CMP Associates Regulation Blog: Recovery without Hiring, United States International Trade Deficit and Fiscal Imbalance, Collapse of United States Dynamism of Income Growth and Employment Creation, International Financial Turbulence and the Global Recession Risk: Part II

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Recovery without Hiring, United States International Trade Deficit and Fiscal Imbalance, Collapse of United States Dynamism of Income Growth and Employment Creation, International Financial Turbulence and the Global Recession Risk: Part II

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Recovery without Hiring, United States International Trade Deficit and Fiscal Imbalance, Collapse of United States Dynamism of Income Growth and Employment Creation, International Financial Turbulence and the 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

II United States International Trade

IIA United States International Trade Deficit and Fiscal Imbalance

IIB 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	2.0	2.1	7.9
Japan	3.5	-0.3	-1.4	4.2
China	7.4	1.7	-2.8
UK	0.0	2.2* RPI 2.6	2.5* output 1.2** input -1.2*	7.9
Euro Zone	-0.4	2.6	2.7	11.6
Germany	1.0 CA	2.1	1.6	5.4
France	0.3	2.2	2.5	10.8
Nether-lands	-0.5	2.5	4.1	5.4
Finland	0.1	3.4	2.6	7.9
Belgium	-0.3	2.6	3.3	7.4
Portugal	-3.3	2.9	4.0	15.7
Ireland	-0.5	2.4	2.4	15.1
Italy	-2.6	3.4	3.0	10.8
Greece	NA	0.3	6.8	NA
Spain	-1.3	3.5	4.1	25.8

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/september-2012/index.html **Core

PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-prices-indices/september-2012/index.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: October 24, 2012

Information received since the Federal Open Market Committee met in September 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 advanced a bit more quickly, but growth in business fixed investment has slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation recently picked up somewhat, reflecting higher energy prices. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient 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 will continue 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 Treasury securities, 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 disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and 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 will continue 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 Treasury securities, 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 a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue 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 Treasury securities, 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.”

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. 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.”

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 IIIQ2012 is analyzed in I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html) and the PCE inflation data from the report on personal income and outlays (Section IV and earlier 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). The Bureau of Economic Analysis (BEA) provides the first estimate of IIIQ2012 GDP with the second estimate of IIIQ2012 to be released on Nov 29 (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 IIA and IV in this blog for Sep 2012 at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html. The next report on “Personal Income and Outlays” for Oct will be released at 8:30 AM on Nov 30, 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 Oct report is analyzed in this blog at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html; 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 Nov will be released on Fri Dec 7, 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

China is experiencing similar inflation behavior as the advanced economies in prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices in Sep 2012 and in declining prices relative to a year earlier. As shown in Table IV-5, inflation of the price indexes for industry in Oct 2012 is 0.2 percent; 12-month inflation is minus 2.8 percent in Oct; and inflation in Jan-Oct 2012 relative to Jan-Oct 2011 is minus 1.6 percent. Inflation of segments in Oct 2012 in China is provided in Table IV-6 in column “Month Sep ∆%.” There were increases of prices of mining & quarrying of 0.7 percent in Oct but decrease of 6.4 percent in 12 months. Prices of consumer goods increased 0.1 percent in Oct and increased 0.2 percent in 12 months. Prices of inputs in the purchaser price index increased 0.1 percent in Oct and declined 3.3 percent in 12 months. Fuel and power increased 0.1 percent in Oct and declined 1.5 percent in 12 months. An important category of inputs for exports is textile raw materials, increasing 0.1 percent in Oct and declining 2.2 percent in 12 months.

Table IV-5, China, Price Indexes for Industry ∆%

	Month Oct ∆%	12-Month Oct ∆%	Jan-Oct 2012/Jan-Oct 2011 ∆%
I Producer Price Indexes	0.2	-2.8	-1.6
Means of Production	0.2	-3.7	-2.4
Mining & Quarrying	0.7	-6.4	-1.8
Raw Materials	0.5	-3.4	-1.9
Processing	0.0	-3.5	-2.7
Consumer Goods	0.1	0.2	0.9
Food	0.0	0.3	1.5
Clothing	0.1	1.6	2.2
Daily Use Articles	0.0	0.5	0.9
Durable Consumer Goods	0.1	-1.0	-0.9
II Purchaser Price Indexes	0.1	-3.3	-1.7
Fuel and Power	0.1	-1.5	1.5
Ferrous Metals	-0.1	-11.4	-6.7
Nonferrous Metals	0.5	-3.1	-6.0
Raw Chemical Materials	0.4	-5.7	-3.9
Wood & Pulp	-0.2	-1.3	0.3
Building Materials	0.9	-1.6	-0.1
Other Industrial Raw Materials	0.1	-1.6	-0.9
Agricultural	-0.1	-0.6	0.0
Textile Raw Materials	0.1	-2.2	-0.8

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

China’s producer price inflation follows waves similar to those around the world but with declining trend since May 2012, as shown in Table IV-6. In the first wave, annual equivalent inflation was 6.4 percent in Jan-Jun 2011, driven by carry trades from zero interest rates to commodity futures. In the second wave, risk aversion unwound carry trades, resulting in annual equivalent inflation of minus 3.1 percent in Jul-Nov 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 2.4 percent in Dec 2011-Jan 2012. In the fourth wave, new carry trades resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. A fifth wave is beginning with annual equivalent minus 5.8 percent in May-Sep 2012. There are declining producer prices in China in Aug-Sep in contrast with increases worldwide. In a fifth wave, producer prices increased 0.2 percent in Oct 2012, which is equivalent to 2.4 percent in a year.

Table IV-6, China, Month and 12-Month Rate of Change of Producer Price Index, ∆%

	12-Month ∆%	Month ∆%
Oct 2012	-2.8	0.2
AE ∆% Oct		2.4
Sep	-3.6	-0.1
Aug	-3.5	-0.5
Jul	-2.9	-0.8
Jun	-2.1	-0.7
May	-1.4	-0.4
AE ∆% May-Sep		-5.8
Apr	-0.7	0.2
Mar	-0.3	0.3
Feb	0.0	0.1
AE ∆% Feb-Apr		2.4
Jan	0.7	-0.1
Dec 2011	1.7	-0.3
AE ∆% Dec-Jan		-2.4
Nov	2.7	-0.7
Oct	5.0	-0.7
Sep	6.5	0.0
Aug	7.3	0.1
Jul	7.5	0.0
AE ∆% Jul-Nov		-3.1
Jun	7.1	0.0
May	6.8	0.3
Apr	6.8	0.5
Mar	7.3	0.6
Feb	7.2	0.8
Jan	6.6	0.9
AE ∆% Jan-Jun		6.4
Dec 2010	5.9	0.7

AE: Annual Equivalent

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

Chart IV-1 of the National Bureau of Statistics of China provides monthly and 12-month rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct, Nov, Dec 2011, Jan, Mar, Apr, May, Jun, Jul, Aug and Sep 2012 pulled down the 12-month rates to 5.0 percent in Oct 2011, 2.7 percent in Nov, 1.7 percent in Dec, 0.7 percent in Jan 2012, 0.0 percent in Feb, minus 0.3 percent in Mar, minus 0.7 percent in Apr, minus 1.4 percent in May, 2.1 in Jun, minus 2.9 percent in Jul, minus 3.5 percent in Aug and minus 3.6 percent in Sep. The increase of 0.2 percent in Oct 2012 pulled up the 12-month rate to minus 2.8 percent.

Chart IV-1, China, Producer Prices for the Industrial Sector Month and 12 months ∆%

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

Chart IV-2 of the National Bureau of Statistics of China provides monthly and 12-month inflation of the purchaser product indices for the industrial sector. Decreasing monthly inflation with four successive contractions from Oct 2011 to Jan 2012 and May-Aug 2012 pulled down the 12-month rate to minus 4.1 percent in Aug and Sep. Consecutive increases of 0.1 percent in Sep and Oct 2012 raised the 12-month rate to 3.3 percent in Oct 2012.

Chart IV-2, China, Purchaser Product Indices for Industrial Sector

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

China is highly conscious of food price inflation because of its high weight in the basket of consumption of the population. Consumer price inflation in China in Oct was minus 0.1 percent and 1.7 percent in 12 months, as shown in Table IV-7. Food prices decreased 0.8 percent in Oct, increasing 1.8 percent in 12 months and 5.1 percent in Jan-Oct 2012 relative to Jan-Oct 2011. Another area of concern is housing inflation which was 0.2 in Oct but increased 2.5 percent in 12 months. Prices of services increased 0.2 percent in Oct and gained 2.3 percent in 12 months.

Table IV-7, China, Consumer Price Index

2012	Oct 12 Month ∆%	Oct 12 Month ∆%	Jan-Oct 2012 ∆% Jan-Oct 2011
Consumer Prices	-0.1	1.7	2.7
Urban	-0.1	1.8	2.8
Rural	-0.1	1.5	2.6
Food	-0.8	1.8	5.1
Non-food	0.3	1.7	1.6
Consumer Goods	-0.2	1.5	3.1
Services	0.2	2.3	1.9
Commodity Categories:
Food	-0.8	1.8	5.1
Tobacco, Liquor	0.1	2.0	3.1
Clothing	0.9	2.7	3.3
Household	0.0	1.5	2.0
Healthcare & Personal Articles	0.2	1.8	2.1
Transportation & Communication	0.1	0.1	-0.1
Recreation, Education, Culture & Services	0.2	1.1	0.4
Residence	0.2	2.5	2.0

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

Month and 12-month rates of change of consumer prices are provided in Table IV-8. There are waves of consumer price inflation in China similar to those around the world (http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html). In the first wave, consumer prices increased at the annual equivalent rate of 8.3 percent in Jan-Mar 2011, driven by commodity price increases resulting from unconventional monetary policy of zero interest rates. In the second wave, risk aversion unwound carry trades with annual equivalent inflation falling to the rate of 2.0 percent in Apr-Jun 2011. In the third wave, inflation returned at 2.9 percent with renewed interest in commodity exposures in Jul-Nov 2011. In the fourth wave, inflation returned at a high 5.8 percent annual equivalent in Dec 2011 to Mar 2012. In the fifth wave, annual equivalent inflation was minus 3.9 percent in Apr to Jun 2012. In the sixth wave, annual equivalent inflation rose to 4.1 percent in Jul-Sep 2012. In the seventh wave, inflation was minus 1.2 percent annual equivalent in Oct 2012. Inflation volatility originating in unconventional monetary policy clouds investment and consumption decisions by business and households.

Table IV-8, China, Month and 12-Month Rates of Change of Consumer Price Index ∆%

	Month ∆%	12-Month ∆%
Oct 2012	-0.1	1.7
AE ∆% Oct	-1.2
Sep	0.3	1.9
Aug	0.6	2.0
Jul	0.1	1.8
AE ∆% Jul-Sep	4.1
Jun	-0.6	2.2
May	-0.3	3.0
Apr	-0.1	3.4
AE ∆% Apr to Jun	-3.9
Mar	0.2	3.6
Feb	-0.1	3.2
Jan	1.5	4.5
Dec 2011	0.3	4.1
AE ∆% Dec to Mar	5.8
Nov	-0.2	4.2
Oct	0.1	5.5
Sep	0.5	6.1
Aug	0.3	6.2
Jul	0.5	6.5
AE ∆% Jul to Nov	2.9
Jun	0.3	6.4
May	0.1	5.5
Apr	0.1	5.3
AE ∆% Apr to Jun	2.0	2.0
Mar	-0.2	5.4
Feb	1.2	4.9
Jan	1.0	4.9
AE ∆% Jan to Mar	8.3
Dec 2010	0.5	4.6

AE: Annual Equivalent

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

Chart IV-3 of the National Bureau of Statistics of China provides monthly and 12-month rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates. Consumer prices fell 0.2 percent in Nov 2011 after increasing only 0.1 percent in Oct but increased 0.3 percent in Dec and a high 1.5 percent in Jan 2012, declining 0.1 percent in Feb, rising 0.2 percent in Mar and declining 0.1 percent in Apr, 0.3 percent in May and 0.6 percent in Jun 2012 but increasing 0.1 percent in Jul, 0.6 percent in Aug 2012 and 0.3 percent in Sep 2012. Consumer prices fell 0.1 percent in Oct 2012. The decline of 0.1 percent in Feb 2012 pulled down the 12-month rate to 3.2 percent, which bounced back to 3.6 percent in Mar with the monthly increase of 0.2 percent and fell to 2.2 percent in Jun with increasing pace of monthly decline from Apr to Jun 2012. Even with increase of 0.1 percent in Jul 2012, consumer price inflation in 12 months fell to 1.8 percent in Jul 2012 but bounced back to 2.0 percent with increase of 0.6 percent in Aug. In Sep, increase of 0.3 percent still maintained 12-month inflation at 1.9 percent. The decline of 0.1 percent in Oct 2012 pulled down the 12-month rate to 1.7 percent, which is the lowest in Chart IV-3.

Chart IV-3, China, Consumer Prices ∆% Month and 12 Months Oct 2011 to Oct 2012

Source: National Bureau of Statistics of China

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

The producer price index of the euro zone increased 0.2 percent in Sep 2012 after increasing 0.9 percent in Aug and 0.3 percent in Jul, falling 0.5 percent in both Jun and May 2012, as shown in Table IV-9. In Jan-Mar, producer prices increased cumulatively 2.0 percent or at annual equivalent rate of 8.3 percent. Energy inflation has oscillated with the shocks of risk aversion that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices increased 0.0 percent in Sep 2012, 2.4 percent in Aug, and 1.4 percent in Jul 2012 or at the annual equivalent rate of 17.2 percent in the quarter Jul-Sep 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.4 percent. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Prices of capital goods have barely moved. Prices of durable consumer goods accelerated at annual equivalent rate of 3.3 percent in Jan-Mar 2012 but were flat in every month from Apr to Jun 2012, increasing 0.1 percent in both Aug and Jul 2012 but then remained unchanged in Sep 2012. Purchasing managers’ indexes worldwide reflect increasing prices of inputs for business while sales prices are stagnant or declining. Unconventional monetary policy causes uncertainty in business decisions with shocks of declining net revenue margins during worldwide inflation waves (http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html).

Table IV-9, Euro Zone, Industrial Producer Prices Month ∆%

	Sep 2012	Aug 2012	Jul 2012	Jun 2012	May 2012	Apr 2012	Mar 2012
Industry ex Construction	0.2	0.9	0.3	-0.5	-0.5	0.0	0.5
Industry ex Construction & Energy	0.3	0.3	-0.1	-0.1	0.0	0.2	0.2
Intermediate Goods	0.4	0.5	-0.3	-0.3	0.1	0.3	0.3
Energy	0.0	2.6	1.4	-1.8	-1.5	-0.2	1.3
Capital Goods	0.0	0.0	0.0	0.1	0.1	0.1	0.1
Durable Consumer Goods	0.0	0.1	0.1	0.0	0.0	0.0	0.1
Nondurable Consumer Goods	0.4	0.4	0.2	0.1	-0.1	0.1	0.2

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

Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-10. The 12-month percentage change of industrial prices excluding construction fell from 4.3 percent in Dec 2011 to 1.6 percent in Jul 2012 but increased to 2.7 percent in both Aug and Sep 2012. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.5 percent in the 12 months ending in Jul 2012, increasing to 8.1 percent in Aug 2012 and 7.0 percent in Sep 2012. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion. Business net revenue suffers wide oscillation preventing sound calculation of risk/returns and capital budgeting.

Table IV-10, Euro Zone, Industrial Producer Prices 12-Month ∆%

	Sep 2012	Aug 2012	Jul 2012	Jun 2012	May 2012	Apr 2012	Mar 2012
Industry ex Construction	2.7	2.7	1.6	1.8	2.3	2.6	3.5
Industry ex Construction & Energy	1.2	1.0	0.8	0.9	1.1	1.3	1.6
Intermediate Goods	0.7	0.2	-0.2	0.1	0.5	0.6	0.9
Energy	7.0	8.1	4.5	4.7	6.2	6.6	9.0
Capital Goods	0.9	0.9	1.0	1.1	1.2	1.2	1.2
Durable Consumer Goods	1.3	1.7	1.9	1.9	1.9	2.0	2.3
Nondurable Consumer Goods	2.3	2.2	2.0	1.9	1.9	2.3	2.8

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

Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html), as shown in Table IV-11. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 12.0 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent producer price inflation declined at minus 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.0 percent. In the third wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.8 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 8.3 percent with a high annual equivalent rate of 9.4 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal of commodity carry trades with equivalent annual inflation of minus 3.9 percent in Apr-Jun 2012. In the seventh wave, annual equivalent inflation jumped to 5.7 percent in Jul-Sep 2012 with 7.4 percent annual equivalent in Jul-Aug 2012. The bottom part of Table IV-7 provides 12-month percentage changes from 1999 to 2010. The final row of Table IV-10 provides the average annual rate of producer-price inflation in the euro area at 2.6 percent in Dec from 1999 to 2011.

Table IV-11, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Sep 2012	0.2	2.7
Aug 2012	0.9	2.7
Jul 2012	0.3	1.6
AE ∆% Jul-Aug	5.7
Jun	-0.5	1.8
May	-0.5	2.3
Apr	0.0	2.6
AE ∆% Apr-Jun	-3.9
Mar	0.5	3.5
Feb	0.6	3.7
Jan	0.9	3.9
AE ∆% Jan-Mar	8.3
Dec 2011	-0.2	4.3
Nov	0.3	5.4
Oct	0.1	5.5
AE ∆% Oct-Dec	0.8
Sep	0.3	5.8
Aug	-0.2	5.8
Jul	0.4	6.1
AE ∆% Jul-Sep	2.0
Jun	0.0	5.9
May	-0.2	6.2
AE ∆% May-Jun	-1.2
Apr	0.9	6.8
Mar	0.8	6.8
Feb	0.8	6.6
Jan	1.3	5.9
AE ∆% Jan-Apr	12.0
Dec 2010	0.8	5.4
Dec 2009		-2.9
Dec 2008		1.1
Dec 2007		4.7
Dec 2006		3.8
Dec 2005		4.5
Dec 2004		3.8
Dec 2003		0.8
Dec 2002		1.5
Dec 2001		-0.6
Dec 2000		4.6
Dec 1999		2.6
Average ∆% 1999-2011		2.6

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

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 Oct 2012 relative to Sep 2012 and 0.1 percent SA in Oct 2012 relative to Sep 2012. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html), as shown in Table IV-12. 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 1.8 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 eighth wave in Sep-Oct 2012, annual equivalent inflation is 0.0 percent NSA and 1.2 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-12, Germany, Consumer Price Index ∆%

	12-Month ∆%	Month ∆% NSA	Month ∆% SA
Oct 2012	2.0	0.0	0.1
Sep	2.0	0.0	0.1
AE ∆% Sep-Oct		0.0	1.2
Aug	2.1	0.4	0.4
Jul	1.7	0.4	0.2
AE ∆% Jul-Aug		4.9	3.7
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	0.1
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	1.9
Jun	2.3	0.1	0.2
May	2.3	0.0	0.2
AE ∆% May-Jun		0.6	2.4
Apr	2.4	0.2	0.2
Mar	2.1	0.5	0.2
Feb	2.1	0.5	0.2
Jan	2.0	-0.4	0.2
AE ∆% Feb-Apr		4.9	2.4
Dec 2010	1.7	1.0	0.3
Nov	1.5	0.1	0.2
Oct	1.3	0.1	0.2
Sep	1.3	-0.1	0.2
Aug	1.0	0.0	0.1
Annual Average ∆%
2011	2.3
2010	1.1
2009	0.4
2008	2.6
Dec 2009	0.9
Dec 2008	1.1
Dec 2007	3.1
Dec 2006	1.4
Dec 2005	1.4
Dec 2004	2.3
Dec 2003	1.0
Dec 2002	1.2
Dec 2001	1.6

AE: Annual Equivalent

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2012/11/PE12_387_611.html;jsessionid=973CE9D3038391CEB811D3DC485654C1.cae4 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart IV-4, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index of Germany from 2004 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-Oct 2012. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.

Chart IV-4, Germany, Consumer Price Index, Unadjusted, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-5, 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-5 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 by 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 and flattening segment as inflation remains unchanged in both Sep and Oct 2012. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

Chart IV-5, 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-13 provides the monthly and 12-month rate of inflation for segments of the consumer price index of Germany in Oct 2012. Inflation excluding energy increased 0.2 percent in Oct 2012 and rose 1.6 percent in 12 months. Excluding household energy inflation was -0.1 percent in Oct and rose 1.6 percent in 12 months. Food prices increased 0.5 percent in Oct and increased 3.3 percent in 12 months. There were differences in inflation of energy-related prices. Heating oil rose 11.3 percent in 12 months and increased 2.2 percent in Oct. Motor fuels decreased 4.0 percent in Oct and increased 5.4 percent in 12 months.

Table IV-13, Germany, Consumer Price Index ∆%

Oct 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	-0.1
Excluding Energy	904.81	1.6	0.2
Total Goods	493.00	2.8	0.1
Nondurable Consumer Goods	305.11	3.6	-0.2
Medium-Term Life Consumer Goods	95.24	2.1	1.3
Durable Consumer Goods	92.65	0.3	-0.1
Services	507.00	1.1	-0.1
Energy Components
Motor Fuels	35.37	5.4	-4.0
Household Energy	59.82	5.6	0.6
Heating Oil	9.21	11.3	2.2
Food	89.99	3.3	0.5

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/11/PE12_387_611.html;jsessionid=973CE9D3038391CEB811D3DC485654C1.cae4

V World Economic Slowdown. 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, IIQ2012 and IIIQ2012 available now for the United States, China and United Kingdom. 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. China grew at 2.2 percent in IIIQ2012, which annualizes at 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). There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.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 and 7.4 percent in IIIQ2012 relative to IIIQ2011. 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. In IIIQ2012, GDP grew 0.5 percent, 2.0 percent at SAAR and 2.3 percent relative to IIIQ2011 (http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html) but with substantial unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html ) and weak hiring (Section IA and earlier at http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.html). UK GDP fell 0.4 percent in IIQ2012, declining 0.5 percent relative to IIQ2011. In IQ2012, UK GDP fell 0.3 percent, declining 0.1 percent relative to a year earlier. UK GDP fell 0.4 percent in IIQ2012 and 0.5 percent relative to a year earlier. UK GDP increased 1.0 percent in IIIQ2012 and was unchanged 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
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.5 SAAR: 2.0	2.3
China	2.2	7.4
United Kingdom	1.0	0.0

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 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states_28.html and earlier 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 10.3 percent in the 12 months ending in Sep, 5.8 percent in the 12 months ending in Aug and 8.1 percent in 12 months ending in Jul while imports increased 4.1 in the 12 months ending in Sep, 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. There was further growth in China’s exports of 11.6 percent in the 12 months ending in Oct while imports increased 2.4 percent. Germany’s exports decreased 2.5 percent in the month of Sep and decreased 3.4 percent in the 12 months ending in Sep while imports decreased 1.6 percent in the month of Sep and decreased 3.6 percent in the 12 months ending in Sep. 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, fell from 47.4 in Sep to 46.0 in Oct for the eighth consecutive month in contraction territory below 50.0 and much lower than the long-term average of the index of 52.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10278). New export orders fell for sixteen consecutive months at the fastest rate of decline since Apr 2009. UK’s exports increased 0.6 percent in Sep and decreased 0.7 percent in Jul-Sep 2012 relative to a year earlier while imports decreased 3.1 percent in Sep and 0.3 percent in Jul-Sep 2012 relative to a year earlier. Net trade deducted 1.0 percentage points from UK GDP growth in IIQ2012. France’s exports decreased 1.5 percent in Sep while imports decreased 1.9 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012. US exports increased 3.1 percent in Sep 2012 and goods exports increased 5.1 percent in Jan-Sep relative to a year earlier but net trade deducted 0.18 percentage points from GDP growth in IIIQ2012. The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) declined to 51.0 in Oct from 51.1 in Sep, which is the weakest reading since Oct 2009 when recovery began (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10255). New export orders declined at the highest rate in 12 months with the index of new exports orders falling from 48.0 in Sep to 47.2 in Oct while total new orders decreased from 52.3 in Sep to 51.1 in Oct because of orders from the internal market. In the six months ending in Sep, United States national industrial production accumulated increase of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than 2.8 percent growth in 12 months. Capacity utilization for total industry in the United States fell 1.1 percentage points in Sep to 78.2 percent from 79.2 percent in Jul, which is 2.0 percentage points lower than the long-run average from 1972 to 2011. Manufacturing increased 0.2 percent in Sep seasonally adjusted, increasing 3.2 percent not seasonally adjusted in 12 months, and increased 0.1 percent in the six months ending in Sep or at the annual equivalent stagnating rate of 0.2 percent (Section VA http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united_21.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	3.1 Sep	5.1 Jan-Sep	1.5 Aug	3.9 Jan-Sep
Japan Sep Aug Jul		-10.3 -5.8 -8.1		4.1 -5.4 2.1
China	-1.8 Jul 0.6 Aug 4.7 Sep -5.7 Oct	1.0 Jul 7.8 Jan-Jul 2.7 Aug 7.1 Jan-Aug 9.9 Sep Jan-Sep 7.4 11.6 Oct 7.8 Jan-Oct	2.2 Jul -0.3 Aug 4.9 Sep -9.4 Oct	4.7 Jul 6.5 Jan-Jul -2.6 Aug 5.2 Jan-Aug 2.4 Sep 4.8 Jan-Sep 2.4 Oct 4.6 Jan-Oct
Euro Area	10.4 12-M Aug	9.0 Jan-Aug	1.3 12-M Aug	2.5 Jan-Aug
Germany	-2.5 Sep CSA	-3.4 Sep	-1.6 Sep CSA	-3.6 Sep
France Sep	-1.5	5.2	-1.9	0.0
Italy Aug	3.9	8.4	4.4	-1.1
UK	0.6 Sep	-0.7 Jul-Sep 12/Jul-Sep 11	-3.1 Sep	-0.3 Jul-Sep 12/Jul-Sep 11
Net Trade % Points GDP Growth	% Points
USA IIIQ2012	-0.18
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 Sep 2012. The share of Asia in Japan’s trade is more than one half, 54.9 percent of exports and 43.8 percent of imports. Within Asia, exports to China are 17.8 percent of total exports and imports from China 21.7 percent of total imports. The second largest export market for Japan in Aug 2012 is the US with share of 17.4 percent of total exports and share of imports from the US of 8.6 percent in total imports. Western Europe has share of 10.9 percent in Japan’s exports and of 9.7 percent in imports. Rates of growth of exports of Japan in Sep are sharply negative for all countries and regions with the exception of 0.9 percent for exports to the US. 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 10.3 percent in Sep 2012 while imports increased by 4.1 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Sep are negative for some trading partners: minus 32.7 percent for the UK, minus 9.7 percent for Brazil, minus 7.9 percent for Germany and minus 3.0 percent for Western Europe. Imports from Asia increased 0.7 percent in the 12 months ending in Sep while imports from China increased 3.8 percent.

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

Sep 2012	Exports Millions Yens	12 months ∆%	Imports Millions Yens	12 months ∆%
Total	5,359,752	-10.3	5,918,307	4.1
Asia	2,944,304	-8.3	2,591,029	0.7
China	953,834	-14.1	1,283,316	3.8
USA	933,372	0.9	506,328	3.8
Canada	65,567	-5.6	76,417	-5.5
Brazil	41,698	-12.0	77,533	-9.7
Mexico	72,939	-11.0	28,427	9.4
Western Europe	585,936	-26.0	573,723	-3.0
Germany	144.224	-12.9	154,489	-7.9
France	43,882	-24.4	79,496	7.7
UK	101,960	-31.2	43,575	-32.7
Middle East	181,035	-0.3	1,242,800	20.8
Australia	121,160	-21.0	385,551	2.0

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, decreased to 51.3 in Oct from 52.4 in Sep, indicating expansion at a moderate rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10308). This index has remained above the contraction territory of 50.0 during 39 consecutive months. Both global manufacturing and services have slowed down considerably with services increasing marginally while manufacturing contracted for a fifth consecutive month. (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10177). Service activity continued in the US with increases also in the Brazil, China, India, Russia and Ireland. The employment index increased from 49.8 in Sep to 51.0 in Oct with continuing increases in input prices. David Hensley, Director of Global Economic Coordination at JP Morgan, finds growth below long-term trend with restrained growth in services and contraction in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10308). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 49.2 in Oct from 48.8 in Sep, for five consecutive months of contraction but at a milder rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10286). New export orders declined for the sixth consecutive month in Oct at a firm rate. The HSBC Brazil Composite Output Index, compiled by Markit, decreased 52.2 in Sep to 50.7 in Oct with continuing expansion at a marginal pace (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10284). Andre Loes, Chief Economist, Brazil, at HSBC, finds slower growth of services activity in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10284). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased slightly to 50.2 in Oct from 49.8 in Sep, indicating marginal improvement of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10252). Andre Loes, Chief Economist, Brazil at HSBC, finds recovery improving with gains in both output and new orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10252).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased marginally to 51.3 in Oct from 51.1 in Sep that was 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=10213).

New export orders registered 48.1 in Oct still in contraction territory with 48.1 in Sep, which wass the fastest decline in new export orders since Oct 2011. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with the official indicators showing mild contraction of manufacturing that is restraining overall economic growth and weakening labor markets (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10213). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) declined to 51.0 in Oct from 51.1 in Sep, which is the weakest reading since Oct 2009 when recovery began (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10255). New export orders declined at the highest rate in 12 months with the index of new exports orders falling from 48.0 in Sep to 47.2 in Oct while total new orders decreased from 52.3 in Sep to 51.1 in Oct because of orders from the internal market. Trevor Balchin, Senior Economist at Markit, finds that the index began IVQ2012 at a weak pace that can restrain overall economic growth with export orders being an important source of weakness in the private goods-producing sector (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10255). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.2 percentage points from 51.5 in Sep to 51.7 in Oct, (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 1.9 percentage points from 52.3 in Sep to 54.2 in Oct. The index of exports decreased 0.5 percentage points from 48.5 in Sep to 48.0 in Oct, remaining in mild contraction territory. The Non-Manufacturing ISM Report on Business^® PMI decreased 0.9 percentage points from 55.1 in Sep to 54.2 in Oct, indicating growth during 39 consecutive months, while the index of new orders decreased 2.9 percentage points from 57.7 in Sep to 54.8 in Oct (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	Sep 12 months NSA ∆%: 2.0; ex food and energy ∆%: 2.0 Sep month ∆%: 0.6; ex food and energy ∆%: 0.1 Blog10/21/12
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 10/21/12
PCE Inflation	Sep 12-month NSA ∆%: headline 1.7; ex food and energy ∆% 1.7 Blog 11/4/12
Employment Situation	Household Survey: Oct Unemployment Rate SA 7.9% Blog calculation People in Job Stress Oct: 28.1 million NSA, 17.4% of Labor Force Establishment Survey: Oct Nonfarm Jobs +171,000; Private +184,000 jobs created Sep 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.6 Blog 11/4/12
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 Sep 2012 3.991 million lower by 1.224 million than 5.215 million in Aug 2005 Blog 11/11/12
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2012 2.3 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 2.0 Blog 10/28/12
Personal Income and Consumption	Sep month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.0 Real Personal Consumption Expenditures (RPCE): 0.4 12-month Sep NSA ∆%: RDPI: 1.9; RPCE ∆%: 2.1 Blog 11/4/2012
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	Compensation Private IIIQ2012 SA ∆%: 0.5 Sep 12 months ∆%: 2.0 Blog 11/4/12
Industrial Production	Sep month SA ∆%: 0.4 Sep 12 months SA ∆%: 2.8 Manufacturing Sep SA ∆% 0.2 Sep 12 months SA ∆% 3.2, NSA 3.2 Capacity Utilization: 78.3 Blog 10/21/12
Productivity and Costs	Nonfarm Business Productivity IIIQ2012∆% SAAE 1.9; IIIQ2012/IIIQ2011 ∆% 1.5; Unit Labor Costs SAAE IIQ2012 ∆% -0.1; IIIQ2012/IIIQ2011 ∆%: 1.1 Blog 11/4/2012
New York Fed Manufacturing Index	General Business Conditions From Sep -10.41 to Oct -6.16 New Orders: From Sep -14.03 to Oct -8.97 Blog 10/21/12
Philadelphia Fed Business Outlook Index	General Index from Sep minus 1.9 to Oct 5.7 New Orders from Sep 1.0 to Oct minus 0.6 Blog 10/21/12
Manufacturing Shipments and Orders	New Orders SA Sep ∆% 4.8 Ex Transport 1.4 Jan-Sep NSA New Orders 3.3 Ex transport 2.5 Blog 11/4/12
Durable Goods	Sep New Orders SA ∆%: 9.9; ex transport ∆%: 2.0 Jan-Sep New Orders NSA ∆%: 4.8; ex transport ∆% 3.4 Blog 10/28/12
Sales of New Motor Vehicles	Jan-Oct 2012 11,992,114; Jan-Oct 2011 10,539,485. Oct SAAR 14.29 million, Sep SAAR 14.94 million, Oct 2011 SAAR 13.34 million Blog 11/4/12
Sales of Merchant Wholesalers	Jan-Sep 2012/Jan-Sep 2011 NSA ∆%: Total 5.2; Durable Goods: 6.2; Nondurable Goods: 4.4 Blog 11/11/12
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Aug 12/Aug 11 NSA ∆%: Sales Total Business 3.2; Manufacturers 2.5 Retailers 5.7; Merchant Wholesalers 1.8 Blog 10/21/12
Sales for Retail and Food Services	Jan-Sep 2012/Jan-Sep 2011 ∆%: Retail and Food Services 5.6; Retail ∆% 5.3 Blog 10/21/12
Value of Construction Put in Place	Sep SAAR month SA ∆%: 0.6 Sep 12-month NSA: 6.1 Jan-Sep 2012 ∆% 8.9 Blog 11/4/12
Case-Shiller Home Prices	Aug 2012/Aug 2011 ∆% NSA: 10 Cities 1.3; 20 Cities: 2.0 ∆% Aug SA: 10 Cities 0.4 ; 20 Cities: 0.5 Blog 11/4/12
FHFA House Price Index Purchases Only	Aug SA ∆% 0.7; 12 month ∆%: 4.8 Blog 10/28/12
New House Sales	Sep 2012 month SAAR ∆%: +5.7 Jan-Sep 2012/Jan-Sep 2011 NSA ∆%: 21.8 Blog 10/28/12
Housing Starts and Permits	Sep Starts month SA ∆%: 15.0 ; Permits ∆%: -11.6 Jan-Sep 2012/Jan-Sep 2011 NSA ∆% Starts 26.7; Permits ∆% 31.5 Blog 10/21/12
Trade Balance	Balance Sep SA -$44217 million versus Aug -$42790 million Exports Sep SA ∆%: 3.1 Imports Sep SA ∆%: 1.5 Goods Exports Jan-Sep 2012/2011 NSA ∆%: 5.1 Goods Imports Jan-Sep 2012/2011 NSA ∆%: 3.9 Blog 11/11/12
Export and Import Prices	Oct 12-month NSA ∆%: Imports 0.4; Exports 1.4 Blog 11/11/12
Consumer Credit	Sep ∆% annual rate: 5.0 Blog 11/11/12
Net Foreign Purchases of Long-term Treasury Securities	Aug Net Foreign Purchases of Long-term Treasury Securities: $90.0 billion Major Holders of Treasury Securities: China $1154 billion; Japan $1122 billion; Total Foreign US Treasury Holdings Aug $5430 billion Blog 10/21/12
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	Sep 2012 SAAR ∆%: Securities 6.7 Loans 2.2 Cash Assets -65.1 Deposits 7.7 Blog 10/28/12
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:

11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/28/12 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.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

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-1 for Sep 2012 and percentage changes from the prior month and for Jan-Sep 2012 relative to Jan-Sep 2011. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 5.2 percent in Jan-Sep 2012 relative to Jan-Sep 2011 and increased 2.0 percent in Sep 2012 relative to Aug 2012. The value of total sales is quite high at $3666.1 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-Sep 2012 reached $1645.6 billion, over two trillion dollars for a year, increasing 1.2 percent in Sep relative to aug and increasing 6.2 percent in Jan-Sep 2012 relative to Jan-Sep 2011. Sales of automotive products reached $298.0 billion in Jan-Sep 2012, increasing 0.1 percent in the month and increasing 24.5 percent relative to a year earlier. There is strong performance of 10.5 percent in machinery but much lower of 0.9 percent in electrical products. Sales of nondurable goods rose 4.4 percent over a year earlier. The influence of commodity prices moderated as shown by decrease of 3.7 percent in farm products but increase of 6.7 percent in petroleum products with increase of 8.3 percent in Sep. 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 1.1 percent in Sep and increased 7.1 percent relative to a year earlier. Inventories of durable goods of $292.3 billion are 59.7 percent of total inventories of $490.0 billion and rose 8.0 percent relative to a year earlier. Automotive inventories increased 6.0 percent relative to a year earlier. Machinery inventories of $81.4 billion rose 18.6 percent relative to a year earlier. Inventories of nondurable goods of $197.7 billion are 40.4 percent of the total and increased 5.9 percent relative to a year earlier. Inventories of farm products increased 7.3 percent in Sep relative to Aug and increased 30.0 percent relative to a year earlier. Inventories of petroleum products increased 5.5 percent in Sep and 11.5 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-Sep 2012 NSA	Sales Sep ∆% SA	Sales∆% Jan-Sep 2012 from Jan-Sep 2011 NSA	INV $ Billions Sep 2012 NSA	INV Sep ∆% SA	INV ∆% Sep 2012 from Sep 2011 NSA
US Total	3666.1	2.0	5.2	490.0	1.1	7.1
Durable	1645.6	1.2	6.2	292.3	0.9	8.0
Automotive	298.0	0.1	24.5	44.6	-0.8	6.0
Prof. Equip.	282.5	0.3	1.6	32.6	0.4	1.4
Computer Equipment	142.8	0.2	-1.0	12.6	0.8	-0.7
Electrical	277.7	3.7	0.9	42.4	0.8	1.8
Machinery	287.3	0.4	10.5	81.4	1.5	18.6
Not Durable	2020.5	2.7	4.4	197.7	1.4	5.9
Drugs	316.9	-0.5	0.3	35.6	-2.3	5.9
Apparel	107.4	1.5	5.9	22.4	-0.5	-4.4
Groceries	432.2	-1.7	6.8	34.8	0.8	2.0
Farm Products	157.5	2.6	-3.7	20.6	7.3	30.0
Petroleum	581.3	8.3	6.7	26.1	5.5	11.5

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 Sep 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-Sep 2012, Millions of Dollars

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

Table VA-2 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Sep 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-Sep 2012, Millions of Dollars

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-2. The total for the US has remained almost without change at 1.19 in Sep 2012, 1.20 in Aug 2012 and 1.16 in Sep 2011. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.58 in Sep 2012, 1.58 in Aug 2012 and 1.50 in Sep 2011. Computer equipment operates with low inventory/sales ratios of 0.77 in Sep 2012, 0.76 in Aug 2012 and 0.75 in Sep 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 Sep 2012 and 0.90 in Aug 2012 which is almost equal to 0.88 in Sep 2011. There are exceptions such as 1.73 in Sep 2012 in apparel that is almost equal to 1.77 in Aug 2012 and lower than 1.96 in Sep 2011.

Table VA-2, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA

	Sep 2012	Aug 2012	Sep 2011
US Total	1.19	1.20	1.16
Durable	1.58	1.58	1.50
Automotive	1.31	1.33	1.48
Prof. Equip.	1.02	1.02	1.00
Comp. Equip.	0.77	0.76	0.75
Electrical	1.29	1.32	1.28
Machinery	2.58	2.55	2.24
Not Durable	0.89	0.90	0.88
Drugs	1.02	1.04	0.92
Apparel	1.73	1.77	1.96
Groceries	0.73	0.71	0.73
Farm Products	1.27	1.22	1.16
Petroleum	0.40	0.41	0.41

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

Chart VA-3 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 with declining trend in the final segment.

Chart VA-3, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2003-2012

Source: US Census Bureau

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

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-3. The data are in seasonally-adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-3) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-3) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Sep 2012, revolving credit was $852 billion, or 31.1 percent of total consumer credit of $2737 billion, and non-revolving credit was $1885 billion, or 68.9 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.2 percent in annual data and sharp decline of 7.4 percent in revolving credit. Consumer credit fell at 1.1 percent in Jul 2012 with sharp decline of revolving credit at 6.9 percent and meager increase of non-revolving credit at 1.5 percent. Consumer credit rebounded in Aug 2012 with increase of total consumer credit at 8.2 percent, revolving credit at 6.1 percent and non-revolving credit at 9.1 percent. In Sep 2012, total consumer credit grew at 5.0 percent with decline of revolving credit at 4.1 percent and increase of non-revolving credit at 9.2 percent.

Table VA-3, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2012
Sep	5.0	-4.1	9.2	2737	852	1885
Aug	8.2	6.1	9.1	2726	855	1871
Jul	-1.1	-6.9	1.5	2707	851	1857
IIIQ	4.0	-1.6	6.6	2737	852	1885
IIQ	6.5	1.3	8.9	2710	856	1854
IQ	5.7	0.6	8.1	2669	853	1816
2011
IVQ	5.9	1.8	7.8	2632	851	1780
IIIQ	1.9	-1.2	3.4	2594	848	1746
2011	3.4	0.2	5.0	2632	851	1780
2010	-1.2	-7.4	2.5	2545	850	1695
2009	-4.5	-8.8	-1.8	2439	922	1517
2008	0.8	0.2	1.2	2549	1010	1539
2007	5.9	8.5	4.3	2529	1008	1521

Note: REV: Revolving; NREV: Non-revolving; ∆%: simple annual rate from unrounded data; Total may not add exactly because of rounding

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g19/current/default.htm

Chart VA-4 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on consumer installment loans at commercial banks, new autos 48 month loans, not seasonally adjusted. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.

Chart VA-4, US, Total Consumer Credit Owned and Securitized SA and Financing Rate on Consumer Installment Loans at Commercial Banks NSA, Millions of Dollars and Percent, 1972-2008

Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g19/current/default.htm

Chart VA-5 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on consumer installment loans at commercial banks, new autos 48 month loan, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012 but with significant fluctuations.

Chart VA-5, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on Consumer Installment Loans at Commercial Banks NSA, Feb 1972-Jun 2012

Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/g19/current/default.htm

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/gor1210a.pdf). For fiscal 2013, the forecast is of growth of GDP between 1.3 and 1.8 percent, with domestic producer price inflation (Corporate Goods Price Index, CGPI) in the range of 0.1 to 0.7 percent and the all items CPI less fresh food of 0.2 to 0.6 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
Oct 2012	+1.4 to +1.6 [+1.5]	-1.2 to -0.9 [-1.1]	-0.1 to -0.1 [-0.1]
Jul 2012	+2.2 to +2.4 [+2.2]	-0.3 to 0.0 [-0.2]	+0.1 to +0.3 [+0.2]
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
Oct 2012	+1.3 to +1.8 [+1.6]	+0.1 to +0.7 [+0.5]	+0.2 to +0.6 [+0.4]
Jul 2012	+1.6 to +1.8 [+1.7]	+0.6 to +0.8 [+0.6]	+0.5 to +0.7 [+0.7]
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]
2014
Oct 2012	+0.2 to +0.7] [+0.6]	+3.7 to +4.4 [+4.2]	+2.4 to +3.0 [+2.8]

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/gor1210a.pdf

Private-sector activity in Japan contracted at a moderate rate with the Markit Composite Output PMI^™ Index increasing from 48.4 in Sep to 48.9 in Oct, which is still below 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10238). Paul Smith, economist at Markit and author of the report, finds that weak manufacturing and unchanged services data suggest unchanged GDP in the beginning of IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10238). The Markit Business Activity Index of Services increased from 48.9 in Sep to 50.0 in Oct, showing no change relative to the prior month (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10238). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 48.0 in Sep to 46.9 in Oct for the lowest reading in 18 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10214). Foreign orders fell for the seventh consecutive months. Paul Smith, economist at Markit and author of the report, finds the data consistent with quarterly contraction of manufacturing output at a quarterly rate in excess of 3 percent with shipments overseas falling at a quarterly rate of about 4 percent because of weak world growth especially in export markets including China (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10214).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	Sep NSA ∆% 0.1; Sep 12 months NSA ∆% -0.3 Blog 10/28/12
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	Sep Unemployed 2.75 million Change in unemployed since last year: minus 20 thousand Unemployment rate: 4.2% Blog 11/4/12
All Industry Indices	Aug month SA ∆% 0.1 12-month NSA ∆% -0.1 Blog 10/21/12
Industrial Production	Sep SA month ∆%: -4.1 12-month NSA ∆% -8.1 Blog 11/4/12
Machine Orders	Total Sep ∆% 9.6 Private ∆%: 15.4 Sep ∆% Excluding Volatile Orders -4.3 Blog 11/11/12
Tertiary Index	Aug month SA ∆% 0.4 Aug 12 months NSA ∆% 0.8 Blog 10/14/12
Wholesale and Retail Sales	Sep 12 months: Total ∆%: -3.5 Wholesale ∆%: -4.8 Retail ∆%: 0.4 Blog 11/4/12
Family Income and Expenditure Survey	Sep 12-month ∆% total nominal consumption -1.2, real -0.9 Blog 11/4/12
Trade Balance	Exports Sep 12 months ∆%: -10.3 Imports Sep 12 months ∆% 4.1 Blog 10/28/12

Links to blog comments in Table JPY: 11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/28/12 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.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 increased 9.6 in Sep 2012 after declining 12.6 percent in Aug 2012 and falling in three of the four months May-Aug 2012. Total private sector orders increased 15.4 percent in Sep 2012 after falling 13.6 percent in Aug. Private-sector orders excluding volatile orders, which are closely watched, decreased 4.3 percent in Sep after decreasing 3.3 percent in Aug. Orders for manufacturing increased 2.8 percent in Sep 2012 after falling 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 were unchanged in Sep 2012 but 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	Sep	Aug	Jul	Jun
Total	9.6	-12.6	-2.6	7.4
Private Sector	15.4	-13.7	4.3	9.3
Excluding Volatile Orders	-4.3	-3.3	4.6	5.6
Mfg	2.8	-15.1	12.0	-2.9
Non Mfg ex Volatile	1.3	3.6	-2.1	2.6
Government	22.4	-7.1	-13.5	19.2
From Overseas	0.0	-14.7	3.0	-9.8
Through Agencies	4.0	-22.0	14.1	-5.3

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/en/stat/juchu/1209juchu-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 still 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, decline again in Jul and Aug 2012 and rebound in total orders in Sep but decline in orders excluding volatile segments.

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 2,272,936 million in Sep 2012 are divided between JPY 716,487 million overseas orders, or 31.5 percent of the total, and domestic orders of JPY 1,466,973 million, or 64.5 percent of the total, with orders through agencies of JPY 89,476 million, or 3.9 percent of the total. Orders through agencies are not shown in the table because of the minor value. Twelve-month percentages changes in Sep 2012 continued to reverse increases in Jul 2012: minus 7.8 percent for total orders, minus 18.4 percent for overseas orders, minus 1.8 percent for domestic orders and minus 7.8 percent for private orders excluding volatile items. Total orders fell 18.6 percent in the 12 months ending in Aug with declines of 31.1 percent in overseas orders and 1.8 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 eight consecutive months from Feb to Sep 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 Sep 2012	2,272,936	716,487	1,466,973	895,574
% Total	100.0	31.5	64.5	39.4
Value Sep 2011	2,464,395	878,359	1,493,256	971,808
% Total	100.0	35.6	60.6	39.4
12-month ∆%
Sep 2012	-7.8	-18.4	-1.8	-7.8
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 Sep 2012 were JPY 89,476 million, or 3.9 percent of the total and 3.8 percent of the total in Sep 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/1209juchu-e.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 Oct 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 but rebounded to 56.5 in Oct.

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

2012	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Oct	56.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Oct 2011 to Oct 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, rebounding to 55.5 in Oct 2012.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug. 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 and movement to 50.2 in Oct 2012 into positive territory.

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

2012	IPM	PI	NOI	INV	EMP	SDEL
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

http://www.stats.gov.cn/english/pressrelease/t20121102_402847908.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 with movement to 50.2 in Oct 2012 above 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 World Economic Outlook (WEO) of the International Monetary Fund (IMF) estimates China’s GDP in current US dollars (USD) at $8250.2 billion in 2012 (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). Table VC-GDP provides the estimate of current value of China’s GDP at CNY 35.3 trillion in IIIQ2012. Cumulative growth in the first three quarters of 2012 relative to the same period in 2011 was 7.7 percent. Secondary industry accounts for 46.8 percent of GDP of which industry alone for 40.1 percent and construction with the remaining 6.7 percent. Tertiary industry accounts for 43.8 percent of GDP and primary industry for 9.4 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 9.9 percent in IIIQ2011 to 7.0 percent in IVQ2011 and 6.1 percent in IQ2012, rebounding to 8.2 percent in IIQ2012 and 9.1 percent in IIIQ2012.

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

Cumulative GDP	Value Current CNY 100 Million	Cumulative Three First Quarters of 2012 Relative to Cumulative Three First Quarters of 2012 ∆% Inflation Adjusted
GDP	353,480.0	7.7
Primary Industry	33,088.0	4.2
Farming	33,088.0	4.2
Secondary Industry	165,428.5	8.1
Industry	141,641.5	7.9
Construction	23,787.0	9.2
Tertiary Industry	154,963.5	7.9
Transport, Storage, Post	18,941.0	6.7
Wholesale, Retail Trades	31,651.2	11.8
Hotel & Catering Services	7,015.6	7.6
Financial Intermediation	22,465.2	9.5
Real Estate	20,789.6	2.7
Other	54,101.0	7.7
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2012
IIIQ2012	2.2	9.1
IIQ2012	2.0	8.2
IQ2012	1.5	6.1
2011
IVQ2011	1.7	7.0
IIIQ2011	2.4	9.9
IIQ2011	2.5	10.4
IQ2011	2.2	9.1

Source: National Bureau of Statistics of China

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10204 ) is mildly improving. The overall Flash China Manufacturing PMI^™ increased marginally from 47.9 in Sep to 49.1 in Oct for a three-month high while the Flash China Manufacturing Output Index increased from 47.3 in Sep to 48.4 in Oct, both in contraction territory below 50.0. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that new easing policies implemented in recent weeks should help in improving the economy with initial manifestation in mild improvement in new orders but that continuing easing policy is required to ensure sound recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10204).The HSBC China Services PMI^™, compiled by Markit, shows marginally improving business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 50.3 in Sep to 50.5 in Oct for second consecutive month of increasing output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10289). 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 to sustain recovery in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10289). The HSBC Business Activity index decreased from 54.3 in Sep to 53.5 in Oct with continuing growth in services at a slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10289). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 49.5 in Oct from 47.9 in Sep, indicating moderate reduction of activity and the twelfth monthly deterioration of the index (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10259). New exports orders registered declines for the sixth consecutive month at a slower but strong rate of decline. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds stabilization of the decline with increase in new orders but weak exports, requiring further stimulus measures (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10259).

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	Oct 12-month ∆%: minus 2.8 Oct month ∆%: 0.2 Blog 11/11/12
Consumer Price Index	Oct month ∆%: -0.1 Oct 12 months ∆%: 1.7 Blog 11/11/12
Value Added of Industry	Sep month ∆%: 0.79 Jan-Sep 2012/Jan-Sep 2011 ∆%: 10.0 Blog 10/21/12
GDP Growth Rate	Year IIIQ2012 ∆%: 7.4 Quarter IIQ2012 ∆%: 2.2 Blog 10/21/12
Investment in Fixed Assets	Sep month ∆%: 1.63 Total Jan-Sep 2012 ∆%: 20.5 Real estate development: 15.4 Blog 10/21/12
Retail Sales	Sep month ∆%: 1.46 Sep 12 month ∆%: 14.2 Jan-Sep ∆%: 14.1 Blog 10/21/12
Trade Balance	Oct balance $31.99 billion Exports ∆% 11.6 Imports ∆% 2.4 Cumulative Oct: $180.42 billion Blog 11/11/12

Links to blog comments in Table CNY:

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

Table VC-1 provides China’s exports, imports, trade balance and percentage changes from Dec 2010 to Oct 2012. China’s trade growth rebounded with growth of exports in 12 months of 11.6 percent in Oct 2012 and 9.9 percent in Sep 2012 after 2.7 percent in Aug 2012 and 1.0 percent in Jul 2012 while imports grew 2.4 percent in both Sep and Oct 2012. As a result, the monthly trade surplus increased from $25.2 billion in Jul 2012 to $31.9 billion in Oct 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. 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, $26.7 billion in Aug 2012, $27.7 billion in Sep 2012 and $31.9 billion in Oct 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
Oct 2012	175.76	11.6	143.83	2.4	31.99
Sep	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 $180.42 billion in Jan-Oct 2012 with cumulative growth of exports of 7.8 percent and 4.6 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, $148.4 billion in Sep 2012 and $180.42 billion in Oct 2012. 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
Oct 2012	1671.32	7.8	1490.96	4.6	180.42
Sep	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, ∆%

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, fell from 46.1 in Sep to 45.8 in Oct, for nine consecutive declines and thirteen drops in fourteen months, registering the lowest reading in 40 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10202). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with decline of GDP of 0.5 percent in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10202). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, decreased from 46.1 in Sep to 45.7 in Oct, which is the ninth consecutive contraction; contraction spread in manufacturing and services throughout the four largest economies of Germany, France, Italy and Spain (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10267). Rob Robson, Senior Economist at Markit, finds that the data are historically consistent with likely decline of GDP at a rate of 0.5 percent per quarter with companies concerned about weakness in both the internal economy and the world economy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10267). The Markit Eurozone Services Business Activity Index declined from 46.1 in Sep to 46.0 in Oct, which is the lowest reading since Jul 2009 with service providers concerned about the internal market and those in the United States and Asia (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10267). The Markit Eurozone Manufacturing PMI^® fell to 45.4 in Oct from 46.1 in Sep (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10253). New export orders declined in Oct for sixteenth consecutive month, with declines for the two largest economies of France and Germany. Rob Dobson, Chief Economist at Markit, finds that manufacturing output declined through all sectors of consumer, intermediate and investment goods with constraint of demand by internally and from abroad, including trade within the euro area and with third regions (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10253). 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	Sep 2012: 11.6% unemployment rate Sep 2012: 18.490 million unemployed Blog 11/4/12
HICP	Sep month ∆%: 0.7 12 months Sep ∆%: 2.6 Blog 10/21/12
Producer Prices	Euro Zone industrial producer prices Sep ∆%: 0.2 Sep 12-month ∆%: 2.7 Blog 11/11/12
Industrial Production	Aug month ∆%: 0.6; Aug 12 months ∆%: -2.9 Blog 10/14/12
Retail Sales	Sep month ∆%: minus 0.2 Sep 12 months ∆%: minus 0.8 Blog 11/11/12
Confidence and Economic Sentiment Indicator	Sentiment 84.5 Oct 2012 Consumer minus 25.7 Oct 2012 Blog 11/4/12
Trade	Jan-Aug 2012/Jan-Aug 2011 Exports ∆%: 9.0 Imports ∆%: 2.5 Aug 2012 12-month Exports ∆% 10.4 Imports ∆% 1.3 Blog 10/21/12

Links to blog comments in Table EUR:

11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.html

10/7/12 http://cmpassocregulationblog.blogspot.com/2012/10/twenty-nine-million-unemployed-or.html

Advanced economies are experiencing weak demand. Table VD-1 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Sep 2012. Retail sales decreased 0.2 percent in Sep 2012 and fell 0.8 percent in 12 months. The 12-month rates of growth have become negative since Mar 2011 with exception of 1.0 percent in Apr 2011 and stability in Aug 2011. The lower part of Table VD-7 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 1990. Retail sales fell 2.4 percent in 2009 after falling 0.8 percent in 2008 and fell again by 0.6 percent in 2011. The average yearly rate of increase of retail sales from 1999 to 2007 was 2.0 percent but growth has not recovered. The average yearly rate of increase for the entire period 1999 to 2011 is lower at 1.1 percent.

Table VD-1, Euro Zone, Volume of Retail Sales, Deflated ∆%

	Month ∆%	12-Month ∆%
Sep 2012	-0.2	-0.8
Aug	0.2	-0.9
Jul	-0.1	-1.5
Jun	0.1	-0.8
May	1.0	-0.7
Apr	-1.5	-3.6
Mar	0.3	0.0
Feb	-0.2	-2.1
Jan	1.2	-1.2
Dec 2011	-1.3	-1.9
Nov	-0.3	-1.5
Oct	-0.2	-0.7
Sep	-0.3	-1.1
Aug	-0.1	0.0
Jul	0.2	-0.4
Jun	0.9	-0.8
May	-1.7	-1.8
Apr	1.1	1.0
Mar	-1.3	-1.4
Feb	0.4	1.1
Jan	0.2	0.9
Annual ∆%
2011		-0.6
2010		0.9
2009		-2.4
2008		-0.8
2007		1.6
2006		2.2
2005		2.0
2004		1.5
2003		0.9
2002		1.2
2001		2.1
2000		2.5
1999		2.3
Average ∆% 1999-2007		2.0
Average ∆% 1999-2011		1.1

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

Growth rates of retail sales of the euro zone by major segments are in Table VD-2. Total sales decreased 0.2 percent in Sep 2012 and declined 0.8 percent in the 12 months ending in Sep 2012. All 12-month percentage changes are negative with exception of 0.0 percent for nonfood products excluding automotive fuel. Total sales of food, drinks and tobacco increased 0.8 percent in Sep but sales of nonfood products excluding automotive fuels fell 0.6 percent in Sep and sales of automotive fuel in specialized stores fell 2.0 percent.

Table VD-2, Euro Zone, Volume of Retail Sales by Products, ∆%

Sep 2012	Month ∆%	12-Month ∆%
Total	-0.2	-0.8
Food, Drinks, Tobacco	0.8	-0.8
Nonfood Products ex Automotive Fuel	-0.6	0.0
Automotive Fuel in Specialized Stores	-2.0	-5.5

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

Month and 12-month percentage rates of change of retail sales by member countries of the euro zone are shown in Table VD-3 for Sep 2012. Retail sales are weak throughout the euro zone. The 12-month percentage changes are negative for all members in Table VD-9 with the exception of 3.0 percent for France, 1.9 percent for Finland, 3.6 percent for Belgium and 1.3 percent for Ireland. The 12-month percentage change for the UK, which is not a member of the euro zone, was 4.0 percent. The European Union’s 12-month percentage change was 0.3 percent.

Table VD-3, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Sep 2012	Month ∆%	12-Month ∆%
Euro Zone	-0.2	-0.8
Germany	1.5	0.0
France	0.8	3.0
Netherlands	NA	NA
Finland	1.3	1.9
Belgium	0.7	3.6
Portugal	-4.0	-5.8
Ireland	0.3	1.3
Italy	NA	NA
Greece	NA	NA
Spain	-7.3	-12.6
UK	0.7	4.0
European Union	0.1	0.3

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 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 Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, decreased from 49.2 in Sep to 48.1 in Oct, which is the sixth consecutive reading below 50, indicating mild contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10203). Respondents to the survey mentioned weakness in export business, especially in southern Europe. The pace of decline of new export orders for manufacturing was at the second fastest rhythm since Apr 2009 and was only worst in Aug 2012. Tim Moore, Senior Economist at Markit, finds that output stabilization was attained by executing existing orders because of the lack of new business (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10203). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, decreased from 49.2 in Sep to 47.7 in Oct, indicating a level below the neutral zone of 50.0 for six consecutive months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10305). Tim Moore, Senior Economist at Markit and author of the report, finds that the composite index of manufacturing and services suggests the possibility that the economy of Germany could experience contracting GDP in IVQ2012 lost strength in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10305). The Germany Services Business Activity Index fell from 49.7 in Sep to 48.4 in Oct, which is below the long-term average of 52.9 and also lower than readings in the first half of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10305). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, fell from 47.4 in Sep to 46.0 in Oct for the eighth consecutive month in contraction territory below 50.0 and much lower than the long-term average of the index of 52.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10278). New export orders fell for sixteen consecutive months at the fastest rate of decline since Apr 2009. Tim Moore, Senior Economist at Markit and author of the report, continuing weakness in orders from major export sectors with output declining in part because of lower demand from the south of Europe together with deteriorating investment throughout Asia (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10278).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	Oct month NSA ∆%: 0.0 Oct 12-month NSA ∆%: 2.0 Blog 11/11/12
Producer Price Index	Sep month ∆%: 0.5 CSA, 0.6 NSA 12-month NSA ∆%: 1.6 Blog 10/21/12
Industrial Production	Mfg Sep month CSA ∆%: -2.3 12-month NSA: -8.5 Blog 11/11/12
Machine Orders	MFG Sep month ∆%: -3.3 Aug 12-month ∆%: -10.2 Blog 11/11/12
Retail Sales	Sep Month ∆% 1.5 12-Month ∆% -3.1 Blog 11/4/12
Employment Report	Unemployment Rate Sep 5.4% Blog 11/4/12
Trade Balance	Exports Sep 12-month NSA ∆%: -3.4 Imports Sep 12 months NSA ∆%: -3.6 Exports Sep month CSA ∆%: minus 2.5; Imports Sep month SA minus 1.6 Blog 11/11/12

Links to blog comments in Table DE:

11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.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 1.8 percent in Sep 2012 and decrease of 7.7 percent in the 12 months ending in Sep 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
Sep 2012	-7.7	-1.8
Aug	-1.3	-0.4
Jul	2.2	1.2
Jun	3.9	-0.3
May	-6.7	1.6
Apr	-0.8	-2.2
Mar	-0.8	2.2
Feb	1.9	-0.5
Jan	4.3	0.5
Dec 2011	1.2	-2.0
Nov	4.6	0.2
Oct	0.4	0.4
Sep	5.5	-2.1
Aug	11.3	-0.2
Jul	6.5	3.0
Jun	0.0	-1.0
May	18.9	0.9
Apr	5.8	-0.3
Mar	10.3	0.8
Feb	16.4	1.2
Jan	16.0	0.8
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 Feb to Sep 2012. There were two sharp declines in the monthly production industries of 2.0 percent in Dec 2011, 2.2 percent in Apr 2012 and 1.8 percent in Sep 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 0.2 percent in Aug 2012 with sharp decline of 3.5 percent in Sep 2012. Durable goods fell in six of ten months from Dec 2011 to Sep 2012 and nondurable goods fell in seven of the ten months from Dec 2011 to Sep 2012.

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

	Sep	Aug	Jul	Jun	May	Apr	Mar	Feb
Production Industries	-1.8	-0.4	1.2	-0.3	1.6	-2.2	2.2	-0.5
Industry	-2.3	-0.3	1.4	-0.7	1.9	-2.1	1.1	0.2
Mfg	-2.3	-0.2	1.4	-0.8	1.9	-2.1	1.1	0.3
Intermediate Goods	-2.2	-1.0	-0.1	0.0	0.7	0.1	0.1	-0.2
Capital Goods	-3.5	0.2	3.6	-1.5	2.2	-3.6	1.6	0.9
Durable Goods	-2.2	-2.4	2.6	-0.1	3.0	-1.2	0.5	-1.5
Nondurable Goods	1.3	1.0	-1.0	-0.6	3.8	-4.0	2.6	-1.0
Energy	-0.3	0.2	-1.2	5.9	-2.4	-0.3	-2.0	6.7

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 Sep 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
Sep	-8.6	-8.5	-10.6	-7.7	-11.4	-5.4	1.9
Aug	-1.7	-1.6	-3.6	-0.3	-0.3	0.1	1.4
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, Aug and Sep 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 probably leading into mild downturn 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 Sep 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 1.8 percent at the high annual equivalent rate of 7.4 percent but the drop in Apr 2012 of 2.1 percent results in decline of 0.3 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 1.9 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 0.8 percent in Jun 2011 but the 12-month change was 3.5 percent. In Jul 2012, manufacturing grew 1.4 percent in the month and 1.9 percent in 12 months. Declining of manufacturing by 0.2 percent in Aug 2012 brought down the 12-month percentage change to minus 1.6 percent. In Sep, manufacturing output fell 2.3 percent, pulling down the 12-month rate to minus 8.5 percent.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Sep 2012	-8.5	-2.3
Aug	-1.6	-0.2
Jul	1.9	1.4
Jun	3.5	-0.8
May	-7.0	1.9
Apr	-1.0	-2.1
Mar	-0.4	1.1
Feb	3.3	0.3
Jan	5.7	0.4
Dec 2011	1.4	-1.5
Nov	5.1	-0.2
Oct	1.2	0.4
Sep	6.5	-2.1
Aug	12.6	-0.2
Jul	8.1	3.1
Jun	0.9	-1.1
May	21.4	1.3
Apr	7.5	0.4
Mar	10.9	0.6
Feb	17.0	1.4
Jan	17.1	-0.5
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 that may be turning downward.

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

Several tables and charts facilitate analysis of machinery orders in Germany. Table VE-5 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany. The same behavior is observed for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and some negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. Total orders decreased 3.3 percent in Sep 2012 with decrease of 1.8 percent in domestic orders and decrease of 4.5 percent of foreign orders. As in other countries, data on orders for manufacturing are highly volatile. All 12-month percentage changes from Jan 2012 to Sep 2012 in Table VE-1, with exception of 0.1 percent for Jan 2012 for domestic orders, are negative largely because of the unusual strength of the Germany economy in the beginning of 2011 but more recently because of slowing world economy in 2012.

Table VE-5, Germany, Volume of Orders Received in Manufacturing, Total, Domestic and Foreign, ∆%

	Total 12 M	Total M	Foreign 12 M	Foreign M	Home 12 M	Home M
2012
Sep	-10.2	-3.3	-8.1	-4.5	-12.5	-1.8
Aug	-4.5	-0.8	-2.2	0.0	-7.3	-1.7
Jul	-1.9	0.1	-0.6	-0.3	-3.4	0.6
Jun	-5.0	-1.3	-7.1	-1.0	-1.9	-1.7
May	-10.5	0.5	-3.1	1.9	-18.4	-1.3
Apr	-3.4	-1.4	-4.0	-3.0	-2.5	0.5
Mar	-2.0	2.9	-0.9	4.2	-3.3	1.4
Feb	-4.5	0.6	-4.9	2.0	-3.9	-0.9
Jan	-3.1	-1.6	-5.7	-4.3	0.1	1.7
2011
Dec	-0.2	0.9	-0.8	4.0	0.6	-2.8
Nov	-4.2	-3.1	-7.6	-5.1	0.0	-0.7
Oct	0.6	2.1	2.2	3.5	-1.3	0.4
Sep	2.4	-3.6	1.2	-4.2	3.8	-2.8
Aug	6.8	-0.8	4.3	-0.5	10.1	-1.1
Jul	5.6	-2.8	5.7	-6.7	5.6	2.4
Jun	3.8	1.4	8.0	11.7	-1.6	-9.7
May	22.7	2.2	16.2	-4.3	30.2	10.3
Apr	6.9	1.9	9.9	2.0	3.4	1.8
Mar	9.1	-3.0	11.9	-2.9	5.8	-3.2
Feb	21.5	0.8	24.8	-0.1	17.8	1.8
Jan	22.4	4.3	26.5	3.4	17.6	5.5
2010
Dec	22.2	-3.3	27.3	-3.4	15.8	-3.2
Nov	21.5	5.2	26.8	8.2	15.6	1.7
Oct	14.1	0.7	17.7	-0.1	10.4	1.7
Sep	13.9	-1.9	16.0	-3.7	11.6	0.4
Aug	23.5	3.3	31.9	5.6	14.4	0.6
Jul	14.2	-1.8	21.7	-2.2	6.3	-1.3
Jun	28.5	3.9	32.0	6.0	24.3	1.4
May	24.4	0.1	28.9	0.4	19.9	-0.1
Apr	29.3	2.2	33.0	2.1	25.2	2.1
Mar	29.4	5.7	32.3	6.2	26.4	5.1
Feb	23.4	-0.3	27.6	-0.1	18.6	-0.5
Jan	16.7	4.4	23.6	4.2	9.7	4.8
Dec 2009	9.2	-2.3	10.6	-2.6	7.4	-1.9
Dec 2008	-28.2	-7.2	-31.5	-9.8	-23.7	-4.1
Dec 2007	7.1	-1.6	9.1	-2.4	4.5	-0.6
Dec 2006	2.9	0.4	3.4	0.4	2.2	0.5
Dec 2005	4.9	-0.5	10.5	-1.0	-1.5	0.1
Dec 2004	12.7	6.6	12.9	8.4	12.7	4.9
Dec 2003	10.7	2.4	16.4	5.4	5.1	-0.8
Dec 2002	-0.2	-3.4	-0.8	-6.6	0.2	-0.3
Average ∆% 2003-2007	7.6		10.4		4.5
Average ∆% 2003-2011	3.6		5.1		1.9

Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted

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

Orders for capital goods of Germany are shown in Table VE-2. Total capital goods orders fell 2.4 percent in Sep 2012 with foreign orders decreasing 3.0 percent and domestic orders decreasing 1.5 percent. There has been evident deceleration from 2010 and early 2011 with growth rates falling from two digit levels to single digits and multiple negative changes. An important aspect of Germany’s economy shown in Tables VE-1 and VE-2 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007. Germany adopted fiscal and labor market reforms to increase productivity.

Table VE-6, Germany, Volume of Orders Received of Capital Goods Industries, Total, Foreign and Domestic, ∆%

	Total 12 M	Total M	Foreign 12 M	Foreign M	Domestic 12 M	Domestic M
2012
Sep	-9.3	-2.4	-7.2	-3.0	-12.5	-1.5
Aug	-4.8	-2.4	-2.5	-1.1	-8.3	-4.2
Jul	0.0	-0.3	1.0	-0.9	-1.5	0.9
Jun	-7.5	-0.2	-10.9	0.2	-1.1	-0.8
May	-11.1	-0.3	-1.9	0.9	-22.9	-2.0
Apr	-2.3	-2.9	-3.7	-5.2	0.0	0.9
Mar	1.9	5.6	3.8	9.2	-1.1	0.1
Feb	-5.9	1.5	-7.4	1.5	-3.6	1.5
Jan	-3.6	-4.8	-6.0	-5.8	0.6	-3.2
2011
Dec	1.6	3.0	0.5	4.4	3.5	1.0
Nov	-5.9	-4.3	-9.4	-7.3	-0.1	0.6
Oct	3.6	3.7	7.5	6.0	-2.3	0.3
Sep	2.9	-3.6	1.8	-3.8	4.9	-3.3
Aug	6.3	0.0	3.5	0.4	11.1	-0.7
Jul	7.7	-7.6	6.9	-12.6	8.9	1.5
Jun	8.9	4.5	13.6	19.5	1.0	-14.7
May	26.8	3.3	18.0	-6.3	40.3	19.1
Apr	11.3	3.3	14.7	4.2	6.2	1.8
Mar	11.0	-5.5	13.7	-4.9	7.0	-6.3
Feb	29.4	2.7	33.1	1.5	23.9	4.6
Jan	26.4	3.1	32.4	3.2	17.5	2.9
2010
Dec	27.3	-4.8	31.0	-6.1	21.3	-2.7
Nov	30.1	8.9	35.9	13.4	21.5	2.1
Oct	20.6	0.0	23.9	-2.3	16.0	3.9
Sep	18.1	-2.9	20.4	-4.6	14.6	-0.1
Aug	29.3	6.4	42.8	8.6	12.0	2.9
Jul	14.1	-3.9	28.4	-4.8	-2.3	-2.6
Jun	33.5	6.2	41.3	9.8	22.2	0.7
May	25.9	1.5	35.6	0.7	13.6	2.7
Apr	30.1	1.2	40.1	1.7	17.4	0.4
Mar	26.2	7.7	33.8	9.0	16.1	5.9
Feb	20.3	-1.3	30.3	-0.2	8.1	-2.8
Jan	16.9	4.4	29.5	2.4	2.5	7.2
Dec 2009	8.1	-1.4	13.6	-1.5	0.5	-1.2
Dec 2008	-32.2	-7.2	-36.7	-9.9	-24.4	-3.5
Dec 2007	9.6	-0.6	11.6	-2.4	6.3	2.2
Dec 2006	3.6	2.3	3.8	2.9	3.1	1.4
Dec 2005	1.9	-2.2	9.8	-2.5	-8.5	-1.7
Dec 2004	19.4	11.2	18.6	12.2	20.5	9.8
Dec 2003	11.7	2.1	17.2	5.0	5.4	-1.6
Dec 2002	-2.8	-4.3	-3.7	-8.1	-1.8	0.2
Average ∆% 2003-2007	9.1		12.1		4.9
Average ∆% 2003-2011	4.3		5.9		2.2

Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted

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

Chart VE-1 of the German Statistisches Bundesamt Deutschland shows the sharp upward trend of total orders in manufacturing before the global recession. There is also an obvious upward trend in the recovery from the recession with Germany’s economy being among the most dynamic in the advanced economies until the slowdown beginning in the final months of 2011 and what could be stationary series from late 2011 into 2012 but risk of decline.

Chart VE-4, Germany, Volume of Total Orders in Manufacturing, Non-Adjusted, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Chart VE-2 of the German Statistisches Bundesamt Deutschland provides unadjusted volume of total orders in manufacturing and a trend curve. The final segment on the right could be the beginning of declining trend but it may be early to reach conclusions.

Chart VE-5, Germany, Volume of Total Orders in Manufacturing and Trend, Non-Adjusted, 2005=100

Source: Statistisches 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-7. 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 14.6 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 2011 fell significantly to 3.6 percent for exports and 9.2 percent for imports. Lower prices may explain part of the decline in nominal values. Exports fell 3.4 percent in 12 months ending in Sep 2012 and imports decreased 3.6 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-7, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%

	Exports EURO Billions	12- Month ∆%	Imports EURO Billions	12-Month ∆%
Sep 2012	91.7	-3.4	74.9	-3.6
Aug	90.2	5.7	73.9	0.5
Jul	93.5	9.2	76.6	2.1
Jun	94.7	7.5	76.8	2.1
May	92.7	0.4	77.2	-0.5
Apr	87.2	3.1	72.7	-1.3
Mar	98.8	0.1	81.4	2.0
Feb	91.2	7.9	76.3	5.4
Jan	86.0	8.4	72.8	4.9
Dec 2011	84.8	4.7	72.2	5.6
Nov	94.1	7.4	78.0	5.8
Oct	89.1	3.6	78.1	9.2
Sep	95.0	10.5	77.7	11.7
Aug	85.3	14.6	73.5	13.2
Jul	85.6	5.2	75.0	9.7
Jun	88.1	3.3	75.2	5.6
May	92.4	21.2	77.5	17.4
Apr	84.5	12.4	73.7	18.5
Mar	98.7	15.3	79.8	15.1
Feb	84.5	20.8	72.4	27.6
Jan	79.3	25.2	68.4	26.0
Dec 2010	81.0	20.0	68.4	24.3
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	31.2
Apr	75.2	16.7	62.2	14.5
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	-5.0
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/2012/11/PE12_385_51.html;jsessionid=61633506F891355DDF446AAB5332A764.cae4 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-8 provides monthly rates of growth of exports and imports of Germany. Exports decreased 2.5 percent in Sep 2012 after increasing 2.3 percent in Aug 2012 and imports decreased 1.6 percent in Sep 2012 after increasing 0.4 percent in Aug 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-8, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted

	Exports	Imports
Sep 2012	-2.5	-1.6
Aug	2.3	0.4
Jul	-0.2	0.3
Jun	-0.4	-2.1
May	3.7	5.1
Apr	-1.7	-4.1
Mar	0.8	0.7
Feb	1.5	2.7
Jan	2.5	1.7
Dec 2011	-2.8	-1.8
Nov	1.7	-1.3
Oct	-3.4	-0.2
Sep	1.5	-0.5
Aug	3.2	0.2
Jul	-1.5	0.4
Jun	-0.1	-0.2
May	2.0	1.4
Apr	-3.6	-0.4
Mar	5.6	2.3
Feb	1.4	1.6
Jan	0.8	4.5
Dec 2010	0.0	-2.0

Chart VE-6 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-6, Germany, Exports Original Value and Trend 2007-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-7 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-7, Germany, Imports Original Value and Trend 2007-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-8 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-8, 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-9 for the current sovereign risk crisis in the euro zone. Table VE-9 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Sep 2012. German exports to other European Union (EU) members are 57.4 percent of total exports in Sep 2012 and 57.2 percent in Jan-Sep 2012. Exports to the euro area are 37.6 percent in Sep and 37.6 percent in Jan-Sep. Exports to third countries are 42.8 percent of the total in Sep and 42.8 percent in Jan-Sep. There is similar distribution for imports. Exports to non-euro countries are decreasing at 2.7 percent in Sep 2012 and increasing 3.8 percent in Jan-Sep 2012 while exports to the euro area are decreasing 9.1 percent in Sep and decreasing 2.1 percent in Jan-Sep 2012. Exports to third countries, accounting for 42.8 percent of the total in Sep 2012, are increasing at 1.8 percent, and 10.4 percent in Jan-Sep, accounting for 42.8 percent of the cumulative total in Jan-Sep 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-9, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

	Sep 2012 € Billions	Sep 12-Month ∆%	Jan–Sep 2012 € Billions	Jan-Sep 2012/ Jan-Sep 2011 ∆%
Total Exports	91.7	-3.4	825.9	4.1
A. EU Members	52.6 % 57.4	-7.0	472.2 % 57.2	-0.2
Euro Area	34.5 % 37.6	-9.1	310.7 % 37.6	-2.1
Non-euro Area	18.1 % 19.7	-2.7	161.4 % 19.5	3.8
B. Third Countries	39.2 % 42.8	1.8	353.7 % 42.8	10.4
Total Imports	74.9	-3.6	682.4	1.2
C. EU Members	47.5 % 63.4	-4.8	432.5 % 63.3	1.3
Euro Area	32.7 % 43.7	-5.7	303.7 % 44.5	0.9
Non-euro Area	14.8 % 19.8	-2.8	128.8 % 18.9	2.1
D. Third Countries	27.4 % 36.6	-1.4	249.9 % 36.6	1.1

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

Source:

Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/11/PE12_385_51.html;jsessionid=61633506F891355DDF446AAB5332A764.cae4 https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

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

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

Period	Average ∆%
1949-2012*	3.3
2000-2012*	1.1
2000-2011	1.1
2000-2007	1.7
1990-1999	1.9
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 Flash France Composite Output Index increased marginally from 43.2 in Sep to 44.8 in Oct; the Sep reading at 43.2 was the lowest in 41 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10201). Jack Kennedy, Senior Economist at Markit and author of the report, finds weakness in IIIQ2012 GDP with possible contraction extending into IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10201).

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased marginally from 43.2 in Sep to 43.5 in Oct, indicating significant contraction of private sector activity for an eighth consecutive month at a fast rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10301). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that combined manufacturing and services weakness contracted at the sharpest rate since Sep 2008 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10301). The Markit France Services Activity index fell from 45.0 in Sep to 43.5 in Oct for the lowest reading in twelve months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10301). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 43.7 in Oct from 42.7 in Sep (which was the sharpest decline of the manufacturing economy since Apr 2009), remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10247). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds continuing weakness in manufacturing with export orders falling at the fastest rate since the middle of 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10247). 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	Sep month ∆%: 0.3 Sep 12 months ∆%: 2.9 Blog 11/4/12
GDP Growth	IIQ2012/IQ2012 ∆%: 0.0 IIQ2012/IIQ2011 ∆%: 0.3 Blog 9/30/12
Industrial Production	Sep ∆%: Manufacturing minus 3.2 12-Month ∆%: Manufacturing minus 2.5 Blog 11/11/12
Consumer Spending	Sep Manufactured Goods ∆%: 0.2 Aug 12-Month Manufactured Goods ∆%: -0.5 Blog 11/4/12
Employment	IIQ2012 Unemployed 2.785 million Unemployment Rate: 9.7% Employment Rate: 63.9% Blog 9/9/12
Trade Balance	Sep Exports ∆%: month -1.5, 12 months 5.2 Sep Imports ∆%: month -1.9, 12 months 0.0 Blog 11/11/12
Confidence Indicators	Historical averages 100 Oct Mfg Business Climate 85 Blog 10/28/12

Links to blog comments in Table FR:

11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/28/12 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-dec elerating-united-states.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.html

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 0.3 percent in Jun 2012, 0.8 percent in Jul 2012 and 2.1 percent in Aug 2012 for cumulative quarterly increase of 3.2 percent at annual equivalent 13.5 percent. Improvement was interrupted by decline of manufacturing of 3.2 in Sep 2012 such that the cumulative from Jun 2012 to Sep 2012 is minus 0.1 percent and minus 2.5 percent in 12 months. Decline of manufacturing in four of the six months from Dec 2011 to May 2012 with cumulative decline of 3.5 percent from Dec 2011 to May 2012, or 6.8 percent annual equivalent, pulled down the 12-month percentage change to minus 4.7 percent in May 2012. In contrast, the cumulative increase of 3.2 percent in Jun-Aug 2012 pulled up the 12-month rate to only minus 0.3 percent in Aug 2012. In the quarter Dec 2011 to Feb 2012, manufacturing fell 2.8 at the annual equivalent rate of minus 10.7 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 2.9 percent in 2009.

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

	Month ∆%	12-Month ∆%
Sep 2012	-3.2	-2.5
Aug	2.1	-0.3
Jul	0.8	-2.8
Jun	0.3	-2.7
May	-1.2	-4.7
Apr	-0.6	-2.1
Mar	1.1	-1.4
Feb	-1.3	-4.0
Jan	0.1	-2.1
Dec 2011	-1.6	-0.2
Nov	1.3	1.5
Oct	-0.3	1.9
Sep	-1.0	1.1
Aug	-0.4	3.7
Jul	0.9	3.0
Jun	-1.7	2.8
May	1.5	3.2
Apr	0.1	2.6
Mar	-1.5	3.5
Feb	0.6	6.7
Jan	2.0	6.0
Dec 2010	0.1	4.9
Dec 2009		-2.9
Dec 2008		-13.0
Dec 2007		-0.2
Dec 2006		2.4
Dec 2005		0.0
Dec 2004		1.4
Dec 2003		0.4
Dec 2002		-0.6
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=20121109

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 followed by renewed decline 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=20121109

France has been running a trade deficit fluctuating around €6,000 million, as shown in Table VF-2. Exports decreased 1.5 percent in Sep 2012 while imports decreased 1.9 percent, resulting in marginal decrease of the trade deficit from revised €5259 million in Aug 2012 to €5033 million in Sep 2012.

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

	Exports	Imports	Trade Balance
Sep 2012	37,591	42,624	-5,033
Aug	38,176	43,435	-5,259
Jul	36,831	41,228	-4,397
Jun	36,326	42,750	-6,424
May	37,425	43,090	-5,665
Apr	36,534	42,778	-6,244
Mar	36,157	41,849	-5,692
Feb	36,812	43,247	-6,435
Jan	36,529	42,242	-5,713
Dec 2011	36,145	41,583	-5,438
Nov	37,058	41,652	-4,594
Oct	35,939	42,134	-6,195
Sep	35,742	42,615	-6,873
Aug	37,212	41,973	-4,761
Jul	35,320	41,771	-6,451
Jun	35,348	41,003	-5,655
May	34,881	41,628	-6,747
Apr	34,639	41,660	-7,021
Mar	35,272	41,699	-6,427
Feb	34,673	41,222	-6,549
Jan	34,386	41,107	-6,721
Dec 2010	33,929	39,576	-5,647

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 decreased 1.5 percent in Sep and increased 5.2 percent in the 12 months ending in Sep. Imports decreased 1.9 percent in Sep and increased 0.0 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 ∆%
Sep 2012	-1.5	5.2	-1.9	0.0
Aug	3.7	2.6	5.4	3.5
Jul	1.4	4.3	-3.6	-1.3
Jun	-2.9	2.8	-0.8	4.3
May	2.4	7.3	0.7	3.5
Apr	1.0	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	1.1	6.2	1.6	2.8
Dec 2011	-2.5	6.5	-0.2	5.1
Nov	3.1	7.2	-1.1	4.5
Oct	0.6	8.9	-1.1	15.4
Sep	-3.9	7.4	1.5	12.2
Aug	5.4	10.7	0.5	8.7
Jul	-0.1	1.6	1.9	9.4
Jun	1.3	4.2	-1.5	10.0
May	0.7	16.4	-0.1	16.9
Apr	-1.8	7.7	-0.1	14.9
Mar	1.7	11.5	1.2	15.4
Feb	0.8	13.9	0.3	22.2
Jan	1.3	14.1	3.9	20.9
Dec 2011		6.5		5.1
Dec 2010		13.6		14.8
Dec 2009		-9.6		-1.8
Dec 2008		-6.8		-10.9
Dec 2007		6.1		8.4
Dec 2006		6.3		6.7
Dec 2005		11.4		15.2
Dec 2004		-3.8		5.7
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 €73,343 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
Sep 2012 12 Months	438,989		506,271		-67,282
Year
2011	428,013	8.4	501,356	12.1	-73,343
2010	394,787	13.9	447,105	14.1	-52,318
2009	346,476	-17.0	391,856	-17.3	-45,380
2008	417,636	2.7	473,853	5.5	-56,217
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 44.5 in Sep to 46.0 in Oct, indicating significant contraction of output of Italy’s services at a marginally slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10304). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that the data suggest contraction of GDP in Italy in IVQ2012 but with rate and movement of private-sector activity toward improvement (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10304). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 45.7 in Sep to 45.5 in Oct for 15 consecutive months of contraction of Italy’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10273). There was more moderate increase in new foreign orders than sharper decline in domestic new orders. Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds that growth of foreign orders was moderate because of weakness in the economies of France and Germany (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10273). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Oct month ∆%: 0.0 Oct 12-month ∆%: 2.6 Blog 11/4/12
Producer Price Index	Sep month ∆%: -0.1 Sep 12-month ∆%: 2.8 Blog 11/4/12
GDP Growth	IIQ2012/IQ2012 SA ∆%: minus 0.8 IIQ2012/IIQ2011 NSA ∆%: minus 2.6 Blog 10/14/12
Labor Report	Sep 2012 Participation rate 63.7% Employment ratio 56.9% Unemployment rate 10.8% Blog 11/4/12
Industrial Production	Sep month ∆%: minus 1.5 12 months ∆%: minus 4.8 Blog 11/11/12
Retail Sales	Aug month ∆%: 0.0 Aug 12-month ∆%: -1.0 Blog 10/28/12
Business Confidence	Mfg Oct 87.6, Jun 88.8 Construction Oct 81.4, Jun 85.4 Blog 10/28/12
Trade Balance	Balance Aug SA €507 million versus Jul €708 Exports Aug month SA ∆%: 3.9; Imports Aug month ∆%: 4.4 Exports 12 months Aug NSA ∆%: +8.4 Imports 12 months NSA ∆%: minus 1.1 Blog 10/21/12

Links to blog comments in Table IT:

11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html

10/28/12 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

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

Italy’s industrial production fell 1.5 percent in Sep 2012, pulling down the 12-month rate of growth to minus 4.8 percent and increased 1.7 percent in Aug with 12-month decline of 5.2 percent, as shown in Table VG-1. Industrial production recovered with growth of 0.8 percent in May 2012 but growth in the 12 months ending in May 2012 was minus 6.7 percent. Industrial production fell 7.9 percent in the 12 months ending in Jun 2012. 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-1, Italy, Industrial Production ∆%

	Month ∆% SA	12-Month ∆% Calendar Adjusted
Sep 2012	-1.5	-4.8
Aug	1.7	-5.2
Jul	-0.2	-7.2
Jun	-1.1	-7.9
May	0.8	-6.7
Apr	-1.9	-9.3
Mar	0.5	-5.6
Feb	-0.8	-7.0
Jan	-2.3	-4.6
Dec 2011	0.9	-1.7
Nov	0.1	-4.1
Oct	-0.9	-3.8
Sep	-3.2	-2.6
Aug	1.6	4.8
Jul	-1.0	-1.1
Jun	-0.1	0.4
May	-1.5	2.1
Apr	1.4	4.0
Mar	-0.2	3.3
Feb	1.5	2.5
Jan	-0.8	0.1
Dec 2010	-0.4	6.7
Nov	0.7	5.5
Oct	-0.1	4.1
Sep	0.9	5.8
Aug	-0.8	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/74106

Chart VG-1 of Italy’s Istituto Nazionale di Statistica provides 12-month percentage changes of Italy’s industrial production. There is worsening trend after Aug 2011, sharply deteriorating after Dec 2011 into 2012 with marginal recovery in May 2012 and further drops in Jun-Jul 2012 followed by marginal improvement in Aug and decline in Sep 2012 but still in negative territory.

Chart VG-1, 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/gva/gross-domestic-product--preliminary-estimate/q3-2012/stb-gross-domestic-product-preliminary-estimate--q3-2012.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 52.2 in Sep to 50.2 in Oct with growth during 22 consecutive months, decreasing at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10288). Andrew Harker, Economist at Markit, finds that the lowest level of the index registered in 22 months suggests continuing leveled trend of economic activity found in official data (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10288). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased from 48.1 in Sep to 47.5 in Oct (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10257). The PMI registered average 47.7 in IIIQ2012, which is the lowest reading since IIQ2009. New export orders fell for a seventh consecutive month. Rob Dobson, Chief Economist at Markit and author of the Markit/CIPS Manufacturing PMI^®, finds that the decline of UK manufacturing accelerated at the beginning of IVQ2012 with continuing deterioration of new export orders with unresolved issues in the euro area and slowing economy in Asia (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10257).

Table UK, UK Economic Indicators


CPI	Sep month ∆%: 0.4 Sep 12-month ∆%: 2.2 Blog 10/21/12
Output/Input Prices	Output Prices: Sep 12-month NSA ∆%: 2.5; excluding food, petroleum ∆%: 1.2 Input Prices: Sep 12-month NSA ∆%: -1.2 Excluding ∆%: -1.3 Blog 10/21/12
GDP Growth	IIIQ2012 prior quarter ∆% minus 1.0; year earlier same quarter ∆%: 0.0 Blog 10/28/12
Industrial Production	Sep 2012/Sep 2011 NSA ∆%: Production Industries minus 2.6; Manufacturing minus 1.0 Blog 11/11/12
Retail Sales	Sep month ∆%: 0.6 Sep 12-month ∆%: +2.5 Blog 10/21/12
Labor Market	Jun-Aug Unemployment Rate: 7.9%; Claimant Count 4.8%; Earnings Growth 1.7% Blog 10/21/12
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:

10/28/12 http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html

10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html

10/14/12 http://cmpassocregulationblog.blogspot.com/2012/10/recovery-without-hiring-imf-view-united.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 Sep 2012. Manufacturing accounts for 67.0 percent of the production industries of the UK and decreased 1.0 percent in the 12 months ending in Sep 2012. Capital goods industries grew at 2.4 percent in the 12 months ending in Sep 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 15.0 percent in the 12 months ending in Sep 2012. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Apr 2011 to Sep 2012. With exception of 2.5 percent for consumer durable goods and most months for capital goods, 12-month percentage changes of all segments are negative from Jan to Sep 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
Sep	-2.6	-15.0	-1.0	-9.2	2.5	-1.7	2.4
Aug	-1.0	-0.9	-1.2	-1.5	-1.0	-4.6	4.3
Jul	-0.7	-2.5	-0.5	-2.2	-0.3	-4.5	6.6
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/september-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 relatively weak in Sep 2012 after strong performance in Jul 2012 and weakness in Aug 2012. The overall index of production industries fell 1.7 percent in Sep 2012, with interruption of improvement in mining decreasing 15.3 percent with increase of manufacturing by 0.1 percent while energy decreased 8.0 percent, capital goods output increased 0.4 percent and durable goods increased 0.6 percent. There was sharp recovery in Jul 2012 with high rates for all components such as 3.0 percent for the production index, 3.2 percent for manufacturing and 3.5 percent for capital goods.

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
Sep	-1.7	-15.3	0.1	-8.9	0.6	0.9	0.4
Aug	-0.5	2.0	-1.2	1.1	-2.8	-0.3	-2.3
Jul	3.0	4.7	3.2	2.3	5.0	1.8	3.5
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/september-2012/index.html

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 2.6 percent was driven by negative contribution of 1.83 percentage points of mining with the subcomponent of oil and gas deducting 1.84 percentage points. Manufacturing deducted 0.72 percentage points. The contribution of manufacturing is strong because of its share of 67.0 percent in the production index with growth of minus 1.0 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing increased 0.1 percent in Sep, adding 0.09 percentage points. Decrease of mining by 15.3 percent deducted 1.88 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 Sep 2012	% Point Contrib.	Volume Month ∆% Sep 2012	% Point Contrib.
PROD IND	100.0	-2.6	-2.58	-1.7	-1.75
MNG	15.4	-15.0	-1.83	-15.3	-1.88
MNG 06	12.6	-20.2	-1.84	-20.9	-1.93
MFG	67.0	-1.0	-0.72	0.1	0.09
ELEC	9.6	-0.5	-0.04	0.5	0.05
WATER & SEW	8.0	0.2	0.02	-0.1	-0.01

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/september-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: chemical and chemical products (CD) deducted 0.59 percentage points with growth in 12 months of minus 9.6 percent; rubber and plastic products (CG) deducted 0.33 percentage points with growth in 12 months of minus 7.0 percent; machinery and equipment (CK) deducted 0.36 percentage points with growth in 12 months of minus 5.6 percent; CF basic pharmaceutical products and preparations (CF), deducting 0.02 percentage points with 12-month growth of minus 0.5 percent; manufacture of food products, beverages and tobacco (CA) deducted 0.09 percentage points with 12-month growth of minus 0.7 percent; and wood products (CC) deducted 0.39 percentage points with growth of minus 5.2 percent in 12 months. The highest positive contribution was 0.63 percentage points by transport equipment (CL), growing 8.2 percent in 12 months. Electrical products (CJ) added 0.38 percentage points with growth of 18.0 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	Sep 2012 12-Month Growth %	Contribution to production (% points)	Sep 2012 Month on month growth (%)	Contribution to production (% points)

CA	11.9	-0.7	-0.09	0.3	0.04
CB	2.0	-1.8	-0.04	-0.2	0.00
CC	5.5	-7.8	-0.39	-1.0	-0.05
CD	0.8	-5.2	-0.04	-3.0	-0.02
CE	6.1	-9.6	-0.59	-1.1	-0.06
CF	6.1	-0.5	-0.02	2.6	0.12
CG	4.7	-7.0	-0.33	0.7	0.03
CH	8.6	1.2	0.11	-0.1	-0.01
CI	4.3	4.5	0.17	1.4	0.06
CJ	2.1	18.0	0.38	1.8	0.05
CK	4.8	-5.6	-0.36	-3.0	-0.19
CL	5.7	8.2	0.63	1.4	0.11
CM	4.5	-3.2	-0.15	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/september-2012/index.html

The UK’s trade account is shown in Table VH-5. In Sep 2012, the UK ran a deficit in trade of goods and services (total trade) of ₤2699 million. The deficit in trade of goods was ₤8368 million and ₤6975 million in goods excluding oil. A surplus in services of ₤5669 million contributed to the smaller overall deficit in goods and services (-₤8368 million plus ₤5669 equal to -₤2699). 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 increased 0.6 percent in Sep 2012 and fell 3.1 percent in the quarter Jul-Sep 2012 relative to the same quarter a year earlier with imports decreasing 3.1 percent in Sep and decreasing 0.1 percent in Jul-Sep 2012 relative to the same quarter a year earlier. Excluding oil, UK exports of goods increased 1.1 percent in Sep 2012 and increased 2.0 in Jul-Sep 2012 relative to a year earlier while imports decreased 3.9 percent in Sep and decreased 0.8 percent in Jul-Sep 2012 relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports decreased 0.2 percent in Sep and fell 4.8 percent in Jul-Sep 2012 relative to a year earlier and imports decreased 0.2 percent in Sep and decreased 1.6 percent in Jul-Sep 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 Sep 2012	Month ∆% Sep 2012	Jul-Sep 2012 ∆% Jul-Sep 2011
Total Trade
Exports	40,475	0.6	-0.7
Imports	43,174	-3.1	-0.3
Balance	-2,699
Trade in Goods
Exports	24,881	1.1	2.0
Imports	33,249	-3.9	-0.8
Balance	-8,368
Trade in Goods Excluding Oil
Exports	21,917	1.9	1.0
Imports	28,892	-2.6	-1.8
Balance	-6,975
Trade in Services
Exports	15,594	-0.2	-4.8
Imports	9,925	-0.2	1.6
Balance	5,669

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

Longer Run