CMP Associates Regulation Blog: Recovery without Hiring, IMF View, United States International Trade, World Currency Wars, Collapse of United States Dynamism of Income Growth and Employment Creation and World Financial Turbulence and Economic Slowdown with Global Recession Risk: Part II

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Recovery without Hiring, IMF View, United States International Trade, World Currency Wars, Collapse of United States Dynamism of Income Growth and Employment Creation and World Financial Turbulence and Economic Slowdown with Global Recession Risk: Part II

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Recovery without Hiring, IMF View, United States International Trade, World Currency Wars, Collapse of United States Dynamism of Income Growth and Employment Creation and World Financial Turbulence and Economic Slowdown with Global Recession Risk

Carlos M. Pelaez

Executive Summary

IA Recovery without Hiring

IA1 Hiring Collapse

IA2 Labor Underutilization

IA3 Ten Million Fewer Full-time Job

IA4 Youth and Middle-Aged Unemployment

IB Collapse of United States Dynamism of Income Growth and Employment Creation

IIA IMF View

IIB United States International Trade

IIB1 United States International Trade

IIB2 Import Export Prices

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

IV Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table IV-1, updated with every blog comment, provides the latest annual data for GDP, consumer price index (CPI) inflation, producer price index (PPI) inflation and unemployment (UNE) for the advanced economies, China and the highly-indebted European countries with sovereign risk issues. The table now includes the Netherlands and Finland that with Germany make up the set of northern countries in the euro zone that hold key votes in the enhancement of the mechanism for solution of sovereign risk issues (Peter Spiegel and Quentin Peel, “Europe: Northern Exposures,” Financial Times, Mar 9, 2011 http://www.ft.com/intl/cms/s/0/55eaf350-4a8b-11e0-82ab-00144feab49a.html#axzz1gAlaswcW). Newly available data on inflation is considered below in this section. Data in Table IV-1 for the euro zone and its members are updated from information provided by Eurostat but individual country information is provided in this section as soon as available, following Table IV-1. Data for other countries in Table IV-1 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section V World Economic Slowdown following with individual country and regional data tables.

Table IV-1, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates

	GDP	CPI	PPI	UNE
US	2.3	1.7	2.1	7.8
Japan	3.5	-0.4	-1.4	4.2
China	8.9	2.0	-3.5
UK	-0.5	2.5* RPI 2.9	2.2* output 1.2** input 1.4*	8.1
Euro Zone	-0.4	2.6	2.7	11.4
Germany	1.0 CA	2.2	1.6	5.5
France	0.3	2.4	2.5	10.6
Nether-lands	-0.5	2.5	4.1	5.3
Finland	0.1	3.3	2.6	7.9
Belgium	-0.3	2.6	3.3	7.4
Portugal	-3.3	3.2	4.0	15.9
Ireland	-0.5	2.6	2.4	15.0
Italy	-2.6	3.3	3.0	10.7
Greece	NA	1.2	6.8	NA
Spain	-1.3	2.7	4.1	25.1

Notes: GDP: rate of growth of GDP; CPI: change in consumer price inflation; PPI: producer price inflation; UNE: rate of unemployment; all rates relative to year earlier

*Office for National Statistics http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/august-2012/index.html **Core

PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/august-2012/index.html Source: EUROSTAT; country statistical sources http://www.census.gov/aboutus/stat_int.html

In the effort to increase transparency, the Federal Open Market Committee (FOMC) provides both economic projections of its participants and views on future paths of the policy rate that in the US is the federal funds rate or interest on interbank lending of reserves deposited at Federal Reserve Banks. These projections and views are discussed initially followed with appropriate analysis.

Jon Hilsenrath, writing on “Fed sets stage for stimulus,” on Aug 31, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390443864204577623220212805132.html?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzes the essay presented by Chairman Bernanke at the Jackson Hole meeting of central bankers, as defending past stimulus with unconventional measures of monetary policy that could be used to reduce extremely high unemployment. Chairman Bernanke (2012JHAug31, 18-9) does support further unconventional monetary policy impulses if required by economic conditions (http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm):

“Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

Professor John H Cochrane (2012Aug31), at the University of Chicago Booth School of Business, writing on “The Federal Reserve: from central bank to central planner,” on Aug 31, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444812704577609384030304936.html?mod=WSJ_hps_sections_opinion), analyzes that the departure of central banks from open market operations into purchase of assets with risks to taxpayers and direct allocation of credit subject to political influence has caused them to abandon their political independence and accountability. Cochrane (2012Aug31) finds a return to the proposition of Milton Friedman in the 1960s that central banks can cause inflation and macroeconomic instability.

Jon Hilsenrath, writing on “Bernanke letter defends Fed actions,” on Aug 24, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444358404577609231770784446.html?mod=WSJ_hp_LEFTWhatsNewsCollection#project%3Dissaletter082412%26articleTabs%3Darticle), finds support for FOMC policies and possible further actions in a letter by Chairman Bernanke (2012Aug22) in reply to inquiry by Representative Darrell Issa (2012Aug1), which were obtained and published by the WSJ on Aug 22, 2012 (http://online.wsj.com/public/resources/documents/Bernankeletter0812.pdf http://s3.documentcloud.org/documents/413447/issaletter0812.pdf). Issa (2012Aug1) inquired from Chairman Bernanke about analysis of monetary policy of various types, including by distinguished Professor Allan Meltzer (http://www.amazon.com/Allan-H.-Meltzer/e/B001H6MWPC/ref=ntt_dp_epwbk_0), the author of three scholarly analytical volumes on the history of the Federal Reserve (Meltzer 2004, 2010a, 2010b), who has emphasized the short-term nature of economic policy that could be more effective if focused on the long term. Chairman Bernanke (2012Aug22), who is also an eminent scholar, provided detailed answers to the queries by Issa (2012Aug1). The first sentence of the reply ignited positive risk taking in financial markets operating with low holiday volumes: “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.”

The statement of the FOMC at the conclusion of its meeting on Sep 13, 2012, revealed the following policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm):

“Release Date: September 13, 2012

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.”

There are several important issues in this statement.

1. Mandate. The FOMC pursues a policy of attaining its “dual mandate” of (http://www.federalreserve.gov/aboutthefed/mission.htm):

“Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates”

2. Open-ended Quantitative Easing or QE_∞. Earlier programs are continued with an additional open-ended $40 billion of bond purchases per months: “To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.”

3. Advance Guidance on Accommodative Policy after Recovery Strengthening. Policy will be accommodative even after the economy recovers satisfactorily: “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.”

4. Monitoring and Policy Focus on Jobs. The FOMC reconsiders its policy continuously in accordance with available information: “The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”

Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval of (1.99, 2.0). Symmetric targets appear to have been abandoned in favor of a self-imposed single jobs mandate of easing monetary policy even with the economy growing at or close to potential output (http://www.federalreserve.gov/newsevents/press/monetary/20120913a.htm): “The [Federal Open Market] Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the recovery strengthens.” The impact on the overall economy and the financial system of errors of policy are magnified by large-scale policy doses of trillions of dollars of quantitative easing and zero interest rates. The US economy has been experiencing financial repression as a result of negative real rates of interest during nearly a decade and programmed in monetary policy statements until 2015 or, for practical purposes, forever. The essential calculus of risk/return in capital budgeting and financial allocations has been distorted. If economic perspectives are doomed until 2015 such as to warrant zero interest rates and open-ended bond-buying by “printing” digital bank reserves (http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html), rational investors and consumers will not invest and consume until just before interest rates are likely to increase. Monetary policy statements on intentions of zero interest rates for another three years or now virtually forever discourage investment and consumption or aggregate demand that can increase economic growth and generate more hiring and opportunities to increase wages and salaries. The doom scenario used to justify monetary policy accentuates adverse expectations on discounted future cash flows of potential economic projects that can revive the economy and create jobs. If it were possible to project the future with the central tendency of the monetary policy scenario and monetary policy tools do exist to reverse this adversity, why the tools have not worked before and even prevented the financial crisis? If there is such thing as “monetary policy science”, why it has such poor record and current inability to reverse production and employment adversity? There is no excuse of arguing that additional fiscal measures are needed because they were deployed simultaneously with similar ineffectiveness.

Table IV-2 provides economic projections of governors of the Board of Governors of the Federal Reserve and regional presidents of Federal Reserve Banks released at the meeting of Sep 13, 2012. The Fed releases the data with careful explanations (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf). Columns “∆% GDP,” “∆% PCE Inflation” and “∆% Core PCE Inflation” are changes “from the fourth quarter of the previous year to the fourth quarter of the year indicated.” The GDP report for IIQ2012 is analyzed in I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2012/07/decelerating-united-states-recovery.html) and the PCE inflation data from the report on personal income and outlays (Section IV at http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). The Bureau of Economic Analysis (BEA) provides the third estimate of IIQ2012 GDP with the first estimate of IIIQ2012 to be released on Oct 26 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm). PCE inflation is the index of personal consumption expenditures (PCE) of the report of the Bureau of Economic Analysis (BEA) on “Personal Income and Outlays” (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm), which is analyzed in sections IB and IV in this blog for Aug 2012 (http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html). The next report on “Personal Income and Outlays” for Sep will be released at 8:30 AM on Oct 29, 2012 (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm). PCE core inflation consists of PCE inflation excluding food and energy. Column “UNEMP %” is the rate of unemployment measured as the average civilian unemployment rate in the fourth quarter of the year. The Bureau of Labor Statistics (BLS) provides the Employment Situation Report with the civilian unemployment rate in the first Friday of every month, which is analyzed in this blog (the Sep report is analyzed in this blog at http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or_7.html, the Aug report is in Section I at http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and the Jul report is analyzed at http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html). The report for Oct will be released on Fri Nov 2, 2012 (http://www.bls.gov/ces/). “Longer term projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy” (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf).

It is instructive to focus on 2012 and 2013 as 2014 and 2015 and longer term are too far away, and there is not much information even on what will happen in 2013 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC but the second block of numbers provides the range of projections by FOMC participants. The first row for each year shows the projection introduced after the meeting of Sep 13, 2012 and the second row “PR” the projection of the Jun 20, 2012 meeting. There are three major changes in the view.

1. Growth “∆% GDP.” The FOMC has reduced the forecast of GDP growth in 2012 from 3.3 to 3.7 percent in Jun 2011 to 2.5 to 2.9 percent in Nov 2011 and 2.2 to 2.7 percent at the Jan 25 meeting but increased it to 2.4 to 2.9 percent at the Apr 25, 2012 meeting, reducing it to 1.9 to 2.4 percent at the Jun 20, 2012 meeting and further to 1.7 to 2.0 percent at the Sep 13, 2012 meeting. GDP growth in 2013 has been increased to 2.5 to 3.0 percent at the meeting on Sep 13

2012 from 2.2 to 2.8 percent at the meeting on Jun 20, 2012. Rate of Unemployment “UNEM%.” The FOMC increased the rate of unemployment from 7.8 to 8.2 percent in Jun 2011 to 8.5 to 8.7 percent in Nov 2011 but has reduced it to 8.2 to 8.5 percent at the Jan 25 meeting and further down to 7.8 to 8.0 percent at the Apr 25, 2012 meeting but increased it to 8.0 to 8.2 percent at the Jun 20, 2012 meeting and did not change it at 8.0 to 8.2 at the meeting on Sep 13, 2012. The rate of unemployment for 2013 has been changed to 7.6 to 7.9 percent at the Sep 13 meeting compared with 7.5 to 8.0 percent at the Jun 20 meeting.

3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 1.5 to 2.0 percent in Jun 2011 to virtually the same of 1.4 to 2.0 percent in Nov 2011 but has reduced it to 1.4 to 1.8 percent at the Jan 25 meeting but increased it to 1.9 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.2 to 1.7 percent at the Jun 20, 2012 meeting. The interval was increased to 1.7 to 1.8 percent at the Sep 13, 2012 meeting.

4. Core Inflation “∆% Core PCE Inflation.” Core inflation is PCE inflation excluding food and energy. There is again not much of a difference of the projection for 2012 in Jun 2011 of 1.4 to 2.0 percent and the Nov 2011 projection of 1.5 to 2.0 percent, which has been reduced slightly to 1.5 to 1.8 percent at the Jan 25 meeting but increased to 1.8 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.7 to 2.0 percent at the Jun 20, 2012 meeting. The projection was virtually unchanged at 1.7 to 1.9 percent at the Sep 13 meeting. For 2013, the projection for core inflation was changed from 1.6 to 2.0 percent at the Jun 20, 2012 meeting to 1.7 to 2.0 percent at the Sep 13, 2012 meeting.

Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, June 2012 and Sep 2012

	∆% GDP	UNEM %	∆% PCE Inflation	∆% Core PCE Inflation
Central Tendency
2012 Jun PR	1.7 to 2.0 1.9 to 2.4	8.0 to 8.2 8.0 to 8.2	1.7 to 1.8 1.2 to 1.7	1.7 to 1.9 1.7 to 2.0
2013 Jun PR	2.5 to 3.0 2.2 to 2.8	7.6 to 7.9 7.5 to 8.0	1.6 to 2.0 1.5 to 2.0	1.7 to 2.0 1.6 to 2.0
2014 Jun PR	3.0 to 3.8 3.0 to 3.5	6.7 to 7.3 7.0 to 7.7	1.6 to 2.0 1.5 to 2.0	1.8 to 2.0 1.6 to 2.0
2015 Jun	3.0 to 3.8 NA	6.0 to 6.8 NA	1.8 to 2.0 NA	1.9 to 2.0 NA
Longer Run Jun PR	2.3 to 2.5 2.3 to 2.5	5.2 to 6.0 5.2 to 6.0	2.0 2.0
Range
2012 Jun PR	1.6 to 2.0 1.6 to 2.5	8.0 to 8.3 7.8 to 8.4	1.5 to 1.9 1.2 to 2.0	1.6 to 2.0 1.7 to 2.0
2013 Jun PR	2.3 to 3.5 2.2 to 3.5	7.0 to 8.1 7.0 to 8.1	1.5 to 2.1 1.5 to 2.1	1.6 to 2.0 1.4 to 2.1
2014 Jun PR	2.7 to 4.1 2.8 to 4.0	6.3 to 7.5 6.3 to 7.7	1.6 to 2.2 1.5 to 2.2	1.6 to 2.2 1.5 to 2.2
2015 Jun PR	2.5 to 4.2 NA	5.7 to 6.9 NA	1.8 to 2.3 NA	1.8 to 2.3 NA
Longer Run Jun PR	2.2 to 3.0 2.2 to 3.0	5.0 to 6.3 4.9 to 6.3	2.0 2.0

Notes: UEM: unemployment; PR: Projection

Source:

http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf

Another important decision at the FOMC meeting on Jan 25, 2012, is formal specification of the goal of inflation of 2 percent per year but without specific goal for unemployment (http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm):

“Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.

The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.

Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.

The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.

In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. ”

The probable intention of this specific inflation goal is to “anchor” inflationary expectations. Massive doses of monetary policy of promoting growth to reduce unemployment could conflict with inflation control. Economic agents could incorporate inflationary expectations in their decisions. As a result, the rate of unemployment could remain the same but with much higher rate of inflation (see Kydland and Prescott 1977 and Barro and Gordon 1983; http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html). Strong commitment to maintaining inflation at 2 percent could control expectations of inflation.

The FOMC continues its efforts of increasing transparency that can improve the credibility of its firmness in implementing its dual mandate. Table IV-3 provides the views by participants of the FOMC of the levels at which they expect the fed funds rate in 2012, 2013, 2014 and the in the longer term. Table IV-3 is inferred from a chart provided by the FOMC with the number of participants expecting the target of fed funds rate (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf). There are 18 participants expecting the rate to remain at 0 to ¼ percent in 2012 and only one to be higher. Not much change is expected in 2013 either with 15 participants anticipating the rate at the current target of 0 to ¼ percent and only four expecting higher rates. The rate would still remain at 0 to ¼ percent in 2014 for 13 participants with four expecting the rate to be in the range of 1.0 to 2.0 percent and two participants expecting rates from 2.0 to 3.0. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels until late in 2014. For 2015, ten participants expect rates to be below 1.0 percent while four expect rates from 3.0 to 4.5 percent. In the long-run, all 19 participants expect rates to be between 3.0 and 4.5 percent.

Table IV-3, US, Views of Target Federal Funds Rate at Year-End of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012

Source:

http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf

Additional information is provided in Table IV-4 with the number of participants expecting increasing interest rates in the years from 2012 to 2015. It is evident from Table IV-4 that the prevailing view in the FOMC is for interest rates to continue at low levels in future years. This view is consistent with the economic projections of low economic growth, relatively high unemployment and subdued inflation provided in Table IV-2.

Table IV-4, US, Views of Appropriate Year of Increasing Target Federal Funds Rate of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012

Appropriate Year of Increasing Target Fed Funds Rate	Number of Participants
2012	1
2013	3
2014	2
2015	12
2016	1

Source:

http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20120913.pdf

The producer price index of the US from 1947 to 2012 in Chart IV-1 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-1, US, Producer Price Index, Finished Goods, NSA, 1947-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Chart II-7 provides 12-month percentage changes of the producer price index from 1948 to 2012. The distinguishing event in Chart II-7 is the Great Inflation of the 1970s. The shape of the two-hump Bactrian camel of the 1970s resembles the double hump from 2007 to 2012.

Chart IV-2, US, Producer Price Index, Finished Goods, 12-Month Percentage Change, NSA, 1948-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

The producer price index excluding food and energy from 1973 to 2012, the first historical date of availability in the dataset of the Bureau of Labor Statistics (BLS), shows similarly dynamic behavior as the overall index, as shown in Chart IV-3. There is no evidence of persistent deflation in the US PPI.

Chart IV-3, US Producer Price Index, Finished Goods Excluding Food and Energy, NSA, 1973-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Chart IV-4 provides 12-month percentage rates of change of the finished goods index excluding food and energy. The dominating characteristic is the Great Inflation of the 1970s. The double hump illustrates how inflation may appear to be subdued and then returns with strength.

Chart IV-4, US Producer Price Index, Finished Goods Excluding Food and Energy, 12-Month Percentage Change, NSA, 1974-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

The producer price index of energy goods from 1974 to 2012 is provided in Chart IV-5. The first jump occurred during the Great Inflation of the 1970s analyzed in various comments of this blog (http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html) and in Appendix I. There is relative stability of producer prices after 1986 with another jump and decline in the late 1990s into the early 2000s. The episode of commodity price increases during a global recession in 2008 could only have occurred with interest rates dropping toward zero, which stimulated the carry trade from zero interest rates to leveraged positions in commodity futures. Commodity futures exposures were dropped in the flight to government securities after Sep 2008. Commodity future exposures were created again when risk aversion diminished around Mar 2011 after the finding that US bank balance sheets did not have the toxic assets that were mentioned in proposing TARP in Congress (see Cochrane and Zingales 2009). Fluctuations in commodity prices and other risk financial assets originate in carry trade when risk aversion ameliorates.

Chart IV-5, US, Producer Price Index, Finished Energy Goods, NSA, 1974-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Chart IV-6 shows 12-month percentage changes of the producer price index of finished energy goods from 1975 to 2012. This index is only available after 1974 and captures only one of the humps of energy prices during the Great Inflation. Fluctuations in energy prices have occurred throughout history in the US but without provoking deflation. Two cases are the decline of oil prices in 2001 to 2002 that has been analyzed by Barsky and Kilian (2004) and the collapse of oil prices from over $140/barrel with shock of risk aversion to the carry trade in Sep 2008.

Chart IV-6, US, Producer Price Index, Finished Energy Goods, 12-Month Percentage Change, NSA, 1974-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Headline and core producer price indexes are in Table IV-5. The headline PPI SA increased 1.1 percent in Sep 2012 and 2.1 percent NSA in the 12 months ending in Aug 2012. The core PPI SA increased 0.0 percent in Sep 2012 and rose 2.3 percent in 12 months. Analysis of annual equivalent rates of change shows inflation waves similar to those worldwide. In the first wave, the absence of risk aversion from the sovereign risk crisis in Europe motivated the carry trade from zero interest rates into commodity futures that caused the average equivalent rate of 9.7 percent in the headline PPI in Jan-Apr 2011 and 4.0 percent in the core PPI. In the second wave, commodity futures prices collapsed in May 2011 with the return of risk aversion originating in the sovereign risk crisis of Europe. The annual equivalent rate of headline PPI inflation collapsed to 1.2 percent in May-Jun 2011 but the core annual equivalent inflation rate was much higher at 3.0 percent. In the third wave, headline PPI inflation resuscitated with annual equivalent at 6.6 percent in Jul-Sep 2011 and core PPI inflation at 4.1 percent. Core PPI inflation was persistent throughout 2011, jumping from annual equivalent at 1.8 percent in the first four months of 2010 to 3.0 percent in 12 months ending in Dec 2011. Unconventional monetary policy is based on the proposition that core rates reflect more fundamental inflation and are thus better predictors of the future. In practice, the relation of core and headline inflation is as difficult to predict as future inflation (see IIID Supply Shocks in http://cmpassocregulationblog.blogspot.com/2011_05_01_archive.html). In the fourth wave, risk aversion originating in the lack of resolution of the European debt crisis caused unwinding of carry trades with annual equivalent headline PPI inflation of minus 1.2 percent in Oct-Nov 2011 and 0.6 percent in the core annual equivalent. In the fifth wave from Dec 2011 to Jan 2012, annual equivalent inflation was 1.2 percent for the headline index but 4.9 percent for the core index excluding food and energy. In the sixth wave, annual equivalent inflation in Feb-Mar 2012 was 1.2 percent for the headline PPI and 1.8 percent for the core. In the seventh wave, renewed risk aversion caused reversal of carry trade commodity exposures with annual equivalent headline inflation of minus 7.5 percent in Apr-May 2012 while core PPI inflation was at annual equivalent 1.2 percent. In the eighth wave, annual equivalent inflation returned at 3.0 percent in Jun-Jul and 4.3 percent for the core index. In the ninth wave, relaxed risk aversion because of the announcement of the impaired bond buying program of the European Central Bank induced carry trades that drove annual equivalent inflation of producer prices of the United States at 18.2 percent in Aug-Sep 2012 and 1.2 percent in the core index. It is almost impossible to forecast PPI inflation and its relation to CPI inflation. “Inflation surprise” by monetary policy could be proposed to climb along a downward sloping Phillips curve, resulting in higher inflation but lower unemployment (see Kydland and Prescott 1977, Barro and Gordon 1983 and past comments of this blog http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). The architects of monetary policy would require superior inflation forecasting ability compared to forecasting naivety by everybody else. In practice, we are all naïve in forecasting inflation and other economic variables and events.

Table IV-5, US, Headline and Core PPI Inflation Monthly SA and 12-Month NSA ∆%

	Finished Goods SA Month	Finished Goods NSA 12 months	Finished Core SA Month	Finished Core NSA 12 months
Sep 2012	1.1	2.1	0.0	2.3
Aug	1.7	2.0	0.2	2.5
AE ∆% Aug	18.2		1.2
Jul	0.3	0.5	0.4	2.5
Jun	0.2	0.7	0.3	2.6
AE ∆% Jun-Jul	3.0		4.3
May	-1.0	0.6	0.1	2.7
Apr	-0.3	1.8	0.1	2.7
AE ∆% Apr-May	-7.5		1.2
Mar	-0.2	2.8	0.2	2.9
Feb	0.4	3.4	0.1	3.1
AE ∆% Feb-Mar	1.2		1.8
Jan	0.3	4.1	0.6	3.1
Dec 2011	-0.1	4.7	0.2	3.0
AE ∆% Dec-Jan	1.2		4.9
Nov	0.1	5.6	0.1	3.0
Oct	-0.3	5.8	0.0	2.9
AE ∆% Oct-Nov	-1.2		0.6
Sep	0.9	7.0	0.3	2.8
Aug	0.2	6.6	0.2	2.7
Jul	0.5	7.1	0.5	2.7
AE ∆% Jul-Sep	6.6		4.1
Jun	0.1	6.9	0.3	2.3
May	0.1	7.1	0.2	2.1
AE ∆% May-Jun	1.2		3.0
Apr	0.7	6.6	0.3	2.3
Mar	0.5	5.6	0.3	2.0
Feb	1.1	5.4	0.2	1.8
Jan	0.8	3.6	0.5	1.6
AE ∆% Jan-Apr	9.7		4.0
Dec 2010	0.9	3.8	0.2	1.4
Nov	0.4	3.4	-0.1	1.2
Oct	0.8	4.3	-0.2	1.6
Sep	0.4	3.9	0.2	1.6
Aug	0.7	3.3	0.2	1.3
Jul	0.2	4.1	0.2	1.5
Jun	-0.2	2.7	0.1	1.1
May	-0.2	5.1	0.3	1.3
Apr	-0.1	5.4	0.1	0.9
Mar	0.5	5.9	0.2	0.9
Feb	-0.6	4.2	0.0	1.0
Jan	1.0	4.5	0.3	1.0

Note: Core: excluding food and energy; AE: annual equivalent

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

The US producer price index NSA from 2000 to 2012 is shown in Chart IV-7. There are two episodes of decline of the PPI during recessions in 2001 and in 2008. Barsky and Kilian (2004) consider the 2001 episode as one in which real oil prices were declining when recession began. Recession and the fall of commodity prices instead of generalized deflation explain the behavior of US inflation in 2008.

Chart IV-7, US, Producer Price Index, NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Twelve-month percentage changes of the PPI NSA from 2000 to 2012 are shown in Chart IV-8. It may be possible to forecast trends a few months in the future under adaptive expectations but turning points are almost impossible to anticipate especially when related to fluctuations of commodity prices in response to risk aversion. In a sense, monetary policy has been tied to behavior of the PPI in the negative 12-month rates in 2001 to 2003 and then again in 2009 to 2010. Monetary policy following deflation fears caused by commodity price fluctuations would introduce significant volatility and risks in financial markets and eventually in consumption and investment.

Chart IV-8, US, Producer Price Index, 12-Month Percentage Change NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

The US PPI excluding food and energy from 2000 to 2012 is shown in Chart IV-9. There is here again a smooth trend of inflation instead of prolonged deflation as in Japan.

Chart IV-9, US, Producer Price Index Excluding Food and Energy, NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Twelve-month percentage changes of the producer price index excluding food and energy are shown in Chart IV-10. Fluctuations replicate those in the headline PPI. There is an evident trend of increase of 12 months rates of core PPI inflation in 2011 but lower rates in the beginning of 2012.

Chart IV-10, US, Producer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

The US producer price index of energy goods from 2000 to 2012 is in Chart IV-11. There is a clear upward trend with fluctuations that would not occur under persistent deflation.

Chart IV-11, US, Producer Price Index Finished Energy Goods, NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Chart IV-12 provides 12-month percentage changes of the producer price index of energy goods from 2000 to 2012. The episode of declining prices of energy goods in 2001 to 2002 is related to the analysis of decline of real oil prices by Barsky and Kilian (2004). Interest rates dropping to zero during the global recession explain the rise of the PPI of energy goods toward 30 percent. Bouts of risk aversion with policy interest rates held close to zero explain the fluctuations in the 12-month rates of the PPI of energy goods in the expansion phase of the economy. Symmetric inflation targets induce significant instability in inflation and interest rates with adverse effects on financial markets and the overall economy.

Chart IV-12, US, Producer Price Index Energy Goods, 12-Month Percentage Change, NSA, 2000-2012

Source: US Bureau of Labor Statistics http://www.bls.gov/ppi/

Inflation in advanced economies has been fluctuating in waves at the production level alternation of surges and moderation of commodity price shocks. Table IV-6 provides month and 12-month percentage rates of inflation of Japan’s corporate goods price index (CGPI). Inflation measured by the CGPI increased 0.3 percent in Sep 2012 and fell 1.4 percent in 12 months. Measured by 12-month rates, CGPI inflation increased from minus 0.2 percent in Jul 2010 to a high of 2.2 percent in Jul 2011 and declined to minus 1.4 percent in Sep 2012. Calendar-year inflation for 2011 is 1.5 percent, which is the highest after declines in 2009 and 2010 but lower than 4.6 percent in the commodity shock driven by zero interest rates during the global recession in 2008. Inflation of the corporate goods prices follows waves similar to those in other indices around the world (http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html). In the first wave, annual equivalent inflation reached 5.9 percent in Jan-Apr, driven by commodity price shocks of the carry trade from zero interest rates to commodity futures. In the second wave, carry trades were unwound because of risk aversion caused by the European debt crisis, resulting in average annual equivalent inflation of minus 1.2 percent in May-Jun. In the third wave, renewed risk aversion caused annual equivalent decline of the CGPI of minus 2.2 percent in Jul-Nov. In the fourth wave, continuing risk aversion resulted in annual equivalent inflation of minus 0.6 percent in Dec 2011 to Jan 2012. In the fifth wave, renewed risk appetite resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation dropped to minus 5.8 percent in May-Jul 2012. In the seventh wave, annual equivalent inflation jumped to 3.0 percent in Aug-Sep 2012. Unconventional monetary policies of zero interest rates and quantitative easing have created a difficult environment for economic and financial decisions with significant inflation volatility.

Table IV-6, Japan, Corporate Goods Price Index (CGPI) ∆%

	Month	Year
Sep 2012	0.3	-1.4
Aug	0.2	-1.9
AE ∆% Aug	3.0
Jul	-0.4	-2.2
Jun	-0.7	-1.5
May	-0.4	-0.8
AE ∆% May-Jul	-5.8
Apr	-0.1	-0.6
Mar	0.5	0.3
Feb 2012	0.2	0.4
AE ∆% Feb-Apr	2.4
Jan	-0.1	0.3
Dec 2011	0.0	0.8
AE ∆% Dec-Jan	-0.6
Nov	-0.1	1.3
Oct	-0.8	1.3
Sep	-0.2	2.0
Aug	-0.1	2.2
Jul	0.3	2.2
AE ∆% Jul-Nov	-2.2
Jun	0.0	1.9
May	-0.2	1.6
AE ∆% May-Jun	-1.2
Apr	0.8	1.8
Mar	0.6	1.3
Feb	0.1	0.7
Jan	0.4	0.6
AE ∆% Jan-Apr	5.9
Dec 2010	0.5	1.2
Nov	-0.1	0.9
Oct	-0.1	0.9
Sep	0.0	-0.1
Aug	-0.1	0.0
Jul	0.0	-0.2
Calendar Year
2011		1.5
2010		-0.1
2009		-5.3
2008		4.6

AE: annual equivalent

Source: Bank of Japan

http://www.boj.or.jp/en/

Chart IV-13 of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan. Percentage changes of inflation of services are not as sharp as those of goods. Japan had the same sharp waves of inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). Inflation also collapsed in the beginning of the 1980s as a result of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid 2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.

Chart IV-13, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1980-2012

Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index

Source: Bank of Japan

http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en

There is similar behavior of year-on-year percentage changes of the US producer price index from 1980 to 2012 in Chart IV-14 of the US Bureau of Labor Statistics as in Chart IV-13 with the domestic goods CGPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.

Chart IV-14, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1980-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/data.htm

Finer detail is provided by Chart IV-15 of the domestic CGPI from 2008 to 2012. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion.

Chart IV-15, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2012

Source: Bank of Japan

http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en

There is similar behavior of the US producer price index from 2008 to 2012 in Chart IV-16 as in the domestic CGPI in Chart IV-15. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-16. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.

Chart IV-16, US, Producer Price Index Finished Goods, Monthly, 2008-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/data.htm

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-17 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009.

Chart IV-17, Japan, Export Corporate Goods Price Index, Monthly, 2008-2012

Source: Bank of Japan

http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index in Chart IV-18 shows an upward trend after the rise during the global recession in 2008 driven by carry trades from fed funds rates collapsing to zero into commodity futures and decline during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan.

Chart IV-18, Japan, Import Corporate Goods Price Index, Monthly, 2008-2012

Source: Bank of Japan

http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en

Chart IV-19 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2012. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from interest rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

Chart IV-19, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2012

Source: Bank of Japan

http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en

The producer price index of the US from 19700 to 2012 in Chart IV-20 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-20, US, Producer Price Index Finished Goods, Monthly, 1970-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/data.htm

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. Petroleum and coal with weight of 5.7 percent increased 4.1 percent in Sep and 2.0 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.8 percent, increased 0.0 percent in Sep and increased 1.1 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income.

Table IV-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Sep 2012	Weight	Month ∆%	12 Month ∆%
Total	1000.0	+0.3	-1.4
Food, Beverages, Tobacco, Feedstuffs	137.5	0.1	-0.5
Petroleum & Coal	57.4	4.1	2.0
Production Machinery	30.8	0.0	1.1
Electronic Components	31.0	0.1	-4.0
Electric Power, Gas & Water	52.7	-0.2	8.7
Iron & Steel	56.6	-0.2	-10.0
Chemicals	92.1	0.1	-3.3
Transport Equipment	136.4	-0.2	-1.4

Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1209.pdf

Percentage point contributions to change of the corporate goods price index (CGPI) in Sep 2012 are provided in Table IV-8 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.3 percent in Sep, the energy shock resulting from carry trades is evident in the 0.26 percentage points added by energy-rich components petroleum & coal products. The exports CGPI increased 0.3 per2ent on the basis of the contract currency with contribution of 0.14 percentage points by chemical and related products that are rich in raw materials and 0.12 percentage points by other primary products and manufactured goods. The imports CGPI increased 2.0 percent on the contract currency basis. Petroleum, coal & natural gas contributed 1.58 percentage points because of carry trades into energy commodity exposures, metals & related products added 0.20 percentage points and foodstuffs and feedstuffs added 0.10 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions.

Table IV-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Sep 2012	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 0.3%
Petroleum & Coals Products	0.26
Nonferrous Metals	0.07
Food, Beverages, Tobacco & Feedstuffs	0.02
Scrap # & Waste	-0.02
B. Export Price Index	Monthly Change: 0.2% contract currency
Chemicals & Related Products	0.14
Other Primary Products & Manufactured Goods	0.12
General Purpose, Production & Business Oriented Machinery	-0.05
C. Import Price Index	Monthly Change: 2.0 % contract currency basis
Petroleum, Coal & Natural Gas	1.58
Metals & Related Products	0.20
Foodstuffs & Feedstuffs	0.10
Textiles	0.04

Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1209.pdf

The estimate of consumer price inflation in Germany in Table IV-9 is 2.0 percent in 12 months ending in Sep 2012, 0.0 percent NSA in Sep 2012 relative to Aug 2012 and 0.1 percent SA in Sep 2012 relative to Aug 2012. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.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 1.9 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 1.2 percent SA. In the seventh wave, annual equivalent inflation NSA is 4.9 percent in Jul-Aug 2012 and 3.7 percent SA. In the quarter Jul-Sep 2012, annual equivalent inflation is 2.4 percent NSA and 2.8 percent SA. 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
Sep 2012	2.0	0.0	0.1
Aug	2.1	0.4	0.4
Jul	1.7	0.4	0.2
AE ∆% Jul-Sep		2.4	2.8
Jun	1.7	-0.1	0.1
May	1.9	-0.2	0.1
AE ∆% May-Jun		-1.8	1.2
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	0.2
Dec 2011	2.1	0.7	0.1
AE ∆% Dec-Jan		1.8	1.8
Nov	2.4	0.0	0.1
Oct	2.5	0.0	0.2
Sep	2.6	0.1	0.3
Aug	2.4	0.0	0.1
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	0.2	0.3
Nov	1.5	0.2	0.2
Oct	1.3	0.2	0.2
Sep	1.3	0.2	0.2
Aug	1.0	0.2	0.1
Annual Average ∆%
2011	2.3
2010	1.1
2009	0.4
2008	2.6

AE: Annual Equivalent

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/10/PE12_353_611.html;jsessionid=D4878BDAF278C5EE773AED75AE562F4B.cae1

Chart IV-12, 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 relaxed in Sep 2012. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.

Chart IV-21, Germany, Consumer Price Index, Unadjusted, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-22, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2008 to 2012. Chart IV-22 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 0.4 percent in Aug 2012. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

Chart IV-22, Germany, Consumer Price Index, Unadjusted and Trend, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Table IV-10 provides the monthly and 12-month rate of inflation for segments of the consumer price index of Germany in Sep 2012. Inflation excluding energy decreased 0.1 percent in Sep 2012 and rose 1.4 percent in 12 months. Excluding household energy inflation was 0.0 percent in Sep and rose 1.7 percent in 12 months. Food prices decreased 0.5 percent in Sep and increased 2.9 percent in 12 months. There were differences in inflation of energy-related prices. Heating oil rose 10.4 percent in 12 months and increased 0.7 percent in Sep. Motor fuels increased 2.4 percent in Sep and increased 8.9 percent in 12 months.

Table IV-10, Germany, Consumer Price Index ∆%

Sep 2012	Weight	12- Month ∆%	Month ∆%
Total	1,000.00	2.0	0.0
Excluding heating oil and motor fuels	955.42	1.6	-0.1
Excluding household energy	940.18	1.7	0.0
Excluding Energy	904.81	1.4	-0.1
Total Goods	493.00	3.0	0.7
Nondurable Consumer Goods	305.11	4.1	0.3
Medium-Term Life Consumer Goods	95.24	1.9	2.8
Durable Consumer Goods	92.65	0.3	0.2
Services	507.00	1.0	-0.7
Energy Components
Motor Fuels	35.37	8.9	2.4
Household Energy	59.82	5.9	0.3
Heating Oil	9.21	10.4	0.7
Food	89.99	2.9	-0.5

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/10/PE12_353_611.html;jsessionid=D4878BDAF278C5EE773AED75AE562F4B.cae1

Table IV-11 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 0.8 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 2.7 percent in Aug-Nov with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.0 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012 and 2.4 percent in Aug-Sep 2012.

Table IV-11, France, Consumer Price Index, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Sep 2012	-0.3	1.9
Aug	0.7	2.1
AE ∆% Aug-Sep	2.4
Jul	-0.4	1.9
Jun	0.0	1.9
May	-0.1	2.0
AE ∆% May-Jul	-2.0
Apr	0.1	2.1
Mar	0.8	2.3
Feb	0.4	2.3
AE ∆% Feb-Apr	5.3
Jan	-0.4	2.3
Dec 2011	0.4	2.5
AE ∆% Dec-Jan	0.0
Nov	0.3	2.5
Oct	0.2	2.3
Sep	-0.1	2.2
Aug	0.5	2.2
AE ∆% Aug-Nov	2.7
Jul	-0.4	1.9
Jun	0.1	2.1
May	0.1	2.0
AE ∆% May-Jul	-0.8
Apr	0.3	2.1
Mar	0.8	2.0
Feb	0.5	1.7
Jan	-0.2	1.8
AE ∆% Jan-Apr	4.3
Dec 2010	0.5	1.8
Annual
2011		2.1
2010		1.5
2009		0.1
2008		2.8
2007		1.5
2006		1.6
2005		1.8
2004		2.1
2003		2.1
2002		1.9
2001		1.7
2000		1.7
1999		0.5
1998		0.7
1997		1.2
1996		2.0
1995		1.8
1994		1.6
1993		2.1
1992		2.4
1991		3.2

AE: Annual Equivalent

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20121011

Table IV-11 provides in the lower panel the estimates of inflation by the Institut National de la Statistique et des Études Économiques (INSEE) for the years from 1991 to 2011. Inflation has been relatively moderate in France. The rise of inflation to 2.8 percent in 2008 was caused by the commodity price shock as investment funds shifted from other risk financial assets into carry trades driven by interest rates falling toward zero. INSEE estimates 2011 inflation at 2.1 percent.

Chart IV-23 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows headline and core consumer price inflation of France. Inflation rose during the commodity price shock of unconventional monetary policy. Risk aversion in late 2008 and beginning of 2009 caused collapse of valuation of commodity futures with resulting decline in inflation. Unconventional monetary policy with alternations of risk aversion resulted in higher inflation in France that stabilized in recent months until the increase of 0.2 percent in Oct 2011, 0.3 percent in Nov and 0.4 percent in Dec that were followed by decline of 0.4 percent in Jan 2012 and increases of 0.4 percent in Feb and 0.8 percent in Mar followed by 0.1 percent in Apr minus 0.1 percent in May and no change in Jun 2012 with marginal decline of 0.4 percent in Jul. Inflation returned with 0.7 percent in Aug 2012 but decline of 0.3 percent in Sep 2012. Both the headline and core indexes are showing negative slopes in the new environment of risk aversion that causes reversals of carry trades into commodity futures prices.

Chart IV-23, France, Consumer Price Index (IPC) and Core Consumer Price Index (ISJ) 12 Months Rates of Change

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20121011

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 and 2.0 percent in Jul-Sep. 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
Sep 2012	0.0	3.2
Aug	0.4	3.2
Jul	0.1	3.1
AE ∆% Jul-Sep	2.0
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 http://www.istat.it/it/archivio/72371

Consumer price inflation in Italy by segments in the estimate by ISTAT for Sep 2012 is provided in Table IV-13. Total consumer price inflation in Sep was unchanged and 3.2 percent in 12 months. Inflation of goods was 0.7 percent and 4.1 percent in 12 months. Prices of durable goods increased 0.1 percent in Sep and increased only 0.4 percent in 12 months, as typical in most countries. Prices of energy increased 2.0 percent in Sep and increased 15.9 percent in 12 months. Food prices increased 0.5 percent in Sep and increased 2.8 percent in 12 months. Prices of services fell 0.8 percent in Sep and rose 1.9 percent in 12 months. Transport prices, also influenced by commodity prices, decreased 4.3 percent in Sep and increased 3.3 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 ∆%

Sep 2012	Month ∆%	12-Month ∆%
General Index	0.0	3.2
I Goods	0.7	4.1
Food	0.5	2.8
Energy	2.0	15.9
Durable	0.1	0.4
Nondurable	0.3	0.7
II Services	-0.8	1.9
Housing	0.3	2.8
Communications	0.1	1.4
Transport	-4.3	3.3

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/72371

Chart IV-21 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy with marginal increase.

Chart, IV-24, Italy, Consumer Price Index, 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

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

Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/datamapper/index.php?db=WEO) to show GDP in dollars in 2011 and the growth rate of real GDP of the world and selected regional countries from 2012 to 2015. 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 3.3 percent in 2012 but accelerating to 3.6 percent in 2013, 4.2 percent in 2014 and 4.4 percent in 2015. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,697 billion of world output of $69,899 billion, or 48.2 percent, but are projected to grow at much lower rates than world output, 1.9 percent on average from 2012 to 2015 in contrast with 3.9 percent for the world as a whole. While the world would grow 16.4 percent in the four years from 2012 to 2015, the G7 as a whole would grow 7.8 percent. The difference in dollars of 2011 is rather high: growing by 16.4 percent would add $11.5 trillion of output to the world economy, or roughly two times the output of the economy of Japan of $5,867 but growing by 7.8 percent would add $5.2 trillion of output to the world, or somewhat below 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 $25,438 billion, or 36.4 percent of world output. The EMDEs would grow cumulatively 24.9 percent or at the average yearly rate of 5.7 percent, contributing $6.3 trillion from 2012 to 2015 or the equivalent of 86.8 percent of $7,298 billion of China in 2011. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,468 billion, or 19.3 percent of world output, which is equivalent to 39.9 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	69,899	3.3	3.6	4.2	4.4
G7	33,697	1.4	1.5	2.2	2.5
Canada	1,739	1.9	2.0	2.4	2.4
France	2,778	0.1	0.4	1.1	1.5
DE	3,607	0.9	0.9	1.4	1.4
Italy	2,199	-2.3	-0.7	0.5	1.2
Japan	5,867	2.2	1.2	1.1	1.2
UK	2,431	-0.4	1.1	2.2	2.6
US	15,076	2.2	2.1	2.9	3.4
Euro Area	13,114	-0.4	0.2	1.2	1.5
DE	3,607	0.9	0.9	1.4	1.4
France	2,778	0.1	0.4	1.1	1.5
Italy	2,199	-2.3	-0.7	0.5	1.2
POT	238	-3.0	-1.0	1.2	1.9
Ireland	221	0.4	1.4	2.5	2.9
Greece	299	-6.0	-4.0	0.0	2.8
Spain	1,480	-1.5	-1.3	1.0	1.6
EMDE	25,438	5.3	5.6	5.9	6.1
Brazil	2,493	1.5	3.9	4.2	4.2
Russia	1,850	3.7	3.8	3.9	3.9
India	1,827	4.9	6.0	6.4	6.7
China	7,298	7.8	8.2	8.5	8.5

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

Source: IMF World Economic Outlook databank http://www.imf.org/external/datamapper/index.php?db=WEO

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/datamapper/index.php?db=WEO). 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 V-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. Estimated rates of unemployment for 2012 are particularly high for the countries with sovereign debt difficulties in Europe: 15.5 percent for Portugal (POT), 14.8 percent for Ireland, 23.8 percent for Greece, 24.9 percent for Spain and 10.6 percent for Italy, which is lower but still high. The G7 rate of unemployment is estimated at 7.5 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	7.5	7.5	7.3	6.9
Canada	7.5	7.3	7.3	7.1	6.9
France	9.6	10.1	10.5	10.3	9.8
DE	6.0	5.2	5.3	5.2	5.2
Italy	8.4	10.6	11.1	11.3	11.0
Japan	4.6	4.5	4.4	4.5	4.4
UK	8.0	8.1	8.1	7.9	7.6
US	8.9	8.2	8.1	7.7	7.1
Euro Area	10.2	11.2	11.5	11.2	10.8
DE	6.0	5.2	5.3	5.2	5.2
France	9.6	10.1	10.5	10.3	9.8
Italy	8.4	10.6	11.1	11.3	11.0
POT	12.7	15.5	16.0	15.3	14.7
Ireland	14.4	14.8	14.4	13.7	13.1
Greece	17.3	23.8	25.4	24.5	22.4
Spain	21.7	24.9	25.1	24.1	23.2
EMDE	NA	NA	NA	NA	NA
Brazil	6.0	6.0	6.5	7.0	7.0
Russia	6.5	6.0	6.0	6.0	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

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

Source: IMF World Economic Outlook databank http://www.imf.org/external/datamapper/index.php?db=WEO

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 0.2 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 0.7 percent, which is much lower than 5.3 percent in IQ2012. Growth of 3.2 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 0.3 percent in IIQ2012, 1.3 percent at SAAR and 2.1 percent relative to a year earlier (Section IA Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html) but with substantial unemployment and underemployment (Section I at http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html) and weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2012/08/recovery-without-hiring-ten-million.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-hiring-ten-million.html). UK GDP fell 0.4 percent in IIQ2012, declining 0.5 percent relative to IIQ2011. In IQ2011, UK GDP fell 0.3 percent, declining 0.1 percent relative to a year earlier. UK GDP fell 0.5 percent in IIQ2012 and 0.5 percent relative to a year earlier. Italy has experienced decline of GDP in four consecutive quarters from IIIQ2011 to IIQ2012. Italy’s GDP fell 0.8 percent in IIQ2012 and declined 2.6 percent relative to IIQ2011. France’s GDP stagnated in both IQ2012 and IIQ2012 and increased 0.3 percent relative to a year earlier in IIQ2012.

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: 5.3	2.9
China	1.8	8.1
Euro Area	0.0	0.0
Germany	0.5	1.7
France	0.0	0.4
Italy	-0.8	-1.4
United Kingdom	-0.3	-0.1
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3 SAAR: 1.3	2.1
Japan	QOQ: 0.2 SAAR: 0.7	3.2
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	-0.8	-2.6
United Kingdom	-0.4	-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

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/2012/09/collapse-of-united-states-creation-of_23.html and for GDP http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation_16.html). Japan’s exports decreased 5.8 percent in the 12 months ending in Aug and 8.1 percent in 12 months ending in Jul while imports decreased 5.4 percent in the 12 months ending in Aug and increased 2.1 percent in the 12 months ending in Jul. The second part of Table V-4 shows that net trade deducted 0.3 percentage points from Japan’s growth of GDP in IIQ2012. China’s exports fell 1.8 percent in the month of Jul and increased 1.0 percent in 12 months. In Aug 2012, China’s exports increased 0.6 percent and increased 2.7 percent in 12 months. Trade rebounded in China in Sep with growth of exports of 9.9 percent in the 12 months ending in Sep and 2.4 percent for imports. Germany’s exports increased 0.5 percent in the month of Jul and increased 9.2 percent in the 12 months ending in Jul while imports increased 0.9 percent in the month of Jul and increased 1.9 percent in the 12 months ending in Jul. Net trade contributed 1.1 percentage points to growth of Germany’s GDP in IIQ2012. The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, increased from 44.7 in Aug to 47.3 in Sep, which is the most moderate deterioration since Mar (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10119). New export orders fell sharply but at a slower pace than in Aug when new export orders fell at a record in the past three and a half years. UK’s exports fell 2.4 percent in Aug and 1.3 percent in Jun-Aug 2012 relative to a year earlier while imports increased 3.4 percent in Aug and 0.8 percent in Jun-Aug 2012 relative to a year earlier. Net trade deducted 1.0 percentage points from UK GDP growth in IIQ2012. France’s exports increased 3.6 percent in Aug while imports increased 6.3 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012. US exports decreased 1.0 percent in Aug 2012 and increased 5.6 percent in Jan-Aug relative to a year earlier but net trade added 0.23 percentage points to GDP growth in IIQ2012. The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) declined to the weakest reading in three years to 51.1 in Sep from 51.5 in Aug, indicating moderate expansion of US manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10144). The PMI reading at 51.4 is lower than 54.2 for IIQ2012. New export orders declined at the highest rate in 11 months with the index of new exports orders falling from 48.8 in Aug to 48.0 in Sep while total new orders increased from 51.9 in Aug to 52.3 in Sep because of orders from the internal market. In the six months ending in Aug, United States national industrial production accumulated decline of 0.4 percent at the annual equivalent rate of decline of 0.8 percent, which is substantially lower than 2.8 percent growth in 12 months. Capacity utilization for total industry in the United States fell 1.0 percentage point in Aug to 78.2 percent, which is 2.1 percentage points lower than the long-run average from 1972 to 2011. Manufacturing decreased 0.7 percent in Aug seasonally adjusted, increasing 4.1 percent not seasonally adjusted in 12 months, and fell 0.5 percent in the six months ending in Aug or at the annual equivalent rate of 1.0 percent (http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation_16.html). 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	-1.0 Aug	5.6 Jan-Aug	-0.1 Aug	4.7 Jan-Aug
Japan Aug Jul		-5.8 -8.1		-5.4 2.1
China	-1.8 Jul 0.6 Aug 4.7 Sep	1.0 Jul 7.8 Jan-Jul 2.7 Aug 7.1 Jan-Aug 9.9 Sep Jan-Sep 7.4	2.2 Jul -0.3 Aug 4.9 Sep	4.7 Jul 6.5 Jan-Jul -2.6 Aug 5.2 Jan-Aug 2.4 Sep 4.8 Jan-Sep
Euro Area	0.3 Jul	8.8 Jan-Jul	-1.0 Jul	2.5 Jan-Jul
Germany	2.4 Aug CSA	5.8 Aug	0.3 Aug CSA	0.4 Aug
France Aug	3.6	2.8	6.3	3.4
Italy Jul	0.3	4.3	2.9	-4.3
UK	-2.4 Aug	-1.3 Jun-Aug 12/Jun-Aug 11	3.4 Aug	0.8 Jun-Aug 12/Jun-Aug 11
Net Trade % Points GDP Growth	% Points
USA IIQ2012	0.23
Japan IIQ2012	-0.3
Germany IIQ2012	1.1
France IIQ2012	-0.4
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 Aug 2012. The share of Asia in Japan’s trade is more than one half, 56.3 percent of exports and 43.6 percent of imports. Within Asia, exports to China are 19.2 percent of total exports and imports from China 20.8 percent of total imports. The second largest export market for Japan in Aug 2012 is the US with share of 17.6 percent of total exports and share of imports from the US of 8.7 percent in total imports. Western Europe has share of 9.6 percent in Japan’s exports and of 10.8 percent in imports. Rates of growth of exports of Japan in Aug are sharply negative for most countries and regions with the exception of 10.3 percent for exports to the US, 18.7 percent to Canada, 6.5 percent for exports to Mexico and 0.3 percent to Brazil. 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 5.8 percent in Aug 2012 while imports decreased by 5.4 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Aug are sharply higher with exception of declines in imports mostly of raw materials: minus 9.3 percent for Middle East, minus 13.2 percent for Australia and minus 27.3 percent for Brazil. Imports from Asia decreased 5.8 percent in the 12 months ending in Aug while imports from China decreased 7.3 percent.

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

Aug 2012	Exports Millions Yens	12 months ∆%	Imports Millions Yens	12 months ∆%
Total	5,045,868	-5.8	5,799,995	-5.4
Asia	2,839,710	-6.7	2,526,870	-5.8
China	966,299	-9.9	1,208,214	-7.3
USA	886,922	10.3	503,962	-0.1
Canada	62,393	18.7	80,017	-17.3
Brazil	42,396	0.3	67,127	-27.3
Mexico	68,528	6.5	26,944	9.1
Western Europe	484,858	-28.3	624,333	2.9
Germany	125,729	-17.8	174,050	8.7
France	36,868	-29.8	85,122	10.3
UK	72,065	-42.1	48,348	-5.1
Middle East	167,393	-1.2	1,083,162	-9.3
Australia	117,080	-1.6	408,332	-13.2

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

Table V-6 of the World Trade Organization provides actual volume of world trade from 2008 to 2011 and projections of the World Trade Organization Secretariat for 2012 and 2013. Trade was weak during the global recession, increasing 2.3 percent in 2008 and decreasing 12.5 percent in 2009. Trade growth was 13.8 percent in 2010 and 5.0 percent in 2011. The World Trade Organization has reduced its projection of growth of world trade in 2012 to 2.5 percent.

Table V-6, World Trade Organization Projections of Growth of Volume of World Merchandise Trade and GDP, ∆%, 2008-2013

	2008	2009	2010	2011	2012*	2013*
World Trade Volume	2.3	-12.5	13.9	5.0	2.5	4.5
Exports
DE	0.9	-15.2	13.0	4.6	1.5	3.3
DINGE	4.3	-7.8	15.3	5.3	3.5	5.7
Imports
DE	-1.1	-14.4	11.0	2.9	0.4	3.4
DINGE	8.6	-10.5	18.3	8.3	5.4	6.1
Real GDP**	1.3	-2.4	3.8	2.4	2.1	2.4
DE	0.0	-3.8	2.7	1.5	1.2	1.5
DINGE	5.6	2.2	7.3	5.3	4.9	5.2

Notes: World Trade Volume: average of exports and imports; *Projections; **At market exchange rates; DE: Developed economies; DINGE: developing economies

Source: World Trade Organization Secretariat for trade, Consensus estimates of GDP forecasts

http://www.wto.org/english/news_e/pres12_e/pr676_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 to 52.5 in Sep from 50.9 in Aug, indicating expansion at a moderate rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10177). This index has remained above the contraction territory of 50.0 during 36 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 average of the reading in IIIQ2012 at 51.7 was almost unchanged relative to 51.6 in IIQ2012, which is a thee-year low and below the trend started with recovery in Aug 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10177). Stronger service activity in the US supported expansion of global output with increases also in the UK, Brazil, Russia and Ireland. The employment index fell from 50.9 in Aug to 49.9 in Sep under constraint by sharp increases in input prices. The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 52.8 in Sep from 48.1 in Aug, which was higher than the 38-month low in Aug and four consecutive months below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10159). The PMI is at 48.5 in IIIQ2012, which is lower than 50.4 in IIQ2012 and the weakest reading since IIQ2009. New export orders declined for the fifth consecutive month. The HSBC Brazil Composite Output Index, compiled by Markit, increased away from contraction territory to 52.8 in Sep from 48.1 in Aug with stronger demand for services than for manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10159). Andre Loes, Chief Economist, Brazil, at HSBC, finds that increasing activity in services could signal the rebound of economic activity expected for the second half of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10159). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased slightly to 49.8 in Sep from 49.3 in Aug, indicating marginal deterioration of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10135). Andre Loes, Chief Economist, Brazil at HSBC, finds recovery of Brazil’s manufacturing in IIIQ2012, improving the outlook for IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10005).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted was unchanged at 51.5 in Sep from 51.5 in Aug, indicating the third weakest reading since Oct 2009 in the beginning of the current recovery with the lowest in Dec 2010; the PMI average in the three months ending in Sep was 51.5, which is lower than 54.2 in the three months ending in Jun and the lowest quarterly reading since IIIQ2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10081). New export orders registered 47.9 in Sep still in contraction territory with 48.8 in Aug, which is the fastest decline in new export orders since Oct 2011. Chris Williams, Chief Economist at Markit, finds that manufacturing could have restrained the US economy in IIIQ2012 that could possibly result in weaker growth than 1.7 percent at seasonally-adjusted annual rate in IIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10081). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) declined to the weakest reading in three years to 51.1 in Sep from 51.5 in Aug, indicating moderate expansion of US manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10144). The PMI reading at 51.4 is lower than 54.2 for IIQ2012. New export orders declined at the highest rate in 11 months with the index of new exports orders falling from 48.8 in Aug to 48.0 in Sep while total new orders increased from 51.9 in Aug to 52.3 in Sep because of orders from the internal market. Chris Williamson, Chief Economist at Markit, finds that the data suggest deterioration of manufacturing toward the end of Sep, which could result in further decline that could cause stagnation of the US economy or growth at a rate lower than 1.3 for GDP in IIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10144). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 1.9 percentage points from 49.6 in Aug to 51.5 in Sep, (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 5.2 percentage points from 47.1 in Aug to 52.3 in Sep. The index of exports increased 1.5 percentage points from 47.0 in Aug to 48.5 in Sep, remaining in mild contraction territory. The Non-Manufacturing ISM Report on Business^® PMI increased 1.4 percentage points from 53.7 in Aug to 53.7 in Sep, indicating growth during 38 consecutive months, while the index of new orders increased 4.3 percentage points from 55.6 in Aug to 59.9 in Sep (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Aug 12 months NSA ∆%: 1.7; ex food and energy ∆%: 1.9 Aug month ∆%: 0.6; ex food and energy ∆%: 0.1 Blog 9/16/12
Producer Price Index	Sep 12-month NSA ∆%: 2.1; ex food and energy ∆% 2.3 Sep month SA ∆% = 1.1; ex food and energy ∆%: 0.0 Blog 10/14/12
PCE Inflation	Aug 12-month NSA ∆%: headline 1.5; ex food and energy ∆% 1.6 Blog 9/30/12
Employment Situation	Household Survey: Sep Unemployment Rate SA 7.8% Blog calculation People in Job Stress Sep: 28.7 million NSA, 17.8% of Labor Force Establishment Survey: Sep Nonfarm Jobs +114,000; Private +104,000 jobs created Aug 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.1 Blog 10/7/12
Nonfarm Hiring	Nonfarm Hiring fell from 63.8 million in 2006 to 50.1 million in 2011 or by 13.7 million Private-Sector Hiring Aug 2012 4.345 million lower by 1.042 million than 5.387 million in Aug 2005 Blog 10/14/12
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.1 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 Blog 9/30/12
Personal Income and Consumption	Aug month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% -0.3 Real Personal Consumption Expenditures (RPCE): 0.1 12-month Aug NSA ∆%: RDPI: 1.8; RPCE ∆%: 2.0 Blog 9/30/2012
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	Aug month SA ∆%: -1.2 Aug 12 months SA ∆%: 2.8 Manufacturing Jul SA ∆% -0.7 Aug 12 months SA ∆% 3.8, NSA 4.1 Capacity Utilization: 78.2 Blog 9/16/12
Productivity and Costs	Nonfarm Business Productivity IIQ2012∆% SAAE 2.2; IIQ2012/IIQ2011 ∆% 1.2; Unit Labor Costs SAAE IIQ2012 ∆% 1.5; IIQ2012/IIQ2011 ∆%: 0.9 Blog 9/9/2012
New York Fed Manufacturing Index	General Business Conditions From Aug -5.85 to Sep -10.41 New Orders: From Aug -5.50 to Sep -14.03 Blog 9/23/12
Philadelphia Fed Business Outlook Index	General Index from Aug minus 7.1 to Sep -1.9 New Orders from Aug minus 5.5 to Sep 1.0 Blog 9/23/12
Manufacturing Shipments and Orders	Aug New Orders SA ∆%: -5.2; ex transport ∆%: 0.7 Jan-Aug New Orders NSA ∆%: 3.7; ex transport ∆% 3.0 Blog 10/7/12
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 9/30/12
Sales of New Motor Vehicles	Jan-Sep 2012 10,899,949; Jan-Sep 2011 9,518,172. Sep SAAR 14.94 million, Aug SAAR 14.52 million, Sep 2011 SAAR 13.4 million Blog 10/7/12
Sales of Merchant Wholesalers	Jan-Aug 2012/Jan-Aug 2011 NSA ∆%: Total 6.1; Durable Goods: 7.6; Nondurable Goods: 4.9 Blog 10/14/12
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jul 12/Jul 11 NSA ∆%: Sales Total Business 3.7; Manufacturers 2.9 Retailers 3.0; Merchant Wholesalers 5.4 Blog 9/16/12
Sales for Retail and Food Services	Jan-Aug 2012/Jan-Aug 2011 ∆%: Retail and Food Services 5.8; Retail ∆% 5.6 Blog 9/16/12
Value of Construction Put in Place	Aug SAAR month SA ∆%: -0.6 Aug 12-month NSA: 6.5 Jan-Aug 2012 ∆% 9.0 Blog 10/7/12
Case-Shiller Home Prices	Jul 2012/Jul 2011 ∆% NSA: 10 Cities 0.6; 20 Cities: 1.2 ∆% Jul SA: 10 Cities 0.4 ; 20 Cities: 0.4 Blog 9/30/12
FHFA House Price Index Purchases Only	Jul SA ∆% 0.2; 12 month ∆%: 3.8 Blog 9/30/12
New House Sales	Aug 2012 month SAAR ∆%: -0.3 Jan-Aug 2012/Jan-Aug 2011 NSA ∆%: 21.9 Blog 9/30/12
Housing Starts and Permits	Jul Starts month SA ∆%: 2.3 ; Permits ∆%: -1.0 Jan-Aug 2012/Jan-Aug 2011 NSA ∆% Starts 25.7; Permits ∆% 30.5 Blog 9/23/12
Trade Balance	Balance Aug SA -$44217 million versus Jul -$42466 million Exports Aug SA ∆%: -1.0 Imports Aug SA ∆%: -0.1 Goods Exports Jan-Aug 2012/2011 NSA ∆%: 5.6 Goods Imports Jan-Aug 2012/2011 NSA ∆%: 4.7 Blog 10/14/12
Export and Import Prices	Sep 12-month NSA ∆%: Imports -0.6; Exports -0.5 Blog 10/14/12
Consumer Credit	Aug ∆% annual rate: 8.0 Blog 10/7/12
Net Foreign Purchases of Long-term Treasury Securities	Jul Net Foreign Purchases of Long-term Treasury Securities: $67.0 billion Major Holders of Treasury Securities: China $1164 billion; Japan $1149 billion; Total Foreign US Treasury Holdings Jun $5348 billion Blog 9/23/12
Treasury Budget	Fiscal Year 2012/2011 ∆%: Receipts 6.4; Outlays -1.7; Individual Income Taxes 3.7 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,089,353 million CBO Forecast 2012FY Deficit $1.171 trillion Blog 10/14/2012
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	Aug 2012 SAAR ∆%: Securities 2.8 Loans 2.9 Cash Assets 30.3 Deposits 5.4 Blog 9/30/12
Flow of Funds	IIQ2012 ∆ since 2007 Assets -$4193B Real estate -$4451B Financial $-157 MM Net Worth -$3389B Blog 9/23/12
Current Account Balance of Payments	IIQ2012 -$1285 B %GDP 3.0 Blog 9/23/12

Links to blog comments in Table USA: 10/7/12 http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or.html

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

9/9/12 http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html

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

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

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-1 for Aug 2012 and percentage changes from the prior month and for Jan-Aug 2012 relative to Jan-Aug 2011. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 6.1 percent in Jan-Aug 2012 relative to Jan-Aug 2011 and increased 0.9 percent in Aug 2012 relative to Jul 2012. The value of total sales is quite high at $3269.9 billion, exceeding four trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Jul 2012 reached $1465.7 billion, over two trillion for a year, increasing 0.9 percent in Aug relative to Jul and increasing 7.6 percent in Jan-Aug 2012 relative to Jan-Aug 2011. Sales of automotive products reached $265.9 billion in Jan-Aug 2012, increasing 2.9 percent in the month and increasing 25.9 percent relative to a year earlier. There is strong performance of 12.8 percent in machinery but much lower of 1.6 percent in electrical products. Sales of nondurable goods rose 4.9 percent over a year earlier. The influence of commodity prices moderated as shown by decrease of 5.4 percent in farm products but increase of 6.5 percent in petroleum products with increase of 5.6 percent in Aug. The final three columns in Table VA-11 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers increased 0.5 percent in Aug and increased 5.3 percent relative to a year earlier. Inventories of durable goods of $288.6 billion are 58.0 percent of total inventories of $497.6 billion and rose 7.5 percent relative to a year earlier. Automotive inventories increased 7.9 percent relative to a year earlier. Machinery inventories of $80.2 billion rose 19.8 percent relative to a year earlier. Inventories of nondurable goods of $191.0 billion are 38.4 percent of the total and increased 0.4 percent relative to a year earlier. Inventories of farm products increased 1.4 percent in Aug relative to Jul and increased 0.1 percent relative to a year earlier. Inventories of petroleum products increased 9.4 percent in Aug and fell 3.5 percent relative to a year earlier.

Table VA-1, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%

2012	Sales $ Billions Jan-Aug 2012 NSA	Sales Aug ∆% SA	Sales∆% Jan-Aug 2012 from Jan-Aug 2011 NSA	INV $ Billions Aug 2012 NSA	INV Aug ∆% SA	INV ∆% Aug 2012 from Aug 2011 NSA
US Total	3269.9	0.9	6.1	497.6	0.5	5.3
Durable	1465.7	0.9	7.6	288.6	0.1	7.5
Automotive	265.9	2.0	25.9	43.4	0.0	7.9
Prof. Equip.	250.1	0.2	2.8	32.8	-1.5	0.1
Computer Equipment	126.1	0.2	0.0	12.5	-5.1	-3.8
Electrical	245.9	0.2	1.6	41.7	-0.3	1.1
Machinery	257.2	0.5	12.8	80.2	1.7	19.8
Not Durable	1804.2	0.9	4.9	191.0	1.2	2.2
Drugs	284.1	-2.7	1.9	35.5	1.5	12.0
Apparel	95.1	-1.8	6.4	22.6	-0.9	-5.1
Groceries	386.8	0.0	8.0	34.2	-1.2	2.9
Farm Products	140.2	1.1	-5.4	17.1	1.4	0.1
Petroleum	516.8	5.6	6.5	24.4	9.4	-3.5

Note: INV: inventories

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Chart VA-1 of the US Census Bureau provides wholesale trade sales without adjustment for seasonality or price changes from Jan 1992 to Aug 2012. The jagged curve of wholesale trade sales without adjustment shows strong seasonal variations. There is a strong long-term trend interrupted by sharp drop during the global recession. Growth resumed along a stronger upward trend and the level in Jun 2012 surpasses the peak before the global recession.

Chart VA-1, US, Wholesale Trade Sales, Monthly, NSA, Jan 1992-Aug 2012, Millions of Dollars

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Table VA-34 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Aug 2012. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop followed by incomplete increase.

Chart VA-2, US, Wholesale Trade Sales, Monthly, SA, Jan 1992-Aug 2012, Millions of Dollars

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Chart VA-3 of the US Census Bureau provides monthly percentage changes of US wholesale trade not seasonally adjusted from Jan 1992 to Jul 2012. The scatter diagram provides wide monthly percentage changes in wholesale trade sales.

Chart VA-3, US, Wholesale Trade Sales, Monthly Percentage Change, NSA, Jan 1992-Jul 2012, %

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-4. The total for the US has remained almost without change at 1.20 in Aug 2012, 1.21 in Jul 2012 and 1.17 in Aug 2011. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.58 in Aug 2012, 1.59 in Jul 2012 and 1.48 in Aug 2011. Computer equipment operates with low inventory/sales ratios of 0.76 in Aug 2012 and 0.80 in Jul 2012 relative to 0.76 in Aug 2011 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.89 in Aug and Jul 2012, which is almost equal to 0.90 in Aug 2011. There are exceptions such as 1.77 in Aug 2012 in apparel that is almost equal to 1.75 in Jul 2012 and lower than 1.96 in Aug 2011.

Table VA-4, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA

	Aug 2012	Jul 2012	Aug 2011
US Total	1.20	1.21	1.17
Durable	1.58	1.59	1.48
Automotive	1.33	1.36	1.50
Prof. Equip.	1.02	1.04	1.01
Comp. Equip.	0.76	0.80	0.76
Electrical	1.32	1.33	1.30
Machinery	2.54	2.51	2.19
Not Durable	0.89	0.89	0.90
Drugs	1.04	1.00	0.89
Apparel	1.77	1.75	1.96
Groceries	0.71	0.72	0.72
Farm Products	1.19	1.18	1.26
Petroleum	0.41	0.40	0.45

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Chart VA-5 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2002 to 2012 seasonally adjusted. Inventory/sales ratios rise during contractions as merchants are caught with increasing inventories because of weak sales and fall during expansions as merchants attempt to fill sales with existing stocks. There is an increase in the inventory/sales ratio in 2012 but not yet significantly higher.

Chart VA-5, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2002-2011

Source: US Census Bureau

http://www2.census.gov/wholesale/img/mwtsbrf.jpg

The US Treasury budget for fiscal years 2012 and 2011 is shown in Table VA-5. Receipts increased 6.4 percent in fiscal year 2012 relative fiscal year 2011. Individual income taxes have grown 3.7 percent relative to the same period a year earlier. Outlays decreased 1.7 percent relative to a year earlier. Table VA-16 also provides the projection of the Congressional Budget Office (CBO) of the deficit for fiscal year 2012 at $1.2 trillion not very different from that in fiscal year 2011 of $1.3 trillion. The deficits from 2009 to 2012 exceed one trillion dollars per year, adding to $5.096 trillion in four years, which is the worst fiscal performance since World War II.

Table VA-5, US, Treasury Budget in Fiscal Year to Date Million Dollars

Fiscal Year 2012	Fiscal Year 2012	Fiscal Year 2011	∆%
Receipts	2,449,093	2,302,495	6.4
Outlays	3,538,446	3,599,285	-1.7
Deficit	-1,089,353	-1,296,791	NA
Individual Income Taxes	1,132,206	1,091,473	3.7
Social Insurance	569,501	565,787	0.7
	Receipts	Outlays	Deficit (-), Surplus (+)
$ Billions
CBO Forecast Fiscal Year 2012	2,456	3,627	-1,171
Fiscal Year 2011	2,303	3,603	-1,300
Fiscal Year 2010	2,162	3,456	-1,294
Fiscal Year 2009	2,105	3,518	-1,413
Fiscal Year 2008	2,524	2,983	-459

Source: http://www.fms.treas.gov/mts/index.html

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

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

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

http://www.boj.or.jp/en/mopo/outlook/index.htm/

Private-sector activity in Japan contracted at a moderate rate with the Markit Composite Output PMI^™ Index decreasing from 48.6 in Aug to 48.4 in Sep, which is still below 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10143). Paul Smith, economist at Markit and author of the report, finds that manufacturing and services data suggest stagnation of GDP in Japan in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10143). The Markit Business Activity Index of Services decreased from 49.3 in Aug to 48.9 in Sep, also showing contraction at slower pace, also declining in IIIQ2012 to the lowest level in a year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10143). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 47.7 in Aug to 48.0 in Aug, for more moderate contraction than in Aug, which registered the weakest private-sector manufacturing activity in 16 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10087). Paul Smith, economist at Markit and author of the report, finds the data consistent with quarterly contraction of industrial production with the significant weakness in export demand because of the slowing global economy and strength of the yen (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10087).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	Sep ∆% +0.3 12 months ∆% minus 1.4 Blog 10/14/12
Consumer Price Index	Aug NSA ∆% 0.1; Aug 12 months NSA ∆% -0.4 Blog 10/14/12
Real GDP Growth	IIQ2012 ∆%: 0.3 on IQ2012; IIQ2012 SAAR 0.7; ∆% from quarter a year earlier: 3.2 % Blog 9/16/12
Employment Report	Aug Unemployed 2.77 million Change in unemployed since last year: minus 180 thousand Unemployment rate: 4.2% Blog 10/14/12
All Industry Indices	Jul month SA ∆% -0.6 12-month NSA ∆% 0.5 Blog 9/23/12
Industrial Production	Aug SA month ∆%: -1.3 12-month NSA ∆% -4.3 Blog 9/30/12
Machine Orders	Total Aug ∆% -12.6 Private ∆%: -13.7 Jul ∆% Excluding Volatile Orders -3.3 Blog 10/14/12
Tertiary Index	Aug month SA ∆% 0.4 Aug 12 months NSA ∆% 0.8 Blog 10/14/12
Wholesale and Retail Sales	Aug 12 months: Total ∆%: -2.7 Wholesale ∆%: -4.3 Retail ∆%: 1.8 Blog 9/30/12
Family Income and Expenditure Survey	Aug 12-month ∆% total nominal consumption 1.4, real 1.8 Blog 9/30/12
Trade Balance	Exports Aug 12 months ∆%: -5.8 Imports Aug 12 months ∆% -5.4 Blog 9/23/12

Links to blog comments in Table JPY:

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

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

Japan’s total machinery orders seasonally adjusted in Table VB-1 fell 12.6 percent in Aug 2012 and in three of the four months May-Aug 2012. Total private sector orders fell 21.0 percent in May but after increasing 16.4 percent in Apr and increased 4.3 percent in Jul, declining 13.7 percent in Aug. Private-sector orders excluding volatile orders, which are closely watched, increased 4.6 percent in Jul after increasing 5.6 percent in Jun but falling 14.8 percent in May but fell 3.3 percent in Aug. Orders for manufacturing fell 15.1 percent in Aug following increase of 12.0 percent in Jul with declines 2.9 percent in Jun and 8.0 percent in May. Overseas orders decreased 14.7 percent in Aug and 9.8 percent in Jun and increased 3.0 percent in Jul. There is significant volatility in industrial orders in advanced economies.

Table VB-1, Japan, Machinery Orders, Month ∆%, SA

2012	Aug	Jul	Jun	May
Total	-12.6	-2.6	7.4	-14.5
Private Sector	-13.7	4.3	9.3	-21.0
Excluding Volatile Orders	-3.3	4.6	5.6	-14.8
Mfg	-15.1	12.0	-2.9	-8.0
Non Mfg ex Volatile	3.6	-2.1	2.6	-6.4
Government	-7.1	-13.5	19.2	-21.8
From Overseas	-14.7	3.0	-9.8	0.3
Through Agencies	-22.0	14.1	-5.3	8.7

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html

Total orders for machinery and total private-sector orders excluding volatile orders for Japan are shown in Chart VB-1 of Japan’s Economic and Social Research Institute at the Cabinet Office. The trend of private-sector orders excluding volatile orders was showing recovery from the drop after Mar 2011 because of the earthquake/tsunami. There was reversal of the trend of increase in total orders with recent decreases. Fluctuations still prevent detecting longer term trends but recovery is evident from the global recession. There was a major setback by the declines in May 2012 shown in the last segment of Chart VB-1 with partial recovery in Jun 2012 and decline again in Jul and Aug 2012.

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html

Table VB-2 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,527,021 million in Aug 2012 are divided between JPY 564,081 million overseas orders, or 36.9 percent of the total, and domestic orders of JPY 884,182 million, or 57.9 percent of the total, with orders through agencies of JPY 78,758 million, or 5.2 percent of the total. Orders through agencies are not shown in the table because of the minor value. Twelve-month percentages changes in Aug 2012 reversed increases in Jul 2012: minus 18.6 percent for total orders, minus 31.1 percent for overseas orders, minus 10.2 percent for domestic orders and minus 6.1 percent for private orders excluding volatile items. Total orders fell 10.9 percent in the 12 months ending in Jun with declines of 11.3 percent in overseas orders and 12.4 percent of domestic orders. Performance was strong in Apr with growth of total orders of 7.5 percent mostly because of growth of domestic orders by 23.0 percent and also in Mar with growth of total orders of 8.1 percent and of domestic orders of 19.0 percent. Percentage growth of overseas orders was negative in seven consecutive months from Feb to Aug 2012. Performance in Feb 2012 was weak with growth of total orders of minus 9.3 percent, minus 8.9 percent of overseas orders, minus 11.2 percent of domestic orders and 8.9 percent of private orders excluding volatile items. Jan 2012 was quite strong with growth of total orders of 9.8 percent driven by growth of overseas orders of 18.3 percent. There is sharp reversal of 12-month percentage changes in Nov with increase of 11.0 percent in total orders, 8.0 percent in overseas orders, 13.5 percent in domestic orders and 12.5 percent in private orders excluding volatile items. The pace of increase declined in Dec with growth in 12 months of 0.8 percent for total orders, 12.6 percent for overseas orders, decline of 8.5 percent for domestic orders and growth of private orders excluding volatile items of 6.3 percent. There was strong impact from the global recession with total orders falling 23.3 percent in 2008, overseas orders dropping 29.4 percent and domestic orders decreasing 17.4 percent. Recovery was vigorous in 2010 with increase of total orders by 9.4 percent, overseas orders by 3.5 percent and domestic orders by 14.1 percent. The heavy impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 also affected machinery orders.

Table VB-2, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series

	Total	Overseas	Domestic	Private ex Volatile
Value Aug 2012	1,527,021	564,081	884,182	639,907
% Total	100.0	36.9	57.9	41.9
Value Aug 2011	1,877,025	818,879	984,179	681,506
% Total	100.0	43.6	52.4	36.3
12-month ∆%
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Aug 2012 were JPY 78,758 million, or 5.2 percent of the total and 3.9 percent of the total in Aug 2011, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally-adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/en/stat/juchu/juchu-e.html

The tertiary activity index of Japan increased 0.4 percent SA in Aug 2012 and increased 0.8 percent NSA in the 12 months ending in Aug 2012, as shown in Table VB-3. The tertiary activity index of Japan seasonally adjusted fell at the annual equivalent rate of minus 4.1 percent in Jan-Apr 2012 for cumulative decline of 1.4 percent but increased 2.6 percent not seasonally adjusted in the 12 months ending in Apr 2012, as shown in Table VB-3. The tertiary activity index fell 0.7 percent in the first eight months of 2012 or at the annual equivalent rate of minus 1.1 percent. There was strong impact from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in the decline of the tertiary activity index by 5.4 percent in Mar 2011 and 3.4 percent in 12 months. The performance of the tertiary sector in the quarter Jul-Sep 2011 was weak: increase of 0.4 percent in Jul, increase of 0.1 percent in Aug and decline of 0.2 percent in Sep, after increasing 1.2 percent in Jun. The not seasonally adjusted index increased 4.2 percent in the 12 months ending in Mar 2012 but the 12-month percentage rate dropped to 0.8 percent in Jun-Jul 2012 and 0.6 percent in Aug 2012. Most of the growth occurred in the quarter from Apr to Jun 2011 with gain of 4.3 percent or at annual equivalent rate of 18.1 percent.

Table VB-3, Japan, Tertiary Activity Index, ∆%

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

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

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Aug are provided in Table VB-4. Electricity, gas, heat supply and water increased 2.3 percent in Aug and increased 1.5 percent in the 12 months ending in Aug. Wholesale and retail trade increased 1.2 percent in the month of Aug and remained unchanged in 12 months. Information and communications decreased 0.8 percent Aug and remained unchanged in 12 months.

Table VB-4, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%

Aug 2012	Weight	Month ∆% SA	12 Months ∆% NSA
Tertiary Index	10,000.0	0.4	0.6
Electricity, Gas, Heat Supply & Water	372.9	2.3	1.5
Information & Communications	951.2	-0.8	0.0
Wholesale & Retail Trade	2,641.2	1.2	0.0
Finance & Insurance	971.1	-0.9	0.3
Real Estate & Goods Rental & Leasing	903.4	-0.4	-0.2
Scientific Research, Professional & Technical Services	551.3	1.7	5.1
Accommodations, Eating, Drinking	496.0	3.0	2.8
Living-Related, Personal, Amusement Services	552.7	0.3	-0.3
Learning Support	116.9	0.0	0.7
Medical, Health Care, Welfare	921.1	0.2	1.7
Miscellaneous ex Government	626.7	-0.3	-0.1

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

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components from Jan to Sep 2012. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep.

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

2012	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Sep 2011 to Sep 2012. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012 and sharper drop to 53.7 in Sep 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/t20121009_402841100.htm

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul and 48.7 in Aug. The index of employment also fell from 51.0 in Apr to 49.1 in Aug. There is mild rebounding to 49.8 in Sep 2012.

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

2012	IPM	PI	NOI	INV	EMP	SDEL
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.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/t20121009_402841094.htm). Chart CIPMMFG provides the index from Sep 2011 to Sep 2012. There is deceleration from 51.2 in Sep 2011 to marginal contraction at 49.0 in Nov 2011. Manufacturing activity recovered to 53.3 in Apr 2012 but then declined to 50.4 in May 2012 and 50.1 in Jun 2012, which is the lowest in a year with exception of contraction at 49.0 in Nov 2011. The index then fell to contraction at 49.2 in Aug 2012 and improved to 49.8 in Sep, closer to the neutral zone of 50.0.

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm

The HSBC China Services PMI^™, compiled by Markit, shows improving business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 49.9 in Aug to 50.3 in Sep growth in services compensating decline in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10187). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds marginal improvement in business conditions in China but that increasing demand requires further easing measures (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10187). The HSBC Business Activity index increased from 52.0 in Aug to 54.3 in Sep with improving activity in services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10187). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 47.9 in Sep from 47.6 in Aug, indicating moderate reduction of activity and the eleventh monthly deterioration of the index (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10116). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that accelerating contraction of export orders with pressure on employment suggest that China still requires further easing of policy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10116).

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	Aug 12-month ∆%: minus 3.5 Aug month ∆%: minus 0.5 Blog 9/16/12
Consumer Price Index	Aug month ∆%: 0.6 Aug 12 months ∆%: 2.0 Blog 9/16/12
Value Added of Industry	Aug month ∆%: 0.69 Jan-Aug 2012/Jan-Aug 2011 ∆%: 10.1 Blog 9/16/12
GDP Growth Rate	Year IIQ2012 ∆%: 7.6 Quarter IIQ2012 ∆%: 1.8 Blog 7/15/12
Investment in Fixed Assets	Aug month ∆%: 1.33 Total Jan-Aug 2012 ∆%: 20.2 Real estate development: 15.6 Blog 9/16/12
Retail Sales	Aug month ∆%: 1.28 Aug 12 month ∆%: 13.2 Jan-Aug ∆%: 14.1 Blog 9/16/12
Trade Balance	Sep balance $27.67 billion Exports ∆% 9.9 Imports ∆% 2.4 Cumulative Sep: $148.43 billion Blog 10/14/12

Links to blog comments in Table CNY:

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

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

Table VC-1 provides China’s exports, imports, trade balance and percentage changes from Dec 2010 to Aug 2012. China’s trade growth rebounded in Sep 2012 with growth of exports of 9.9 percent in 12 months and 2.4 percent for imports and trade surplus of $27.7 billion. China’s trade growth appears to be decelerating with growth of exports of 2.7 percent in the 12 months ending in Aug 2012 and minus 2.6 percent for imports. The number that caught attention in financial markets was growth of 1.0 percent in exports in the 12 months ending in Jul 2012. Imports were also weak, growing 4.7 percent in 12 months ending in Jul 2012. Exports increased 11.3 percent in Jun 2012 relative to a year earlier while imports grew 6.3 percent. The rate of growth of exports fell to 4.9 percent in Apr 2012 relative to a year earlier and imports increased 0.3 percent but export growth was 15.3 percent in May and imports increased 12.7 percent. China reversed the large trade deficit of USD 31.48 billion in Feb 2012 with a surplus of $5.35 billion in Mar 2012, $18.42 billion in Apr 2012, $18.7 billion in May 2012, $31.7 billion in Jun 2012, $25.2 billion in Jul 2012 and $26.7 billion in Aug 2012. Exports fell 0.5 percent in the 12 months ending in Jan while imports fell 15.3 percent for a still sizeable trade surplus of $27.3 billion. In Feb, exports increased 18.4 percent while imports jumped 39.6 percent for a sizeable deficit of $31.48 billion. There are distortions from the New Year holidays.

Table VC-1, China, Exports, Imports and Trade Balance USD Billion and ∆%

	Exports USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Sep 2012	186.35	9.9	158.68	2.4	27.67
Aug	177.97	2.7	151.31	-2.6	26.66
Jul	176.94	1.0	151.79	4.7	25.15
Jun	180.20	11.3	148.48	6.3	31.72
May	181.1	15.3	162.4	12.7	18.7
Apr	163.25	4.9	144.83	0.3	18.42
Mar	165.66	8.9	160.31	5.3	5.35
Feb	114.47	18.4	145.95	39.6	-31.48
Jan	149.94	-0.5	122.66	-15.3	27.28
Dec 2011	174.72	13.4	158.20	11.8	16.52
Nov	174.46	13.8	159.94	22.1	14.53
Oct	157.49	15.9	140.46	28.7	17.03
Sep	169.67	17.1	155.16	20.9	14.51
Aug	173.32	24.5	155.56	30.2	17.76
Jul	175.13	20.4	143.64	22.9	31.48
Jun	161.98	17.9	139.71	19.3	22.27
May	157.16	19.4	144.11	28.4	13.05
Apr	155.69	29.9	144.26	21.8	11.42
Mar	152.20	35.8	152.06	27.3	0.14
Feb	96.74	2.4	104.04	19.4	-7.31
Jan	150.73	37.7	144.27	51.0	6.46
Dec 2010	154.15	17.9	141.07	25.6	13.08

Source:

http://english.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1

Table VC-2 provides cumulative exports, imports and the trade balance of China together with percentage growth of exports and imports. The trade balance in 2011 of $155.14 billion is lower than those from 2008 to 2010. China’s trade balance reached $148.43 billion in Aug 2012 with cumulative growth of exports of 7.4 percent and 4.8 percent of imports. There is a rare cumulative deficit of $4.2 billion in Feb 2012 reversed to a small surplus in Mar 2012 and a higher surplus of $19.3 billion in Apr 2012, increasing to $37.9 billion in May, $68.9 billion in Jun 2012, $94.1 billion in Jul 2012, $120.8 billion in Aug 2012 and $148.4 billion. More observations are required to detect trends of Chinese trade but available data suggest deceleration that would be expected from the large share of trade with Europe.

Table VC-2, China, Year to Date Exports, Imports and Trade Balance USD Billion and ∆%

	Exports USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Sep 2012	1495.56	7.4	1347.13	4.8	148.43
Aug	1309.21	7.1	1188.45	5.2	120.76
Jul	1131.24	7.8	1037.14	6.4	94.10
Jun	954.38	9.2	885.46	6.7	68.91
May	774.4	8.7	736.5	6.7	37.9
Apr	593.24	6.9	573.94	5.1	19.3
Mar	430.06	7.6	428.95	6.9	1.11
Feb	264.40	6.9	268.64	7.7	-4.24
Jan	149.94	-0.5	122.66	-15.3	27.28
Dec 2011	1,898.60	20.3	1,743.46	24.9	155.14
Nov	1,724.01	21.1	1585.61	26.4	138.40
Oct	1,549.71	22.0	1,425.68	26.9	124.03
Sep	1,392.27	22.7	1,285.17	26.7	107.10
Aug	1,222.63	23.6	1,129.90	27.5	92.73
Jul	1,049.38	23.4	973.17	26.9	76.21
Jun	874.3	24.0	829.37	27.6	44.93
May	712.37	25.5	689.41	29.4	22.96
Apr	555.30	27.4	545.02	29.6	10.28
Mar	399.64	26.5	400.66	32.6	-1.02
Feb	247.47	21.3	248.36	36.0	-0.89
Jan	150.7	37.7	144.27	51.0	6.46
Dec 2010	1577.93	31.3	1394.83	38.7	183.10

Source:

http://english.mofcom.gov.cn/static/column/statistic/BriefStatistics.html/1

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.4 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.3 percent in 2012 but growth of 1.0 percent in 2013.

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.2
2007	2.1	7.6	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.4
2010	1.6	10.1	2.0
2011	2.7	10.1	1.4
2012*			-0.3
2013*			1.0

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

The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, decreased from 46.3 in Aug to 46.1 in Sep, which is the eighth consecutive contraction; the index average of 46.3 in IIIQ2012 is lower than 46.4 in IIQ2012 and the lowest reading since IIQ2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10168). Chris Williamson, Chief Economist at Markit, finds that the data are consistent with likely decline of GDP at a higher rate in IIIQ2012 with the euro area falling again into recession (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10168). The Markit Eurozone Services Business Activity Index declined from 47.2 in Aug to 46.1 in Sep, which is the lowest reading since Jul 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10168). The Markit Eurozone Manufacturing PMI^® rose to 46.1 in Sep from 45.1 in Aug (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10110). The average PMI for IIIQ2012 was 45.1, which was the weakest reading since IIQ2009 and below 45.4 in IIQ2012. New export orders declined in Sep for a fifteenth consecutive month, with decline for all countries in the index, with the sharpest contractions in Greece, Austria and Germany. Chris Williamson, Chief Economist at Markit, finds that the index suggests manufacturing in the euro area declined at a quarterly rate of possibly as high as 1 percent, exerting pressure on GDP and employment with the euro area falling into recession in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10110). 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 10/7/12
Unemployment	Aug 2012: 11.4% unemployment rate Aug 2012: 18.196 million unemployed Blog 10/7/12
HICP	Aug month ∆%: 0.4 12 months Jul ∆%: 2.6 Blog 9/16/12
Producer Prices	Euro Zone industrial producer prices Aug ∆%: 0.9 Aug 12-month ∆%: 2.7 Blog 10/7/12
Industrial Production	Aug month ∆%: 0.6; Aug 12 months ∆%: -2.9 Blog 10/14/12
Retail Sales	Aug month ∆%: 0.1 Aug 12 months ∆%: -1.3 Blog 10/7/12
Confidence and Economic Sentiment Indicator	Sentiment 85.0 Sep 2012 Confidence minus 25.9 Sep 2012 Blog 9/30/12
Trade	Jan-Jul 2012/Jan-Jul 2011 Exports ∆%: 8.8 Imports ∆%: 2.5 Jul 2012 12-month Exports ∆% 11.2 Imports ∆% 2.1 Blog 9/23/12

Links to blog comments in Table EUR: 10/7/12 http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or.html

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

Industrial production in the euro area increased 0.6 percent in Aug 2012, declining in three of six months from Mar to Aug 2012 for cumulative growth of 0.6 percent that is equivalent to 1.2 percent in a year, as shown in Table VD-1 with revised estimates by EUROSTAT. Energy was the only segment decreasing in May. Improved weather caused decline of energy by 8.2 percent in Mar that drove down the rate of growth of total industry to minus 0.1 percent. Industrial production is highly volatile in the euro zone.

Table VD-1, Euro Zone, Industrial Production Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Aug 2012	0.6	0.0	0.9	0.7	3.9	1.3
Jul	0.6	0.2	-0.4	2.0	-0.4	-0.4
Jun	-0.5	-0.5	1.1	-1.1	0.4	-0.7
May	1.0	0.6	-1.2	1.3	0.5	2.0
Apr	-1.0	-1.1	5.2	-2.8	-0.8	-1.7
Mar	-0.1	1.0	-8.2	1.2	0.0	1.6

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

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12102012-AP/EN/4-12102012-AP-EN.PDF

Table VD-2 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. Industrial production decreased 2.9 percent in the 12 months ending in Aug. All segments fell in 12 months ending in Aug 2012 with exception of nil growth of energy. All segments increased in Aug with exception of nil growth of intermediate goods.

Table VD-2, Euro Zone, Industrial Production 12-Month ∆%

2012	Aug Month ∆%	Aug 12-Month ∆%
Total	0.6	-2.9
Intermediate Goods	0.0	-4.9
Energy	0.9	0.0
Capital Goods	0.7	-1.9
Durable Consumer Goods	3.9	-4.9
Nondurable Consumer Goods	1.3	-1.4

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12102012-AP/EN/4-12102012-AP-EN.PDF

There has been significant decline in percentage changes of industrial production and major categories in 12-month rates into 2012 as shown in Table VD-3. The 12-month rate of growth in Mar 2011 of minus 1.7 percent has fallen to minus 2.9 percent in Aug 2012. Trend is difficult to identify because of significant volatility. Capital goods were growing at 2.4 percent in the 12 months ending in Mar 2011 and at minus 1.9 percent in the 12 months ending in Aug 2012.

Table VD-3, Euro Zone, Industrial Production 12-Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Aug 2012	-2.9	-4.9	0.0	-1.9	-4.9	-1.4
Jul	-2.8	-3.9	0.5	-1.7	-9.8	-2.6
Jun	-2.0	-3.6	1.2	-0.7	-2.4	-2.2
May	-2.6	-3.7	-0.5	-1.7	-6.3	-2.0
Apr	-2.6	-4.4	2.5	-1.0	-6.8	-3.9
Mar	-1.7	-2.8	-6.4	2.4	-6.1	-1.8

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

Source: Eurostat http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/4-12102012-AP/EN/4-12102012-AP-EN.PDF

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

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

Table VE-DE, Germany, GDP Annual ∆%

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

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

The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 47.0 in Aug to 49.2 in Sep, indicating only moderate reduction in output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10171). Tim Moore, Senior Economist at Markit and author of the report, finds that the economy of Germany stabilized after moderate contraction in prior months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10171). There was marginal improvement in the Germany Services Business Activity Index from 48.3 in Aug to 49.7 in Sep, which is the second worst reading in a year and significantly lower than the long-term average of 53.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10171). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, increased from 44.7 in Aug to 47.3 in Sep, which is the most moderate deterioration since Mar (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10119). New export orders fell sharply but at a slower pace than in Aug when new export orders fell at a record in the past three and a half years. Tim Moore, Senior Economist at Markit and author of the report, finds that Germany’s manufacturing output and new orders supported the PMI index, suggesting that the bottom may have been reached (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10119).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	Sep month NSA ∆%: 0.0 Sep 12-month NSA ∆%: 2.0 Blog 10/14/12
Producer Price Index	Aug month ∆%: 0.5 CSA, 0.6 NSA 12-month NSA ∆%: 1.6 Blog 9/23/12
Industrial Production	Mfg Jul month CSA ∆%: -0.4 12-month NSA: -1.7 Blog 10/14/12
Machine Orders	MFG Aug month ∆%: -1.3 Aug 12-month ∆%: -4.8 Blog 10/7/12
Retail Sales	Aug Month ∆% -0.8 12-Month ∆% 0.3 Blog 9/30/12
Employment Report	Unemployment Rate Jul 5.4% Blog 9/30/12
Trade Balance	Exports Aug 12-month NSA ∆%: 5.8 Imports Aug 12 months NSA ∆%: 0.4 Exports Aug month SA ∆%: 2.4; Imports Aug month SA 0.3 Blog 10/14/12

Links to blog comments in Table DE: 10/7/12 http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or.html

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

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

The production industries index of Germany in Table VE-1 shows decrease of 1.3 percent in Aug 2012 and decrease of 0.5 percent in the 12 months ending in Aug 2012. Germany’s production industries suffered decline of 7.3 percent in Dec 2008 relative to Dec 2007 and decline of 2.3 percent in 2009. Recovery was vigorous with 14.2 percent in the 12 months ending in Dec 2010. The first quarter of 2011 was quite strong when the German economy outperformed the other advanced economies. The performance of Germany’s production industries from 2002 to 2006 was vigorous with average rate of 4.5 percent. Data for the production industries index of Germany fluctuate sharply from month to month and also in 12-month rates.

Table VE-1, Germany, Production Industries, Month and 12-Month ∆%

	12-Month ∆% NSA	Month ∆% Calendar SA
Aug 2012	-1.3	-0.5
Jul	2.2	1.2
Jun	3.9	-0.4
May	-6.7	1.8
Apr	-0.8	-2.2
Mar	-0.8	2.3
Feb	1.9	-0.5
Jan	4.3	0.5
Dec 2011	1.2	-2.0
Nov	4.6	0.1
Oct	0.4	0.5
Sep	5.5	-2.2
Aug	11.3	-0.3
Jul	6.5	3.0
Jun	0.0	-1.0
May	18.9	1.0
Apr	5.8	-0.3
Mar	10.3	0.9
Feb	16.4	1.2
Jan	16.0	0.7
Dec 2010	14.2
Dec 2009	-2.3
Dec 2008	-7.3
Dec 2007	-0.1
Dec 2006	2.5
Dec 2005	4.9
Dec 2004	5.3
Dec 2003	5.1
Dec 2002	2.0
Average ∆% per Year
Dec 1993 to Dec 2011	1.4
Dec 1993 to Dec 2000	1.5
Dec 1993 to Dec 2006	1.6
Dec 2002 to Dec 2006	4.5
Dec 2007 to Dec 2011	1.2

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

Table VE-2 provides monthly percentage changes of the German production industries index by components from Jan to Aug 2012. There were two sharp declines in the monthly production industries of 2.0 percent in Dec 2011 and 2.2 percent in Apr 2012 and milder declines of 0.5 percent in both Aug 2012 and Feb 2012 and 0.4 percent in Jun 2012 with much milder recoveries in the other months but growth of 1.2 percent in Jul, 1.8 percent in May 2012 and 2.3 percent in Mar 2012. The declines of investment or capital goods were quite sharp with 1.4 percent in Dec 2011, 3.6 percent in Apr 2012 with recovery by 2.2 percent in May 2012 but decline of 1.5 percent in Jul 2012 and 0.0 percent in Aug 2012. Durable goods fell in five of nine months from Dec 2011 to Aug 2012 and nondurable goods fell in six of the nine months from Dec 2011 to Aug 2012.

Table VE-2, Germany, Production Industries, Industry and Components, Month ∆%

	Aug	Jul	Jun	May	Apr	Mar	Feb	Jan
Production Industries	-0.5	1.2	-0.4	1.8	-2.2	2.3	-0.5	0.5
Industry	-0.5	1.5	-0.8	2.1	-2.1	1.1	0.2	0.4
Mfg	-0.4	1.5	-0.9	2.1	-2.1	1.1	0.3	0.3
Intermediate Goods	-1.3	0.0	0.0	1.0	0.1	0.2	-0.1	0.5
Capital Goods	0.0	3.6	-1.5	2.2	-3.6	1.6	0.9	0.5
Durable Goods	-1.4	2.6	-0.1	3.0	-1.2	0.5	-1.5	1.2
Nondurable Goods	0.7	-1.0	-0.6	3.8	-4.0	2.6	-1.0	-0.9
Energy	1.5	-1.2	5.9	-2.4	-0.3	-2.0	6.7	1.1

Seasonally Calendar Adjusted

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

Table VE-3 provides 12-month unadjusted percentage changes of industry and components in Germany. Although there are sharp fluctuations in the data there is suggestion of deceleration that would be expected from much higher earlier rates. The deceleration is quite evident in single-digit percentage changes from Sep 2011 to Aug 2012 relative to high double-digit percentage changes in Jan-Mar 2011. There are multiple negative 12-month percentage changes across many segments. Growth rates in the recovery from the global recession from IVQ2007 to IIQ2009 were initially very vigorous in comparison with the growth rates before the contraction that are shown in the bottom part of Table VE-3.

Table VE-3, Germany, Industry and Components, 12-Month ∆% Unadjusted

	IND	MFG	INTG	CG	DG	NDG	EN
2012
Aug	-1.8	-1.7	-3.6	-0.5	0.7	-0.2	2.7
Jul	1.9	1.9	0.4	4.4	-3.2	-0.6	3.0
Jun	3.5	3.5	2.0	5.9	7.0	0.0	5.4
May	-7.0	-7.0	-6.7	-6.9	-11.0	-8.2	-0.1
Apr	-1.1	-1.0	-1.2	1.1	-6.0	-6.0	0.6
Mar	-0.5	-0.4	-2.3	2.7	-6.5	-3.3	-6.3
Feb	3.2	3.3	1.4	7.1	-0.7	-2.1	0.0
Jan	5.9	5.7	4.2	9.5	4.3	1.1	-12.0
2011
Dec	1.4	1.4	2.5	1.0	-0.4	0.2	-16.4
Nov	4.9	5.1	3.9	7.9	1.9	0.0	-4.0
Oct	1.1	1.2	0.4	3.6	-2.7	-2.8	-7.2
Sep	6.4	6.5	6.4	8.9	3.6	0.2	-6.3
Aug	12.8	12.6	10.8	20.2	4.5	1.2	-3.5
Jul	8.0	8.1	6.5	13.1	7.7	-0.5	-8.1
Jun	0.9	0.9	1.6	2.0	-10.5	-2.0	-7.4
May	21.4	21.4	17.7	28.3	21.7	13.4	-12.0
Apr	7.4	7.5	5.9	11.1	4.9	2.2	-8.2
Mar	10.7	10.9	10.0	14.9	8.5	2.1	1.2
Feb	16.8	17.0	16.1	22.4	11.0	6.1	-2.2
Jan	16.8	17.1	16.7	23.2	11.2	4.2	-1.8
2010
Dec	17.5	17.6	14.5	26.3	9.1	2.9	4.8
Nov	13.8	13.8	13.1	19.0	7.9	3.6	2.9
Oct	9.9	10.1	10.1	13.9	6.5	0.9	0.2
Sep	9.5	9.3	12.1	10.0	7.9	1.7	-2.4
Aug	17.2	17.2	19.0	20.3	19.5	6.9	-2.1
Jul	9.1	8.8	12.7	8.7	7.2	0.9	-0.2
Jun	16.2	16.1	20.5	16.0	20.5	5.3	-2.5
May	13.3	13.3	20.2	11.6	10.7	1.7	12.8
Apr	14.9	14.8	21.8	15.3	8.5	0.0	9.9
Mar	14.2	14.5	20.4	11.7	11.8	6.4	7.2
Feb	7.1	7.5	10.8	7.0	7.4	-1.2	5.4
Jan	0.6	0.9	6.7	-3.4	-0.4	-3.9	3.3
Dec 2010	17.5	17.6	14.5	26.3	9.1	2.9	4.8
Dec 2009	-3.3	-3.2	3.3	-9.9	-0.1	1.1	3.8
Dec 2008	-7.6	-7.4	-14.4	-5.5	-11.2	3.7	-9.0
Dec 2007	0.1	-0.3	-0.6	2.5	-10.0	-2.6	1.7
Dec 2006	3.1	3.1	5.2	2.3	8.7	-1.0	-5.4
Dec 2005	5.8	5.8	3.5	8.9	3.2	2.2	0.6
Dec 2004	5.2	5.6	7.6	3.4	0.9	5.7	9.6
Dec 2003	5.5	5.3	5.6	6.3	1.6	4.6	0.3
Dec 2002	3.7	3.4	5.3	3.4	-5.9	2.2	-2.6

Note: IND: Industry; MFG: Manufacturing; INTG: Intermediate Goods; CG: Capital Goods; DG: Durable Goods; NDG: Nondurable Goods; EN: Energy

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

Broader perspective since 2002 is provided by Chart VE-1 of the Statistisches Bundesamt Deutschland, Federal Statistical Agency of Germany. The index of production industries rises by more than one third between 2003 and 2008 with sharp fluctuations and then collapses during the global recession in 2008. Recovery has been in a steep upward trajectory that has recovered at the more recent peaks the losses during the contraction. Recovery was reversed by the drop in Dec with strong rebound into 2012 and another sharp drop in Apr 2012 with recovery in May 2012 and drops in Jun and Aug 2012.

Chart VE-1, Germany, Production Industries, Not Adjusted, 2005=100

Source: Statistiche Bundesamt Deutschland

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

More detail is provided by Chart VE-2 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2007 to 2012. There could be some flattening in recent months as depicted by trend.

Chart VE-2, Germany, Production Index, Production Industries, Not Adjusted Index and Trend, 2005=100

Source: Statistiche Bundesamt Deutschland

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

Table VE-4 provides month and 12-month rates of growth of manufacturing in Germany from Jan 2011 to Aug 2012. There are fluctuations in both monthly rates and in the past 12 months. Recovery is strong in Jan-Mar 2012 with cumulative growth of 1.7 percent at the high annual equivalent rate of 7.0 percent but the drop in Apr 2012 of 2.1 percent results in decline of 0.4 percent in the first four months of 2012 that pulls down the 12-month rate of Apr 2012 to minus 1.0 percent. Growth of 2.1 percent in May 2012 is insufficient to prevent decline of 7.0 percent in 12 months because production was quite strong in the first part of 2011. Manufacturing decreased 0.9 percent in Jun 2011 but the 12-month change was 3.5 percent. In Jul 2012, manufacturing grew 1.5 percent in the month and 1.9 percent in 12 months. Declining of manufacturing by 0.4 percent in Aug 2012 brought down the 12-month percentage change to minus 1.7 percent.

Table VE-4, Germany, Manufacturing Month and 12-Month ∆%

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Aug 2012	-1.7	-0.4
Jul	1.9	1.5
Jun	3.5	-0.9
May	-7.0	2.1
Apr	-1.0	-2.1
Mar	-0.4	1.1
Feb	3.3	0.3
Jan	5.7	0.3
Dec 2011	1.4	-1.4
Nov	5.1	-0.3
Oct	1.2	0.5
Sep	6.5	-2.3
Aug	12.6	-0.3
Jul	8.1	3.2
Jun	0.9	-1.1
May	21.4	1.4
Apr	7.5	0.4
Mar	10.9	0.7
Feb	17.0	1.4
Jan	17.1	-0.6
Dec	17.6	1.9

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, provides the manufacturing index of Germany from 2007 to 2012. Manufacturing was already flattening in 2007 and fell sharply in 2008 to the beginning of 2010. Manufacturing grew sharply in the initial phase of recovery but has flattened in recent months as revealed by the trend.

Chart VE-3, Germany, Manufacturing Index, Not Adjusted Index and Trend, 2005=100

Source: Statistiche Bundesamt Deutschland

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

Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-5. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.4 percent and imports 13.2 percent. In Sep 2011, exports grew 10.5 percent relative to a year earlier and imports grew 12.0 percent. Growth rates in 12 months ending in Oct fell significantly to 3.7 percent for exports and 8.9 percent for imports. Lower prices may explain part of the decline in nominal values. Exports grew 5.8 percent in 12 months ending in Aug 2012 and imports increased 0.4 percent. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.

Table VE-5, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%

	Exports EURO Billions	12- Month ∆%	Imports EURO Billions	12-Month ∆%
Aug 2012	90.1	5.8	73.6	0.4
Jul	93.5	9.1	76.6	1.8
Jun	94.7	7.5	76.8	1.5
May	92.7	0.8	77.2	-0.3
Apr	87.1	3.4	72.7	-1.0
Mar	98.8	0.6	81.4	2.5
Feb	91.2	8.5	76.3	5.8
Jan	86.0	9.3	72.8	6.2
Dec 2011	85.0	4.9	72.1	5.4
Nov	94.8	8.2	78.9	7.0
Oct	89.2	3.7	77.9	8.9
Sep	95.0	10.5	77.8	12.0
Aug	85.1	14.4	73.5	13.2
Jul	85.7	5.3	75.3	10.0
Jun	88.1	3.3	75.6	6.2
May	92.0	20.8	77.4	17.2
Apr	84.3	12.1	73.4	18.1
Mar	98.2	14.7	79.4	14.5
Feb	84.1	20.1	72.1	27.1
Jan	78.6	24.1	68.5	24.4
Dec 2010	81.0	20.0	68.4	24.4
Nov	87.6	21.2	73.7	30.9
Oct	86.0	18.7	71.5	19.2
Sep	86.0	21.2	69.5	17.0
Aug	74.4	23.8	64.9	27.1
Jul	81.4	15.3	68.4	24.4
Jun	85.3	27.5	71.2	33.9
May	76.2	25.6	66.1	31.3
Apr	75.2	16.7	62.2	14.4
Mar	85.6	22.0	69.3	18.0
Feb	70.0	9.7	56.8	3.2
Jan	63.4	-0.3	55.1	-1.9
Dec 2009	67.5	1.2	55.0	-7.3
Dec 2008	66.7	-8.6	59.4	-5.1
Dec 2007	73.0	-0.6	62.5	-0.1
Dec 2006	73.4	10.2	62.6	8.5
Dec 2005	66.6	11.5	57.7	18.1
Dec 2004	59.7	9.2	48.9	10.8
Dec 2003	54.7	7.6	44.1	3.9
Dec 2002	50.8	5.5	42.5	6.4
Dec 2001	48.2	-3.7	39.9	-17.5
Dec 2000	50.0		48.4

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/10/PE12_347_51.html;jsessionid=044505258E3149E5E76FEC0D2365CE66.cae1

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

Table VE-6 provides monthly rates of growth of exports and imports of Germany. Exports increased 2.4 percent in Aug 2012 after increasing 0.4 percent in Jul 2012 and imports increased 0.3 percent in Aug 2012 after increasing 0.3 percent in Jul 2012. Export growth and import growth were vigorous in Jan-Mar 2011 when Germany’s economy outperformed most advanced economies but less dynamic and consistently in following months as world trade weakens.

Table VE-6, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted

	Exports	Imports
Aug 2012	2.4	0.3
Jul	0.4	0.3
Jun	-1.4	-2.1
May	4.2	5.1
Apr	-1.7	-4.1
Mar	0.8	0.7
Feb	1.5	2.7
Jan	2.4	2.0
Dec 2011	-3.1	-3.2
Nov	2.2	0.1
Oct	-2.7	-0.6
Sep	0.7	-0.3
Aug	3.2	-0.1
Jul	-1.0	0.2
Jun	-0.6	0.5
May	2.3	1.6
Apr	-3.4	-0.3
Mar	5.6	2.3
Feb	1.7	2.4
Jan	0.2	3.2
Dec 2010	0.1	-2.6

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/10/PE12_347_51.html;jsessionid=044505258E3149E5E76FEC0D2365CE66.cae1

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

Chart VE-4 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that is milder than earlier in the recovery but does not appear to be flattening.

Chart VE-4, Germany, Exports Original Value and Trend 2007-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-5 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend that could be flattening.

Chart VE-5, Germany, Imports Original Value and Trend 2007-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-6 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2007. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization followed by stronger trend in recent months.

Chart VE-6, Germany, Trade Balance Original and Trend 2007-2012

Source: Statistisches Bundesamt Deutschland

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

There is extremely important information in Table VE-7 for the current sovereign risk crisis in the euro zone. Table VE-7 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Aug 2012. German exports to other European Union (EU) members are 54.1 percent of total exports in Aug 2012 and 57.1 percent in Jan-Aug 2012. Exports to the euro area are 33.7 percent in Aug and 37.6 percent in Jan-Aug. Exports to third countries are 45.9 percent of the total in Aug and 42.8 percent in Jan-Aug. There is similar distribution for imports. Exports to non-euro countries are growing at 6.8 percent in Aug 2012 and 5.0 percent in Jan-Aug 2012 while exports to the euro area are decreasing 3.2 percent in Aug and decreasing 0.9 percent in Jan-Aug 2012. Price competitiveness through devaluation could improve export performance and growth. Economic performance in Germany is closely related to its high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone. Germany could benefit from depreciation of the euro because of high share in its exports to countries not in the euro zone but breakdown of the euro zone raises doubts on the region’s economic growth that could affect German exports to other member states.

Table VE-6, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

	Aug 2012 € Billions	Aug 12-Month ∆%	Jan–Aug 2012 € Billions	Jan-Aug 2012/ Jan-Aug 2011 ∆%
Total Exports	90.1	5.8	734.1	5.5
A. EU Members	48.7 % 54.1	0.4	419.5 % 57.1	1.1
Euro Area	30.4 % 33.7	-3.1	276.3 % 37.6	-0.9
Non-euro Area	18.3 % 20.3	6.8	143.3 % 19.5	5.0
B. Third Countries	41.4 % 45.9	13.0	314.5 % 42.8	11.9
Total Imports	73.8	0.4	607.5	2.1
C. EU Members	45.0 % 61.0	0.7	385.0 % 63.4	2.3
Euro Area	31.5 % 42.7	1.1	270.9 % 44.6	2.1
Non-euro Area	13.5 % 18.3	-0.4	114.0 % 18.8	2.8
D. Third Countries	28.8 % 39.0	0.1	222.6 % 36.6	1.7

Notes: Total Exports = A+B; Total Imports = C+D

Source:

Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/10/PE12_347_51.html;jsessionid=044505258E3149E5E76FEC0D2365CE66.cae1

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	1.9
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=28

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 48.0 in Aug to 43.2 in Sep, indicating significant contraction of private sector activity at the highest rate since mar 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10156). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that combined manufacturing and services weakness suggests that the French GDP may have contracted in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10156). The Markit France Services Activity index fell from 49.2 in Aug to 45.0 in Sep for the lowest reading in eleven months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10156). The Markit France Manufacturing Purchasing Managers’ Index^® fell to 42.7 in Sep from 46.0 in Aug, which was the sharpest decline of the manufacturing economy since Apr 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10129). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds continuing deterioration in manufacturing with weakening new orders in home and foreign markets, indicating that manufacturing deducted from GDP growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10129). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Sep month ∆% -0.3 12 months ∆%: 1.9 10/14/12
PPI	Aug month ∆%: 1.2 Jun 12 months ∆%: 2.5 Blog 9/30/12
GDP Growth	IIQ2012/IQ2012 ∆%: 0.0 IIQ2012/IIQ2011 ∆%: 0.3 Blog 9/30/12
Industrial Production	Aug ∆%: Manufacturing 1.8 12-Month ∆%: Manufacturing -0.4 Blog 10/14/12
Consumer Spending	Aug Manufactured Goods ∆%: -1.0 Aug 12-Month Manufactured Goods ∆%: -0.9 Blog 9/30/12
Employment	IIQ2012 Unemployed 2.785 million Unemployment Rate: 9.7% Employment Rate: 63.9% Blog 9/9/12
Trade Balance	Aug Exports ∆%: month 3.6, 12 months 2.8 Aug Imports ∆%: month 6.3, 12 months 3.4 Blog 10/14/12
Confidence Indicators	Historical averages 100 Sep Mfg Business Climate 90 Blog 9/30/12

Links to blog comments in Table FR:

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/9/12 http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html

Table VF-1 provides longer historical perspective of manufacturing in France. There has been steady improvement in manufacturing output in France with three consecutive months of increases Jun-Aug 2012 with 1.0 percent in Jul 2012 and 1.8 percent in Aug 2012 for cumulative quarterly increase of 3.1 percent at annual equivalent 13.1 percent. Decline of manufacturing in four of the six months from Dec 2011 to May 2012 with cumulative decline of 3.4 percent from Dec 2011 to May 2012, or 6.6 percent annual equivalent, pulled down the 12-month percentage change to minus 4.7 percent in May 2012. In contrast, the cumulative increase of 3.1 percent in Jun-Aug 2012 pulled up the 12-month rate to only minus 0.4 percent in Aug 2012. In the quarter Dec 2011 to Feb 2012, manufacturing fell 2.7 at the annual equivalent rate of minus 10.3 percent. There is strength earlier in the recovery in 2010 and early 2011 with less strong performance in the latter part of 2011. Manufacturing fell 13.0 percent in 2008 during the global contraction and an additional 2.8 percent in 2009.

Table VF-1, France, Manufacturing, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Aug 2012	1.8	-0.4
Jul	1.0	-2.6
Jun	0.3	-2.6
May	-1.0	-4.7
Apr	-0.8	-2.1
Mar	1.1	-1.2
Feb	-1.1	-3.8
Jan	0.1	-1.8
Dec 2011	-1.7	0.0
Nov	1.3	1.9
Oct	0.3	2.2
Sep	-1.7	1.1
Aug	-0.4	4.1
Jul	1.0	3.3
Jun	-1.8	3.0
May	1.7	3.5
Apr	0.1	2.8
Mar	-1.5	3.7
Feb	0.9	6.9
Jan	2.0	6.1
Dec 2010	0.1	4.9
Dec 2009		-2.8
Dec 2008		-13.0
Dec 2007		-0.2
Dec 2006		2.3
Dec 2005		0.0
Dec 2004		1.4
Dec 2003		0.4
Dec 2002		-0.5
Dec 2001		-4.9
Dec 2000		5.2
Annual
Average ∆% 1990-2000		1.6
Average ∆% 2003-2007		0.9

Source:

Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20121010

Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques shows indices of manufacturing in France from 2008 to 2012. Manufacturing, which is CZ in Chart VF-1, fell deeply in 2008 and part of 2009. All curves of industrial indices tend to flatten recently with oscillations and declines and marginal improvement in the final segment.

Chart VF-1, France, Industrial Production Indices 2007-2011

Legend : CZ : Manufacturing - (C1) : Manufacture of food products and beverages - (C3) : Electrical and electronic equipment; machine equipment - (C4) : Manufacture of transport equipment - (C5) : Other manufacturing

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20121010

France has been running a trade deficit fluctuating around €6,000 million, as shown in Table VF-2. Exports increased 3.6 percent in Aug 2012 while imports increased 6.3 percent, resulting in increase of the trade deficit from revised €4062 million in Jul 2012 to €5286 million in Aug 2012.

Table VF-2, France, Exports, Imports and Trade Balance, € Millions

	Exports	Imports	Trade Balance
Aug 2012	38,170	43,456	-5,286
Jul	36,829	40,891	-4,062
Jun	36,334	42,811	-6,477
May	37,416	43,052	-5,636
Apr	36,528	42,790	-6,262
Mar	36,136	41,858	-5,722
Feb	36,793	43,237	-6,444
Jan	36,513	42,239	-5,726
Dec 2011	36,144	41,524	-5,380
Nov	37,062	41,647	-4,585
Oct	35,941	41,895	-5,954
Sep	35,727	42,371	-6,644
Aug	37,139	42,033	-4,894
Jul	35,300	41,735	-6,435
Jun	35,341	41,009	-5,688
May	34,870	41,647	-6,777
Apr	34,622	41,672	-7,050
Mar	35,248	41,705	-6,457
Feb	34,651	41,215	-6,564
Jan	34,373	41,092	-6,719
Dec 2010	33,921	39,577	-5,656

Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

Monthly and 12-month rates of growth of exports and imports of France are provided in Table VF-3. Exports increased 3.6 percent in Aug and increased 2.8 percent in the 12 months ending in Aug. Imports increased 4.5 percent in Aug and increased 3.4 percent in 12 months. Growth of exports and imports has fluctuated in 2011 and 2012 as a result of price surges of commodities and raw materials.

Table VF-3, France, Exports and Imports, Month and 12-Month ∆%

	Exports Month ∆%	Exports 12-Month ∆%	Imports Month ∆%	Imports 12-Month ∆%
Aug 2012	3.6	2.8	6.3	3.4
Jul	1.4	4.3	-4.5	-2.0
Jun	-2.9	2.8	-0.6	4.4
May	2.4	7.3	0.6	3.4
Apr	1.1	5.5	2.2	2.7
Mar	-1.8	2.5	-3.2	0.4
Feb	0.8	6.2	2.4	4.9
Jan	1.0	6.2	1.7	2.8
Dec 2011	-2.5	6.6	-0.3	4.9
Nov	3.1	7.2	-0.6	4.3
Oct	0.6	9.0	-1.1	14.4
Sep	-3.8	7.3	0.8	11.4
Aug	5.2	10.6	0.7	8.8
Jul	-0.1	1.6	1.8	9.4
Jun	1.4	4.2	-1.5	10.1
May	0.7	16.4	-0.1	17.1
Apr	-1.8	7.7	-0.1	14.9
Mar	1.7	11.4	1.2	15.4
Feb	0.8	13.9	0.3	22.3
Jan	1.3	14.1	3.8	20.9
Dec 2011		6.6		4.9
Dec 2010		13.6		14.9
Dec 2009		-9.6		-1.8
Dec 2008		-6.9		-10.9
Dec 2007		6.2		8.4
Dec 2006		6.3		6.6
Dec 2005		11.4		15.1
Dec 2004		-3.8		5.8
Dec 2003		7.1		1.6

Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

Annual data for France’s exports, imports and trade balance are provided in Table VF-4. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €73,049 million in 2011. Annual growth rates of exports have not been sufficiently high to compensate for growth of imports driven in part by commodity price increases.

Table VF-4, France, Exports, Imports and Balance Year € Millions and ∆%

	Exports € Millions	∆%	Imports € Millions	∆%	Balance € Millions
Aug 2012 12 Months	439,353		507,765		-68,412
Year
2011	427,827	8.4	500,876	12.0	-73,049
2010	394,701	13.9	447,204	14.1	-52,503
2009	346,404	-17.1	391,788	-17.3	-45,384
2008	417,634	2.7	473,853	5.5	-56,219
2007	406,487	3.0	448,981	5.8	-42,494
2006	394,621	9.5	424,549	10.4	-29,928
2005	360,376	4.4	384,588	9.6	-24,212
2004	345,256	5.4	350,996	7.0	-5,740
2003	327,653		327,884		-231

Source: http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

VG Italy. Table VG-IT provides annual percentage changes of Italy’s GDP and expenditure components. Growth of Italy’s economy was relatively strong in 2007 with GDP growth of 1.7 percent, growth of Gross Domestic Investment (GDI) of 1.8 percent and growth of exports of 6.2 percent. There was sharp impact of the contraction on the economy of Italy with decline of GDP of 1.2 percent in 2008 followed by sharper decline of 5.5 percent in 2009. GDI fell sharply by 11.7 percent in 2009. Exports (EXP) also contracted sharply by 17.5 percent. Recovery was strong in 2010 with growth of GDP of 1.8 percent, GDI 2.1 percent and EXP 11.4 percent. Recovery stalled in 2011 with growth of GDP of 0.4 percent moving toward contraction at the end of the year and contraction of GDI of 1.8 percent while EXP grew 6.0 percent.

Table VG-IT, Italy, Gross Domestic Product and Expenditure Components, Annual ∆%

	2007	2008	2009	2010	2011
GDP	1.7	-1.2	-5.5	1.8	0.4
NCE	1.1	-0.5	-1.0	0.7	-0.1
GDI	1.8	-3.7	-11.7	2.1	-1.8
EXP	6.2	-2.8	-17.5	11.4	6.0
IMP	5.2	-3.0	-13.4	12.5	0.6

Notes: NCE: National Consumption Expenditures; GDI: Gross Domestic Investment; EXP: Exports; IMP: Imports

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/71887

The Markit/ADACI Business Activity Index increased from 44.0 in Aug to 44.5 in Sep, indicating sharp contraction of output of Italy’s services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10167). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that the data suggest contraction of GDP in Italy in IIIQ2012 at a rate close to the contraction in IIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10167). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 43.6 in Aug to 45.7 in Sep for 12 consecutive months of contraction of Italy’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10122). There was more moderate decline in new foreign orders than sharper decline in domestic new orders. Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds slower contraction of employment, new orders and output, suggesting slower pace of deterioration of manufacturing in Italy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10122). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Sep month ∆%: 0.0 Sep 12-month ∆%: 3.2 Blog 10/14/12
Producer Price Index	Aug month ∆%: 0.8 Aug 12-month ∆%: 3.0 Blog 9/30/12
GDP Growth	IIQ2012/IQ2012 SA ∆%: minus 0.8 IIQ2012/IIQ2011 NSA ∆%: minus 2.6 Blog 10/14/12
Labor Report	Jul 2012 Participation rate 64.0% Employment ratio 57.1% Unemployment rate 10.7% Blog 9/2/12
Industrial Production	Jul month ∆%: -0.2 12 months ∆%: minus 7.3 Blog 9/16/12
Retail Sales	Jul month ∆%: -0.2 Jul 12-month ∆%: -3.2 Blog 9/30/12
Business Confidence	Mfg Sep 88.3, May 86.5 Construction Sep 86.5, May 82.2 Blog 9/30/12
Trade Balance	Balance Jul SA €1607 million versus Jun €801 Exports Jul month SA ∆%: 0.3; Imports Jul month ∆%: 2.9 Exports 12 months Jul NSA ∆%: +4.3 Imports 12 months NSA ∆%: minus 4.3 Blog 9/23/12

Links to blog comments in Table IT:

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

9/2/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of_2.html

Table VG-1 provides annual percentage changes of Italy’s GDP and expenditure components. Growth of Italy’s economy was relatively strong in 2007 with GDP growth of 1.7 percent, growth of Gross Domestic Investment (GDI) of 1.8 percent and growth of exports of 6.2 percent. There was sharp impact of the contraction on the economy of Italy with decline of GDP of 1.2 percent in 2008 followed by sharper decline of 5.5 percent in 2009. GDI fell sharply by 11.7 percent in 2009. Exports (EXP) also contracted sharply by 17.5 percent. Recovery was strong in 2010 with growth of GDP of 1.8 percent, GDI 2.1 percent and EXP 11.4 percent. Recovery stalled in 2011 with annual growth of GDP of 0.4 percent moving toward contraction beginning in the second half of the year and contraction of GDI of 1.8 percent while EXP grew 6.0 percent.

Table VG-1, Italy, Gross Domestic Product Annual ∆%

	2007	2008	2009	2010	2011
GDP	1.7	-1.2	-5.5	1.8	0.4
NCE	1.1	-0.5	-1.0	0.7	-0.1
GDI	1.8	-3.7	-11.7	2.1	-1.8
EXP	6.2	-2.8	-17.5	11.4	6.0
IMP	5.2	-3.0	-13.4	12.5	0.6

Notes: NCE: National Consumption Expenditures; GDI: Gross Domestic Investment; EXP: Exports; IMP: Imports

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/71887

Table VG-2 provides revised percentage changes of GDP in Italy of quarter on prior quarter and quarter on same quarter a year earlier. Italy’s GDP fell 0.8 percent in IIQ2012 and declined revised 2.6 percent relative to IIQ2011. GDP had been growing during six consecutive quarters but at very low rates from IQ2010 to IIQ2011 but has fallen in four consecutive quarters from IIIQ2011 to IIQ2012 at increasingly higher rates of contraction from 0.2 percent in IIIQ2011 to 0.7 percent in IVQ2011, 0.8 percent in IQ2012 and 0.8 percent in IIQ2012. GDP contracted cumulatively 2.5 percent in four consecutive quarterly contractions from IIIQ2011 to IIQ2012. The yearly rate has fallen from 2.2 percent in IVQ2010 to minus 2.6 percent in IIQ2012. The fiscal adjustment of Italy is significantly more difficult with the economy not growing especially on the prospects of increasing government revenue. The strategy is for reforms to improve productivity so as to facilitate future fiscal consolidation.

Table VG-2, Italy, GDP ∆%

	Quarter ∆% Relative to Preceding Quarter	Quarter ∆% Relative to Same Quarter Year Earlier
IIQ2012	-0.8	-2.6
IQ2012	-0.8	-1.4
IVQ2011	-0.7	-0.5
IIIQ2011	-0.2	0.4
IIQ2011	0.3	1.0
IQ2011	0.1	1.4
IVQ2010	0.2	2.2
IIIQ2010	0.4	1.9
IIQ2010	0.7	1.9
IQ2010	0.9	1.0
IVQ2009	-0.1	-3.5
IIIQ2009	0.4	-5.0
IIQ2009	-0.2	-6.6
IQ2009	-3.6	-6.9
IVQ2008	-1.6	-3.0
IIIQ2008	-1.3	-1.9
IIQ2008	-0.5	-0.2
IQ2008	0.5	0.5
IV2007	-0.4	0.1
IIIQ2007	0.3	1.7
IIQ2007	0.2	2.0
IQ2007	0.0	2.4

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/72093

Chart VG-1 of the Italian National Institute of Statistics (ISTAT) provides growth of GDP of Italy at market prices. The year on year rate of growth pulled strongly out of the contraction. There is an evident trend of deceleration with increasingly sharper contraction.

Chart VG-1, Italy, GDP at Market Prices, ∆% on Same Quarter Year Earlier

Source: Istituto Nazionale di Statistica

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

Table VG-3 provides growth in IIQ2012 relative to IQ2012 and relative to IIQ2011 of Italy’s GDP and expenditure components. GDP fell 0.8 percent in IIQ2012 and 2.6 percent relative to a year earlier. The two main components of aggregate internal demand are quite weak: final consumption expenditure fell 0.7 percent in IIQ2012 and fell 3.0 percent relative to a year earlier while gross fixed capital formation declined 2.1 percent in IIQ2012 and declined 9.0 percent relative to a year earlier. Exports are crawling in weak euro area and world economic conditions with growth of 0.1 percent in IIQ2012 and 1.3 percent relative to a year earlier. Imports fell 0.5 percent in IIQ2012 and declined 8.3 percent relative to a year earlier.

Table VG-3, Italy, GDP and Expenditure Components, ∆%

	IIQ2012/IQ2012 ∆%	IIQ2012/IIQ2011 ∆%
GDP	-0.8	-2.6
Final Consumption Expenditure	-0.7	-3.0
Gross Fixed Capital Formation	-2.1	-9.0
Exports	0.1	1.3
Imports	-0.5	-8.2

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/72093

Italy’s industrial production increased 1.7 percent in Aug 2012, pulling down the 12-month rate of growth to minus 5.2 percent and fell 0.1 percent in Jul with 12-month decline of 7.2 percent, as shown in Table VG-4. Industrial production recovered with growth of 0.7 percent in May 2012 but growth in the 12 months ending in May 2012 was minus 6.7 percent. There have been negative changes with oscillations in monthly industrial production. Industrial production fell 18.8 percent in 2009 after falling 3.2 percent in 2008.

Table VG-4, Italy, Industrial Production ∆%

	Month ∆% SA	12-Month ∆% Calendar Adjusted
Aug 2012	1.7	-5.2
Jul	-0.1	-7.2
Jun	-1.1	-7.9
May	0.7	-6.7
Apr	-1.8	-9.3
Mar	0.5	-5.5
Feb	-0.8	-7.0
Jan	-2.3	-4.6
Dec 2011	0.9	-1.7
Nov	0.0	-4.1
Oct	-0.8	-3.8
Sep	-3.4	-2.6
Aug	1.5	4.8
Jul	-0.9	-1.1
Jun	-0.2	0.4
May	-1.4	2.1
Apr	1.4	4.0
Mar	-0.2	3.2
Feb	1.5	2.5
Jan	-0.8	0.1
Dec 2010	-0.4	6.7
Nov	0.7	5.5
Oct	0.0	4.1
Sep	0.7	5.8
Aug	-1.0	11.4
Jul	0.6	7.5
Jun	1.0	9.9
May	0.9	8.9
Apr	0.9	9.5
Mar	-0.2	8.5
Feb	-0.3	4.5
Jan	4.0	0.6
Dec 2009	-1.3	-6.6
Year		Not CA
2011		-0.7
2010		7.0
2009		-18.8
2008		-3.2

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/72236

Chart VG-2 of Italy’s Istituto Nazionale di Statistica provides 12-month percentage changes of Italy’s industrial production. There is trend of deterioration after Aug 2011, sharply deteriorating after Dec 2011 into 2012 with marginal recovery in May 2012 and further drops in Jun-Jul 2012 with increase of 1.7 in the month of Aug 2012 but still in negative territory in 12-month percentages.

Chart VG-2, Italy, Industrial Production, 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

http://www.istat.it/en

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.0 percent in 2009 after dropping 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 0.9 percent in 2011. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.7 percent on average between 1948 and 2011, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.3 percent as advanced economies struggle with weak internal demand and world trade.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	4.2
2001	2.9
2002	2.4
2003	3.8
2004	2.9
2005	2.8
2006	2.6
2007	3.6
2008	-1.0
2009	-4.0
2010	1.8
2011	0.9
Average ∆% per Year
1948-2011	2.7
1948-1959	2.9
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.6
2000-2011	1.7
2000-2007	3.0
2009-2011	1.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2012/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 53.7 in Aug to 52.2 in Sep with growth during 21 consecutive months, decreasing at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10162). Chris Williamson, Chief Economist at Markit, finds that the UK economy could have grown at 0.1 in IIIQ2012 with moderate growth of services but marginal decline in construction and sharp decline in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10162). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased from 49.6 in Aug to 48.4 in Sep (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10013). The PMI registered average 47.7 in IIIQ2012, which is the lowest reading since IIQ2009. New export orders fell for a sixth consecutive month with slowing demand from the European Union and Asia. Chris Williamson, Chief Economist at Markit and author of the Markit/CIPS Manufacturing PMI^®, finds that the PMI data suggest contraction of manufacturing output in the UK at a quarterly rate higher than 1 percent that could restrain growth, maintaining the economy in recession (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10125).

Table UK, UK Economic Indicators


CPI	Aug month ∆%: 0.5 Aug 12-month ∆%: 2.5 Blog 9/23/12
Output/Input Prices	Output Prices: Jul 12-month NSA ∆%: 1.7; excluding food, petroleum ∆%: 1.3 Input Prices: Jul 12-month NSA ∆%: -2.4 Excluding ∆%: -1.5 Blog 9/9/12
GDP Growth	IIQ2012 prior quarter ∆% minus 0.4; year earlier same quarter ∆%: minus 0.5 Blog 9/30/12
Industrial Production	Aug 2012/Jul 2011 NSA ∆%: Production Industries minus 1.2; Manufacturing minus 1.2 Blog 10/14/12
Retail Sales	Aug month ∆%: -0.2 Aug 12-month ∆%: +2.7 Blog 9/23/12
Labor Market	May-Jul Unemployment Rate: 8.1%; Claimant Count 4.8%; Earnings Growth 1.5% Blog 9/16/12
Trade Balance	Balance Aug minus ₤4169 million Exports Aug ∆%: -2.4; Jun-Aug ∆%: -1.3 Imports Aug ∆%: 3.4 Jun-Aug ∆%: 0.8 Blog 10/14/12

Links to blog comments in Table UK:

9/30/12 http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html

9/23/12 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html

9/16/12 http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html

9/9/12 http://cmpassocregulationblog.blogspot.com/2012/09/twenty-eight-million-unemployed-or_10.html

The UK Office for National Statistics provides the output of production industries with revisions. Table VH-1 incorporates the revisions released on Oct 11, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2011/index.html) and the latest available data for Aug 2012. Manufacturing accounts for 67.0 percent of the production industries of the UK and decreased 1.2 percent in the 12 months ending in Aug. Capital goods industries grew at 4.1 percent in the 12 months ending in Aug 2012 and had been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 11.7 percent in the 12 months ending in Feb 2011. Mining and quarrying fell 2.4 percent in the 12 months ending in Jul 2012. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Apr 2011 to Jul 2012. Energy and mining have been drivers of decline. The lower part of Table VH-1 provides rates of change of yearly values. Manufacturing output fell 9.7 percent in 2009 after falling 2.5 percent in 2008 but grew at 3.8 percent in the initial phase of the recovery in 2010 and 2.0 percent in 2011.

Table VH-1, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, 12-Month ∆%

	PROD IND	MNG	MFG	ENGY	CON DUR	CON NDUR	CAP
2012
Aug	-1.2	-1.8	-1.2	-1.9	-1.2	-4.3	4.1
Jul	-0.8	-2.8	-0.7	-2.3	-0.9	-4.4	6.3
Jun	-3.8	-6.0	-3.9	-4.5	-7.4	-5.8	1.8
May	-1.5	-8.6	-1.2	-3.3	-3.1	-5.3	3.7
Apr	-2.1	-14.1	-1.4	-5.8	-1.8	-5.5	3.7
Mar	-2.6	-8.8	-1.2	-8.1	-6.0	-2.0	1.3
Feb	-2.2	-8.8	-1.9	-4.2	-6.3	-0.9	-0.5
Jan	-3.8	-20.8	-0.4	-15.0	-6.0	0.7	3.4
2011
Dec	-2.7	-14.5	0.7	-14.6	-4.0	-0.6	6.3
Nov	-3.2	-13.9	-1.3	-11.9	0.3	-1.4	4.4
Oct	-2.5	-13.3	-0.8	-11.3	-1.7	-2.0	4.1
Sep	-1.6	-16.7	0.6	-11.3	-1.6	-1.1	6.4
Aug	-1.3	-15.2	0.6	-9.6	-1.3	0.6	3.7
Jul	-0.9	-15.6	1.9	-10.4	2.1	3.3	3.6
Jun	-0.3	-15.4	2.9	-9.8	7.5	1.4	7.3
May	-0.9	-20.5	3.5	-13.0	2.0	3.4	6.1
Apr	-0.9	-14.5	2.7	-11.2	1.1	4.1	5.3
Mar	0.1	-16.2	3.5	-10.6	2.4	0.5	10.0
Feb	2.0	-11.5	5.1	-7.3	1.0	1.0	11.7
Jan	3.6	-3.3	5.6	-3.1	4.0	-0.6	10.3
2011/ 2010	-0.7	-14.2	2.0	-10.3	1.0	0.7	6.5
2010/ 2009	2.1	-4.3	3.8	-3.0	-4.1	-0.5	10.2
2009/ 2008	-9.1	-9.0	-9.7	-6.6	-6.7	-0.8	-10.2
2008/ 2007	-2.8	-6.2	-2.5	-3.1	-5.6	-1.6	-3.0
2007/2006	-0.5	-2.7	0.9	-1.5	1.1	-1.6	2.6

Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Energy; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Good

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2012/index.html

Percentage changes in the production industries and major components in a month relative to the prior month are shown in Table VH-2. The production industries were weak in Aug 2012 after strong performance in Jul 2012. The overall index of production industries fell 0.5 percent in Aug 2012, with continuing improvement in mining increasing 1.4 percent but decline of manufacturing by 1.4 percent while energy increased 0.7 percent while capital goods output fell 2.2 percent and durable goods declined 2.4 percent. There was sharp recovery in Jul 2012 with high rates for all components such as 2.8 percent for the production index, 3.1 percent for manufacturing and 3.2 percent for capital goods. Manufacturing fell in all months from Jun 2011 to Nov 2011 with exception of 0.0 percent in Sep 2011. Manufacturing fell in four of the six months from Nov 2011 to Apr 2012. After growing 1.4 percent in May 2012, manufacturing fell 2.9 percent in Jun 2012 but rebounded with growth of 3.1 percent in Jul 2012, declining 1.1 percent in Aug 2012. In Dec 2011, manufacturing grew 1.2 percent but decreased 0.2 percent in Jan 2012 and 1.2 percent in Feb 2012, growing 1.0 percent in Mar 2012 and declining 1.0 percent in Apr 2012 but growing 1.4 percent in May 2012. Growth was stronger in the first five months to May 2011 with the exception of decline by 0.8 percent in Apr. The decline of manufacturing by 2.9 percent in Jun 2012 is the sharpest monthly decline for manufacturing in Table VH-2 but was followed by growth of 3.1 percent in Jul 2012.

Table VH-2, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, Latest Month on Previous Month ∆%

	PROD IND	MNG	MFG	ENGY	CON DUR	CON NDUR	CAP
2012
Aug	-0.5	1.4	-1.1	0.7	-2.4	-0.1	-2.2
Jul	2.8	4.4	3.1	2.3	4.3	1.9	3.2
Jun	-2.4	2.8	-2.9	-1.0	-3.1	-1.0	-1.4
May	1.2	0.9	1.4	1.5	-0.2	0.5	2.5
Apr	-0.7	-5.0	-1.0	0.8	2.2	-2.8	-0.8
Mar	-0.3	-1.6	1.0	-4.7	1.3	-0.2	2.9
Feb	0.3	4.0	-1.2	5.4	-1.6	-0.8	-2.0
Jan	-0.5	-2.8	-0.2	-1.8	1.4	-0.1	-0.9
2011
Dec	0.6	-2.6	1.2	-1.3	-0.8	1.2	0.7
Nov	-0.4	-1.7	-0.3	-0.8	1.4	-0.4	1.4
Oct	-1.2	0.0	-1.1	-1.6	-0.5	-0.5	-1.4
Sep	-0.1	-1.2	0.0	-1.1	-2.9	-2.0	2.2
Aug	-0.2	0.4	-0.5	0.4	-2.1	-0.2	-0.1
Jul	-0.2	0.9	-0.3	-0.1	-2.6	0.4	-1.2
Jun	0.0	0.0	-0.2	0.2	1.5	-0.4	0.4
May	0.6	-5.1	1.2	-1.1	1.0	0.3	2.4
Apr	-1.1	0.7	-0.8	-1.7	-2.1	0.8	-3.0
Mar	0.1	-1.5	0.3	-0.7	0.9	0.9	1.1
Feb	-1.3	-9.7	0.3	-6.5	-1.2	0.8	1.9
Jan	0.6	4.9	0.8	-1.3	3.5	-1.4	1.9
2010
Dec	0.1	-1.9	-0.8	1.9	3.6	0.4	-1.2

Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Electricity, Gas and Water Supply; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2012/index.html

The weights of components of the production index and contributions by components to the monthly and 12-month percentage changes of volume are provided in Table VH-3. The 12-month rate of output of the production industries of minus 1.2 percent was driven by negative contribution of 0.87 percentage points of manufacturing. Mining deducted 0.22 percentage points of the general component of mining with the subcomponent of oil and gas contributing negative 0.22 percentage points. The contribution of manufacturing is strong because of its share of 67.0 percent in the production index with growth of minus 1.2 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing decreased 1.1 percent in Aug, deducting 0.78 percentage points. Increase of mining by 1.4 percent contributed 0.17 percentage points.

Table VH-3, UK, Weights of Components, Volume 12-Month and Month ∆% and Percentage Point Contributions of Production Industries by Components

	Weight %	Volume 12-Month ∆% Ending in Aug 2012	% Point Contrib.	Volume Month ∆% Aug 2012	% Point Contrib.
PROD IND	100.0	-1.2	-1.18	-0.5	-0.50
MNG	15.4	-1.8	-0.22	1.4	0.17
MNG 06	12.6	-2.3	-0.22	2.1	0.19
MFG	67.0	-1.2	-0.87	-1.1	-0.78
ELEC	9.6	-1.7	-0.16	-0.6	-0.06
WATER & SEW	8.0	0.9	0.08	2.1	0.17

Notes: Contrib: Contribution; PROD IND: Index of Production; MNG: Mining and Quarrying (of which 14.4 percent of the total weight in oil and gas extraction); MNG 06: Subdivision of Mining including oil and gas extraction; MFG: Manufacturing; ELEC: Electricity, gas, steam and air conditioning; WATER & SEW: water supply, sewerage and waste management

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2012/index.html

Table VH-4 provides the breakdown of manufacturing 12-month and monthly growth and percentage contributions. Several negative contributions to 12-month growth were by: CF basic pharmaceutical products and preparations (CF), deducting 0.36 percentage points with 12-month growth of minus 7.3 percent; manufacture of food products, beverages and tobacco (CA) deducted 0.39 percentage points with 12-month growth of minus 3.0 percent; and wood products (CC) deducted 0.27 percentage points with growth of minus 5.4 percent in 12 months. The highest positive contribution was 0.80 percentage points by transport equipment (CL), growing 11.0 percent in 12 months. Electrical products (CJ) added 0.30 percentage points with growth of 14.1 percent in 12 months.

Table VH-4, UK, Growth Rates of Manufacturing and Percentage Point Contributions to the Index of Production

Sub-sector	% of production	Jul 2012 12-Month Growth %	Contribution to production (% points)	Jul 2012 Month on month growth (%)	Contribution to production (% points)

CA	11.9	-3.0	-0.39	-0.5	-0.06
CB	2.0	-1.2	-0.02	0.6	0.01
CC	5.5	-5.4	-0.27	-0.4	-0.02
CD	0.8	-2.8	-0.02	-2.0	-0.01
CE	6.1	-9.0	-0.56	-1.3	-0.07
CF	6.1	-7.3	-0.36	0.1	0.00
CG	4.7	-6.8	-0.32	0.0	0.00
CH	8.6	2.0	0.18	-0.3	-0.02
CI	4.3	-0.1	0.00	-0.7	-0.03
CJ	2.1	14.1	0.30	-0.3	-0.01
CK	4.8	0.1	0.01	-2.5	-0.16
CL	5.7	11.0	0.80	-4.5	-0.38
CM	4.5	-4.6	-0.22	-0.5	-0.02

Notes:

CA Manufacture of food products, beverages and tobacco; CB Textiles, wearing apparel and leather products; CC Wood and paper products and printing; CD Coke and refined petroleum products; CE Chemicals and chemical products; CF Basic pharmaceutical products and preparations; CG Rubber and plastic products and nonmetallic mineral products; CH Basic metals and metal products; CI Computer, electronic and optical products; CJ Electrical equipment; CK Machinery and equipment not elsewhere classified; CL Transport equipment; CM Other manufacturing and repair.

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/iop/index-of-production/august-2012/index.html

The UK’s trade account is shown in Table VH-5. In Aug 2012, the UK ran a deficit in trade of goods and services (total trade) of ₤4169 million. The deficit in trade of goods was ₤9844 million and ₤8185 million in goods excluding oil. A surplus in services of ₤5675 million contributed to the smaller overall deficit in goods and services (-₤9844 million plus ₤5675 equal to -₤4169). Services have contributed to lower trade account deficits and also softened the impact of the global recession on the UK economy. Exports of goods and services decreased 2.4 percent in Aug 2012 and fell 1.3 percent in the quarter Jun-Aug 2012 relative to the same quarter a year earlier with imports increasing 3.4 percent in Aug and increasing 0.8 percent in un-Aug 2012 relative to the same quarter a year earlier. Excluding oil, UK exports of goods decreased 4.3 percent in Aug 2012 and fell 0.9 in Jun-Aug 2012 relative to a year earlier while imports increased 2.0 percent in Aug and decreased 0.1 percent in Jun-Aug 2012 relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports increased 0.1 percent in Aug and fell 2.8 percent in Jun-Aug 2012 relative to a year earlier and imports decreased 0.3 percent in Aug and increased 1.8 percent Jun-Aug 2012 relative to a year earlier.

Table VH-5, Value of UK Trade in Goods and Services, Balance of Payments Basis, ₤ Million and ∆%

	₤ Million SA Aug 2012	Month ∆% Aug 2012	Jun-Aug 2012 ∆% Jun-Aug 2011
Total Trade
Exports	40,266	-2.4	-1.3
Imports	44,435	3.4	0.8
Balance	-4,169
Trade in Goods
Exports	24,642	-4.0	-0.2
Imports	34,486	4.5	0.4
Balance	-9,844
Trade in Goods Excluding Oil
Exports	21,397	-4.3	-0.9
Imports	29,582	2.0	-0.1
Balance	-8,185
Trade in Services
Exports	15,624	0.1	-2.8
Imports	9,949	-0.3	1.8
Balance	5,675

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/august-2012/index.html

Longer Run