion from IIIQ2009 to IIQ2011 accumulated 3.2 percent at the annual equivalent rate of 1.1 percent while accumulated growth of 0.3 percent from the second quarter of 2011 to the second quarter of 2012 has been at the annual equivalent rate of 0.2 percent. Recovery has been much weaker than the cumulative 2.7 percent in the four quarters of 2006. Weak recoveries in advanced economies have prevented full utilization of labor, capital and productive resources.

Table VF-2, France, Quarterly Real GDP Growth, Quarter on Prior Quarter ∆%

	IQ	IIQ	IIIQ	IVQ
2012	0.0	0.0
2011	0.9	0.0	0.3	0.0
2010	0.3	0.7	0.4	0.4
2009	-1.7	0.0	0.1	0.5
2008	0.3	-0.6	-0.5	-1.6
2007	0.6	0.5	0.4	0.3
2006	0.7	1.0	0.1	0.9
2005	0.1	0.3	0.5	0.7
2004	0.5	0.8	0.4	0.9
2003	0.2	0.0	0.7	0.6
2002	0.7	0.5	0.2	-0.1
2001	0.5	0.3	0.2	-0.5
2000	1.1	0.7	0.5	0.9
1999	0.6	0.9	1.0	1.2

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

Growth rates of France’s real GDP in a quarter relative to the same quarter a year earlier are shown in Table VF-3. France has not recovered the rates of growth in excess of 2 percent prior to the global recession. GDP fell 4.3 percent in IQ2009, 3.7 percent in IIQ2009, 3.1 percent in IIIQ2009 and 1.0 percent in IVQ2009. Growth in IVQ2011 relative to IVQ2010 was 1.8 percent and GDP growth declined to 0.3 percent in both IQ2012 and IIQ2012 relative to the same quarter a year earlier.

Table VF-3, France, Real GDP Growth Current Quarter Relative to Same Quarter Year Earlier ∆%

	IQ	IIQ	IIIQ	IVQ
2012	0.3	0.3
2011	2.3	1.7	1.5	1.2
2010	1.0	1.6	1.9	1.8
2009	-4.3	-3.7	-3.1	-1.0
2008	1.6	0.5	-0.5	-2.3
2007	2.6	2.1	2.5	1.9
2006	2.3	3.0	2.5	2.7
2005	2.1	1.7	1.9	1.7
2004	1.8	2.6	2.3	2.5
2003	0.9	0.4	0.8	1.6
2002	0.6	0.9	0.9	1.3
2001	2.7	2.2	1.9	0.5
2000	4.3	4.1	3.6	3.3
1999	2.9	2.8	3.2	3.7

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

Percentage changes and contributions of segments of GDP in France are provided in Table VF-4. Internal demand contributed 0.1 percentage points to GDP growth in IIQ2012, 0.0 percentage points to GDP growth in IQ2012, 0.3 percentage points in IVQ2011 and 0.2 percentage points in IIIQ2011. Net foreign trade subtracted 0.5 percentage points of GDP growth in IIQ2012 and 0.1 percentage points in IQ2012 but contributed 0.8 percentage points in IVQ201 after contributing 0.3 percentage points in IIIQ2011.

Table VF-4, France, Contributions to GDP Growth, Calendar and Seasonally Adjusted, %

∆% from Prior Period	IIIQ 2011	IVQ 2011	IQ 2012	IIQ 2012	2011	2012
GDP	0.3	0.0	0.0	0.0	1.7	0.2
Imports	0.5	-1.6	0.6	1.8	5.2	0.8
Household Consump.	0.2	0.0	0.2	-0.2	0.2	-0.1
Govt. Consump.	0.2	0.2	0.5	0.5	0.2	1.0
GFCF	0.3	1.3	-0.8	0.6	3.5	0.8
Exports	1.6	1.2	0.1	0.2	5.5	2.2
% Point Contribs.
Internal Demand ex Inventory Changes	0.2	0.3	0.0	0.1	0.9	0.4
Inventory Changes	-0.2	-1.0	0.1	0.3	0.8	-0.6
Net Foreign Trade	0.3	0.8	-0.1	-0.5	0.0	0.3

Notes: Consump.: Consumption; Gvt.: Government; GFCF: Gross Fixed Capital Formation; Contribus.: Contributions

Source:  Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques provides percentage point contributions to GDP growth. GDP grew sharply into IQ2011 and then stalled in IIQ2011. Final consumption was the key negative contributor to GDP growth in IIQ2011. GDP growth strengthened in IIIQ2011 with the impulse originating in final consumption. Net trade, gross fixed capital formation (GFCF) and final consumption drove GDP growth in IVQ2011. Final consumption and inventory change were positive contributors to GDP growth in IQ2012 with subtractions by GFCF (Gross Fixed Capital Formation) and net trade. Net trade subtracted from growth in IIQ2012.

Chart VF-1, France, Percentage Point Contributions to GDP Growth

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20120814

VG Italy. The Markit/ADACI Business Activity Index was virtually unchanged at 43.0 in Jul relative to 43.1 in Jun, indicating sharp contraction of output of Italy’s services sector in 14 consecutive months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9921). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that the rate of contraction in services was only sharpest in four other readings in the history of the index, which occurred during the global recession (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9921). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), fell from 45.2 in Jun to 43.4 in Jul for ten consecutive months of contraction of Italy’s manufacturing quite sharp relative to the history of the index with the weakest reading since May 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9864). Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds continuing sharp contraction of new orders of manufacturing in Italy both at home and abroad (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9864). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jul month ∆%: 0.0 Jul 12-month ∆%: 3.1 Blog 8/12/12
Producer Price Index	Jun month ∆%: -0.1 Jun 12-month ∆%: 2.2 Blog 8/5/12
GDP Growth	IIQ2012/IQ2012 SA ∆%: minus 0.7 IIQ2012/IIQ2011 NSA ∆%: minus 2.5 Blog 8/12/12
Labor Report	Jun 2012 Participation rate 63.9% Employment ratio 56.9% Unemployment rate 10.8% Blog 8/5/12
Industrial Production	Jun month ∆%: -1.4 12 months ∆%: minus 6.7 Blog 8/12/12
Retail Sales	May month ∆%: -0.2 May 12-month ∆%: -2.0 Blog 7/29/12
Business Confidence	Mfg Jul 87.1, Mar 90.9 Construction Jul 84.0, Mar 82.6 Blog 7/29/12
Trade Balance	Balance Jun SA €1592 million versus May €343 Exports Jun month SA ∆%: -1.4; Imports Jun month ∆%: -5.3 Exports 12 months Jun NSA ∆%: +5.5 Imports 12 months NSA ∆%: minus 7.1 Blog 8/12/12

Links to blog comments in Table IT: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

8/5/12 http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html

7/29/12 http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html

VH United Kingdom. Revised annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of revised 4.0 percent in 2009 after dropping revised 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 0.8 percent in 2011. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.7 percent on average between 1948 and 2011, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.3 percent as advanced economies struggle with weak internal demand and world trade.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	4.2
2001	2.9
2002	2.4
2003	3.8
2004	2.9
2005	2.8
2006	2.6
2007	3.6
2008	-1.0
2009	-4.0
2010	1.8
2011	0.8
Average ∆% per Year
1948-2011	2.7
1948-1959	2.9
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.6
2000-2011	1.7
2000-2007	3.0
2009-2011	1.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q2-2012/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® fell from 51.3 in Jun to 51.0 in Jul with growth during 19 consecutive months but at the weakest level in that period (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9922). Paul Smith, Senior Economist at Markit, finds that weather and the Olympics preparations restrained activity but that combining the index with that of construction the index fell below 50.0 for the first time in 39 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9922). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) fell from 48.4 in Jun to 45.4 in July, which is the lowest reading since May 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9893). The decline of 4.3 points in May is the second sharpest decline in the history of 20 years of the index. Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI^®, finds weakness in output to the sharpest level since Mar 2009 with lack of demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9893).

Table UK provides the country data table for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jul month ∆%: 0.1 Jul 12-month ∆%: 2.6 Blog 8/19/12
Output/Input Prices	Output Prices: Jul 12-month NSA ∆%: 1.7; excluding food, petroleum ∆%: 1.3 Input Prices: Jul 12-month NSA ∆%: -2.4 Excluding ∆%: -1.5 Blog 8/12/12
GDP Growth	IIQ2012 prior quarter ∆% minus 0.7; year earlier same quarter ∆%: minus 0.8 Blog 7/29/12
Industrial Production	Jun 2012/Jun 2011 NSA ∆%: Production Industries minus 4.3; Manufacturing minus 4.3 Blog 8/12/12
Retail Sales	Jul month ∆%: 0.3 Jul 12-month ∆%: +2.8 Blog 8/19/12
Labor Market	Apr-Jun Unemployment Rate: 8.0%; Claimant Count 4.9%; Earnings Growth 1.6% Blog 8/19/12
Trade Balance	Balance Jun minus ₤4308 million Exports Jun ∆%: -4.6; Apr-Jun ∆%: 0.2 Imports Jun ∆%: -0.7 Apr-Jun ∆%: 2.2 Blog 8/12/12

Links to blog comments in Table UK: 8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

7/29/12 http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html

7/22/12 http://cmpassocregulationblog.blogspot.com/2012/07/world-inflation-waves-financial_22.html

Data and analysis by the UK Office for National Statistics reveal improvement of the labor market in the United Kingdom even with weaker reading of GDP (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html). Chart VH-1 of the UK Office for National Statistics, with the chart data in Table VH-1, shows diverging recent trends of increasing level of employment ages 16 and over together with total weekly hours worked diverging from continuing contraction of GDP. GDP contracted 0.7 percent in the preliminary estimate of IIQ2012 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q2-2012/index.html see VH at http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery_29.html), contracting 0.8 percent relative to a year earlier. The UK Office for National Statistics estimates cumulative GDP contraction of 1.4 percent in the past three quarters. There are special events in the preliminary estimate of GDP for IIQ2012: output declined sharply in Jun 2012 similar to the experience of the Silver and Golden Jubilee celebrations in 1977 and 2002 with bank holidays while economic activity was also curtailed by unseasonal weather in Apr and Jun (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html). The UK Office for National Statistics finds important structural change in the UK labor market, with increasing flexibility: the number of part-time workers increased 174,000 in IIQ2012 relative to a year earlier while the number of full-time workers increased 77,000, revealing retention of staff by employers instead of reductions; and over the year ending in IIQ2012, the number of employees increased 128,000 over the quarter with increase of 39,000 self-employed workers (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html). The level employed increased 201,000, with the employment rate increasing from 70.6 percent in IQ2012 to 71.0 percent in IIQ2012, which is the highest since Mar 2009 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html). While employment growth was accompanied by increase in total hours worked of 0.5 percent, average hours worked declined 0.2 percent, meaning that increasing employment was processed in reduction of hours worked (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html).

Chart VH-1, UK,  Employment Level Ages 16 and Over, Total Weekly Hours and GDP, 2008-2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html

Table VH-1, UK, Indices of Quarterly Employment Ages 16 and Over, Total Hours Worked and GDP, 2008-2012

IQ2008 =100

Q1 2008	100	100	100
Q2	100.1	98.9	99.2
Q3	99.6	98.9	97.4
Q4	99.4	98.3	95.3
Q1 2009	98.9	96.7	93.9
Q2	97.9	96.3	93.8
Q3	97.8	95.8	94.2
Q4	97.9	95.8	94.5
Q1 2010	97.6	95.7	95.1
Q2	98.2	96.5	95.8
Q3	98.9	97	96.3
Q4	98.7	97.4	96
Q1 2011	99	97.4	96.3
Q2	99	96.3	96.2
Q3	98.5	97.1	96.8
Q4	98.8	97.3	96.5
Q1 2012	99.2	98	96.1
Q2	99.9	98.5	95.5

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q2---august-labour-market-update/2012-q2--august-labour-market-update.html

Labor market statistics of the UK for the quarter Apr-Jun 2012 are provided in Table VH-2. The unemployment rate fell to 8.0 percent and the number unemployed decreased 46,000 in the quarter, reaching 2.564 million. There are 882,000 unemployed over one year and 442,000 unemployed over two years, up 4,000 on the quarter. The employment rate is 71.0 percent. Earnings growth including bonuses was 1.6 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 4.9 percent, unchanged on the month but up 0.1 percentage point on the year.  There are 7.94 million people working part time in Dec-Feb. The number of employees and self-employed part-time because they could not find full-time employment increased 16,000 to 1.42 million.

Table VH-2, UK, Labor Market Statistics

	Quarter Apr-Jun 2012
Unemployment Rate	8.0% down 0.2 % points on quarter and +0.1 from year earlier
Number Unemployed	(1) -46,000 on quarter +51,000 from year earlier to reach 2.564 million (2) Unemployment rate 16 to 24 years of age -0.2 % points on quarter to 21.5% of that age group; number unemployed 16 to 24 years 1.012 million down 4,000 on quarter (3) Unemployed 16 to 24 years excluding those in full-time education 713,000 (314,000 in full-time education) up 6,000 on quarter; unemployment rate 20.3%, down 0.1 % points
Number Unemployed > one and two years	(1) Number unemployed over one year: 882,000 (2) Number unemployed over two years: 422,000, up 4,000 on quarter
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.6%, down 0.3 % points on quarter (2) Economically inactive 16-64 years down 117,000 on quarter and down 214,000 on year to 9.098 million
Employment Rate	71.0% Apr-Jun, up 0.4 % points on quarter
Number Employed	(1) Up 201,000 on quarter, +251,000 on year to 29.476 million                              (2) Number of employees up 128,000 on quarter to 25.02 million (3) Self-employed +101,000 on quarter to 4.12 million (5) Number in other job categories +26,000 to 210,000
Earnings Growth Rates Year on Year	(1) Total +1.6% (including bonuses) over year earlier; regular 1.7%; private sector 1.8% on year earlier, public sector rose 1.6% on year earlier   (2) Regular private +2.0% (excluding bonuses) over year earlier; regular public 1.7% on year earlier
Full-time and Part-time	(1) Number full-time 21.41 million, up 130,000 on quarter                               (2) Number part-time 8.07 million, up 71,000 on quarter (3) Number employees and self-employed working part-time because they could not find full-time employment 1.42 million up 16,000 on quarter
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 1.593 million; down 5,900 in month +35,600 on year earlier (2) Claimant count 4.9%, unchanged on month but up 0.1 % point on year
Labor Productivity	(1) Output per worker fell 0.7% from IVQ2011 to IQ2012 (2) Unit labor costs increased 1.4% from IVQ2011 to IQ2012

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/august-2012/index.html

Table VH-3 provides indicators of the labor force survey of the UK for Apr-Jun 2012 and earlier quarters. There has been deterioration in UK labor markets with the rate of unemployment increasing from 7.9 percent in Apr-Jun 2011 to 8.0 percent in Apr-Jun 2012.

Table VH-3, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Apr-Jun 2012	40,186	29,476	71.0	2,564	8.0
Jan-Mar 2012	40,180	29,274	70.6	2,610	8.2
Oct-Dec 2011	40,175	29,146	70.4	2,657	8.4
Jul-Sep 2011	40,169	29,063	70.2	2,624	8.3
Apr-Jun 2011	40,151	29,224	70.6	2,513	7.9
Apr-Jun 2010	39,962	28,975	70.4	2,471	7.9

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

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/august-2012/index.html

The volume of retail sales in the UK seasonally adjusted increased 0.3 percent in Jul 2012 and increased 2.8 percent not seasonally adjusted in the 12 months ending in Jul, as shown in Table VH-4. Retail sales percentage changes in 12 months had been positive since Sep 2011 with exception of decline of 1.5 percent in Apr 2012. Cumulative growth from Sep 2011 to Mar 2012 was 3.1 percent, or at the high annual equivalent rate of 5.8 percent. Growth in the four months Apr-Jul 2012 was virtually flat because of the decline of 2.6 percent in Apr 2012. There has been significant volatility in monthly retail sales in the UK.

Table VH-4, UK, Volume of Retail Sales ∆%

	Month ∆%	12-Month ∆%
Jul 2012	0.3	2.8
Jun	0.8	2.6
May	1.5	2.2
Apr	-2.6	-1.5
Mar	2.0	3.0
Feb	-0.7	0.8
Jan	0.2	0.8
Dec 2011	0.6	2.3
Nov	-0.3	0.2
Oct	0.7	0.6
Sep	0.8	0.4
Aug	-0.4	-1.2
Jul	0.0	-0.9
Jun	0.4	-0.7
May	-2.1	-0.7
Apr	1.9	2.1
Mar	-0.2	0.1
Feb	-0.7	0.2
Jan	1.7	3.6
Dec 2010	-1.6	-2.1

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2012/index.html

Retail sales in the UK struggle with relatively high inflation. Table VH-5 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales increased 0.2 percent in the 12 months ending in Jul while that of sales excluding auto fuel decreased 1.2 percent. The implied deflator of auto fuel sales rose to 16.9 percent in Sep 2011, which is the highest 12-month increase in 2011, but then declined to 14.8 percent in Oct 2011, 12.6 percent in Nov, 1.2 percent in May 2012 and minus 1.3 percent in Jul 2012. The percentage change of the implied deflator of sales of food stores at 1.9 percent in Jul 2012 is also higher than for total retail sales. Increases in fuel prices at the retail level have occurred throughout most years since 2005 with exception of the decline of 9.5 percent in 2008 when commodity carry trades were reversed in the panic of the financial crisis, as shown in Table VH-5. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-5, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes, ∆%

	All Retail	Ex Auto Fuel	Food Stores	Non- Food	Auto Fuel
Jul 2012	0.2	0.5	1.9	-0.5	-1.3
Jun	0.3	0.7	2.2	-0.5	-1.1
May	1.2	1.3	3.1	-0.1	1.2
Apr	2.0	1.7	3.7	0.0	5.2
Mar	2.9	2.5	4.5	0.9	4.9
Feb	2.6	2.2	4.0	0.6	5.3
Jan	2.5	2.1	3.5	0.9	5.3
Dec 2011	2.8	2.0	4.3	0.6	9.1
Nov	3.8	2.7	4.6	1.4	12.6
Oct	4.6	3.4	5.0	2.1	14.7
Sep	5.1	3.6	6.1	1.5	16.9
Aug	5.4	4.0	6.0	2.3	16.2
Jul	5.1	3.8	5.9	2.1	14.4
Jun	4.6	3.3	6.1	1.0	14.5
May	4.6	3.4	5.5	1.7	13.1
Apr	4.2	3.2	4.8	1.9	12.2
Mar	4.3	2.9	4.3	1.7	14.8
Feb	4.9	3.6	5.5	2.0	15.0
Jan	4.2	3.0	5.3	1.1	14.4
Dec 2010	3.4	2.9	5.2	1.1	12.4
Dec 2009	3.6	2.4	2.1	1.7	16.8
Dec 2008	-0.3	0.4	7.1	-4.1	-9.5
Dec 2007	1.8	0.6	3.9	-1.7	15.3
Dec 2006	1.1	0.9	3.3	-1.0	1.1
Dec 2005	-0.4	-1.0	1.3	-2.6	6.6

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2012/index.html

UK monthly retail volume of sales is quite volatile, as shown in Table VH-6. Total volume of sales increased 0.3 percent in Jul 2012. There were increases in most major categories in Jul 2012, with exception of decline of 0.5 percent in predominantly nonfood stores, after increases in all major categories in Jun 2012 with exception of decline of 2.5 percent in auto fuel stores because of decline in commodity prices. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

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

	All Retail	Ex Auto Fuel	Food Stores	Non- Food	Auto Fuel
Jul 2012	0.3	0.0	0.4	-0.5	2.6
Jun	0.8	1.1	0.4	1.8	-2.5
May	1.5	1.0	0.5	1.5	6.4
Apr	-2.6	-1.4	-0.5	-2.4	-13.5
Mar	2.0	1.6	0.0	3.0	5.6
Feb	-0.7	-0.6	-0.3	-1.1	-0.9
Jan	0.2	0.5	-0.3	1.0	-2.3
Dec 2011	0.6	0.5	0.6	0.5	1.0
Nov	-0.3	-0.6	-0.7	-1.0	2.9
Oct	0.7	0.7	0.6	0.8	1.3
Sep	0.8	0.8	0.1	1.7	0.0
Aug	-0.4	-0.3	0.1	-1.0	-0.8
Jul	0.0	0.0	0.9	-0.2	-0.2
Jun	0.4	0.4	0.2	0.0	-0.3
May	-2.1	-2.4	-4.2	-1.1	0.4
Apr	1.9	2.0	3.0	1.1	0.8
Mar	-0.2	-0.1	1.3	-1.2	-0.7
Feb	-0.7	-0.9	-0.7	-1.3	1.1
Jan	1.7	1.1	0.3	1.9	7.7
Dec 2010	-1.6	-1.0	-1.9	-1.1	-6.4

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2012/index.html

Percentage growth in 12 months of retail sales volume by component groups in the UK is provided in Table VH-7. Total retail sales increased 2.8 percent in the 12 months ending in Jul 2012 with decrease of 1.7 percent in sales excluding auto fuel. Significant improvement since Aug 2011 was interrupted with sharp declines in Apr 2012 but recovery in May-Jul 2012.

Table VH-7, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

	All Retail	Ex Auto Fuel	Food Stores	Non- Food	Auto Fuel
Jul 2012	2.8	3.3	0.9	4.0	-1.7
Jun	2.6	3.3	1.4	4.4	-4.4
May	2.2	2.6	1.2	2.6	-2.3
Apr	-1.5	-0.8	-3.6	-0.1	-7.8
Mar	3.0	2.6	-0.2	3.6	7.4
Feb	0.8	0.8	1.1	-0.6	1.0
Jan	0.8	0.6	0.8	-0.8	3.1
Dec 2011	2.3	1.2	1.4	0.1	13.6
Nov	0.2	-0.3	-1.1	-1.5	5.2
Oct	0.6	0.4	0.4	-0.9	2.4
Sep	0.4	0.0	-0.1	-1.2	3.5
Aug	-1.2	-1.6	-0.6	-3.8	2.0
Jul	-0.9	-1.2	-1.1	-2.8	2.2
Jun	-0.7	-1.1	-4.1	-0.7	3.3
May	-0.7	-1.0	-3.2	-0.8	2.4
Apr	2.1	1.9	1.8	0.6	4.0
Mar	0.1	-0.3	-0.9	-0.7	3.9
Feb	0.2	-0.3	-2.2	0.0	4.8
Jan	3.6	3.2	-2.4	7.1	7.4
Dec 2010	-2.1	-1.5	-3.9	-0.3	-8.4
Dec 2009	1.2	1.9	2.4	0.7	-4.1
Dec 2008	1.3	2.6	-1.1	4.3	-9.0

Source: http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2012/index.html

Table VH-8 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 2.8 percent in the 12 months ending in Jul 2012. Sales of predominantly food stores with weight of 41.3 percent increased 0.9 percent in the 12 months ending in Jul 2012, contributing 0.4 percentage points. Mostly nonfood stores with weight of 41.6 percent increased 1.8 percent with contribution of 1.8 percentage points. Positive contribution to 12-month percentage changes of volume was made by non-store retailing with weight of 5.3 percent, growth of 15.2 percent and positive contribution of 0.8 percentage points but automotive fuel with weight of 11.8 percent and growth of minus 1.7 percent deducted 0.2 percentage points. The value of retail sales increased 3.1 percent in the 12 months ending in Jul 2012. There were positive contributions: 1.2 percentage points for predominantly food stores, 1.5 percentage points for predominantly nonfood stores and 0.7 percentage points for non-store retailing. Automotive fuel stores deducted 0.3 percentage points.

Table VH-8, UK, Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Jul 2012	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	2.8		3.1
Mostly Food Stores	41.3	0.9	0.4	2.9	1.2
Mostly Nonfood Stores
Total	41.6	4.0	1.8	3.4	1.5
Non- specialized	7.8	9.6	0.7	8.2	0.6
Textile, Clothing & Footwear	12.3	-0.1	0.0	0.5	0.1
Household Goods Stores	8.8	2.0	0.2	1.5	0.1
Other	12.7	6.1	0.8	4.8	0.6
Non-store Retailing	5.3	15.2	0.8	13.9	0.7
Automotive Fuel	11.8	-1.7	-0.2	-2.5	-0.3

Cont.: Contribution

Sources: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2012/index.html

 

© Carlos M. Pelaez, 2010, 2011, 2012