CMP Associates Regulation Blog

There is similar behavior in the monthly fluctuations of the PCE price index excluding food and energy in Chart IV-2. The exclusion of commodity components does not eliminate negative changes. Fluctuations have been in a tight range from 0.0 percent to 0.4 percent, excluding a few outliers.

Chart IV-2, US, Percentage Change of PCE Price Index Excluding Food and Energy from Prior Month, 1999-2012

Source: US Bureau of Economic Analysis

As with all commodity prices, oscillations of the PCE price index of food in Chart IV-3 are quite wide. Monetary policy of zero interest rates has caused trends of increase such as from 2007 into the global recession and in the current expansion phase after 2010 with interruptions by events of risk aversion.

Chart IV-3, US, Percentage Change of PCE Price Index Food from Prior Month, 1999-2012

Source: US Bureau of Economic Analysis

The band of fluctuation of the PCE price index of energy in Chart IV-4 is much wider. An interesting feature is the abundance of negative changes.

Chart IV-4, US, Percentage Change of PCE Price Index Energy from Prior Month, 1999-2012

Source: US Bureau of Economic Analysis

Table IV-6 provides 12-month rates of PCE inflation. Headline PCE inflation has increased from 1.5 percent in Jan 2011 to 2.8 percent in Aug 2011 and 2.9 percent in Sep 2012, declining to 1.5 percent in May and Jun 2012 and 1.3 percent in Jul 2012. PCE inflation excluding food and energy (PCEX), used as indicator in monetary policy, has increased from 1.1 percent in Jan 2011 to 1.9 percent in Dec 2011 and Jan and Feb 2012 with 2.0 percent in Mar 2012, 1.9 percent in Apr 2012, 1.8 percent in May and Jun 2012 and 1.6 percent in Jul 2012, which is still below or at the tolerable maximum of 2.0 percent in monetary policy. The unintended effect of shocks of commodity prices from zero interest rates captured by PCE food prices (PCEF) and energy (PCEE) in the absence of risk aversion should be weighed in design and implementation of monetary policy.

Table IV-6, US, Percentage Change in 12 Months of Prices of Personal Consumption Expenditures ∆%

	PCE	PCEG	PCEG -D	PCES	PCEX	PCEF	PCEE
2012
Jul	1.3	0.1	-1.8	1.9	1.6	2.0	-4.7
Jun	1.5	0.4	-1.6	2.1	1.8	2.4	-3.6
May	1.5	0.6	-1.3	2.0	1.8	2.4	-3.3
Apr	1.9	1.6	-1.2	2.1	1.9	2.9	1.5
Mar	2.2	2.5	-0.8	2.1	2.0	3.2	5.4
Feb	2.4	2.9	-0.7	2.2	1.9	3.9	8.0
Jan	2.4	3.0	-0.5	2.2	1.9	4.6	6.8
2011
Dec	2.4	3.1	-0.5	2.1	1.9	5.1	7.4
Nov	2.6	4.0	-0.6	1.9	1.7	5.0	13.5
Oct	2.6	4.2	-0.5	1.8	1.6	5.2	15.1
Sep	2.9	4.9	-0.7	1.9	1.6	5.1	20.7
Aug	2.8	4.9	-0.4	1.8	1.6	4.8	19.8
Jul	2.8	4.8	-0.2	1.8	1.5	4.3	20.6
Jun	2.7	4.7	-0.4	1.7	1.4	4.0	21.6
May	2.6	4.5	-0.9	1.7	1.4	3.6	22.0
Apr	2.4	3.8	-1.2	1.6	1.2	3.2	19.4
Mar	2.1	3.0	-1.6	1.6	1.1	3.0	16.1
Feb	1.8	2.1	-1.6	1.7	1.2	2.4	11.5
Jan	1.5	1.3	-2.0	1.7	1.1	1.8	7.7
2010
Dec	1.5	1.1	-2.2	1.7	1.1	1.3	8.6
Nov	1.4	0.6	-2.0	1.7	1.2	1.3	4.4
Oct	1.5	0.8	-1.7	1.8	1.2	1.3	6.3
Sep	1.6	0.5	-1.3	2.1	1.5	1.2	4.1
Aug	1.7	0.6	-0.9	2.2	1.6	0.7	4.0

Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

The headline PCE index is shown in Chart IV-5 from 1999 to 2012. There is an evident upward trend with the bump of the global recession after IVQ2008.

Chart IV-5, US, Price Index of Personal Consumption Expenditures 1999-2012

The headline consumer price index is shown in Chart IV-6. There is also an upward trend but with fluctuations and the 2008 bump.

Chart IV-6, US, Consumer Price Index, NSA, 1999-2012

Source: US Bureau of Labor Statistics

The PCE price index excluding food and energy is shown in Chart IV-7. There is less pronounced long-term trend with fewer bumps because of excluding more volatile commodity items.

Chart IV-7, US, Price Index of Personal Consumption Expenditures Excluding Food and Energy 1999-2012

The core consumer price index, excluding food and energy, is shown in Chart IV-8. There is also an upward trend but with fluctuations.

Chart IV-8, US, Consumer Price Index Excluding Food and Energy, NSA, 1999-2012

Source: US Bureau of Labor Statistics

The PCE price index of food is shown in Chart IV-9. There is a more pronounced upward trend and sharper fluctuations.

Chart IV-9, US, Price Index of Personal Consumption Expenditures Food 1999-2012

There is similar behavior in the consumer price index of food in Chart IV-10. There is an upward trend from 1999 to 2011 with a major bump in 2009 when commodity futures positions were unwound. Zero interest rates with bouts of risk aversion dominate the trend into 2011. Risk aversion softens the trend toward the end of 2011 and in 2012.

Chart IV-10, US, Consumer Price Index, Food, NSA, 1999-2012

Source: US Bureau of Labor Statistics

The most pronounced trend of PCE price indexes is that of energy in Chart IV-11. It is impossible to explain the hump in 2008 in the middle of the global recession without the carry trade from zero interest rates to leveraged positions in commodity futures. Risk aversion after Sep 2008 caused flight to the safe haven of government obligations. The return of risk appetite with zero interest rates caused a first wave of carry trades with another upward trend interrupted by the first European sovereign risk crisis in Apr-Jul 2010. Zero interest rates with risk appetite caused another sharp upward trend of commodity prices interrupted by risk aversion from the second sovereign crisis. In the absence of risk aversion, carry trades from zero interest rates to positions in risk financial assets will continue to cause distortions such as commodity price trends and fluctuations.

Chart IV-11, US, Price Index of Personal Consumption Expenditures Energy Goods and Services 1999-2012

Chart IV-12 provides the consumer price index of energy commodities. Unconventional monetary policy of zero or near zero interest rates causes upward trends in commodity prices reflected in (1) increase from 2003 to 2007; (2) sharp increase during the global contraction in 2008; (3) collapse from 2008 into 2009 as positions in commodity futures were unwound in a flight to government obligations; (4) new upward trend after 2010; and (5) episodes of decline during risk aversion shocks such as the more recent segment during the worsening European debt crisis in Nov and Dec of 2011 and with new strength of commodity prices in the beginning of 2012 followed by softness in another episode of risk aversion.

Chart IV-12, US, Consumer Price Index, Energy, NSA, 1999-2012

Source: US Bureau of Labor Statistics

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

Chart IV-13 of the US Energy Information Administration provides prices of the crude oil futures contract. Unconventional monetary policy of very low interest rates and quantitative easing with suspension of the 30-year bond to lower mortgage rates caused a sharp upward trend of oil prices. There is no explanation for the jump of oil prices to $149/barrel in 2008 during a sharp global recession other than carry trades from zero interest rates to commodity futures. Prices collapsed in the flight to government obligations. Risk appetite with zero interest rates resulted in another upward trend of commodity prices after 2009 with fluctuations during periods of risk aversion. All price indexes are affected by unconventional monetary policy.

Chart IV-13, US, Crude Oil Futures Contract

Source: US Energy Information Administration

Source: Energy Information Administration

Unconventional monetary policy of zero interest rates and quantitative easing has been used in Japan and now also in the US. Table IV-7 provides the consumer price index of Japan, with inflation of minus 0.4 percent in 12 months ending in Jul, declines of 0.3 percent NSA (not-seasonally-adjusted) and 0.4 unchanged SA (seasonally-adjusted) in the month of Jul. Inflation of consumer prices in the first four months of 2012 annualizes at 2.1 percent SA and 3.0 percent NSA. Annual equivalent inflation in the first three months of 2012 is 2.8 percent SA and 3.7 percent NSA. There are negative percentage changes in most of the 12-month rates in 2011 with the exception of Jul and Aug both with 0.2 percent and stability in Sep. All monthly and 12-month rates of inflation are nonnegative in the first four months of 2012. There are eight years of deflation and one of zero inflation in the 12-month rate of inflation in Dec from 1995 to 2010. This experience is entirely different from that of the US that shows long-term inflation. It is difficult to justify unconventional monetary policy because of risks of deflation similar to that experienced in Japan.

Table IV-7, Japan, Consumer Price Index, All Items ∆%

	∆% Month SA	∆% Month NSA	∆% 12-Month NSA
Jul 2012	0.0	-0.3	-0.4
Jun	-0.4	-0.5	-0.2
May	-0.4	-0.3	0.2
Apr	0.0	0.1	0.4
Mar	0.1	0.5	0.5
Feb	0.3	0.2	0.3
Jan	0.3	0.2	0.1
Dec 2011	0.1	0.0	-0.2
Nov	-0.1	-0.6	-0.5
Oct	0.0	0.1	-0.2
Sep	-0.1	0.0	0.0
Aug	-0.2	0.1	0.2
Jul	0.3	0.0	0.2
Jun	-0.1	-0.2	-0.4
May	-0.1	0.0	-0.4
Apr	-0.1	0.1	-0.4
Mar	0.0	0.3	-0.5
Feb	0.1	0.0	-0.5
Jan	0.0	-0.1	-0.6
Dec 2010	-0.2	–0.3	0.0
Dec 2009			-1.7
Dec 2008			0.4
Dec 2007			0.7
Dec 2006			0.3
Dec 2005			-0.1
Dec 2004			0.2
Dec 2003			-0.4
Dec 2002			-0.3
Dec 2001			-1.2
Dec 2000			-0.2
Dec 1999			-1.1
Dec 1998			0.6
Dec 1997			1.8
Dec 1996			0.6
Dec 1995			-0.3
Dec 1994			0.7
Dec 1993			1.0
Dec 1992			1.2
Dec 1991			2.7
Dec 1990			3.8
Dec 1989			2.6
Dec 1988			1.0
Dec 1987			0.8
Dec 1986			-0.3
Dec 1985			1.9
Dec 1984			2.6
Dec 1983			1.7
Dec 1982			2.0
Dec 1981			4.3
Dec 1980			6.9
Dec 1979			5.6
Dec 1978			3.9
Dec 1977			5.0
Dec 1976			10.5
Dec 1975			7.8
Dec 1974			21.0
Dec 1973			18.3
Dec 1972			5.7
Dec 1971			4.8

Source: http://www.stat.go.jp/english/data/cpi/1581.htm

Chart IV-14 provides the US consumer price index NSA from 1913 to 2012. The dominating characteristic is the increase in slope during the Great Inflation from the middle of the 1960s through the 1970s. There is long-term inflation in the US and no evidence of deflation risks.

Chart IV-14, US, Consumer Price Index, All Items, NSA, 1913-2012

Source: US Bureau of Labor Statistics

Chart IV-15 provides 12-month percentage changes of the US consumer price index from 1914 to 2012. There are actually three waves of inflation in the second half of the 1960s, in the mid 1970s and again in the late 1970s. Table IV-15 provides similar inflation waves in the economy of Japan with 18.3 percent in 1973 and 21.0 percent in 1974. Inflation rates then stabilized in the US in a range with only two episodes above 5 percent. There are isolated cases of deflation concentrated over extended periods only during the 1930s.

Chart IV-15, US, Consumer Price Index, All Items, NSA, 12-Month Percentage Change 1914-2012

Source: US Bureau of Labor Statistics

Chart IV-16 provides the US consumer price index excluding food and energy from 1957 (when it first becomes available) to 2012. There is long-term inflation in the US without episodes of deflation.

IV-16, US, Consumer Price Index Excluding Food and Energy, NSA, 1957-2012

Source: US Bureau of Labor Statistics

Chart IV-17 provides 12-month percentage changes of the consumer price index excluding food and energy from 1958 (when it first becomes avaible) to 2012. There are three waves of inflation in the 1970s during the Great Inflation. There is no episode of deflation.

Chart IV-17, US, Consumer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 1958-2012

Source: US Bureau of Labor Statistics

https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_294_611.html;jsessionid=64981FF3276A527536CED0D823B0C095.cae1

More detail on the consumer price index of Japan in Jul is shown in Table IV-8. Inflation in the 12 months ending in Jul has been driven by items rich in commodities such as 3.0 percent in fuel, light and water charges with increase of 0.1 percent in the month of Jul. There is similar behavior in the preliminary estimate for Aug for the Ku Area of Tokyo with increase of 1.2 percent of fuel, light and water charges and increase of 5.1 percent in 12 months. There is decline in most items in the consumer price index in Jul. There is mild deflation in the CPI excluding food, alcoholic beverages and energy with minus 0.6 percent in the 12 months ending in Jul and decrease of 0.2 percent in the month of Jul. The CPI excluding imputed rent decreased 0.3 percent in Jul and decreased 0.5 percent in 12 months. The all-items CPI estimate for Jul of the Ku-Area of Tokyo increased 0.1 percent in Jul and declined 0.7 percent in 12 months.

Table IV-8, Japan, Consumer Price Index, ∆%

2012	Jul 2012/Jun 2012 ∆%	Year ∆%
CPI All Items	-0.3	-0.4
CPI Excluding Fresh Food	-0.2	-0.3
CPI Excluding Food, Alcoholic Beverages and Energy	-0.2	-0.6
CPI Goods	-0.7	-0.8
CPI Services	0.1	-0.1
CPI Excluding Imputed Rent	-0.3	-0.5
CPI Fuel, Light, Water Charges	0.1	3.0
CPI Transport & Communications	-0.2	-1.2
CPI Ku-Area Tokyo All Items	0.1	-0.7
Fuel, Light, Water Charges Ku Area Tokyo	1.2	5.1

Note: Ku-area Tokyo CPI data preliminary for Aug 2012

Source: http://www.stat.go.jp/english/data/cpi/1581.htm

The estimate of consumer price inflation in Germany in Table IV-9 is 1.7 percent in 12 months ending in Jul 2012, 0.4 percent NSA in Jul 2012 relative to Jun 2012 and 0.2 percent SA in Jul 2012 relative to Jun 2012. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html), as shown in Table IV-9. In the first wave, annual equivalent inflation was 4.9 percent in Feb-Apr 2011 NSA and 2.4 percent SA during risk appetite in carry trades from zero interest rates to commodity futures. In the second wave, annual equivalent consumer price inflation collapsed to 0.6 percent NSA and 2.4 percent SA in May-Jun 2011 because of risk aversion caused by European sovereign debt event. In the third wave, annual equivalent consumer price inflation was 1.2 percent NSA and 2.2 percent SA in Jul-Nov 2011 as a result of relaxed risk aversion. In the fourth wave, annual equivalent inflation was 1.8 percent NSA and 1.2 percent SA in Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation rose to 4.9 percent NSA and 2.4 percent SA in Feb-Apr 2012 during another energy-commodity carry trade shock. In the sixth wave, annual equivalent inflation in May-Jun 2012 is minus 1.8 percent NSA and flat SA. In the beginning of a new seventh wave, annual equivalent inflation NSA is 4.2 percent in Jul-Aug 2012, on the basis of the preliminary estimate for Aug by Statistisches Bundesamt Deutschland, and 2.4 percent SA in Jul. Under unconventional monetary policy of zero interest rates and quantitative easing inflation becomes highly volatile during alternative shocks of risk aversion and risk appetite, preventing sound investment and consumption decisions.

Table IV-9, Germany, Consumer Price Index ∆%

	12-Month ∆%	Month ∆% NSA	Month ∆% SA
Aug 2012	2.0	0.3
Jul	1.7	0.4	0.2
AE ∆% Jul-Aug		4.3	2.4
Jun	1.7	-0.1	0.0
May	1.9	-0.2	0.0
AE ∆% May-Jun		-1.8	0.0
Apr	2.1	0.2	0.2
Mar	2.1	0.3	0.1
Feb	2.3	0.7	0.3
AE ∆% Feb-Apr		4.9	2.4
Jan	2.1	-0.4	0.1
Dec 2011	2.1	0.7	0.1
AE ∆% Dec-Jan		1.8	1.2
Nov	2.4	0.0	0.1
Oct	2.5	0.0	0.1
Sep	2.6	0.1	0.3
Aug	2.4	0.0	0.2
Jul	2.4	0.4	0.2
AE ∆% Jul-Nov		1.2	2.2
Jun	2.3	0.1	0.2
May	2.3	0.0	0.2
AE ∆% May-Jun		0.6	2.4
Apr	2.4	0.2	0.2
Mar	2.1	0.5	0.2
Feb	2.1	0.5	0.2
Jan	2.0	-0.4	0.2
AE ∆% Feb-Apr		4.9	2.4
Dec 2010	1.7	1.0
Nov	1.5	0.1
Oct	1.3	0.1
Sep	1.3	-0.1
Aug	1.0	0.0
Annual Average ∆%
2011	2.3
2010	1.1
2009	0.4
2008	2.6

AE: Annual Equivalent

Source: Statistisches Bundesamt Deutschland

Chart IV-18, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index of Germany from 2003 to 2012. There is an evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in subsequent months with renewed strength in Dec, decline in Jan 2012 and another upward spike from Feb to Apr 2012, new drop in May-Jun 2012 and increases in Jul and Aug 2012. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.

Chart IV-18, Germany, Consumer Price Index, Unadjusted, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-19, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2003 to 2012. Chart IV-18 captures inflation waves with alternation of periods of positive and negative slopes resulting from zero interest rates with shocks of risk appetite and risk aversion. For example, the negative slope of decline of inflation 0.2 percent in May 2012 and 0.1 percent in Jun 2012 follows an upward slope of price increases in Feb-Apr 2012 after decline of inflation by 0.4 percent in Jan 2012. The final segment shows another positive slope caused by inflation of 0.4 percent in Jul 2012, which is followed by 0.3 percent in Aug 2012 in preliminary estimates. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

Chart IV-19, Germany, Consumer Price Index, Unadjusted and Trend, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Italy’s producer price inflation in Table IV-10 also has the same waves in 2011 and into 2012 observed for many countries (http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism.html). The annual equivalent producer price inflation in the first wave Jan-Apr was 10.7 percent, which was driven by increases in commodity prices resulting from the carry trades from zero interest rates to risk financial assets, in particular leveraged positions in commodities. In the second wave, producer price inflation was minus 0.2 percent in May and flat in Jun for annual equivalent inflation rate in May-Jun of minus 1.2 percent. In the third wave, annual equivalent inflation was 2.4 percent in Jul-Sep in a pause of risk aversion. With the return of risk aversion in the fourth wave coinciding with worsening sovereign debt crisis in Europe, annual equivalent inflation was 0.4 percent in Oct-Dec. Inflation accelerated in the fifth wave in Jan and Feb 2012 to annual equivalent 7.4 percent and annual equivalent of 6.6 percent in Jan-Mar. In the sixth wave, annual equivalent inflation in Mar-Apr was at 4.3 percent. In the seventh wave, risk aversion originating in world economic slowdown and financial turbulence softened carry trades with annual equivalent inflation falling to minus 2.4 percent in May-Jun 2012. In the beginning of an eighth wave, more aggressive carry trades into commodity futures exposures resulted in increase of inflation of 0.4 percent in Jul 2012 at annual equivalent 4.9 percent.

Table IV-10, Italy, Industrial Prices, Internal Market

	Month ∆%	12-Month ∆%
Jul 2012	0.4	2.4
AE ∆% Jul	4.9
Jun	-0.1	2.2
May	-0.3	2.3
AE ∆% May-Jun	-2.4
Apr	0.3	2.5
Mar	0.4	2.8
AE ∆% Mar-Apr	4.3
Feb	0.4	3.2
Jan	0.8	3.5
AE ∆% Jan-Feb	7.4
Dec 2011	0.0	3.9
Nov	0.3	4.7
Oct	-0.2	4.7
AE ∆% Oct-Dec	0.4
Sep	0.2	4.7
Aug	0.1	4.8
Jul	0.3	4.9
AE ∆% Jul-Sep	2.4
Jun	0.0	4.6
May	-0.2	4.8
AE ∆% May-Jun	-1.2
Apr	0.7	5.6
Mar	0.8	6.2
Feb	0.7	5.8
Jan	1.2	5.3
AE ∆% Jan-Apr	10.7
Dec 2010	0.7	4.7
Year
2011		5.0
2010		3.0
2009		-5.4
2008		5.9
2007		3.3
2006		5.2
2005		4.0
2004		2.7
2003		1.6
2002		0.2
2001		1.9

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/69319

Chart IV-20 of the Istituto Nazionale di Statistica provides 12-month percentage changes of the producer price index of Italy. Rates of change in 12 months stabilized from Jul to Nov 2011 and then fell to 3.5 percent in Jan 2012 with increases of 0.8 percent in the month of Jan 2012 and 0.4 percent in Feb. Inflation was 0.4 percent in Mar 2012 and 2.8 percent in 12 months. The decline of annual equivalent inflation from 7.4 percent in Jan-Feb 2012 to 4.3 percent in Mar-Apr pulled down 12-month inflation to 2.8 percent in Mar and 2.5 percent in Apr. Percentage declines of inflation of 0.3 percent in May and 0.1 percent in Jun pulled down the 12-month rate of inflation to 2.2 percent in Jun 2012. Renewed inflation of 0.4 percent in Jul 2012 pulled up the 12-month rate to 2.4 percent.

Chart IV-20, Italy, Producer Price Index 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/69284

Monthly and 12-month inflation of the producer price index of Italy and individual components is provided in Table IV-11. Energy prices increased 2.2 percent in Jul 2012 and rose 9.6 percent in 12 months. Producer-price inflation is positive for all components in the month of Jul with the exception of declines of 0.2 percent in capital goods and 0.2 percent in intermediate goods. There is higher inflation in 12 months of 2.3 percent for nondurable goods than 1.5 percent for durable goods.

Table IV-11, Italy, Industrial Prices, Internal Market, ∆%

	Jul 2012/ Jun 2012	Jul 2012/ Jul 2011
Total	0.4	2.4
Consumer Goods	0.4	2.2
Durable Goods	0.2	1.5
Nondurable	0.4	2.3
Capital Goods	-0.3	0.3
Intermediate	-0.2	-0.3
Energy	2.2	9.6

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/69319

The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-12. Annual equivalent inflation in the first four months of 2011 was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.7 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. Economies are shocked worldwide by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion.

Table IV-12, Italy, Consumer Price Index

	Month	12 Months
Aug 2012	0.4	3.2
Jul	0.1	3.1
AE ∆% Jul-Aug	3.0
June	0.2	3.3
May	0.0	3.2
AE ∆% May-Jun	1.2
Apr	0.5	3.3
Mar	0.5	3.3
Feb	0.4	3.3
AE ∆% Feb-Apr	5.7
Jan	0.3	3.2
Dec 2011	0.4	3.3
AE ∆% Dec-Jan	4.3
Nov	-0.1	3.3
Oct	0.6	3.4
AE ∆% Oct-Nov	3.0
Sep	0.0	3.0
Aug	0.3	2.8
Jul	0.3	2.7
AE ∆% Jul-Sep	2.4
Jun	0.1	2.7
May	0.1	2.6
AE ∆% May-Jun	1.2
Apr	0.5	2.6
Mar	0.4	2.5
Feb	0.3	2.4
Jan	0.4	2.1
AE ∆% Jan-Apr	4.9
Dec 2010	0.4	1.9
Annual
2011		2.8
2010		1.5
2009		0.8
2008		3.3
2007		1.8
2006		2.1

Source: Istituto Nazionale di Statistica

Consumer price inflation in Italy by segments in the estimate by ISTAT for Aug 2012 is provided in Table IV-13. Total consumer price inflation in Aug was 0.4 percent and 3.2 percent in 12 months. Inflation of goods was 0.2 percent and 3.9 percent in 12 months. Prices of durable goods were unchanged in Aug and increased only 0.8 percent in 12 months, as typical in most countries. Prices of energy increased 1.8 percent in Aug and increased 13.4 percent in 12 months. Food prices fell 0.1 percent in Aug and increased 2.5 percent in 12 months. Prices of services increased 0.7 percent in Aug and rose 2.3 percent in 12 months. Transport prices, also influenced by commodity prices, increased 3.1 percent in Aug and increased 4.1 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion.

Table IV-13, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%

Aug 2012	Month ∆%	12-Month ∆%
General Index	0.4	3.2
I Goods	0.2	3.9
Food	-0.1	2.5
Energy	1.8	13.4
Durable	0.0	0.8
Nondurable	-0.1	0.9
II Services	0.7	2.3
Housing	0.1	2.5
Communications	-0.1	1.7
Transport	3.1	4.1

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/69284

Chart IV-21 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy that could continue in the beginning wave of declines of commodity prices if risk aversion persists.

Chart, IV-21, Italy, Consumer Price Index, 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

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

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/update/02/index.htm

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

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

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

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

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog for IQ2012 and IIQ2012. Growth is weak throughout most of the world. Japan’s GDP increased 1.3 percent in IQ2012 and 2.9 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP grew 0.3 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 1.4 percent, which is much lower than 5.5 percent in IQ2012. Growth of 3.5 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. China grew at 1.8 percent in IIQ2012, which annualizes to 7.4 percent. Xinhuanet informs that Premier Wen Jiabao considers the need for macroeconomic stimulus, arguing that “we should continue to implement proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). Premier Wen elaborates that “the country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). China’s GDP grew 7.6 percent in IIQ2012 relative to IIQ2011. Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2012. China’s GDP grew 8.1 percent in IQ2012 relative to a year earlier but only 7.6 percent in IIQ2012 relative to a year earlier. GDP was flat in the euro area in IQ2012 and also in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.4 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 but 1.0 percent relative to a year earlier when adjusted for calendar (CA) effects. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.4 percent in IIQ2012, 1.5 percent at SAAR and 2.2 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 0.5 percent in IIQ2012, declining 0.5 percent relative to IIQ2011. In IQ2011, UK GDP fell 0.3 percent, declining 0.2 percent relative to a year earlier. Italy has experienced decline of GDP in four consecutive quarters from IIIQ2011 to IIQ2012. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.5 percent relative to IIQ2011. France’s GDP stagnated in both IQ2012 and IIQ2012 and fell 0.3 percent relative to a year earlier.

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

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

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

Source: Country Statistical Agencies

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

There is evidence of deceleration of growth of world trade and even contraction in more recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html). In Jul 2012, Japan’s exports fell 5.8 percent in the month and 8.1 percent in 12 months while imports increased 4.4 percent in the month and 2.1 percent in 12 months. The second part of Table V-4 shows that net trade deducted 0.3 percentage points from Japan’s growth of GDP in IIQ2012. In Jul 2012, China’s exports fell 1.8 percent in the month and increased 1.0 percent in 12 months. Germany’s exports fell 1.5 percent in the month of Jun and increased 7.4 percent in the 12 months ending in Jun while imports fell 3.0 percent in the month of Jun and decreased 1.5 percent in the 12 months ending in Jun. Net trade contributed 1.1 percentage points to growth of Germany’s GDP in IIQ2012. The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, fell from 47.5 in Jul to 47.0 in Aug, which is the lowest since Jun 2009 and the fourth consecutive month of decline with declines of both services and manufacturing and sharp decline of new export orders for manufacturers (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949). Tim Moore, Senior Economist at Markit, finds deterioration in business conditions in Germany relative to the first semester of 2012 with new export orders in manufacturing falling at the sharpest rate since Apr 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949).

UK’s exports fell 4.6 percent in Jun and decreased 1.4 percent in Apr-Jun 2012 relative to Apr-Jun 2011 while imports fell 0.7 percent in Jun and increased 2.2 percent in Apr-Jun 2012 relative to Apr-Jun 2011. Net trade deducted 1.0 percentage points from UK GDP growth in IIQ2012. France’s exports fell 1.9 percent in Jun and net trade deducted 0.5 percentage points to GDP growth in IIQ2012. US exports increased 0.9 percent in Jun 2012 and 7.1 percent in Jan-Jun relative to a year earlier but net trade deducted 0.31 percentage points from GDP growth in IIQ2012. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased marginally from 51.4 in Jul to 51.9 in Aug, indicating the third weakest reading since Oct 2009 in the beginning of the current recovery with the lowest in Dec 2010 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). New export orders registered 48.7 in Aug still in contraction territory with 48.6 in Jul. Rob Dodson, Economist at Markit, finds that IIIQ2012 is at the lowest in the current recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.

Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	0.9 Jun	7.1 Jan-Jun	-1.5 Jun	6.0 Jan-Jun
Japan Jul	-5.8	-8.1	4.4	2.1
China	-1.8 Jul	1.0 Jul 7.8 Jan-Jul	2.2 Jul	4.7 Jul 6.5 Jan-Jul
Euro Area	2.2 Jun	8.3 Jan-Jun	-2.9 Jun	2.4 Jan-Jun
Germany	-1.5 Jun CSA	7.4 Jun	-3.0 Jun CSA	-1.5 Jun
France Jun	-1.9	4.3	-0.4	5.8
Italy Jun	-1.4	5.5	-5.3	-7.1
UK	-4.6 Jun	-1.4 Apr-Jun	-0.7 Jun	2.2 Apr-Jun
Net Trade % Points GDP Growth	% Points
USA IIQ2012	-0.31
Japan IIQ2012	-0.3
Germany IIQ2012	1.1
France IIQ2012	-0.5
UK IIQ2012	-1.0

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

http://www.customs.go.jp/toukei/latest/index_e.htm http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

http://english.customs.gov.cn/publish/portal191/ http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home

https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1 http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

http://www.insee.fr/en/

http://www.istat.it/it/

http://www.statistics.gov.uk/hub/index.html

The geographical breakdown of exports by imports of Japan with selected regions and countries is provided in Table V-5 for Jul 2012. The share of Asia in Japan’s trade is more than one half, 55.6 percent of exports and 45.1 percent of imports. Within Asia, exports to China are 19.0 percent of total exports and imports from China 21.6 percent of total imports. The second largest export market for Japan in Jul 2012 is the US with share of 17.6 percent of total exports and share of imports from the US of 8.8 percent in total imports. Western Europe has share of 9.6 percent in Japan’s exports and of 11.0 percent in imports. Rates of growth of exports of Japan in Jul are sharply negative for most countries and regions with the exception of 4.7 percent for exports to the US, 15.3 percent to Canada and 9.0 percent for exports to the Middle East. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity, which could be part of the explanation for the decline of Japan’s exports by 8.1 percent in Jul 2012 while imports increased by 2.1 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Jul are sharply higher with exception of declines in imports mostly of raw materials: minus 5.4 percent for Middle East, minus 6.6 percent for Australia and minus 27.7 percent for Brazil. Imports from Asia increased 2.8 percent in the 12 months ending in Jul while imports from China increased 3.3 percent.

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

Jun 2012	Exports Millions Yens	12 months ∆%	Imports Millions Yens	12 months ∆%
Total	5,313,281	-8.1	5,830,663	2.1
Asia	2,956,186	-9.0	2,629,261	2.8
China	1,009,095	-11.9	1,259,160	3.3
USA	934,186	4.7	512,324	7.6
Canada	63,745	15.3	93,209	15.8
Brazil	38,537	-8.7	72,324	-27.7
Mexico	69,165	-5.6	29,749	15.9
Western Europe	510,315	-28.4	639,386	8.4
Germany	137,005	-19.8	169,862	14.9
France	38,336	-33.3	94,594	18.8
UK	70,222	-32.0	47,673	25.2
Middle East	184,758	9.0	989,543	-5.4
Australia	110,817	-25.0	399,395	-6.6

Source: http://www.customs.go.jp/toukei/latest/index_e.htm

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased from 50.3 in Jun to 51.7 in Jul, indicating expansion at a moderate rate, which is one of the lowest in the current expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9928). This index has remained above the contraction territory of 50.0 during 35 months. Both global manufacturing and services have slowed down considerably with services increasing marginally because of activity in the US while manufacturing deepened its decline. The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, fell to 48.4 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.

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased marginally from 51.4 in Jul to 51.9 in Aug, indicating the third weakest reading since Oct 2009 in the beginning of the current recovery with the lowest in Dec 2010 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). New export orders registered 48.7 in Aug still in contraction territory with 48.6 in Jul. Rob Dodson, Economist at Markit, finds that IIIQ2012 is at the lowest in the current recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9958). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® 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	Jul 12-month NSA ∆%: headline 1.3; ex food and energy ∆% 1.6 Blog 9/2/12
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 2.3 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.7 Blog 9/2/12
Personal Income and Consumption	Jul month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 Real Personal Consumption Expenditures (RPCE): 0.4 12-month Jul NSA ∆%: RDPI: 2.0; RPCE ∆%: 1.3 Blog 9/2/2012
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	Jul New Orders SA ∆%: 2.8; ex transport ∆%: 0.8 Jan-Jul New Orders NSA ∆%: 4.7; ex transport ∆% 3.5 Blog 9/2/12
Durable Goods	Jul New Orders SA ∆%: 4.2; ex transport ∆%: -0.4 Jan-Jul 12/Jan-Jul 11 NSA New Orders ∆%: 7.5; ex transport ∆% : 5.5 Blog 8/26/12
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	Jun 2012/Jun 2011 ∆% NSA: 10 Cities 0.1; 20 Cities: 0.5 ∆% Jun SA: 10 Cities 1.0 ; 20 Cities: 0.9 Blog 9/2/12
FHFA House Price Index Purchases Only	Jun SA ∆% 0.7; 12 month ∆%: 3.7 Blog 8/26/12
New House Sales	Jul 2012 month SAAR ∆%: 3.6 Jan-Jul 2012/Jan-Jul 2011 NSA ∆%: 21.1 Blog 8/26/12
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
CBO Budget and Economic Outlook	2012 Deficit $1128 B 7.3% GDP Debt 11,318 B 72.8% GDP 2013 Deficit $614 B, Debt 12,064 B 76.1% GDP Blog 8/26/12
Commercial Banks Assets and Liabilities	Jul 2012 SAAR ∆%: Securities 17.7 Loans 3.1 Cash Assets 31.6 Deposits 15.4 Blog 8/26/12
Flow of Funds	IQ2012 ∆ since 2007 Assets -$4113B Real estate -$4916B Financial $367.3MM Net Worth -$3300B Blog 6/17/12
Current Account Balance of Payments	IQ2012 -$137B %GDP 3.6 Blog 06/17/12

Links to blog comments in Table USA:

8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

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

6/17/12 http://cmpassocregulationblog.blogspot.com/2012/06/destruction-of-three-trillion-dollars_17.html

Manufacturers’ shipments increased 2.0 percent in Jul 2012 after decreasing 1.2 percent in Jun. New orders increased 2.8 percent in Jul following decrease by 0.5 percent in Jun, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by increase of 88.1 percent of new orders of nondefense aircraft in Nov and revised 21.0 percent in Dec followed by decline of 17.2 percent in Jan and revised increase by 2.7 percent in Feb but sharp decline of 46.6 percent in Mar with increases of 7.6 percent in May, revised increase of 32.5 percent in Jun and increase of 53.9 percent in Jul. New orders excluding transportation equipment increased 0.7 percent in Jul. Capital goods new orders, indicating investment, increased 3.5 percent in Jul, increasing 8.1 percent in Jun after decreasing 3.2 percent in May. New orders of nondefense capital goods increased 6.3 percent in Jul. Excluding more volatile aircraft, capital goods orders decreased 4.0 percent in Jul.

Table VA-1, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Jul 2012 ∆%	Jun 2012 ∆%	May 2012 ∆%
Total
S	2.0	-1.2	0.3
NO	2.8	-0.5	0.5
Excluding Transport
S	1.0	-1.3	0.2
NO	0.7	-2.2	0.0
Excluding Defense
S	2.2	-1.3	0.1
NO	3.4	-1.6	0.2
Durable Goods
S	2.5	0.0	1.1
NO	4.1	1.6	1.5
Machinery
S	-0.9	4.2	1.2
NO	-4.1	-2.5	5.0
Computers & Electronic Products
S	1.1	0.2	3.8
NO	-0.2	-4.9	-0.4
Computers
S	-4.1	-10.4	2.1
NO	-15.7	-13.0	6.7
Transport Equipment
S	8.6	-1.0	1.4
NO	14.4	10.8	3.6
Automobiles
S	-1.2	-1.5	0.8
Motor Vehicles
S	20.1	-1.6	1.0
NO	20.6	-1.8	1.2
Nondefense Aircraft
S	6.6	-4.9	2.2
NO	53.9	32.5	7.6
Capital Goods
S	0.1	0.9	1.8
NO	3.5	8.1	3.2
Nondefense Capital Goods
S	0.7	0.8	0.9
NO	6.3	2.4	2.3
Capital Goods ex Aircraft
S	-0.5	1.4	1.0
NO	-4.0	-2.7	2.3
Nondurable Goods
S	1.5	-2.3	-0.4
NO	1.5	-2.3	-0.4

Note:Mfg: manufacturing; S: shipments; NO: new orders; Transport: transportation

Source: US Census Bureau http://www.census.gov/manufacturing/m3/

Chart VA-14 of the US Census Bureau shows monthly changes in manufacturers’ new orders in the past 12 months. Trends are difficult to discern for these data because of the significant volatility.

Chart VA-1, US, Manufacturers’ New Orders 2010-2011 Seasonally Adjusted, Month ∆%

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr022.html

Chart VA-2 of the US Bureau of the Census provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2012. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments are found in earlier periods followed with continuing growth, as in the latest observation for Jul.

Chart VA-2, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2012

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-2. Values are cumulative millions of dollars in Jan-Jul 2012 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Jul 2012 total $3313.1 billion and new orders total $3291.1, growing respectively by 5.3 percent and 4.7 percent relative to the same period in 2011. Excluding transportation equipment, shipments grew 4.4 percent and new orders increased 3.5 percent. Excluding defense, shipments grew 5.6 percent and new orders grew 5.2 percent. Durable goods shipments reached $1552.7 billion in Jan-Jul 2012, or 46.9 percent of the total, growing by 9.1 percent, and new orders $1326.8 billion, or 46.9 percent of the total, growing by 8.8 percent. Important information in Table VA-2 is the large share of nondurable goods: with shipments of $1760.4 billion or 53.1 percent of the total, growing by 2.4 percent. Capital goods have relatively high value of $540.0 billion for shipments, growing 7.4 percent, and new orders $567.5 billion, growing 5.1 percent, which could be a favorable sign of future investment. Excluding aircraft, capital goods shipments reached $442.2 billion, growing by 7.7 percent, and new orders $449.5 billion, growing 3.5 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 11.0 percent of US national income in IQ2012 (see Table I-13).

Table VA-2, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars

Jan-Jul 2012	Shipments	∆% 2012/ 2011	New Orders	∆% 2012/ 2011
Total	3,313,112	5.3	3,291,104	4.7
Excluding Transport	2,876,434	4.4	2,837,914	3.5
Excluding Defense	3,239,691	5.6	3,215,819	5.2
Durable Goods	1,552,671	8.8	1,530,663	7.5
Machinery	224,885	11.4	225,728	-0.5
Computers & Electronic Products	194,781	0.6	151,450	3.8
Computers	8,170	-18.6	8,088	-18.6
Transport Equipment	436,678	11.6	453,190	12.7
Automobiles	59,775	26.8
Motor Vehicles	130,611	5.8	129,492	5.2
Nondefense Aircraft	63,169	25.0	82,860	40.3
Capital Goods	540,019	7.4	567,522	5.1
Nondefense Capital Goods	482,902	9.8	508,345	8.3
Capital Goods ex Aircraft	442,204	7.7	449,512	3.5
Nondurable Goods	1,760,441	2.4	1,760,441	2.4
Food Products	414,791	3.4
Petroleum Refineries	471,808	3.6
Chemical Products	448,022	-0.5

Note: Transport: transportation Source: US Census Bureau http://www.census.gov/manufacturing/m3/

Chart VA-3 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Jul 2012. Fluctuations are evident that are smoothed by seasonal adjustment in the earlier Chart VA-2. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend.

Chart VA-3, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2012

Source: US Census Bureau http://www.census.gov/manufacturing/m3/

Table VA-3 shows the euphoria of prices during the boom and the subsequent decline. House prices rose 93.7 percent in the 10-city composite of the Case-Shiller home price index and 78.1 percent in the 20-city composite between Jun 2000 and Jun 2005. Prices rose around 100 percent from Jun 2000 to Jun 2006, increasing 109.9 percent for the 10-city composite and 93.3 percent for the 20-city composite. House prices rose 39.5 percent between Jun 2003 and Jun 2005 for the 10-city composite and 34.5 percent for the 20-city composite propelled by low fed funds rates of 1.0 percent between Jun 2003 and Jun 2004 and then only increasing by 0.25 basis points at every meeting of the Federal Open Market Committee (FOMC) until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decline of yields of mortgage-backed securities with intended decrease in mortgage rates. Similarly, between Jun 2003 and Jun 2006 the 10-city index gained 51.2 percent and the 20-city index increased 46.0 percent. House prices have fallen from Jun 2006 to Jun 2012 by 31.5 percent for the 10-city composite and 31.1 percent for the 20-city composite. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Jun 2012, house prices increased 0.1 percent in the 10-city composite and increased 0.5 percent in the 20-city composite. Table VA-3 also shows that house prices increased 43.8 percent between Jun 2000 and Jun 2012 for the 10-city composite and increased 33.2 percent for the 20-city composite. House prices are close the lowest level since peaks during the boom before the financial crisis and global recession. The 10-city composite fell 31.5 percent from the peak in Jun 2006 to Jun 2012 and the 20-city composite fell 31.1 percent from the peak in Jul 2006 to Jun 2012. The final part of Table VA-3 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average annual growth rate between Dec 1987 and Dec 2011 for the 10-city composite was 3.2 percent. Data for the 20-city composite are available only beginning in Jan 2000. House prices accelerated in the 1990s with the average rate of the 10-city composite of 5.0 percent between Dec 1992 and Dec 2000 while the average rate for the period Dec 1987 to Dec 2000 was 3.8 percent. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate of the 10-city composite between Dec 2000 and Dec 2011 was 2.5 percent while the rate of the 20-city composite was 1.9 percent.

Table VA-3, US, Percentage Changes of Standard & Poor’s Case-Shiller Home Price Indices, Not Seasonally Adjusted, ∆%

	10-City Composite	20-City Composite
∆% Jun 2000 to Jun 2003	38.8	32.4
∆% Jun 2000 to Jun 2005	93.7	78.1
∆% Jun 2003 to Jun 2005	39.5	34.5
∆% Jun 2000 to Jun 2006	109.9	93.3
∆% Jun 2003 to Jun 2006	51.2	46.0
∆% Jun 2005 to Jun 2012	-25.8	-25.2
∆% Jun 2006 to Jun 2012	-31.5	-31.1
∆% Jun 2009 to Jun 2012	1.1	0.2
∆% Jun 2010 to Jun 2012	-3.8	-3.9
∆% Jun 2011 to Jun 2012	0.1	0.5
∆% Jun 2000 to Jun 2012	43.8	33.2
∆% Peak Jun 2006 Jun 2012	-31.5
∆% Peak Jul 2006 Jun 2012		-31.1
Average ∆% Dec 1987-Dec 2011	3.2	NA
Average ∆% Dec 1987-Dec 2000	3.8	NA
Average ∆% Dec 1992-Dec 2000	5.0	NA
Average ∆% Dec 2000-Dec 2011	2.5	1.9

Source: http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

With the exception of Apr 2011, Jul 2011 for the 20-city composite and Feb through Jun 2012, house prices seasonally-adjusted declined in every month for both the 10-city and 20-city Case-Shiller composites from Dec 2010 to Jan 2012, as shown in Table VA-4. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. Without seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Aug 2011 but fell in every month from Sep 2011 to Feb 2012. The not seasonally adjusted index registers decline in Mar of 0.1 percent for the 10-city composite and is flat for the 20-city composite. House prices seasonally-adjusted increased 0.7 percent in both Mar and Apr 2012 for both the 10-city and 20-city indexes. Not seasonally adjusted house prices increased 1.3 percent in Apr 2012. In May 2012, house prices SA increased 0.9 percent for the 10-city composite and 1.9 percent NSA and 0.9 percent for the 20-city composite SA and 2.3 percent NSA. In Jun 2012, house prices increased 1.0 percent for the 10-city composite SA and 2.2 percent NSA and 0.9 percent for the 20-city composite SA and 2.3 percent NSA. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

Table VA-4, US, Monthly Percentage Change of S&P Case-Shiller Home Price Indices, Seasonally Adjusted and Not Seasonally Adjusted, ∆%

	10-City Composite SA	10-City Composite NSA	20-City Composite SA	20-City Composite NSA
Jun 2012	1.0	2.2	0.9	2.3
May	0.9	1.9	0.9	2.3
Apr	0.8	1.3	0.8	1.3
Mar	0.6	-0.1	0.7	0.0
Feb	0.1	-0.9	0.1	-0.8
Jan	-0.3	-1.0	-0.1	-1.0
Dec 2011	-0.6	-1.2	-0.5	-1.2
Nov	-0.7	-1.4	-0.7	-1.3
Oct	-0.6	-1.3	-0.6	-1.3
Sep	-0.6	-0.6	-0.6	-0.7
Aug	-0.4	0.1	-0.8	0.1
Jul	-0.1	0.9	0.3	1.0
Jun	-0.1	1.0	-0.2	1.2
May	-0.2	1.0	-0.2	1.0
Apr	0.1	0.6	0.0	0.6
Mar	-0.2	-1.0	-0.3	-1.0
Feb	-0.3	-1.3	-0.3	-1.2
Jan	-0.3	-1.1	-0.3	-1.1
Dec 2010	-0.3	-0.9	-0.3	-0.9

Source: http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

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 reduction 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	Jul NSA ∆% -0.3; Jul 12 months NSA ∆% -0.4 Blog 9/2/12
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	Jul Unemployed 2.88 million Change in unemployed since last year: minus 240 thousand Unemployment rate: 4.3% Blog 9/2/12
All Industry Indices	Jun month SA ∆% 0.2 12-month NSA ∆% 0.5 Blog 8/26/12
Industrial Production	Jul SA month ∆%: -1.2 12-month NSA ∆% -1.0 Blog 9/2/12
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	Jul 12 months: Total ∆%: -3.1 Wholesale ∆%: -3.9 Retail ∆%: -0.8 Blog 9/2/12
Family Income and Expenditure Survey	Jul 12-month ∆% total nominal consumption 1.2, real 1.7 Blog 9/2/12
Trade Balance	Exports Jul 12 months ∆%: -8.1 Imports Jul 12 months ∆% 2.1 Blog 8/26/12

Links to blog comments in Table JPY:

8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

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

In Jul 2012, industrial production in Japan decreased 0.1 percent and decreased 1.0 percent in the 12 months ending in Jul 2012, as shown in Table VB-1. In the four months Apr-Jul 2012, industrial production fell cumulative 3.7 or at the annual equivalent rate of 12.5 percent. As a result, growth of industrial production in 12 months fell from 14.2 percent in Mar 2012 to minus 1.0 percent in Jul 2012. Japan’s industrial production increased during two consecutive months by revised 2.3 percent in Dec 2011 and revised 0.9 percent in Jan 2012, reducing the percentage decline in 12 months from minus 3.0 percent in Dec to minus 1.6 percent in Jan 2012 and positive 1.5 percent in Feb. Monthly industrial production had climbed in every month since the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, with exception of Sep 2011 but fell again in Nov by 1.7 percent. Industrial production was higher in 12 months for the first month in Aug 2011 by 1.6 percent and again in Oct by 0.9 percent but fell 2.9 percent in Nov and 3.0 percent in Dec 2011 relative to a year earlier. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 16.4 percent in 2010. The annual average in calendar year 2011 fell 2.3 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011.

Table VB-1, Japan, Industrial Production ∆%

	∆% Month SA	∆% 12 Months NSA
Jul 2012	-1.2	-1.0
Jun	0.4	-1.5
May	-3.4	6.0
Apr	-0.2	12.9
Mar	1.3	14.2
Feb	-1.6	1.5
Jan	0.9	-1.6
Dec 2011	2.3	-3.0
Nov	-1.7	-2.9
Oct	1.8	0.9
Sep	-1.9	-2.4
Aug	0.9	1.6
Jul	1.1	-1.7
Jun	3.8	-0.6
May	5.8	-4.6
Apr	2.4	-12.7
Mar	-16.2	-12.4
Feb	1.1	4.5
Jan	1.2	6.1
Dec 2010	2.4	5.9
Calendar Year
2011		-2.3
2010		16.4
2009		-21.9
2008		-3.4

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

The employment report for Japan in Jul 2012 is in Table VB-2. The rate of unemployment seasonally adjusted decreased to 4.3 percent in Jul and Jun 2012 from 4.4 percent in May 2012. The rate of unemployment not seasonally adjusted fell to 4.4 in Jun 2012 from 4.7 percent a year earlier. The employment rate at 56.6 percent in Jul 2012 was unchanged from a year earlier.

Table VB-2, Japan, Employment Report Jul 2012

Unemployed	2.88 million
Change since last year	-240 thousand; ∆% –7.7
Unemployment rate	4.3% SA -0.1; NSA 4.4%, -0.3 from earlier year
Population ≥ 15 years	110.98 million
Change since last year	∆% –0.2
Labor Force	65.65 million
Change since last year	∆% –0.5
Employed	62.77 million
Change since last year	% -0.1
Labor force participation rate	59.2
Change since last year	0.0
Employment rate	56.6%
Change since last year	0.0

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications http://www.stat.go.jp/english/data/roudou/154.htm

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2010 to 2012. The sharp decline in Sep 2011 was the best reading in 2011 but the rate increased in the final quarter of the year, declining in Feb 2012 and stabilizing in Mar 2012 but increasing to 4.6 percent in Apr 2012 and declining again to 4.4 percent in May 2012 and 4.3 percent in both Jun and Jul 2012.

Chart VB-1, Japan, Unemployment Rate

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/154.htm

During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid 1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for 1968, 1975, 1980 and 1985 and yearly from 1990 to 2011. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.4 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, while the participation rate fell from 60.4 percent to 59.6 percent, falling to 59.3 percent in 2011, and the employment rate fell from 58.1 percent to 56.6 percent in 2010 and 56.5 percent in 2011. The global recession adversely affected labor markets in advanced economies.

Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %

	Unemployment Rate	Participation Rate	Employment Rate
1968	1.2	65.9	65.1
1975	1.9	63.0	61.9
1980	2.0	63.3	62.0
1985	2.6	63.0	61.4
1990	2.1	63.3	61.9
1991	2.1	63.8	62.4
1992	2.2	64.0	62.6
1993	2.5	63.8	62.2
1994	2.9	63.8	61.8
1995	3.2	63.4	61.4
1996	3.4	63.5	61.4
1997	3.4	63.7	61.5
1998	4.1	63.3	60.7
1999	4.7	62.9	59.9
2000	4.7	62.4	59.5
2001	5.0	62.0	58.9
2002	5.4	61.2	57.9
2003	5.3	60.8	57.6
2004	4.7	60.4	57.6
2005	4.4	60.4	57.7
2006	4.1	60.4	57.9
2007	3.9	60.4	58.1
2008	4.0	60.2	57.8
2009	5.1	59.9	56.9
2010	5.1	59.6	56.6
2011	4.6	59.3	56.5

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/154.htm

The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months, which can be appreciated in the chart in the link in parentheses but followed by decline in Nov, renewed strength in Dec, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012 with recovery in Jul 2012 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption increased 1.7 percent in real terms in Jul 2012 and increased 1.2 percent in nominal terms. There are several segments of decreasing real consumption: clothing and footwear declining 1.5 percent in real terms and 1.3 percent in nominal terms, fuel, light and water charges declining 2.5 percent in real terms but increasing 0.4 percent in nominal terms, food declining 1.8 percent in real terms and 2.2 percent in nominal terms, culture and recreation declining 10.7 in real terms and 12.3 percent in nominal terms and other consumption expenditures declining 0.4 percent in real terms and 0.1 percent in nominal terms. Real household income decreased 2.2 percent; real disposable income decreased 4.0 percent; and real consumption expenditures increased 1.5 percent.

Table VB-4, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

Jul 2012	Nominal	Real
Households of Two or More Persons
Total Consumption	1.2	1.7
Excluding Housing, Vehicles & Remittance		-0.6
Food	-2.2	-1.8
Housing	10.7	10.9
Fuel, Light & Water Charges	0.4	-2.5
Furniture & Household Utensils	-4.1	-1.0
Clothing & Footwear	-1.3	-1.5
Medical Care	5.7	6.3
Transport and Communications	17.3	18.7
Education	5.2	4.8
Culture & Recreation	-12.3	-10.7
Other Consumption Expenditures	-0.1	-0.4*
Workers’ Households
Income	-2.7	-2.2
Disposable Income	-4.5	-4.0
Consumption Expenditures	1.0	1.5

*Real: nominal deflated by CPI excluding imputed rent

Source: http://www.stat.go.jp/english/data/kakei/156.htm

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Jul 2012. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 5.5 percent in IQ2012 with private consumption contributing 3.0 for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of 1.4 percent and contribution of 0.3 percentage points of personal consumption. Nominal consumption increased 4.3 percent in May 2012 but at a lower 1.5 percent in Jun 2012 and 1.2 percent in Jul 2012 and real consumption expenditures increased 4.0 percent in May 2012 but at a lower 1.6 percent in Jun 2012 and 1.7 percent in Jul 2012. Both nominal and real consumption expenditures increased in 2009, 0.3 percent and 2.1 percent, respectively.

Table VB-5, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

	Nominal Consumption Expenditures ∆% Relative to a Year Earlier	Real Consumption Expenditures ∆% Relative to a Year Earlier
Jul 2012	1.2	1.7
Jun	1.5	1.6
May	4.3	4.0
Apr	3.2	2.6
Mar	4.1	3.4
Feb	2.7	2.3
Jan	-2.1	-2.3
Dec 2011	0.3	0.5
Nov	-3.8	-3.2
Oct	-0.6	-0.4
Sep	-1.9	-1.9
Aug	-3.9	-4.1
Jul	-1.8	-2.1
Jun	-3.9	-3.5
May	-1.6	-1.2
Apr	-2.5	-2.0
Mar	-8.8	-8.2
Feb	-0.1	0.5
Jan	-0.9	-0.3
Dec 2010	-3.2	-3.3
Dec 2009	0.3	2.1

Source: http://www.stat.go.jp/english/data/kakei/156.htm

Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012 and beginning of IIIQ2012. Table VB-6 provides Japan’s wholesale and retail sales. Retail sales decreased 0.8 percent in the 12 months ending in Jul 2012. Total sales decreased 3.1 percent in the 12 months ending in Jul 2012. Retail sales are recovering from the deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through Jun 2012 but fell again by 0.8 percent in Jul 2012.

Table VB-6, Japan, Wholesale and Retail Sales 12 Month ∆%

	Total	Wholesale	Retail
Jul 2012	-3.1	-3.9	-0.8
Jun	-2.8	-3.8	0.2
May	2.5	2.1	3.6
Apr	1.7	0.3	5.7
Mar	2.9	0.5	10.3
Feb	-0.1	-1.3	3.4
Jan	-2.0	-3.5	1.8
Dec 2011	-0.8	-2.0	2.5
Nov	-2.3	-2.4	-2.2
Oct	1.1	0.8	1.9
Sep	0.3	0.8	-1.1
Aug	3.1	5.2	-2.6
Jul	2.3	3.0	0.6
Jun	3.1	3.8	1.2
May	1.3	2.3	-1.3
Apr	-2.6	-1.7	-4.8
Mar	-1.3	1.2	-8.3
Feb	5.3	7.2	0.1
Jan	3.3	4.6	0.1
Dec 2010	3.5	5.7	-2.1
Calendar Year
2011	1.0	1.8	-1.2
2010	1.5	1.1	2.5
2009	-20.5	-25.6	-2.3
2008	1.2	1.5	0.3

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

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/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 Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9950) deteriorated. The overall Flash China Manufacturing PMI^™ decreased from 49.3 in Jul to 47.8 in Aug for a nine-month low, while the Flash China Manufacturing Output Index decreased from 50.8 in Jul to 47.9 in Aug, at a five-month low and in contraction territory below 50.0. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that deterioration of the index suggests China is struggling with world economic activity and that further policy easing could occur in the form of investment in infrastructure (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9950).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:

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

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

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

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.3
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	10.1	1.5
2012*			-0.3
2013*			1.0

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, was virtually unchanged at 46.6 in Aug from 46.5 in Jul, for seven consecutive declines and eleven drops in twelve months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9951). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI suggests recession in the economy of the euro zone in IIIQ2012; the combined Jul and Aug indexes are consistent with decline of GDP of 0.5 percent to 0.6 percent in IIIQ2012 GDP (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9951). 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.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2012 ∆% -0.2; IIQ2012/IIQ2011 ∆% -0.4 Blog 8/19/12
Unemployment	Jul 2012: 11.3% unemployment rate Jul 2012: 18.002 million unemployed Blog 9/2/12
HICP	Jul month ∆%: -0.5 12 months Jul ∆%: 2.4 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 86.1 Aug 2012 Confidence minus 24.6 Aug 2012 Blog 9/2/12
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:

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

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

Eurostat estimates the rate of unemployment in the euro area as 11.3 percent in Jul 2012, as shown in Table VD-1. The number of unemployed in Jul 2012 was 18.002 million, which was 2.051 million higher than 15.951 million in Jul 2011. The rate of unemployment jumped from 10.1 percent in Jul 2011 to 11.3 percent in Jul 2012.

Table VD-1, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA

	Unemployment Rate %	Number Unemployed Millions
Jul 2012	11.3	18.002
Jun	11.3	17.914
May	11.2	17.794
Apr	11.1	17.644
Mar	11.0	17.441
Feb	10.9	17.222
Jan	10.8	17.062
Dec 2011	10.7	16.886
Nov	10.6	16.793
Oct	10.5	16.793
Sep	10.3	16.322
Aug	10.2	16.058
Jul	10.1	15.951
Jun	10.0	15.768
May	9.9	15.683
Apr	9.9	15.566
Mar	9.9	15.594
Feb	9.9	15.617
Jan	10.0	15.679
Dec 2010	10.0	15.780

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

Table VD-2 shows the disparity in rates of unemployment in the euro area with 11.3 percent for the region as a whole and 18.002 million unemployed but 5.5 percent in Germany and 2.301 million unemployed. At the other extreme is Spain with rate of unemployment of 25.1 percent and 5.78 million unemployed. The rate of unemployment of the European Union in Jul is 10.4 percent with 25.254 million unemployed.

Table VD-2, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Jul 2012	Unemployment Rate %	Unemployed Millions
Euro Zone	11.3	18.002
Germany	5.5	2.301
France	10.3	3.017
Netherlands	5.3	0.469
Finland	7.6	0.206
Portugal	15.7	0.852
Ireland	14.9	0.310
Italy	10.7	2.764
Greece	NA	NA
Spain	25.1	5.786
Belgium	7.2	0.352
European Union	10.4	25.254

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

Chart VD-1 provides Eurosat estimates of unemployment rates in the European Union. There is significant diversity in the rates of unemployment in members of the euro zone and the European Union.

Chart VD-1, Unemployment Rate in Various Countries and Regions

Source: EUROSTAT

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

The Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). This deterioration is shown in Table VD-3 with the index falling from 102.5 in Jul 2011 to 86.1 in Aug 2012. There is downward trend in 2012 with the index still above the minimum value of 69.1 reached in Mar 2009 but still below the average of 100.

Table VD-3, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-6.7	10.6	-12.9	-9.0	-17.6
Maximum	117.9 05-00	7.8 04-07	35.3 08-98	2.5 05-00	5.3 06-90	6.1 02-90
Minimum	69.1 03-09	-38.2 03-09	-27.3 03-09	-34.3 03-09	-24.9 01-93	-46.3 09-93
Aug 2012	86.1	-15.3	-10.8	-24.6	-17.3	-33.1
Jul	87.9	-15.1	-8.5	-21.5	-15.0	-28.5
Jun	89.9	-12.8	-7.4	-19.8	-14.4	-28.1
May	90.5	-11.4	-5.2	-19.3	-18.1	-30.2
Apr	92.9	-9.0	-2.4	-19.9	-11.1	-27.5
Mar	94.5	-7.1	-0.3	-19.1	-12.0	-26.7
Feb	94.5	-5.7	-0.9	-20.3	-14.0	-24.6
Jan	93.4	-7.0	-0.7	-20.7	-15.5	-28.1
Dec 2011	92.8	-7.2	-2.6	-21.3	-12.2	-28.9
Nov	93.5	-7.3	-2.0	-20.5	-11.2	-26.0
Oct	94.4	-6.6	-0.2	-20.1	-9.9	-27.3
Sep	94.6	-6.0	-0.3	-19.3	-9.9	-29.8
Aug	98.1	-2.9	3.4	-16.8	-8.8	-26.0
Jul	102.5	0.5	7.5	-11.5	-3.7	-27.2
Jun	104.9	3.1	9.7	-10.0	-2.7	-26.8

ESI: Economic Sentiment Index; IND: Industry; SERV: Services; CON: Consumer; RET: Retail Trade; CONS: Construction

Source: European Commission Services

ESI: Economic Sentiment Index; IND: Industry; SERV: Services; CON: Consumer; RET: Retail Trade; CONS: Construction

Source: European Commission Services http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm

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

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

Table VE-DE, Germany, GDP Year ∆%

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

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, fell from 47.5 in Jul to 47.0 in Aug, which is the lowest since Jun 2009 and the fourth consecutive month of decline with declines of both services and manufacturing and sharp decline of new export orders for manufacturers (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949). Tim Moore, Senior Economist at Markit, finds deterioration in business conditions in Germany relative to the first semester of 2012 with new export orders in manufacturing falling at the sharpest rate since Apr 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9949).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 0.3 ∆%; II/Q2012/IIQ2011 ∆% 0.5 1.0 CA 2011/2010: 3.0% GDP ∆% 1992-2011 Blog 8/26/12 5/27/12
Consumer Price Index	Aug month NSA ∆%: 0.3 Aug 12-month NSA ∆%: 2.0 Blog 9/2/12
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	Jul Month ∆% -1.0 12-Month ∆% -0.9 Blog 9/2/12
Employment Report	Unemployment Rate Jul 5.8% Blog 9/2/12
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:

8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1. The number unemployed, not seasonally adjusted, fell from 2.55 million in Jul 2011 to 2.41 million in Jul 2012, or 5.5 percent, while the unemployment rate fell from 6.1 percent in Jul 2011 to 5.8 percent in Jul 2012. The number of persons in employment, not seasonally adjusted, increased from 39.46 million in Jul 2011 to 39.48 million in Jul 2012, or 0.1 percent, while the employment rate was unchanged from 62.6 percent in Jul 2011 to 62.6 percent in Jul 2012. The number unemployed, seasonally adjusted, fell from 2.31 million in Jun 2012 to 2.30 million in Jul 2012, while the unemployment rate was unchanged from 5.5 percent in Jun 2012 to 5.5 percent in Jul 2012. The number of persons in employment, seasonally adjusted, increased from 39.66 million in Jun 2012 to 39.68 million in Jul 2012, or 0.1 percent.

Table VE-1, Germany, Unemployment Labor Force Survey

	Jul 2012	Jun 2012	Jul 2011
NSA
Number Unemployed Millions	2.41 ∆% Jul 2012/Jun 2012: 10.0 ∆% Jul 2012/Jul 2011: -5.5	2.19	2.55
% Rate Unemployed	5.8	5.2	6.1
Persons in Employment Millions	39.48 ∆% Jul 2012/Jun 2012: -0.2 ∆% Jul 2012/Jul 2011: 0.1	39.54	39.46
Employment Rate	62.6	62.8	62.6
SA
Number Unemployed Millions	2.30 ∆% Jul 2012/Jun 2012: -0.4 ∆% Jul 2012/Jul 2011: –7.3	2.31	2.48
% Rate Unemployed	5.5	5.5	5.9
Persons in Employment Millions	39.68 ∆% Jul 2012/Jun 2012: 0.1 ∆% Jul 2012/Jul 2011: 0.0	39.66	39.69

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland (Destatis)https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_296_132.html;jsessionid=AFF07267412CCDA5E81905462A22A0A3.cae2

The unemployment rate in Germany as percent of the labor force in Table VE-2 stood at 6.8 percent in Aug 2012. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

Table VE-2, Germany, Unemployment Rate in Percent of Labor Force

	Percent of Labor Force
Aug 2012	6.8
Jul	6.8
Jun	6.6
May	6.7
Apr	7.0
Mar	7.2
Feb	7.4
Jan	7.3
Dec 2011	6.6
Nov	6.4
Oct	6.5
Sep	6.6
Aug	7.0
Jul	7.0
Jun	6.9
May	7.0
Apr	7.3
Mar	7.6
Feb	7.9
Jan	7.9
Dec 2010	7.1
Dec 2009	7.8
Dec 2008	7.4
Dec 2007	8.1
Dec 2006	9.6
Dec 2005	11.1

Source: Statistisches Bundesamt Deutschland (Destatis)https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-1 of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, 6.6 percent in May 2012 and 6.8 percent in Jun and Jul 2012.

Chart VE-1, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland (Destatis)https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Retail sales in Germany adjusted for inflation are provided in Table VE-3. There have been sharp fluctuations in monthly and 12 months percentage changes. Retail sales fell 0.9 percent in Jul 2012 after decreases of 0.2 percent in Apr, 0.4 percent in Feb and 1.1 percent in Jan. The 12-month percentage change is minus 1.0 percent in Jul 2012.

Table VE-3, Retail Sales in Germany Adjusted for Inflation

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Jul 2012	-1.0	-0.9
Jun	3.7	0.5
May	-0.9	0.0
Apr	-4.8	-0.2
Mar	3.6	0.9
Feb	2.1	-0.4
Jan	1.8	-1.1
Dec 2011	1.3	0.7
Nov	1.3	-0.4
Oct	-0.3	0.0
Sep	1.5	0.4
Aug	3.5	-0.6
Jul	-1.9	0.3
Jun	-2.3	3.0
May	4.7	-2.1
Apr	5.0	0.7
Mar	-2.6	-2.4
Feb	2.5	0.6
Jan	3.0	1.2
Dec 2010	0.6	0.6
Dec 2009	-2.2
Dec 2008	3.3
Dec 2007	-6.2
Dec 2006	1.3

Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-2 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at constant prices from 2007 to 2012. There appear to be fluctuations without trend.

Chart VE-2, Germany, Turnover in Retail Trade at Constant Prices 2005=100

Source: ,Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at current prices from 2007 to 2011. There are also sharp fluctuations but without trend.

Chart VE-3, Germany, Turnover in Retail Sales at Current Prices, Original Values, 2005=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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 Flash France Composite Output Index increased from 47.9 in Jul to 48.9 in Jun, indicating moderate contraction for a sixth consecutive month (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9948). Jack Kennedy, Senior Economist at Markit and author of the report, finds weakness in IIIQ2012 GDP (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9948).

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 Aug Mfg Business Climate 90 Blog 9/2/12

Links to blog comments in Table FR:

8/19/12 http://cmpassocregulationblog.blogspot.com/2012/08/world-inflation-waves-loss-of-dynamism_19.html

8/12/12 http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html

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

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

Table VF-1, France, Business Climate Indicator of Manufacturing of INSEE, General Balance of Opinion, SA %

The business climate survey of the Institut National de la Statistique et des Études Économiques (INSEE) of France finds consecutive worsening conditions in May-Jul with marginal improvement in Aug. Table VF-1 shows the INSEE business climate manufacturing indicator. The headline synthetic index decreased from 93 in May to 89 in Jul, improving to 90 in Aug. The final row shows general production expectations deteriorating from minus 29 in May to minus 44 in Jul and Aug, well below the average since 1976 of minus 8. The indicator of demand and export order levels fell continuously from minus 28 in May to minus 36 in Jul, well below the average of minus 12 since 1976, rebounding to minus 28 in Aug.

Mfg 2012	Average since 1976	May	Jun	Jul	Aug
Synthetic Index	100	93	91	89	90
Recent Changes in Output	5	-3	-7	-10	-9
Finished- Goods Inventory Level	13	12	11	12	12
Demand and Total Order Levels	-17	-29	-33	-30	-33
Demand and Export Order Levels	-12	-28	-30	-36	-28
Personal Production Expectations	5	-2	-5	-9	-6
General Production Expectations	-8	-29	-32	-44	-44

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20120829

Chart VF-1 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the business climate synthetic index of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug 2012.

Chart VF-1, France, INSEE Industrial Business Climate Synthetic Index

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20120829

Chart VF-2 of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov is showing declining trend in Jan with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012 with new improvement in Aug 2012.

Chart VF-2, INSEE Business Climate Manufacturing Turning Point Indicator

Source: Institut National de la Statistique et des Études

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20120829

Chart VF-3 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows the indexes of general production expectations, personal production expectations and recent changes in output. All three indexes fell during the past three contractions after 1991, 2001 and 2008. The indexes are showing downward trend in 2011 that continued in Nov, Dec and Jan 2012 with slight reversal in Feb and significant improvement in Mar followed by weakens in Apr through Jul 2012 and stability in Aug 2012.

Chart VF-3, Climate Manufacturing General Production, Personal Production and Recent Changes in Output of INSEE, SA %

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20120829

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	Aug month ∆%: 0.4 Aug 12-month ∆%: 3.2 Blog 9/2/12
Producer Price Index	Jul month ∆%: 0.4 Jul 12-month ∆%: 2.4 Blog 9/2/12
GDP Growth	IIQ2012/IQ2012 SA ∆%: minus 0.7 IIQ2012/IIQ2011 NSA ∆%: minus 2.5 Blog 8/12/12
Labor Report	Jul 2012 Participation rate 64.0% Employment ratio 57.1% Unemployment rate 10.7% Blog 9/2/12
Industrial Production	Jun month ∆%: -1.4 12 months ∆%: minus 6.7 Blog 8/12/12
Retail Sales	Jun month ∆%: 0.4 Jun 12-month ∆%: -0.5 Blog 9/2/12
Business Confidence	Mfg Aug 87.2, Apr 89.3 Construction Aug 82.0, Apr 83.8 Blog 9/2/12
Trade Balance	Balance Jun SA €1592 million versus May €343 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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.1 percent in Dec 2006 to 10.7 percent in both Jul and Jun 2012. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %
Jul 2012	64.0	57.1	10.7
Jun	63.9	57.1	10.7
May	63.7	57.1	10.5
Apr	63.7	56.9	10.6
Mar	63.6	56.9	10.4
Feb	63.4	57.0	10.0
Jan	63.2	57.0	9.7
Dec 2011	62.9	56.9	9.4
Nov	62.7	56.7	9.3
Oct	62.6	56.9	8.9
Sep	62.3	56.8	8.8
Aug	62.4	57.0	8.4
Jul	62.3	57.1	8.2
Jun	62.1	57.0	8.1
May	62.1	57.0	8.1
Apr	61.9	56.9	7.9
Mar	62.2	57.2	7.9
Feb	61.9	56.9	7.9
Jan	61.9	56.8	8.1
Dec 2010	62.1	56.9	8.2
Dec 2009	62.3	57.0	8.3
Dec 2008	62.5	58.1	6.9
Dec 2007	63.1	59.0	6.5
Dec 2006	62.5	58.6	6.1
Dec 2005	62.5	57.8	7.5
Dec 2004	62.5	57.4	7.9

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/69250

Table VG-2 provides more detail on the labor report for Italy in Jun\l 2012. The level of employment increased 1000 from Jun to Jul 2012 and decreased 5,000 from Jul 2011 to Jul 2012. Unemployment decreased 3,000 in Jul 2012 and increased 695,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 35.3 percent in Jul 2012 for ages 15 to 24.

Table VG-2, Italy, Labor Report

Jul 2012	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	23.025	1	0.0	-5	0.0
UNE	2.764	-3	-0.1	695	33.6
INA 15-64	14.272	-27	-0.2	-674	-4.5
EMP %	57.1		0.0		0.0
UNE %	10.7		0.0		2.5
Youth UNE % 15-24	35.3		1.3		7.4
INA % 15-64	36.0		-0.1		-1.6

Notes: EMP: Employed; UNE: Unemployed; INA 15-64: Inactive aged 15 to 64; EMP %: Employment Rate; UNE %: Unemployment Rate; Youth UNE % 15-24: Youth Unemployment Rate aged 15 to 24; INA % 15-64: Inactive Rate aged 15 to 64.

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/69250

Chart VG-1 of the Istituto Nazionale di Statistica provides the rate of unemployment in Italy. The rate stabilized in 2011 at around 8 percent until mid year and then climbed to 10.7 percent in both Jun and Jul 2012.

Chart VG-1, Italy, Rate of Unemployment, %

Source: Istituto Nazionale di Statistica

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level dropped from slightly above 23 million in 2011, climbing back to 23 million May-Jul 2012.

Chart VG-2, Italy, Total Number of Employed Persons, Millions, SA

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/69038

An important part of the analysis of Blanchard (2011WEOSep, 2012WEOApr) is the much more difficult adjustment of economies with need of fiscal consolidation in the presence of weak economic growth. Demand has significantly weakened throughout the advanced economies. There are many sound fundamentals in Italy such as high income and competitive companies. The restraints consist of low economic growth with high debt/GDP ratio. Table VG-3 provides growth of retail sales for Italy. Retail sales increased 0.4 percent in Jun 2012 relative to May 2012, decreased 1.7 percent in Apr-Jun 2012 relative to Jan-Mar 2012, decreased 0.5 percent in Jun 2012 relative to Jun 2011 and decreased 1.4 percent in Jan-Jun 2012 relative to Jan-Jun 2011.

Table VG-3, Italy, Retail Sales ∆%

	Jun 2012/ May 2012 SA	Apr-Jun 12/ Jan 11- Mar 12 SA	Jun 2012/ Jun 2011 NSA	Jan-Jun 2012/ Jan-Jun 2011
Total	0.4	-1.7	-0.5	-1.4
Food	0.2	-1.2	1.3	0.2
Non-food	0.4	-1.9	-1.4	-2.2

Source: Istituto Nazionale di Statistica

Chart VG-3 provides 12-month percentage changes of retail sales in Italy. There are only positive changes in Dec 2010 and Apr 2011. Retail sales fell relative to a year earlier in most months of 2011 with improvement in Feb and Mar 2012 but sharp decline in Apr 2012 followed by improvements in May and Jun 2012.

Chart VG-3, Italy, Percentage Changes of Retail Sales in 12 Months

Source: Istituto Nazionale di Statistica