Twenty Eight Million Unemployed or Underemployed, Falling Real Wages, Destruction of One Trillion Dollars of Household Wealth for Inflation Adjusted Loss of 10.9 Percent, Fifteen to Forty Three Years to Return Unemployment to Normal, World Financial Turbulence and Economic Slowdown with Global Recession Risk: Part II

 

Twenty Eight Million Unemployed or Underemployed, Falling Real Wages, Destruction of One Trillion Dollars of Household Wealth for Inflation Adjusted Loss of 10.9 Percent, Fifteen to Forty Three Years to Return Unemployment to Normal, World Financial Turbulence and Economic Slowdown with Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2010, 2011, 2012

Executive Summary

IA Twenty Eight Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

IIA Destruction of One Trillion Dollars of Household Wealth

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

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

IIIF Appendix on Sovereign Bond Valuation. There are two approaches to government finance and their implications: (1) simple unpleasant monetarist arithmetic; and (2) simple unpleasant fiscal arithmetic. Both approaches illustrate how sovereign debt can be perceived riskier under profligacy.

First, Unpleasant Monetarist Arithmetic. Fiscal policy is described by Sargent and Wallace (1981, 3, equation 1) as a time sequence of D(t), t = 1, 2,…t, …, where D is real government expenditures, excluding interest on government debt, less real tax receipts. D(t) is the real deficit excluding real interest payments measured in real time t goods. Monetary policy is described by a time sequence of H(t), t=1,2,…t, …, with H(t) being the stock of base money at time t. In order to simplify analysis, all government debt is considered as being only for one time period, in the form of a one-period bond B(t), issued at time t-1 and maturing at time t. Denote by R(t-1) the real rate of interest on the one-period bond B(t) between t-1 and t. The measurement of B(t-1) is in terms of t-1 goods and [1+R(t-1)] “is measured in time t goods per unit of time t-1 goods” (Sargent and Wallace 1981, 3). Thus, B(t-1)[1+R(t-1)] brings B(t-1) to maturing time t. B(t) represents borrowing by the government from the private sector from t to t+1 in terms of time t goods. The price level at t is denoted by p(t). The budget constraint of Sargent and Wallace (1981, 3, equation 1) is:

D(t) = {[H(t) – H(t-1)]/p(t)} + {B(t) – B(t-1)[1 + R(t-1)]} (1)

Equation (1) states that the government finances its real deficits into two portions. The first portion, {[H(t) – H(t-1)]/p(t)}, is seigniorage, or “printing money.” The second part,

{B(t) – B(t-1)[1 + R(t-1)]}, is borrowing from the public by issue of interest-bearing securities. Denote population at time t by N(t) and growing by assumption at the constant rate of n, such that:

N(t+1) = (1+n)N(t), n>-1 (2)

The per capita form of the budget constraint is obtained by dividing (1) by N(t) and rearranging:

B(t)/N(t) = {[1+R(t-1)]/(1+n)}x[B(t-1)/N(t-1)]+[D(t)/N(t)] – {[H(t)-H(t-1)]/[N(t)p(t)]} (3)

On the basis of the assumptions of equal constant rate of growth of population and real income, n, constant real rate of return on government securities exceeding growth of economic activity and quantity theory equation of demand for base money, Sargent and Wallace (1981) find that “tighter current monetary policy implies higher future inflation” under fiscal policy dominance of monetary policy. That is, the monetary authority does not permanently influence inflation, lowering inflation now with tighter policy but experiencing higher inflation in the future.

Second, Unpleasant Fiscal Arithmetic. The tool of analysis of Cochrane (2011Jan, 27, equation (16)) is the government debt valuation equation:

(M_t + B_t)/P_t = E_t∫(1/R_{t, t+τ})s_t+τdτ (4)

Equation (4) expresses the monetary, M_t, and debt, B_t, liabilities of the government, divided by the price level, P_t, in terms of the expected value discounted by the ex-post rate on government debt, R_{t, t+τ}, of the future primary surpluses s_t+τ, which are equal to T_t+τ – G_t+τ or difference between taxes, T, and government expenditures, G. Cochrane (2010A) provides the link to a web appendix demonstrating that it is possible to discount by the ex post R_{t, t+τ}. The second equation of Cochrane (2011Jan, 5) is:

M_tV(i_t, ·) = P_tY_t (5)

Conventional analysis of monetary policy contends that fiscal authorities simply adjust primary surpluses, s, to sanction the price level determined by the monetary authority through equation (5), which deprives the debt valuation equation (4) of any role in price level determination. The simple explanation is (Cochrane 2011Jan, 5):

“We are here to think about what happens when [4] exerts more force on the price level. This change may happen by force, when debt, deficits and distorting taxes become large so the Treasury is unable or refuses to follow. Then [4] determines the price level; monetary policy must follow the fiscal lead and ‘passively’ adjust M to satisfy [5]. This change may also happen by choice; monetary policies may be deliberately passive, in which case there is nothing for the Treasury to follow and [4] determines the price level.”

An intuitive interpretation by Cochrane (2011Jan 4) is that when the current real value of government debt exceeds expected future surpluses, economic agents unload government debt to purchase private assets and goods, resulting in inflation. If the risk premium on government debt declines, government debt becomes more valuable, causing a deflationary effect. If the risk premium on government debt increases, government debt becomes less valuable, causing an inflationary effect.

There are multiple conclusions by Cochrane (2011Jan) on the debt/dollar crisis and Global recession, among which the following three:

(1) The flight to quality that magnified the recession was not from goods into money but from private-sector securities into government debt because of the risk premium on private-sector securities; monetary policy consisted of providing liquidity in private-sector markets suffering stress

(2) Increases in liquidity by open-market operations with short-term securities have no impact; quantitative easing can affect the timing but not the rate of inflation; and purchase of private debt can reverse part of the flight to quality

(3) The debt valuation equation has a similar role as the expectation shifting the Phillips curve such that a fiscal inflation can generate stagflation effects similar to those occurring from a loss of anchoring expectations.

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	2.5	2.2	2.3	7.7
Japan	0.1	-0.4	-1.0	4.2
China	7.4	1.7	-2.8
UK	-0.1	2.7* RPI 3.2	2.5* output 1.4** input 0.1*	7.8
Euro Zone	-0.6	2.5	2.6	11.7
Germany	0.9	2.1	1.5	5.4
France	0.1	2.2	2.9	10.7
Nether-lands	-1.4	3.3	4.5	5.5
Finland	-1.1	3.5	2.8	7.7
Belgium	-0.3	2.6	4.5	7.5
Portugal	-3.4	2.1	4.6	16.3
Ireland	-0.5	2.1	3.0	14.7
Italy	-2.4	2.8	2.6	11.1
Greece	-7.2	0.9	4.1	NA
Spain	-1.6	3.5	3.5	26.2

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/october-2012/index.html **Core

PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/october-2012/index.html

Source: EUROSTAT; country statistical sources http://www.census.gov/aboutus/stat_int.html

Table IV-1 shows the simultaneous occurrence of low growth, inflation and unemployment in advanced economies. The US grew at 2.5 percent in IIIQ2012 relative to IIIQ2011 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2012/pdf/gdp3q12_2nd.pdf See I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html). Japan’s GDP fell 0.7 percent in IVQ2011 relative to IVQ2010 and contracted 1.8 percent in IIQ2011 relative to IIQ2010 because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 but grew at the seasonally-adjusted annual rate (SAAR) of 9.5 percent in IIIQ2011, decreasing at the SAAR of 1.2 percent in IVQ 2011, increasing at the SAAR of 5.2 percent in IQ2012 and 0.3 percent in IIQ2012 but contracting at the SAAR of 3.5 percent in IIIQ2012 (see Section VB http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation_16.html); the UK grew at 1.0 percent in IIIQ2012 relative to IIQ2012 and GDP fell 0.1 percent in IIIQ2012 relative to IIIQ2011 (see Section VH at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_2.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html); and the Euro Zone grew at minus 0.1 percent in IIIQ2012, minus 0.2 percent in IIQ2012, 0.0 percent in IQ2012 relative to IVQ2011 and fell 0.6 percent in IIIQ2012 relative to IIIQ2011 (see Section VD and earlier http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html ). These are stagnating or “growth recession” rates, which are positive or about nil growth rates with some contractions that are insufficient to recover employment. The rates of unemployment are quite high: 7.7 percent in the US but 17.7 percent for unemployment/underemployment or job stress of 28.6 million (see Table I-4 and earlier at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html ), 4.2 percent for Japan (see Section VB at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_2.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html), 7.8 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_192.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united_21.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 2.2 percent in the US, -0.4 percent for Japan, 1.7 percent for China, 2.5 percent for the Euro Zone (2.2 percent in the flash estimate for Nov http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-30112012-AP/EN/2-30112012-AP-EN.PDF) and 2.7 percent for the UK. Stagflation is still an unknown event but the risk is sufficiently high to be worthy of consideration (see http://cmpassocregulationblog.blogspot.com/2011/06/risk-aversion-and-stagflation.html). The analysis of stagflation also permits the identification of important policy issues in solving vulnerabilities that have high impact on global financial risks. There are six key interrelated vulnerabilities in the world economy that have been causing global financial turbulence: (1) sovereign risk issues in Europe resulting from countries in need of fiscal consolidation and enhancement of their sovereign risk ratings (see Section III and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real.html); (2) the tradeoff of growth and inflation in China now with change in growth strategy to domestic consumption instead of investment and political developments in a decennial transition; (3) slow growth by repression of savings with de facto interest rate controls (see IIA2 at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html 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 http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2012/08/twenty-nine-million-unemployed-or.html), weak hiring with the loss of 10 million full-time jobs (see http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html) and continuing job stress of 24 to 30 million people in the US and stagnant wages in a fractured job market (see Section I and earlier at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html); (4) the timing, dose, impact and instruments of normalizing monetary and fiscal policies (see Section I http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html http://cmpassocregulationblog.blogspot.com/2012/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2011/08/united-states-gdp-growth-standstill.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html http://cmpassocregulationblog.blogspot.com/2011/03/global-financial-risks-and-fed.html http://cmpassocregulationblog.blogspot.com/2011/02/policy-inflation-growth-unemployment.html) in advanced and emerging economies; (5) the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 that had repercussions throughout the world economy because of Japan’s share of about 9 percent in world output, role as entry point for business in Asia, key supplier of advanced components and other inputs as well as major role in finance and multiple economic activities (http://professional.wsj.com/article/SB10001424052748704461304576216950927404360.html?mod=WSJ_business_AsiaNewsBucket&mg=reno-wsj); and (6) geopolitical events in the Middle East.

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.

Chairman Bernanke (2012Nov20) finds that potential output in the US may have diminished recently such that temporarily the rate of growth could be 2 percent per year:

“The accumulating evidence does appear consistent with the financial crisis and the associated recession having reduced the potential growth rate of our economy somewhat during the past few years. In particular, slower growth of potential output would help explain why the unemployment rate has declined in the face of the relatively modest output gains we have seen during the recovery. Output normally has to increase at about its longer-term trend just to create enough jobs to absorb new entrants to the labor market, and faster-than-trend growth is usually needed to reduce unemployment. So the fact that unemployment has declined in recent years despite economic growth at about 2 percent suggests that the growth rate of potential output must have recently been lower than the roughly 2-1/2 percent rate that appeared to be in place before the crisis.”

Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation).

Jon HIlsenrath, writing on “Fed stimulus likely in 2013,” published in the Wall Street Journal on Nov 28, 2012 (http://professional.wsj.com/article/SB10001424127887323751104578147443715538694.html?mod=WSJPRO_hpp_LEFTTopStories), finds that the Fed is likely to continue unconventional monetary policy of zero interest rates and quantitative easing in 2013 because of the fiscal situation of the US and weak world economy. 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 Oct 24, 2012, revealed the following policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20121024a.htm):

“Release Date: October 24, 2012

For immediate release

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; see Shultz et al 2012), 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 and earlier at http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states.html) and the PCE inflation data from the report on personal income and outlays (Section IV at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or_4.html). The Bureau of Economic Analysis (BEA) provides the second estimate of IIIQ2012 GDP with the third estimate of IIIQ2012 to be released on Dec 20 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html). 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 Oct 2012 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html. The next report on “Personal Income and Outlays” for Nov will be released at 8:30 AM on Dec 21, 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 was released on Fri Dec 7, 2012 (http://www.bls.gov/ces/) and analyzed in this blog in Section I. “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

	0 to 0.25	0.5 to 1.0	1.0 to 1.5	1.0 to 2.0	2.0 to 3.0	3.0 to 4.5
2012	18	1
2013	15	3		1
2014	13			4	2
2015	1	9		3	2	4
Longer Run						19

Source:

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

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

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

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

Source:

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

The producer price index of the euro zone increased 0.1 percent in Oct 2012, 0.2 percent in Sep, 0.9 percent in Sep and 0.3 percent in Aug, as shown in Table IV-5. 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 fell 0.2 percent in Oct 2012 after 0.0 percent in Sep 2012, 2.6 percent in Aug, and 1.3 percent in Jul 2012 or at the annual equivalent rate of 16.7 percent in the quarter Jul-Sep 2012 and at 26.1 percent in Jul-Aug 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, increasing at 0.1 percent in Oct 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/2012/11/united-states-unsustainable-fiscal.html).

Table IV-5, Euro Zone, Industrial Producer Prices Month ∆%

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

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-6. 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, falling to 2.6 percent in Oct 2012. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.4 percent in the 12 months ending in Jul 2012, increasing to 8.0 percent in Aug 2012 and 6.9 percent in Sep 2012 but falling to 5.9 percent in Oct 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-6, Euro Zone, Industrial Producer Prices 12-Month ∆%

	Oct 2012	Sep 2012	Aug 2012	Jul  2012	Jun  2012	May   2012	Apr  2012
Industry ex Construction	2.6	2.7	2.7	1.6	1.8	2.3	2.6
Industry ex Construction & Energy	1.5	1.3	1.0	0.8	0.9	1.1	1.3
Intermediate Goods	1.3	0.8	0.2	-0.2	0.1	0.5	0.6
Energy	5.9	6.9	8.0	4.4	4.7	6.2	6.6
Capital Goods	0.9	0.9	0.9	1.0	1.1	1.2	1.2
Durable Consumer Goods	1.3	1.3	1.7	1.8	1.9	1.9	2.0
Nondurable Consumer Goods	2.5	2.4	2.2	2.0	1.9	1.9	2.3

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/2012/11/united-states-unsustainable-fiscal.html), as shown in Table IV-7. 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 7.4 percent in Jul-Aug 2012. In the eighth wave, annual equivalent inflation treated to 1.8 percent in Sep-Oct 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-7, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Oct 2012	0.1	2.6
Sep	0.2	2.7
AE ∆% Sep-Oct	1.8
Aug	0.9	2.7
Jul	0.3	1.6
AE ∆% Jul-Aug	7.4
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

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 all countries. 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 0.1 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of 0.3 percent, which is much lower than 5.2 percent in IQ2012. Growth of 3.3 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.9 percent in IIIQ2012 at the SAAR of minus 3.5 percent and increased 0.1 percent relative to a year earlier. 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 fell 0.1 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.5 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.6 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. In IIIQ2012, Germany’s GDP increased 0.2 percent and 0.4 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.3 percent at SAAR and 2.1 percent relative to a year earlier. In IIIQ2012, GDP grew 0.7 percent, 2.7 percent at SAAR and 2.5 percent relative to IIIQ2011 (http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html) but with substantial unemployment and underemployment (Section I) and weak hiring (http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html). 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 fell 0.1 percent relative to a year earlier. Italy has experienced decline of GDP in five consecutive quarters from IIIQ2011 to IIIQ2012. Italy’s GDP fell 0.8 percent in IQ2012 and declined 1.4 percent relative to IQ2011. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.2 percent and declined 2.4 percent relative to a year earlier. France’s GDP stagnated in IQ2012 and increased 0.4 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and increased 0.2 percent relative to a year earlier.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.5        SAAR: 2.0	2.4
Japan	QOQ: 1.3 SAAR: 5.2	2.9
China	1.8	8.1
Euro Area	0.0	-0.1
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: 0.1 SAAR: 0.3	3.3
China	1.8	7.6
Euro Area	-0.2	-0.5
Germany	0.3	0.5 1.0 CA
France	-0.1	0.1
Italy	-0.7	-2.4
United Kingdom	-0.4	-0.5
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.7  SAAR: 2.7	2.5
Japan	QOQ: –0.9 SAAR: –3.5	0.1
China	2.2	7.4
Euro Area	-0.1	-0.6
Germany	0.2	0.4
France	0.2	0.2
Italy	-0.2	-2.4
United Kingdom	1.0	-0.1

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

Source: Country Statistical Agencies

http://www.bea.gov/national/index.htm#gdp

There is evidence of deceleration of growth of world trade and even contraction in more recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB at http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and earlier http://cmpassocregulationblog.blogspot.com/2012/10/mediocre-and-decelerating-united-states_28.html and for GDP Section VB http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html ). Japan’s exports decreased 6.5 percent in the 12 months ending in Oct, 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 decreased 1.6 percent in the 12 months ending in Oct, 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 and deducted 2.9 percentage points from GDP growth in IIIQ2012. 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 1.4 percentage points to growth of Germany’s GDP in IIQ2012 and contributed 1.4 percentage points in IIIQ2012. 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 0.8 percentage points from UK GDP growth in IIQ2012 and added 0.7 percentage points in IIIQ2012. 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, adding 0.3 percentage points in IIIQ2012. 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 added 0.14 percentage points to GDP growth in IIIQ2012. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 52.4 in Nov from 51.0 in Oct, which was the sharpest improvement in five months, indicating mild expansion of manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10327).

New export orders registered 48.9 in Nov nearly still in neutral territory with 47.2 in Oct, indicating stability after contraction during five consecutive months. 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 Oct, United States national industrial production accumulated decrease of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than 1.7 percent growth in 12 months. Capacity utilization for total industry in the United States fell 0.4 percentage points in Oct to 77.8 percent from 78.2 percent in Sep, which is 2.5 percentage points lower than the long-run average from 1972 to 2011. Manufacturing decreased 0.9 percent in Oct seasonally adjusted, increasing 1.8 percent not seasonally adjusted in 12 months, and decreased 1.8 percent in the six months ending in Oct or at the annual equivalent rate of 3.6 percent (Section VA http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html and earlier http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united_21.html). The report on industry by the Board of Governors of the Federal Reserve System states estimates that hurricane Sandy could have “reduced the rate of change in total output by nearly 1 percentage points” (http://www.federalreserve.gov/releases/g17/current/). 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		Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		Oct -1.6 Sep 4.1 Aug -5.4 Jul 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 Sep	-2.0	-4.2	-4.2	-10.6
UK	-0.8 Oct	-2.7 Aug-Oct 12/Aug-Oct 11	1.9 Oct	-0.1 Aug-Oct 12/Aug-Oct 11
Net Trade % Points GDP Growth	% Points
USA IIIQ2012	0.14
Japan	-0.3 IIQ2012 -2.9 IIIQ2012
Germany	1.4 IIQ2012 1.4 IIIQ2012
France	-0.4 IIQ2012   0.3 IIIQ2012
UK	-0.8 IIQ2012 0.7 IIIQ2012

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 and imports of Japan with selected regions and countries is provided in Table V-5 for Oct 2012. The share of Asia in Japan’s trade is more than one half, 55.2 percent of exports and 47.1 percent of imports. Within Asia, exports to China are 18.4 percent of total exports and imports from China 23.8 percent of total imports. The second largest export market for Japan in Oct 2012 is the US with share of 17.9 percent of total exports and share of imports from the US of 8.9 percent in total imports. Western Europe has share of 10.2 percent in Japan’s exports and of 11.0 percent in imports. Rates of growth of exports of Japan in Oct are sharply negative for all countries and regions with the exception of 3.1 percent for exports to the US, 8.0 percent for Canada, 8.5 percent for Mexico and 0.1 percent for the Middle East. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity, which could be part of the explanation for the decline of Japan’s exports by 6.5 percent in Oct 2012 while imports decreased by 1.6 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Oct are negative for some trading partners: minus 12.2 percent for Brazil, minus 14.0 percent for the Middle East and minus 0.9 percent for Australia. Imports from Asia increased 2.0 percent in the 12 months ending in Oct while imports from China increased 3.6 percent.

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

Oct 2012	Exports Millions Yens	12 months ∆%	Imports Millions Yens	12 months ∆%
Total	5,149,993	-6.5	5,698,965	-1.6
Asia	2,840,904	-4.9	2,684,524	2.0
China	947,766	-11.6	1,354,298	3.6
USA	921,094	3.1	504,661	0.1
Canada	68,425	8.0	95,185	3.7
Brazil	40,816	-9.9	86,524	-12.2
Mexico	72,546	8.5	33,040	27.5
Western Europe	526,663	-23.5	628,625	5.7
Germany	132,834	-17.2	169,561	6.2
France	40,252	-28.3	89,505	11.6
UK	85,584	-12.6	49,634	2.2
Middle East	189,249	0.1	870,364	-14.0
Australia	109,197	-25.5	369,236	-0.9

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

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

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

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

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

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

http://www.wto.org/english/news_e/pres12_e/pr676_e.htm

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 53.7 in Nov from 51.0 in Oct, indicating expansion at a moderate rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10439). This index has remained above the contraction territory of 50.0 during 40 consecutive months. Both global manufacturing and services have slowed down considerably with services accelerating while manufacturing stabilized (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10439). The employment index fell from 50.8 in Oct to 50.0 in Nov with continuing increases in input prices but at slower pace. David Hensley, Director of Global Economic Coordination at JP Morgan, finds encouraging signs in services while manufacturing could grow again toward the end of 2012 but employment may be restrained by cost restraint (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10439). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 49.7 in Nov from 48.8 in Oct, for the highest reading in five month and just below the neutral 50.0 level (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10408). New export business declined for the eighth consecutive month in Nov, mixing growth in China and stability in the US with decreases in Europe and Japan. David Hensley, Director of Global Economics Coordination at JP Morgan, finds improving global manufacturing at the end of the year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10408). The HSBC Brazil Composite Output Index, compiled by Markit, increased to 53.0 in Nov from 50.7 in Oct, indicating solid expansion at the fastest rate in eight months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10409). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 50.4 in Oct to 52.5 in Nov (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10409). Andre Loes, Chief Economist, Brazil, at HSBC, finds consolidation of the recovery of economic activity in Brazil (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10409). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 50.2 in Oct to 52.2 in Nov, indicating improvement of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10395). Andre Loes, Chief Economist, Brazil at HSBC, finds recovery improving with gains in both output and new orders at the fastest pace since IQ2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10395).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 52.4 in Nov from 51.0 in Oct, which was the sharpest improvement in five months, indicating mild expansion of manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10327).

New export orders registered 48.9 in Nov nearly still in neutral territory with 47.2 in Oct, indicating stability after contraction during five consecutive months. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with that the index is consistent with output growth in Nov at an annual rate of 1.0 percent (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10327). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 52.8 in Nov from 51.0 in Oct, indicating marginal improvement in manufacturing sector conditions (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10399). The index of new exports orders increased from 47.2 in Oct to 50.3 in Nov while total new orders increased from 51.1 in Oct to 53.6 in Nov. The increase in new export orders was the first in six months. Chris Williamson, Chief Economist at Markit, finds that manufacturing continue to be weak in output and creation of jobs; the increase of the index is partly due to new work resulting from Hurricane Sandy; and manufacturing is likely to make only marginal contribution to growth that is weakening when considering consumer spending (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10399). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 2.2 percentage points from 51.7 in Oct to 49.5 in Nov, which is the lowest level since 49.2 in Jul 2009 (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders decreased 3.9 percentage points from 54.2 in Oct to 50.3 in Nov. The index of exports decreased 1.0 percentage points from 48.0 in Oct to 47.0 in Nov, remaining in mild contraction territory. The Non-Manufacturing ISM Report on Business^® PMI increased 0.5 percentage points from 54.2 in Oct to 54.7 in Nov, indicating growth during 40 consecutive months, while the index of new orders increased 3.3 percentage points from 54.8 in Oct to 58.1 in Nov (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	Oct 12 months NSA ∆%: 2.2; ex food and energy ∆%: 2.0 Oct month ∆%: 0.1; ex food and energy ∆%: 0.2 Blog11/18/12
Producer Price Index	Oct 12-month NSA ∆%: 2.3; ex food and energy ∆% 2.1 Oct month SA ∆% = -0.2; ex food and energy ∆%: -0.2 Blog 11/18/12
PCE Inflation	Oct 12-month NSA ∆%: headline 1.7; ex food and energy ∆% 1.6 Blog 12/2/12
Employment Situation	Household Survey: Nov Unemployment Rate SA 7.7% Blog calculation People in Job Stress Nov: 28.4 million NSA, 18.2% of Labor Force Establishment Survey: Nov Nonfarm Jobs +146,000; Private +147,000 jobs created  Oct 12-month Average Hourly Earnings Inflation Adjusted ∆%: -1.3 Blog 12/9/12
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 2.5 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 2.7 Blog 12/2/12
Real Private Fixed Investment	SAAR IIIQ2012 0.7 ∆% IVQ2007 to IIIQ2012: minus 12.7% Blog 12/2/12
Personal Income and Consumption	Oct month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% minus 0.1 Real Personal Consumption Expenditures (RPCE): minus 0.3 12-month Oct NSA ∆%: RDPI: 1.9; RPCE ∆%: 1.2 Blog 12/2/2012
Quarterly Services Report	IIIQ12/IIIQ11 SA ∆%: Information 2.1 Professional 6.0 Administrative 3.9 Hospitals 7.4 Financial & Insurance 6.5 Blog 12/9/12
Employment Cost Index	Compensation Private IIIQ2012 SA ∆%: 0.5 Sep 12 months ∆%: 2.0 Blog 11/4/12
Industrial Production	Oct month SA ∆%: minus 0.4 Oct 12 months SA ∆%: 1.7 Manufacturing Oct SA ∆% minus 0.9 Oct 12 months SA ∆% 1.8, NSA 3.2 Capacity Utilization: 77.8 Blog 11/18/12
Productivity and Costs	Nonfarm Business Productivity IIIQ2012∆% SAAE 2.9; IIIQ2012/IIIQ2011 ∆% 1.7; Unit Labor Costs SAAE IIIQ2012 ∆% -1.9; IIIQ2012/IIIQ2011 ∆%: 0.1 Blog 12/9/2012
New York Fed Manufacturing Index	General Business Conditions From Oct -6.16 to Nov -5.22 New Orders: From Oct -8.97 to Nov 3.08 Blog 11/18/12
Philadelphia Fed Business Outlook Index	General Index from Oct 5.7 to Nov minus Oct 10.7 New Orders from Oct minus 0.6 to Nov minus 4.6 Blog 11/18/12
Manufacturing Shipments and Orders	New Orders SA Oct ∆% 0.8 Ex Transport 1.3 Jan-Oct NSA New Orders 3.5 Ex transport 2.6 Blog 12/9/12
Durable Goods	Oct New Orders SA ∆%: 0.0; ex transport ∆%: 1.5 Jan-Oct New Orders NSA ∆%: 4.9; ex transport ∆% 3.0 Blog 12/2/12
Sales of New Motor Vehicles	Jan-Nov 2012 13,135,576; Jan-Nov 2011 11,534,206. Nov SAAR 15.54 million, Oct SAAR 14.29 million, Nov 2011 SAAR 13.55 million Blog 12/9/12
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	Sep 12/Sep 11 NSA ∆%: Sales Total Business 0.9; Manufacturers 1.6 Retailers 2.9; Merchant Wholesalers -1.6 Blog 11/18/12
Sales for Retail and Food Services	Jan-Oct 2012/Jan-Oct 2011 ∆%: Retail and Food Services 5.5; Retail ∆% 5.3 Blog 11/18/12
Value of Construction Put in Place	Oct SAAR month SA ∆%: 1.4 Oct 12-month NSA: 10.8 Jan-Oct 2012 ∆% 9.3 Blog 12/9/12
Case-Shiller Home Prices	Sep 2012/Sep 2011 ∆% NSA: 10 Cities 2.1; 20 Cities: 3.0 ∆% Sep SA: 0.3 Cities 0.4 ; 20 Cities: 0.4 Blog 12/2/12
FHFA House Price Index Purchases Only	Sep SA ∆% 0.2; 12 month NSA ∆%: 4.5 Blog 12/2/12
New House Sales	Oct 2012 month SAAR ∆%: minus 0.3 Jan-Oct 2012/Jan-Oct 2011 NSA ∆%: 20.5 Blog 12/2/12
Housing Starts and Permits	Oct Starts month SA ∆%: 3.6 ; Permits ∆%: -2.7 Jan-Oct 2012/Jan-Oct 2011 NSA ∆% Starts 28.2; Permits  ∆% 33.2 Blog 11/25/12
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	Oct ∆% annual rate: 6.2 Blog 12/9/12
Net Foreign Purchases of Long-term Treasury Securities	Sep Net Foreign Purchases of Long-term Treasury Securities: $3.3 billion Major Holders of Treasury Securities: China $1156 billion; Japan $1131 billion; Total Foreign US Treasury Holdings Aug $5455 billion Blog 11/18/12
Treasury Budget	Fiscal Year 2013/2012 ∆% Oct: Receipts 13.0; Outlays 16.4; Individual Income Taxes 17.6 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,089,353 million Blog 11/18/2012
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 11/18/12
Commercial Banks Assets and Liabilities	Oct 2012 SAAR ∆%: Securities 8.3 Loans 4.4 Cash Assets -66.6 Deposits 7.3 Blog 11/25/12
Flow of Funds	IIIQ2012 ∆ since 2007 Assets -$2059B Real estate -$4035B Financial +$1529 MM Net Worth -$1232B Blog 12/9/12
Current Account Balance of Payments	IIQ2012 -$1285 B %GDP 3.0 Blog 9/23/12

Links to blog comments in Table USA:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/25/12 http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html

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

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

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

The Bureau of Labor Statistics (BLS) of the Department of Labor provides the quarterly report on productivity and costs. The operational definition of productivity used by the BLS is (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.” The BLS has revised the estimates for productivity and unit costs. Table VA-1 provides revised data for nonfarm business sector productivity and unit labor costs for the first three quarters of 2012 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 4.2 percent and of 1.3 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 2.9 percent in IIIQ2012, as shown in column 2 “IIIQ2012 SAEE.” The increase of labor productivity from IIIQ2011 to IIIQ2012 was 1.7 percent, reflecting increases in output of 3.5 percent and of hours worked of 1.8 percent, as shown in column 3 “IIIQ2012 YoY.” Hours worked increased from 0.2 percent in IIQ2012 in SAAE to 1.3 percent in IIIQ2012 while output rose from 2.1 percent in IIQ2011 to 4.2 percent in IIIQ2012. The BLS defines unit labor costs as (http://www.bls.gov/news.release/pdf/prod2.pdf 2): “BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.” Unit labor costs decreased at the SAAE rate of 1.9 percent in IIIQ2012 and rose 0.1 percent in IIIQ2012 relative to IIIQ2011. Hourly compensation increased at the SAAE rate of 0.9 percent in IIIQ2012, which deflating by the estimated consumer price increase SAAE rate in IIIQ2012 results in decrease of real hourly compensation by 1.4 percent. Real hourly compensation increased 0.1 percent in IIIQ2012 relative to IIIQ2011.

Table VA-1, US, Nonfarm Business Sector Productivity and Costs %

	IIIQ 2012 SAAE	IIIQ 2012 YoY	IIQ 2012 SAAE	IIQ 2012 YoY	IQ 2012 SAAE	IQ 2012 YoY
Productivity	2.9	1.7	1.9	1.2	-0.5	1.0
Output	4.2	3.5	2.1	2.9	2.7	3.2
Hours	1.3	1.8	0.2	1.7	3.2	2.2
Hourly Comp.	0.9	1.8	1.3	1.6	5.8	1.2
Real Hourly Comp.	-1.4	0.1	0.6	-0.3	3.3	-1.6
Unit Labor Costs	-1.9	0.1	-0.5	0.4	6.4	0.2
Unit Nonlabor Payments	9.5	3.7	4.7	3.7	-4.0	4.7
Implicit Price Deflator	2.8	1.6	1.6	1.8	1.9	2.1

Notes: SAAE: seasonally adjusted annual equivalent; Comp.: compensation; YoY: Quarter on Same Quarter Year Earlier

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

In 2011, productivity increased 0.7 percent in the annual average, as shown in Table VA-2. Increases in productivity were revised to 3.1 percent in the 2010 annual average and 2.9 percent in the 2009 annual average. The contraction period and the recovery period have been characterized by savings of labor inputs. Real hourly compensation fell 0.5 percent in 2011, interrupting increases of 1.8 percent in 2009 and 0.4 percent in 2010. Unit labor costs fell 1.5 percent in 2009 and 1.0 percent in 2010 but increased 2.0 percent in 2011.

Table VA-2, US, Revised Nonfarm Business Sector Productivity and Costs Annual Average, ∆% Annual Average 

	2011 ∆%	2010 ∆%	2009 ∆%	2008  ∆%	2007 ∆%
Productivity	0.7	3.1	2.9	0.6	1.5
Real Hourly Compensation	-0.5	0.4	1.8	-0.4	1.1
Unit Labor Costs	2.0	-1.0	-1.5	2.8	2.4

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

Productivity jumped in the recovery after the recession from Mar IQ2001 to Nov IVQ2001 (http://www.nber.org/cycles.html). Table VA-3 provides quarter on quarter and annual percentage changes in nonfarm business output per hour, or productivity, from 1999 to 2012. The annual average jumped from 2.9 percent in 2001 to 4.6 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 8.8 percent in the first quarter after the recession in IQ2002. Productivity increases decline later in the expansion period. Productivity increases were mediocre during the recession from Dec IVQ2007 to Sep IIIQ2009 (http://www.nber.org/cycles.html) and increased during the first phase of expansion from IIQ2009 to IQ2010, trended lower and collapsed in 2011 and 2012.

Table VA-3, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2012

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	3.9	0.3	3.3	7.1	3.3
2000	-1.5	9.4	0.1	4.0	3.4
2001	-1.3	7.4	2.5	5.8	2.9
2002	8.8	0.5	3.8	-0.2	4.6
2003	3.7	5.5	9.5	1.5	3.7
2004	0.6	3.3	0.7	0.5	2.6
2005	4.2	-0.8	3.1	-0.2	1.6
2006	2.5	0.4	-2.2	2.7	0.9
2007	-0.2	3.4	4.8	1.9	1.5
2008	-2.6	2.4	-0.8	-3.4	0.6
2009	5.5	6.8	5.2	5.0	2.9
2010	2.7	-0.5	3.3	1.9	3.1
2011	-2.0	1.2	0.6	2.8	0.7
2012	-0.5	1.9	2.9

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

Chart VA-1 of the Bureau of Labor Statistics (BLS) provides SAAE rates of nonfarm business productivity from 1999 to 2012. There is a clear pattern in both episodes of economic cycles in 2001 and 2007 of rapid expansion of productivity in the transition from contraction to expansion followed by more subdued productivity expansion. Part of the explanation is the reduction in labor utilization resulting from adjustment of business to the sudden shock of collapse of revenue. Productivity rose briefly in the expansion after 2009 but then collapsed and moved to negative change with some positive changes recently at lower rates.

Chart VA-1, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2012

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

Percentage changes from prior quarter at SAAE rates and annual average percentage changes of nonfarm business unit labor costs are provided in Table VA-4. Unit labor costs fell during the contractions with continuing negative percentage changes in the early phases of the recovery. Weak labor markets partly explain the decline in unit labor costs. As the economy moves toward full employment, labor markets tighten with increase in unit labor costs. The expansion beginning in IIIQ2009 has been characterized by high unemployment and underemployment. Table VA-4 shows continuing subdued increases in unit labor costs in 2011 but with increase of 6.4 percent in IQ2012 followed by decrease of 0.5 percent in IIQ2012 and decline of 1.9 percent in IIIQ2012.

Table VA-4, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2012

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	3.0	0.5	0.1	1.6	0.9
2000	17.4	-7.4	8.6	-1.6	3.9
2001	10.9	-5.8	-1.1	-1.7	1.5
2002	-4.1	3.4	-1.6	2.2	-1.3
2003	2.8	1.4	-3.5	1.8	1.0
2004	-2.5	2.4	5.8	2.7	0.7
2005	-1.0	3.5	2.6	2.6	2.3
2006	2.9	1.3	3.6	6.8	2.8
2007	4.0	-1.8	-1.9	4.3	2.4
2008	8.7	-3.4	4.3	5.7	2.8
2009	-8.2	-0.2	-3.1	-3.9	-1.5
2010	-1.3	3.3	-1.4	-1.4	-1.0
2011	11.3	-1.3	-0.6	-3.3	2.0
2012	6.4	-0.5	-1.9

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

Chart VA-2 provides percentage changes quarter on quarter at SAAE rates of nonfarm business unit labor costs. With the exception of 3.3 percent in IIQ2010, a jump of 11.3 percent in IQ2011 and 6.4 percent in IQ2012, changes in nonfarm business unit labor costs have been negative.

Chart VA-2, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2012

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

Table VA-5 provides percentage change from prior quarter at annual rates for nonfarm business real hourly worker compensation. The expansion after the contraction of 2001 was followed by strong recovery of real hourly compensation. Real hourly compensation increased at the rate of 4.4 percent in IQ2011 but fell at annual rates of 4.4 percent in IIQ2011, 3.1 percent in IIIQ2011 and 1.9 percent in IVQ2011 but increased at 3.3 percent in IQ2012 and at 0.6 percent in IIQ2012, declining at 0.4 percent in IIIQ2012. In 2011, real hourly compensation fell 0.5 percent.

Table VA-5, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2012

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	5.4	-2.0	0.2	5.6	2.2
2000	11.4	-1.8	4.7	-0.4	4.0
2001	5.4	-1.5	0.2	4.5	1.6
2002	2.8	0.6	0.0	-0.6	1.5
2003	2.4	7.7	2.5	1.8	2.4
2004	-5.2	2.6	3.7	-1.1	0.6
2005	1.3	-0.1	-0.3	-1.3	0.6
2006	3.1	-1.8	-2.6	11.6	0.5
2007	-0.2	-3.0	0.3	1.3	1.1
2008	1.4	-6.1	-2.8	12.2	-0.4
2009	-0.7	4.7	-1.6	-2.1	1.8
2010	0.5	3.1	0.4	-2.4	0.4
2011	4.4	-4.4	-3.1	-1.9	-0.5
2012	3.3	0.6	-1.4

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

Chart VA-3 provides percentage change from prior quarter at annual rate of nonfarm business real hourly compensation from 1999 to 2012. There are significant fluctuations in quarterly percentage changes oscillating between positive and negative. There is no clear pattern in the two contractions in the 2000s.

Chart VA-3, US, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2012

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

Chart VA-4 provides percentage change of nonfarm business output per hour in a quarter relative to the same quarter a year earlier. As in most series of real output, productivity increased sharply in 2010 but the momentum was lost after 2011 as with the rest of the real economy.

Chart VA-4, US, Nonfarm Business Output per Hour, Percent Change from Same Quarter a Year Earlier 1999-2012

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

Chart VA-5 provides percentage changes of nonfarm business unit labor costs relative to the same quarter a year earlier. Softening of labor markets caused relatively high yearly percentage changes in the recession of 2001 repeated in the recession in 2009. Recovery was strong in 2010 but then weakened.

Chart VA-5, US, Nonfarm Business Unit Labor Costs, Percent Change from Same Quarter a Year Earlier 1999-2012

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

Chart VA-6 provides percentage changes in a quarter relative to the same quarter a year earlier for nonfarm business real hourly compensation. Labor compensation eroded sharply during the recession with brief recovery in 2010 and another fall until recently.

Chart VA-6, US, Nonfarm Business Real Hourly Compensation, Percent Change Same Quarter a Year Earlier 1999-2012

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

Rapid increase of US labor productivity in the 1990s is shown in Chart VA-7 with the index of nonfarm business labor productivity from 1947 to 2012. The rate of productivity increase continued in the early part of the 2000s but then softened and fell during the global recession.

Chart VA-7, US, Nonfarm Business Labor Productivity, Output per Hour, 1947-2012, Index 2005=100

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

Unit labor costs increased sharply during the Great Inflation from the late 1960s to 1981 as shown by sharper slope in Chart VA-8. Unit labor costs continued to increase but at a lower rate.

Chart VA-8, US, Nonfarm Business, Unit Labor Costs, 1947-2012, Index 2005=100

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

Real hourly compensation increased at relatively high rates after 1947 to the early 1970s but reached a plateau that lasted until the early 1990s, as shown in Chart VA-9. There were rapid increases until the global recession.

Chart VA-9, US, Nonfarm Business, Real Hourly Compensation, 1947-2012, Index 2005=100

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

Table VA-6 provides the quarterly services report of the US Bureau of the Census of the Department of Commerce. Data are adjusted for seasonality but not for price changes. Third quarter 2012 (IIIQ2012) growth of revenue was 0.3 for information services, minus 0.1 percent for professional, scientific and technical services, 2.5 percent for administrative services and support and 1.7 percent for hospitals. Growth of revenue in IIIQ2012 relative to IIIQ2011 was still high: 2.1 percent for information services, 6.0 percent for professional, scientific and technical services, 3.9 percent for administrative services and support and 7.4 percent for hospitals. Growth of revenue in IIQ2012 relative to IQ2012 was still high: 0.5 percent for information services, 1.3 percent for professional, scientific and technical services, 0.7 percent for administrative services and support and 0.7 percent for hospitals. There is again the difficulty in separating price and quantity changes.

Table VA-6, US, Selected Services, Estimates of Quarterly Revenue for Employer Firms, SA Millions of USD and ∆%

	INFO	PROF	ADMIN	HOSP
IIIQ2012	295,261	363,161	164,098	228,102
∆% IIIQ2012/ IIIQ2011	0.3	-0.1	2.5	1.7
∆% IIIQ2012/ IIQ2011	2.1	6.0	3.9	7.4
IIQ2012	294,363	363,586	160,067	224,243
∆% IIQ2012/ IQ2012	0.5	1.3	0.7	0.7
∆% IIQ2012/ IIQ2011	2.4	9.0	2.9	3.8
IQ2012	292,850	358,878	158,976	222,636
∆% IQ2012/ IVQ2011	0.8	2.7	1.7	1.1
IVQ2011	290,611	349,333	156,344	220,268
∆% IVQ2011/ IIIQ2011	0.5	2.0	-1.0	3.7
IIIQ2011	289,251	342,474	157,988	212,388
∆% IIIQ2011/ IIQ2011	0.6	2.6	1.6	-1.7
IIQ2011	287,475	333,686	155,556	216,115

Note: INFO: Information; PROF: Professional, Scientific and Technical Services; ADMIN: Administrative and Support and Waste Management and Remediation Services; HOSP: Hospitals

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

Chart VA-10 of the US Census Bureau of the Department of Commerce provides the quarterly service report SA from IIIQ2003 to IIIQ2012. Services revenue contracted during the recession from IVQ2007 (December) to IIQ2009 (June) (http://wwwdev.nber.org/cycles/cyclesmain.html) but there appears to be continuing growth especially for professional, scientific and technical services with steeper slope from IVQ2010 through IIIQ2012.

Chart VA-10, US, Quarterly Revenue for Selected Services, SA $ Billions

Source: US Census Bureau

http://www2.census.gov/services/qss/qss.gif

Total revenues of information services not seasonally adjusted in millions of current dollars are shown in Table VA-7 from IVQ2003, when they become available, to IIIQ2012. The row below current values provides percentage change in the quarter from the quarter a year earlier. Growth rates were robust before the global recession in the range from 3.9 percent in IVQ2005 to 5.5 percent in IQ2005. Percentage changes were negative in all quarters in 2008 with the largest losses in the first three quarters. Growth was milder in the expansion phase than before the global recession. As with most indicators of the US, growth was robust in the final three quarters of 2010 and initial quarters of 2011. Growth rates fell with the lowest of 2.0 percent in IIIQ2012 relative to IIIQ2011.

Table VA-7, US, Information Services Revenue Not Seasonally Adjusted, Millions of Dollars, 2003-2012

Year	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2003	NA	NA	NA	237,312
2004	223,586	233,202	232,990	246,321
2005	235,968	244,096	244,776	255,896
∆%	5.5	4.7	5.1	3.9
2006	245,165	254,695	255,763	271,440
∆%	4.0	4.3	4.5	6.1
2007	258,050	265,760	267,333	281,198
∆%	5.3	4.3	4.5	3.6
2008	270,308	277,714	277,654	282,673
∆%	4.8	4.5	3.9	0.5
2009	261,828	266,885	265,504	280,742
∆%	-3.1	-3.9	-4.4	-0.7
2010	267,820	275,092	276,004	291,309
∆%	2.3	3.1	3.9	3.8
2011	276,123	286,900	285,780	300,782
∆%	3.1	4.3	3.5	3.3
2012	286,700	294,069	291,423	NA
∆%	3.8	2.5	2.0

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

Chart VA-11 provides total revenue of information services not seasonally adjusted from IVQ2013 to IIIQ2012 in current millions of dollars not seasonally adjusted. Oscillating growth was strong before the drop of the global recession. Growth has been moderate in more recent quarters.

Chart VA-11, Quarterly Revenue for Information Services Not Seasonally Adjusted, Millions of Dollars 2003-2012

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

A similar pattern is provided by Chart VA-12 with quarterly total revenue of information services in current millions of dollars adjusted for seasonality. There is the same hump of the global recession followed by resumption of growth.

Chart VA-12, Quarterly Revenue for Information Services Seasonally Adjusted, Millions of Dollars 2003-2012

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

Table VA-8 provides total revenue of financial services and insurance in current million dollars not seasonally adjusted from IIIQ2009, when data first become available, to IIIQ2012. The row below values provides percentage changes in a quarter relative to the same quarter a year earlier. Percentage changes were negative until 2012 with 3.7 percent in IQ2012, 2.1 percent in IIQ2012 and 6.5 percent in IIIQ2012.

Table VA-8, US, Financial Services and Insurance Total Revenue Not Seasonally Adjusted, Millions of Dollars, 2003-2012

Year	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2009	NA	NA	849,290	847,843
2010	835,813	836,665	835,981	836,909
∆%	NA	NA	-1.6	-1.3
2011	834,709	833,788	820,745	828,759
∆%	-0.1	-0.3	-1.8	-1.0
2012	865,622	851,610	874,063	NA
∆%	3.7	2.1	6.5

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

Chart VA-9 provides total quarterly revenue of financial services and insurance from IIIQ2009, when data first become available, to IIIQ2012. Total revenue of financial services and insurance contracted 2.3 percent between IVQ2009 and IVQ2011 and grew 5.5 percent between IVQ2011 and IIIQ2012.

Chart VA-9, Total Quarterly Revenue for Financial Services and Insurance Not Seasonally Adjusted, Millions of Dollars 2003-2012

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

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-9 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Jan-Nov 2012, light vehicle sales accumulated to 13,135,576, which is higher by 13.9 percent relative to 11,534,206 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally-adjusted annual rate of light vehicle sales in the US reached 15.54 million in Nov 2012, higher than 14.29 million in Oct 2012 and higher than 13.55 million in Nov 2011 (http://motorintelligence.com/m_frameset.html).

Table VA-9, US, New Motor Vehicle Sales and Car Production, Thousand Units

	New Motor Vehicle Sales	New Car Sales and Leases	New Truck Sales and Leases	Domestic Car Production
1990	14,137	9,300	4,837	6,231
1991	12,725	8,589	4,136	5,454
1992	13,093	8,215	4,878	5,979
1993	14,172	8,518	5,654	5,979
1994	15,397	8,990	6,407	6,614
1995	15,106	8,536	6,470	6,340
1996	15,449	8,527	6,922	6,081
1997	15,490	8,273	7,218	5,934
1998	15,958	8,142	7,816	5,554
1999	17,401	8,697	8,704	5,638
2000	17,806	8,852	8,954	5,542
2001	17,468	8,422	9,046	4,878
2002	17,144	8,109	9,036	5,019
2003	16,968	7,611	9,357	4,510
2004	17,298	7,545	9,753	4,230
2005	17,445	7,720	9,725	4,321
2006	17,049	7,821	9,228	4,367
2007	16,460	7,618	8,683	3,924
2008	13,494	6,814	6.680	3,777
2009	10,601	5,456	5,154	2,247
2010	11,772	5,729	6,044	2,840

Source: US Census Bureau http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart VA-10, US, Motor Vehicles and Parts Output, 1972-2012

Source: Board of Governors of the Federal Reserve System http://www.federalreserve.gov/releases/G17/Current/default.htm

Manufacturers’ shipments increased 0.4 percent in Oct 2012 after increasing 0.7 percent in Sep 2012 and decreasing 0.2 percent in Aug 2012. New orders increased 0.8 percent in Oct following increase by 4.5 percent in Sep and decrease of 5.1 percent in Aug, as shown in Table VA-10. These data are very volatile. Volatility is illustrated by increase of 2642.2 percent of new orders of nondefense aircraft in Sep 2012 following decline by 97.2 percent in Aug. New orders excluding transportation equipment increased 1.3 percent in Oct. Capital goods new orders, indicating investment, increased 0.8 in Oct after increasing 24.2 percent in Sep but decreasing 25.8 percent in Aug. New orders of nondefense capital goods increased 1.8 percent in Oct after increasing 22.8 percent in Sep but falling 23.9 percent in Aug. Excluding more volatile aircraft, capital goods orders increased 2.9 percent in Oct.

Table VA-10, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Oct 2012  ∆%	Sep 2012  ∆%	Aug 2012 ∆%
Total
S	0.4	0.7	-0.2
NO	0.8	4.5	-5.1
Excluding Transport
S	0.6	0.7	1.1
NO	1.3	1.2	0.7
Excluding Defense
S	0.4	0.7	-0.3
NO	0.8	4.1	-4.5
Durable Goods
S	-0.4	0.5	-2.9
NO	0.5	9.1	-13.1
Machinery
S	0.6	-0.8	-1.1
NO	4.6	7.8	-6.1
Computers & Electronic Products
S	-0.4	2.3	-3.5
NO	0.5	-0.5	-4.0
Computers
S	-19.1	15.1	-0.6
NO	-19.4	11.5	15.0
Transport Equipment
S	-1.0	0.8	-8.0
NO	-2.3	29.7	-33.7
Automobiles
S	0.7	3.3	-2.8
Motor Vehicles
S	2.1	-0.9	-15.8
NO	3.0	-2.4	-15.7
Nondefense Aircraft
S	-0.6	13.6	-5.9
NO	-5.6	2642.2	-97.2
Capital Goods
S	-0.5	1.8	-1.8
NO	0.8	24.2	-25.8
Nondefense Capital Goods
S	-0.3	1.4	-1.8
NO	1.8	22.8	-23.9
Capital Goods ex Aircraft
S	-0.1	-0.3	-1.1
NO	2.9	-0.5	0.3
Nondurable Goods
S	1.1	0.9	2.2
NO	1.1	0.9	2.2

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

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

Chart VA-11 of the US Census Bureau shows monthly changes in manufacturers’ new orders in the past 12 months. Trends are difficult to discern for these data because of the significant volatility.

Chart VA-11, US, Manufacturers’ New Orders 2010-2011 Seasonally Adjusted, Month ∆%

Source: US Census Bureau

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

Chart VA-12 of the US Bureau of the Census provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2012. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments are found in earlier periods followed with continuing growth interrupted by the 5.1 percent drop in Aug but recovery of 4.5 percent in Sep and 0.8 percent in Oct.

Chart VA-12, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2012

Source: US Census Bureau

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

Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-11. Values are cumulative millions of dollars in Jan-Oct 2012 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Oct 2012 total $4792.7 billion and new orders total $4723.7 billion, growing respectively by 4.6 percent and 3.5 percent relative to the same period in 2011. Excluding transportation equipment, shipments grew 3.6 percent and new orders increased 2.5 percent. Excluding defense, shipments grew 3.7 percent and new orders grew 2.6 percent. Durable goods shipments reached $2248.2 billion in Jan-Oct 2012, or 46.9 percent of the total, growing by 7.4 percent, and new orders $2179.2 billion, or 46.1 percent of the total, growing by 4.9 percent. Important information in Table VA-9 is the large share of nondurable goods: with shipments of $2544.6 billion or 53.1 percent of the total, growing by 2.3 percent. Capital goods have relatively high value of $778.6 billion for shipments, growing 5.7 percent, and new orders $789.8 billion, growing 0.8 percent, which could be an indicator of future investment. Excluding aircraft, capital goods shipments reached $634.8 billion, growing 5.3 percent, and new orders $633.1 billion, growing 0.1 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 11.2 percent of US national income in IIQ2012.

Table VA-11, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars 

Jan-Oct 2012	Shipments	∆% 2012/ 2011	New Orders	∆% 2012/ 2011
Total	4,792,731	4.6	4,723,719	3.5
Excluding Transport	4,153,152	3.7	4,074,710	2.6
Excluding Defense	4,686,080	4.9	4,620,064	3.9
Durable Goods	2,248,180	7.4	2,179,168	4.9
Machinery	323,612	9.4	313,933	-3.2
Computers & Electronic Products	281,453	-0.5	213,992	-0.3
Computers	11,360	-26.6	11,411	-25.7
Transport Equipment	639,579	11.0	649,009	9.6
Automobiles	88,269	24.6
Motor Vehicles	189,762	5.1	188,051	4.5
Nondefense Aircraft	93,068	21.6	110,843	21.5
Capital Goods	778,630	5.7	789,819	0.8
Nondefense Capital Goods	695,996	7.5	710,410	3.1
Capital Goods ex Aircraft	634,796	5.3	633,129	0.1
Nondurable Goods	2,544,551	2.3	2,544,551	2.3
Food Products	604,125	2.7
Petroleum Refineries	689,690	5.3
Chemical Products	635,467	-1.3

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

Chart VA-13 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Sep 2012. Fluctuations are evident, which are smoothed by seasonal adjustment in the earlier Chart VA-25. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend, flattening recently.

Chart VA-13, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2012

Source: US Census Bureau

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

Construction spending at seasonally-adjusted annualized rate (SAAR) reached $872.1 billion in Oct, which was higher by 1.4 percent than in the prior month of Sep, as shown in Table VA-12. Residential investment, with $300.8 billion accounting for 34.5 percent of total value of construction, increased 3.0 percent in Oct and nonresidential investment, with $571.3 billion accounting for 65.5 percent of the total, increased 0.5. Public construction increased 0.8 percent while private construction increased 1.6 percent. Data in Table VA-12 show that nonresidential construction at $571.3 billion is much higher in value than residential construction at $300.8 billion while total private construction at $592.1 billion is much higher than public construction at $280.1 billion, all in SAAR. Residential and nonresidential construction contributed positively to growth of GDP in the US in IQ2012 and IIQ2012 but nonresidential investment deducted from GDP growth in IIIQ2012 (http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html).

Table VA-12, US, Value of Construction Put in Place in the United States Seasonally Adjusted Annual Rate Billion Dollars and Month and 12-Month ∆%  

	Oct 2012   SAAR               $ Millions	Month ∆%	12-Month ∆%
Total	872,142	1.4	9.6
Residential	300,826	3.0	19.4
Nonresidential	571,316	0.5	5.1
Total Private	592,091	1.6	15.5
Private Residential	294,237	3.0	20.8
New Single Family	141,284	3.6	29.0
New Multi-Family	23,825	6.2	53.2
Private Nonresidential	297,853	0.3	10.7
Total Public	280,051	0.8	-1.0
Public Residential	6,589	1.9	-20.9
Public Nonresidential	273,462	0.8	-0.4

SAAR: seasonally adjusted annual rate; B: billions

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Further information on construction spending is provided in Table VA-13. The original monthly estimates not-seasonally adjusted (NSA) and their 12-month rates of change are provided in the first two columns while the SAAR and their monthly changes are provided in the final two columns. There has been improvement in construction in the US in 2011 but another bump in early 2012. On a monthly basis, construction fell three consecutive months from Dec 2010 to Feb 2011, increasing in ten of the eleven months from Mar 2011 to Jan 2012, with sole decline of 3.0 percent in Jul 2011. Improvement was interrupted in 2012 with decline of 0.5 percent in Feb 2012, further decline of 0.3 percent in Mar and recovery of 0.9 percent in Apr, 1.7 percent in May and 0.8 percent in Jun with strong 1.1 percent in Aug and 1.4 percent in Oct 2012. The 12 months rates of change improved from minus 8.6 percent in Apr 2011 to the first positive 12-month percentage change of 0.7 percent in Nov and further improvement with 10.8 percent in Oct 2012.

Table VA-13, US, Value and Percentage Change in Value of Construction Put in Place, Dollars Millions and ∆%

	Value NSA Month $ Millions	12-Month ∆% NSA	Value SAAR $ Millions	Month ∆% SA*
Oct 2012	81,195	10.8	872,142	1.4
Sep	78,782	7.2	860,399	0.5
Aug	81,457	8.5	855,916	1.1
Jul	78,070	11.6	846,645	0.2
Jun	76,491	7.3	845,072	0.8
May	71,635	8.8	838,778	1.7
Apr	66,201	9.1	825,133	0.9
Mar	60,939	8.6	817,842	-0.3
Feb	56,108	11.8	820,677	-0.5
Jan	56,535	10.9	824,687	0.5
Dec 2011	62,825	4.4	820,614	2.1
Nov	68,476	0.7	804,046	1.0
Oct	73,282	-0.3	795,733	0.7
Sep	73,515	-1.7	790,294	0.5
Aug	75,101	-1.0	786,308	3.0
Jul	69,929	-4.3	763,468	-3.0
Jun	71,297	-3.7	786,784	1.4
May	65,845	-4.4	775,837	2.7
Apr	60,682	-8.6	755,420	0.3
Mar	56,130	-6.8	753,433	1.0
Feb	50,184	-7.1	746,056	-0.9
Jan	50,971	-8.3	752,638	-3.5
Dec 2010	60,202	-6.1	779,895	-2.3

SAAR: Seasonally-adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The sharp contraction of the value of construction in the US is revealed by Table VA-14. Construction spending in Jan-Oct 2012, not seasonally adjusted, reached $707.4 billion, which is higher by 9.3 percent than $646.9 billion in the same period in 2011. The depth of the contraction is shown by the decline of construction spending from $1,005.3 billion in Jan-Oct 2006 to only $707.4 billion in the same period in 2012, or decline by minus 29.6 percent. The comparable decline from Jan-Oct 2005 to Jan-Oct 2012 is minus 25.7 percent. Construction spending in Jan-Oct 2012 fell by 7.4 percent relative to the same period in 2003. Construction spending is lower by 8.2 percent in Jan-Oct 2012 relative to the same period in 2009. Construction has been weaker than the economy as a whole.

Table VA-14, US, Value of Construction Put in Place in the United States, Not Seasonally Adjusted, $ Millions and ∆%

Jan-Oct 2012 $ MM	707,415
Jan-Oct 2011 $ MM	646,936
∆% to 2012	9.3
Jan-Oct 2010 $ MM	675,392
∆% to 2012	4.7
Jan-Oct 2009 $MM	770,617
∆% to 2012	-8.2
Jan-Oct 2006 $ MM	1,005,319
∆% to 2012	-29.6
Jan-Oct 2005 $ MM	952,493
∆% to 2012	-25.7
Jan-Oct 2003 $ MM	763,646
∆% to 2012	-7.4

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-14 of the US Census Bureau provides value of construction spending in the US not seasonally adjusted from Jan 2002 to Sep 2012. There are wide oscillations requiring seasonal adjustment to compare adjacent data. There was sharp decline during the global recession followed in recent periods by a stationary series that may be moving upward again

Chart VA-14, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2012

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Monthly construction spending in the US in the seven months Apr-Sep not seasonally adjusted is shown in Table VA-14 for the years between 2002 and 2012. The values of $81.2 billion in Oct 2012, $73.3 billion in Oct 2011 and $73.5 billion in Oct 2010 are lower than $83.1 billion in Oct 2003 and also lower than $75.7 billion in Oct 2002 with only marginally higher value for Oct 2012. Construction fell by 21.8 percent from the peak of $103.8 billion Oct 2007 to $81.2 billion in Oct 2012. The data are not adjusted for inflation or changes in quality.

Table VA-14, US, Value of Construction Spending Not Seasonally Adjusted, Millions of Dollars

Year	May	Jun	Jul	Aug	Sep	Oct
2002	73,384	77,182	78,863	79,460	76,542	75,710
2003	74,473	80,377	82,971	85,191	83,841	83,133
2004	83,736	89,932	93,614	96,164	92,538	90,582
2005	92,959	99,632	103,158	106,706	103,269	102,339
2006	102,495	107,607	108,423	110,434	104,191	101,582
2007	100,534	105,399	107,090	110,430	105,150	103,847
2008	92,781	96,338	98,483	99,786	96,755	95,612
2009	76,808	81,429	83,379	84,368	81,213	79,949
2010	68,906	74,035	73,077	75,834	74,764	73,470
2011	65,845	71,297	69,929	75,101	73,515	73,282
2012	71,635	76,491	78,070	81,457	78,782	81,195

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-15 of the US Census Bureau shows SAARs of construction spending for the US since 1993. Construction spending surged in nearly vertical slope after the stimulus of 2003 combining near zero interest rates and subsequent slow adjustment in 17 doses of increases by 25 basis points between Jun 2004 and Jun 2006 together with other housing subsidies. Construction spending collapsed after subprime mortgages defaulted with the fed funds rate increasing from 1.00 percent in Jun 2004 to 5.25 percent in Jun 2006. Subprime mortgages were programmed for refinancing in two years after increases in homeowner equity in the assumption that fed funds rates would remain low forever or increase in small increments (Gorton 2009EFM see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Price declines of houses or even uncertainty prevented refinancing of subprime mortgages that defaulted, causing the financial crisis that eventually triggered the global recession. Chart VA-15 shows a trend of increase in the final segment but it is difficult to assess if it will be sustained.

Chart VA-15, US, Construction Expenditures SAAR 1993-2012

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr050.html

Construction spending at SAARs in the four months Jun to Sep is shown in Table VA-15 for the years between 2002 and 2012. There is a peak in 2006 to 2007 with subsequent collapse of SAARs and rebound in 2012.

Table VA-15, US, Value of Construction Spending SAAR Millions of Dollars

Year	Jul	Aug	Sep	Oct
2002	847,129	839,008	832,134	839,690
2003	891,264	901,839	911,589	925,732
2004	1,006,119	1,013,724	1,012,290	1,015,562
2005	1,109,691	1,119,782	1,131,739	1,145,663
2006	1,165,093	1,158,193	1,151,104	1,139,292
2007	1,154,018	1,160,593	1,165,162	1,152,511
2008	1,066,919	1,057,459	1,056,666	1,050,690
2009	899,601	889,643	880,259	869,374
2010	788,524	791,653	798,916	800,266
2011	763,468	786,308	790,294	795,733
2012	846,645	855,916	860,399	872,142

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-16 of the US Census Bureau provides SAARs of value of construction from Jan 2002 to Oct 2012. There is clear acceleration after 2003 when fed funds rates were fixed in at 1.0 percent in Jun 2003 until Jun 2004. Construction peaked in 2005-2006, stabilizing in 2007 at a lower level and then collapsed in a nearly vertical drop until 2011 with increases into 2012.

Chart VA-16, US, Construction Expenditures SAAR 2002-2012

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Annual available data for the value of construction put in place in the US between 1993 and 2011 are provided in Table VA-16. Data from 1993 to 2001 are available for public and private construction with breakdown in residential and nonresidential only for private construction. Data beginning in 2002 provide aggregate residential and nonresidential values. Total construction value put in place in the US increased 60.3 percent between 1993 and 2011 but most of the growth, 65.3 percent, was concentrated in 1993 to 2000 with decline of 3.1 percent between 2000 and 2011. Total value of construction fell 8.2 percent between 2002 and 2011 with value of nonresidential construction increasing 19.4 percent while value of residential construction fell 38.9 percent. Value of total construction fell 31.7 percent between 2005 and 2011, with value of residential construction declining 60.2 percent while value of nonresidential construction rose 9.4 percent. Value of total construction fell 33.3 percent between 2006 and 2011, with value of nonresidential construction decreasing 2.7 percent while value of residential construction fell 60.4 percent. In 2002, nonresidential construction had a share of 52.6 percent in total construction while the share of residential construction was 47.4 percent. In 2011, the share of nonresidential construction in total value rose to 68.4 percent while that of residential construction fell to 31.6 percent.

Table VA-16, Annual Value of Construction Put in Place 1993-2011, Millions of Dollars and ∆% 

	Total	Private Nonresidential	Private Residential
1993	485,548	150,006	208,180
1994	531,892	160,438	241,033
1995	548,666	180,534	228,121
1996	599,693	195,523	257,495
1997	631,853	213,720	264,696
1998	688,515	237,394	296,343
1999	744,551	249,167	326,302
2000	802,756	275,293	346,138
2001	840,249	273,922	364,414
	Total	Total Nonresidential	Total Private Residential
2002	847,874	445,914	401,960
2003	891,497	440,246	451,251
2004	991,356	452,948	538,408
2005	1,140,136	486,629	617,507
2006	1,167,222	547,408	619,814
2007	1,152,351	651,883	500,468
2008	1,067,564	709,818	357,746
2009	903,201	649,273	253,928
2010	804,561	555,449	249,112
2011	778,238	532,552	245,686
∆% 1993-2011	60.3
∆% 1993-2000	65.3
∆% 2000-2011	-3.1
∆% 2002-2011	-8.2	19.4	-38.9
∆% 2005-2011	-31.7	9.4	-60.2
∆% 2006-2011	-33.3	-2.7	-60.4

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-17 shows sharp growth of residential construction spending in the US from 2002 to 2012. The value of construction spending dropped sharply during the global recession and has remained at a low plateau with an apparent increase in the final segment.

Chart, VA-17, US, Residential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2012

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Nonresidential construction has been more resilient. Chart VA-18 provides the value of nonresidential construction not seasonally adjusted. There was more moderate growth of nonresidential construction with more prudent business management and fewer subsidies. Nonresidential construction also declined during the global recession but less sharply than residential construction and has remained at a lower plateau.

Chart, VA-18, US, Nonresidential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2012

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-15. 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 Oct 2012, revolving credit was $858 billion, or 31.2 percent of total consumer credit of $2754 billion, and non-revolving credit was $1896 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 rebounded in Aug 2012 with increase of total consumer credit at 8.4 percent, revolving credit at 7.1 percent and non-revolving credit at 9.0 percent. In Sep 2012, total consumer credit grew at 5.4 percent with decline of revolving credit at 3.1 percent and increase of non-revolving credit at 9.2 percent. Consumer credit rebounded in Oct 2012 with total credit growing at 6.2 percent, revolving credit at 4.7 percent and non-revolving credit at 6.9 percent.

Table VA-15, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2012
Oct	6.2	4.7	6.9	2754	858	1896
Sep	5.4	-3.1	9.2	2739	854	1885
Aug	8.4	7.1	9.0	2727	856	1871
IIIQ	4.3	-0.6	6.6	2739	854	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-19 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-19, US, Total Consumer Credit Owned and Securitized SA and Financing Rate on Consumer Installment Loans at Commercial Banks NSA, Millions of Dollars and Percent, Jan 1972-Aug 2012

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

Chart VA-20 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-20, 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-Aug 2012

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

B 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 marginal rate with the Markit Composite Output PMI^™ Index increasing from 48.9 in Oct to 49.9 in Nov, which is nearly equal 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10394). Paul Smith, economist at Markit and author of the report, finds that growth in services could raise hopes for avoiding contraction in IVQ2012 but that activity in services originated mostly in clearing existing contracts, raising doubts on sustained recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10394). The Markit Business Activity Index of Services increased from 50.0 in Oct to 51.4 in Nov, the first increase in services activity in seven months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10394). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 46.9 in Oct to 46.5 in Nov for the lowest reading in 19 months and the six consecutive month of contraction below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10339). Foreign orders fell for the eighth consecutive month at a faster rate. 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 in Nov that could affect GDP with weak internal and external demand, particularly in foreign markets (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10339 ).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	Oct ∆% minus 0.3 12 months ∆% minus 1.0 Blog 11/18/12
Consumer Price Index	Oct NSA ∆% 0.0; Oct 12 months NSA ∆% -0.4 Blog 12/2/12
Real GDP Growth	IIIQ2012 ∆%: minus 0.9 on IIQ2012;  IIIQ2012 SAAR minus 3.5; ∆% from quarter a year earlier: 0.1 % Blog 11/18/12
Employment Report	Oct Unemployed 2.71 million Change in unemployed since last year: minus 180 thousand Unemployment rate: 4.2% Blog 12/2/12
All Industry Indices	Sep month SA ∆% -0.3 12-month NSA ∆% -1.1 Blog 11/25/12
Industrial Production	Oct SA month ∆%: 1.8 12-month NSA ∆% -4.3 Blog 12/2/12
Machine Orders	Total Sep ∆% 9.6 Private ∆%: 15.4 Sep ∆% Excluding Volatile Orders -4.3 Blog 11/11/12
Tertiary Index	Sep month SA ∆% 0.3 Sep 12 months NSA ∆% 0.2 Blog 11/18/12
Wholesale and Retail Sales	Oct 12 months: Total ∆%: -1.7 Wholesale ∆%: -1.8 Retail ∆%: -1.2 Blog 12/2/12
Family Income and Expenditure Survey	Oct 12-month ∆% total nominal consumption -0.5, real -0.1 Blog 12/2/12
Trade Balance	Exports Oct 12 months ∆%: minus 6.5 Imports Oct 12 months ∆% minus 1.6 Blog 11/25/12

Links to blog comments in Table JPY:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/25/12 http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html

8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.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 No 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 55.5 in Oct and 55.6 in Nov 2012.

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

2012	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Nov 2011 to Nov 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 and 55.6 in Nov 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 and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct and 50.6 in Nov. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul and 48.7 in Aug, climbing above 50.0 to 51.2 in Nov 2012. The index of employment also fell from 51.0 in Apr to 49.1 in Aug and further down to 48.7 in Nov 2012.

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

2012	IPM	PI	NOI	INV	EMP	SDEL
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers from Nov 2011 to Nov 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 and 50.6 in Nov 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/

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/

Table VD-GDPb provides growth of GDP in China relative to a year earlier and relative to prior quarter. Growth of GDP relative to a year earlier decelerated from 12.1 percent in IQ2010 to 7.4 percent in IIIQ2012. Growth of secondary industry decelerated from 14.5 percent in IQ2010 to 7.9 percent in IIIQ2012.

Table VC-GDPb, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ     2012	IIQ 2012	IIIQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9
GDP ∆% Relative to a Prior Quarter	2.2	2.3	2.4	1.9	1.8	1.8	2.2
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

Source: National Bureau of Statistics of China

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10326) is improving. The overall Flash China Manufacturing PMI^™ increased marginally from 49.5 in Oct to 50.4 in Nov for a thirteen-month high high while the Flash China Manufacturing Output Index increased from 48.2 in Oct to 51.3 in Nov, both expansion territory above 50.0. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the movement of the HSBC into expansion territory for the first time in 12 months verifies improving recovery but stimulus policies should continue because of the fragility of world economic growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10326).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 50.5 in Oct to 51.6 in Nov for the third consecutive month of increasing output at the fastest rate since Jul 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10434). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds marginal improvement in business conditions in China but that services entities increased employment and feel more optimistic about the economy in the next year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10434). The HSBC Business Activity index decreased from 53.5 in Oct to 52.1 in Nov with continuing growth in services at a slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10434). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that services activity will benefit from growth in manufacturing promoted by higher internal demand resulting from easier policies (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10434). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 50.5 in Nov from 49.5 in Oct, indicating moderate activity and the first monthly improvement of the index in 13 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10391). New exports orders registered the first increase since Apr 2012 at marked rate, with strength in foreign demand from Europe and the US. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds gradual improvement of the economy of China consistent with probable growth of GDP at 8 percent in IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10391).

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	Oct month ∆%: 0.81 Jan-Oct 2012/Jan-Oct 2011 ∆%: 10.0 Blog 11/18/12
GDP Growth Rate	Year IIIQ2012 ∆%: 7.4 Quarter IIQ2012 ∆%: 2.2 Blog 10/21/12
Investment in Fixed Assets	Oct month ∆%: 1.94 Total Jan-Oct 2012 ∆%: 20.7 Real estate development: 15.4 Blog 11/18/12
Retail Sales	Oct month ∆%: 1.34 Oct 12 month ∆%: 14.5 Jan-Oct ∆%: 14.1 Blog 11/18/12
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:

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html

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

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.4 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.4 percent in 2012 and 0.1 percent in 2013 but 1.4 percent in 2014.

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	10.2	1.4
2012*			-0.4
2013*			0.1
2014*			1.4

*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, increased from 45.7 in Oct to 45.8 in Nov, for ten consecutive declines and fourteen drops in fifteen months, with Oct registering the lowest reading since IIQ2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10329). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with significant worsening of economic activity with GDP declining even by 0.5 percent in IVQ2012 compared with contraction of 0.1 percent in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10329). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 45.7 in Oct to 46.5 in Nov, which is the tenth consecutive contraction; contraction spread in manufacturing and services throughout the four largest economies of Germany, France, Italy and Spain with weak demand from internal and export markets affecting both manufacturing and services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10404). Chris Williamson, Chief Economist at Markit, finds that the data are consistent with likely decline of GDP at a rate higher than 0.1 percent in IIIQ2012 but at a lower rate of contraction at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10404). The Markit Eurozone Services Business Activity Index increased from 46.0 in Oct, which was a low in 39 months since Jul 2009, to 46.7 in Nov but with contraction in 14 of the past 15 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10404). The Markit Eurozone Manufacturing PMI^® increased to 46.2 in Nov from 45.4 in Oct, which is the highest reading in eight months in sixteen consecutive months of deterioration of manufacturing business in the euro zone (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10365). New export orders declined in Nov for the seventeenth consecutive month with contracting demand within the euro area and deteriorating global markets. Chris Williamson, Chief Economist at Markit, finds that manufacturing output declined at the lowest rate in eight months, suggesting that recession in the euro area may have continued into a third consecutive quarter (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10365). Table EUR provides the regional data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2012 ∆% -0.1; IIIQ2012/IIIQ2011 ∆% -0.6 Blog 12/9/12
Unemployment	Oct 2012: 11.7% unemployment rate Oct 2012: 18.703 million unemployed Blog 12/2/12
HICP	Oct month ∆%: 0.2 12 months Oct ∆%: 2.5 Blog 11/18/12
Producer Prices	Euro Zone industrial producer prices Oct ∆%: 0.1 Oct 12-month ∆%: 2.6 Blog 12/9/12
Industrial Production	Sep month ∆%: -2.5; Sep 12 months ∆%: -2.3 Blog 11/18/12
Retail Sales	Oct month ∆%: minus 1.2 Oct 12 months ∆%: minus 1.6 Blog 12/9/12
Confidence and Economic Sentiment Indicator	Sentiment 85.7 Nov 2012 Consumer minus 26.9 Nov 2012 Blog 12/2/12
Trade	Jan-Sep 2012/Jan-Sep 2011 Exports ∆%: 8.0 Imports ∆%: 1.8 Sep 2012 12-month Exports ∆% 1.4 Imports ∆% -4.1 Blog 11/18/12

Links to blog comments in Table EUR:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

Table VD-1 provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 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 0.4 percent in 2012, 0.1 percent in 2013 and 1.4 percent in 2014.

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

Year	∆%
2014 EUROSTAT Forecast	1.4
2013 EUROSTAT Forecast	0.1
2012 EUROSTAT Forecast	-0.4
2011	1.4
2010	2.0
2009	-4.4
2008	0.4
2007	3.0
2006	3.2
2005	1.7
2004	2.2
2003	0.7
2002	0.9
2001	2.0
2000	3.8
1999	2.9
1998	2.8
1997	2.6
1996	1.5

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

Table VD-2 provides percentage changes of euro area real GDP in a quarter relative to the prior quarter. Real GDP fell 0.4 percent in IVQ2011, remained unchanged in IQ2012 and fell 0.2 percent in IIQ2012. GDP fell 0.1 percent in IIIQ2012. The global recession manifested in the euro area in five consecutive quarterly declines from IIQ2008 to IIQ2009. The strongest impact was contraction of 2.8 percent in IQ2009. Recovery began in IIIQ2009 with cumulative growth of 3.7 percent to IQ2011 or at the annual equivalent rate of 2.1 percent. Growth was much more vigorous from IVQ2003 to IQ2008.

Table VD-2, Euro Area, Real GDP, Percentage Change from Prior Quarter, Calendar and Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2012	0.0	-0.2	-0.1
2011	0.6	0.2	0.1	-0.4
2010	0.5	1.0	0.4	0.3
2009	-2.8	-0.3	0.4	0.4
2008	0.5	-0.4	-0.6	-1.7
2007	0.8	0.4	0.6	0.4
2006	0.9	1.1	0.7	1.0
2005	0.2	0.7	0.6	0.6
2004	0.5	0.5	0.4	0.3
2003	0.0	0.1	0.5	0.7
2002	0.2	0.6	0.3	0.0
2001	0.9	0.1	0.1	0.2
2000	1.3	0.9	0.4	0.6

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

Table VD-3 provides percentage change in real GDP in the euro area in a quarter relative to the same quarter a year earlier. Growth rates were quite strong from 2004 to 2007. There were five consecutive quarters of sharp declines in GDP in a quarter relative to the same quarter a year earlier from IVQ2008 to IVQ2009 with sharp contractions of 5.4 percent in IQ2009, 5.3 percent in IIQ2009 and 4.4 percent in IIIQ2009. Growth rates decline in magnitude with 1.3 percent in IIIQ2011 and 0.6 percent in IVQ211 with contractions of 0.1 percent in IQ2012, 0.5 percent in IIQ2012 and 0.6 percent in IIIQ2012.

Table VD-3, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a Year Earlier, Calendar and Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2012	-0.1	-0.5	-0.6
2011	2.4	1.6	1.3	0.6
2010	1.0	2.3	2.3	2.2
2009	-5.4	-5.3	-4.4	-2.3
2008	2.0	1.2	0.0	-2.1
2007	3.7	3.0	3.0	2.3
2006	3.3	3.4	3.8	3.7
2005	1.7	1.9	2.2	3.0
2004	2.2	2.2	1.8	1.5
2003	0.9	0.4	0.5	1.2
2002	0.5	1.0	1.2	1.1
2001	2.9	2.1	1.7	1.2
2000	4.3	4.4	3.8	3.3

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

Table VD-4 provides GDP growth in IIIQ2012 and relative to the same quarter a year earlier for the euro zone, European Union, Japan and the US. The GDP of the euro zone fell 0.1 percent in IIIQ2012 and declined 0.6 percent relative to a year earlier while the GDP of the European Union increased 0.1 percent in IIIQ2012 and decreased 0.4 percent relative to a year earlier. Growth in IIIQ2012 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (Section I and earlier http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html) and motivate hiring (http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html)

Table VD-4, Euro Zone, European Union, Japan and USA, Real GDP Growth

	∆% IIIQ2012/ IIQ2012	∆% IIIQ2012/ IIIQ2011
Euro Zone	-0.1	-0.6
European Union	0.1	-0.4
Germany	0.2	0.9
France	0.2	0.1
Netherlands	-1.1	-1.4
Finland	-0.1	-1.1
Belgium	0.0	-0.3
Portugal	-0.8	-3.4
Ireland*	0.0	-0.5
Italy	-0.2	-2.4
Greece	NA	-7.2
Spain	-0.3	-1.6
United Kingdom	1.0	-0.1
Japan	-0.9	0.2
USA	0.7	2.5

*Calendar adjusted; IIQ2012

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

Chart VD-1 of EUROSTAT provides growth in 2011 relative to 2010 for a large variety of countries. There have been diverging experiences in growth in the world economy.

Chart VD-1, Euro Zone, European Union, Real GDP Growth 2011 ∆% on Previous Year

Source: EUROSTAT

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

Advanced economies are experiencing weak demand. Table VD-5 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Oct 2012. Retail sales decreased 1.2 percent in Oct 2012 and fell 3.6 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, stability in Aug 2011 and 0.1 percent in Mar 2012. The lower part of Table VD-5 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 1999. 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-5, Euro Zone, Volume of Retail Sales, Deflated ∆%

	Month ∆%	12-Month ∆%
Oct 2012	-1.2	-3.6
Sep	-0.6	-1.6
Aug	-0.2	-0.7
Jul	0.1	-1.3
Jun	0.2	-0.7
May	0.8	-0.6
Apr	-1.5	-3.4
Mar	0.3	0.1
Feb	-0.2	-2.0
Jan	1.2	-1.1
Dec 2011	-1.3	-1.8
Nov	-0.4	-1.4
Oct	0.1	-0.7
Sep	-0.3	-1.1
Aug	0.0	0.0
Jul	0.2	-0.4
Jun	0.8	-0.8
May	-1.7	-1.8
Apr	0.9	1.0
Mar	-1.1	-1.4
Feb	0.4	1.1
Jan	0.1	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 1.2 percent in Oct 2012 and declined 3.6 percent in the 12 months ending in Oct 2012. All 12-month and monthly percentage changes are negative.

Table VD-6, Euro Zone, Volume of Retail Sales by Products, ∆%

Oct 2012	Month ∆%	12-Month ∆%
Total	-1.2	-3.6
Food, Drinks, Tobacco	-0.8	-2.9
Nonfood Products ex Automotive Fuel	-1.4	-3.5
Automotive Fuel in Specialized Stores	-0.1	-3.6

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-7 for Oct 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 0.7 percent for France, 1.0 percent for Belgium and 4.2 percent for Ireland. The 12-month percentage change for the UK, which is not a member of the euro zone, was 1.9 percent. The European Union’s 12-month percentage change was minus 2.4 percent.

Table VD-7, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Oct 2012	Month ∆%	12-Month ∆%
Euro Zone	-1.2	-3.6
Germany	-2.8	-3.8
France	0.4	0.7
Netherlands	NA	NA
Finland	-3.0	-1.5
Belgium	0.7	1.0
Portugal	-4.5	-6.7
Ireland	1.9	4.2
Italy	NA	NA
Greece	NA	NA
Spain	-1.2	-11.5
UK	-0.8	1.9
European Union	-1.1	-2.4

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, increased from 49.7 in Oct to 47.9 in Nov, which is the seventh consecutive reading below 50, indicating mild contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10331). The pace of decline of new export orders for manufacturing was at the lowest in six months, with some respondents finding enhanced demand in China. Tim Moore, Senior Economist at Markit, finds that difficult short-term output for manufacturing and services firms because of decline at the sharpest rate in three years of stocks of purchases (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10331). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 47.7 in Oct to 49.2 in Nov, indicating a level below the neutral zone of 50.0 for seven consecutive months but improving at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10383). Tim Moore, Senior Economist at Markit and author of the report, finds that the composite index of manufacturing and services indicates four months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10383). The Germany Services Business Activity Index increased from 48.4 in Oct to 49.7 in Sep, which is below the long-term average of 52.9 and also lower than readings in the first half of 2012 but indicating only marginal decline in general services business activity (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10383). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 46.0 in Oct to 46.8 in Nov for the ninth consecutive month in contraction territory below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10384). New export orders fell for seventeen consecutive months but the rate of decline was the second slowest since Mar 2012. Tim Moore, Senior Economist at Markit and author of the report, finds continuing weakness in Germany’s manufacturing but some encouragement in the slower drop of new orders and output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10384 ).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIIQ2012 0.2 ∆%; III/Q2012/IIIQ2011 ∆% 0.4 2011/2010: 3.0% GDP ∆% 1992-2011 Blog 8/26/12 5/27/12 11/25/12
Consumer Price Index	Oct month NSA ∆%: 0.0 Oct 12-month NSA ∆%: 2.0 Blog 11/11/12
Producer Price Index	Oct month ∆%: 0.1 CSA, 0.0 NSA 12-month NSA ∆%: 1.5 Blog 11/25/12
Industrial Production	Mfg Oct month CSA ∆%: -2.4 12-month NSA: 2.7 Blog 12/9/12
Machine Orders	MFG Oct month ∆%: 3.9 Oct 12-month ∆%: 3.4 Blog 12/9/12
Retail Sales	Oct Month ∆% -0.8 12-Month ∆% -2.8 Blog 12/2/12
Employment Report	Unemployment Rate Sep 5.4% Blog 12/2/12
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:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/25/12 http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.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 2.6 percent in Oct 2012 and increase of 3.1 percent in the 12 months ending in Oct 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
Oct 2012	3.1	-2.6
Sep	-7.3	-1.3
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 Mar to Oct 2012. There were four sharp declines in the monthly production industries index of 2.0 percent in Dec 2011, 2.2 percent in Apr 2012, 1.3 percent in Sep 2012 and 2.6 percent in Oct 2012. The declines of investment or capital goods were quite sharp with 1.4 percent in Dec 2011, 3.6 percent in Apr 2012, recovery by 2.2 percent in May 2012 but decline of 1.5 percent in Jul 2012, sharp decline of 3.5 percent in Sep 2012 and even sharper decline of 4.3 percent in Oct 2012. Durable goods fell in seven of eleven months from Dec 2011 to Oct 2012 and nondurable goods also fell in multiple months.

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

	Oct	Sep	Aug	Jul	Jun	May	Apr	Mar
Production Industries	-2.6	-1.3	-0.4	1.2	-0.3	1.6	-2.2	2.2
Industry	-2.4	-2.1	-0.3	1.4	-0.7	1.9	-2.1	1.1
Mfg	-2.4	-2.1	-0.2	1.4	-0.8	1.9	-2.1	1.1
Intermediate Goods	-1.1	-1.8	-1.0	-0.1	0.0	0.7	0.1	0.1
Capital Goods	-4.3	-3.5	0.2	3.6	-1.5	2.2	-3.6	1.6
Durable Goods	-6.2	-1.2	-2.4	2.6	-0.1	3.0	-1.2	0.5
Nondurable Goods	0.1	1.0	1.0	-1.0	-0.6	3.8	-4.0	2.6
Energy	-3.2	5.0	0.2	-1.2	5.9	-2.4	-0.3	-2.0

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
Oct	2.7	2.7	1.5	2.6	0.4	6.0	5.0
Sep	-8.4	-8.3	-10.2	-7.6	-10.5	-5.7	7.2
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, Sep and Oct 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 2008 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 Oct 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 2.1 percent, pulling down the 12-month rate to minus 8.3 percent. Manufacturing decreased 2.4 percent in Oct but increased 2.7 percent in 12 months.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Oct 2012	2.7	-2.4
Sep	-8.3	-2.1
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 increased 3.9 percent in Oct 2012 with increase of 0.4 percent in domestic orders and increase of 6.4 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-5, 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
Oct	3.4	3.9	6.4	6.7	-0.1	0.4
Sep	-9.3	-2.4	-6.6	-2.9	-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	0.4	-3.1	1.8	-18.4	-1.3
Apr	-3.4	-1.4	-4.0	-3.0	-2.5	0.5
Mar	-2.0	2.8	-0.9	4.1	-3.3	1.4
Feb	-4.5	0.7	-4.9	2.0	-3.9	-0.9
Jan	-3.1	-1.6	-5.7	-4.2	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	-0.9	4.3	-0.6	10.1	-1.1
Jul	5.6	-2.7	5.7	-6.6	5.6	2.4
Jun	3.8	1.4	8.0	11.8	-1.6	-9.7
May	22.7	2.2	16.2	-4.5	30.2	10.3
Apr	6.9	1.9	9.9	2.1	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	5.3	26.8	8.3	15.6	1.7
Oct	14.1	0.6	17.7	-0.3	10.4	1.7
Sep	13.9	-1.8	16.0	-3.6	11.6	0.4
Aug	23.5	3.3	31.9	5.5	14.4	0.6
Jul	14.2	-1.8	21.7	-2.1	6.3	-1.3
Jun	28.5	3.8	32.0	5.9	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	-0.6	10.5	-1.1	-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-6. Total capital goods orders increased 3.5 percent in Oct 2012 with foreign orders increasing 5.7 percent and domestic orders increasing 0.9 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-5 and VE-6 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
Oct	3.5	4.5	5.7	6.7	0.2	0.9
Sep	-7.7	-0.7	-4.5	-0.3	-12.4	-1.4
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-4 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

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 43.5 in Oct to 44.6 in Nov for the ninth consecutive contraction, indicating fast rate of decline (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10328). Jack Kennedy, Senior Economist at Markit and author of the report, finds weakness in the index suggesting that GDP growth of 0.2 percent in IIIQ2012 may not be sustained in IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10328).

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased marginally from 43.5 in Oct to 44.3 in Nov, indicating significant contraction of private sector activity for a ninth consecutive month at slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10367). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that new business declining at the fastest rate since the beginning of 2009 indicates weak conditions of France’s services sector at the end of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10367). The Markit France Services Activity index increased from 44.6 in Oct to 45.8 in Nov (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10301). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 44.5 in Nov from 43.7 in Sep, remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10347). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds continuing weakness in manufacturing with new orders falling at fast pace mostly because of restrained internal demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10347). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Oct month ∆% 0.2 12 months ∆%: 1.9 11/18/12
PPI	Sep month ∆%: 0.3 Sep 12 months ∆%: 2.9 Blog 11/4/12
GDP Growth	IIIQ2012/IIQ2012 ∆%: 0.2 IIIQ2012/IIIQ2011 ∆%: 0.2 Blog 11/18/12
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 Nov Mfg Business Climate 88 Blog 11/25/12

Links to blog comments in Table FR:

11/25/12 http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html

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

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

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 decreased from 44.6 in Oct to 44.6 in Nov, indicating significant contraction of output of Italy’s services at a marginally higher rate for contraction during a year and a half (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10428). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that the data suggest contraction of business services activity at an accelerating rate, breaking improvement in recent months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10428). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 45.5 in Oct to 45.1 in Nov for 16 consecutive months of contraction of Italy’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10388 ). New foreign orders continued contracting especially from France and Germany. Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds that decline of foreign orders was partly because of weakness in the economies of France and Germany but also to high selling prices that reversed prior gains in competitiveness (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10388). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Nov month ∆%: -0.2 Oct 12-month ∆%: 2.5 Blog 12/2/12
Producer Price Index	Oct month ∆%: -0.3 Oct 12-month ∆%: 2.6 Blog 12/2/12
GDP Growth	IIQ2012/IQ2012 SA ∆%: minus 0.8 IIQ2012/IIQ2011 NSA ∆%: minus 2.6 Blog 11/18/12
Labor Report	Oct 2012 Participation rate 64.0% Employment ratio 56.9% Unemployment rate 11.1% Blog 12/2/12
Industrial Production	Sep month ∆%: minus 1.5 12 months ∆%: minus 4.8 Blog 11/11/12
Retail Sales	Sep month ∆%: 0.0 Sep 12-month ∆%: -1.7 Blog 11/25/12
Business Confidence	Mfg Nov 88.5, Jul 87.3 Construction Oct 79.7, Jul 83.5 Blog 12/2/12
Trade Balance	Balance Sep SA €1556 million versus Aug €968 Exports Sep month SA ∆%: minus 2.0; Imports Sep month minus ∆%: 4.2 Exports 12 months Sep NSA ∆%: minus 4.2 Imports 12 months NSA ∆%: minus 10.6 Blog 11/18/12

Links to blog comments in Table IT:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/25/12 http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

11/11/12 http://cmpassocregulationblog.blogspot.com/2012/11/recovery-without-hiring-united-states.html

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

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

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

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

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q3-2012/stb-second-estimate-of-gdp--q3-2012.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 50.6 in Oct to 50.2 in Nov with growth during 23 consecutive months, decreasing at the margin (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10433). Chris Williamson, Chief Economist at Markit, finds that the lowest level of the index registered in 23 months suggests together with weak survey data for manufacturing and construction suggests that the UK economy could fall back to contraction after growth in IIIQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10433). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 47.3 in Oct to 49.1 in Nov for seven months in contraction territory (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10398). The PMI registered average 47.8 in IIIQ2012, which is the lowest reading since IIQ2009 but the average to date for IVQ2012 at 48.2 is higher than 47.8 in IIIQ2012. New export orders continued to fall with declining new business from Europe and the US. Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI^®, finds that recession in the Europe and weak world growth continue to affect exports (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10398). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Oct month ∆%: 0.5 Oct 12-month ∆%: 2.7 Blog 11/18/12
Output/Input Prices	Output Prices: Oct 12-month NSA ∆%: 2.5; excluding food, petroleum ∆%: 1.4 Input Prices: Oct 12-month NSA ∆%: 0.1 Excluding ∆%: -0.3 Blog 11/18/12
GDP Growth	IIIQ2012 prior quarter ∆% minus 1.0; year earlier same quarter ∆%: -0.1 Blog 12/2/12
Industrial Production	Oct 2012/Oct 2011 ∆%: Production Industries minus 3.0; Manufacturing minus 2.1 Blog 12/9/12
Retail Sales	Oct month ∆%: 0.0 Oct 12-month ∆%: 0.6 Blog 11/18/12
Labor Market	Jul-Sep Unemployment Rate: 7.8%; Claimant Count 4.8%; Earnings Growth 1.8% Blog 11/18/12
Trade Balance	Balance Oct minus ₤3644 million Exports Oct ∆%: -0.8; Aug-Oct ∆%: -2.7 Imports Oct ∆%: 1.9 Aug-Oct ∆%: -0.1 Blog 12/9/12

Links to blog comments in Table UK:

12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html

11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html

The UK Office for National Statistics provides the output of production industries with revisions. Table VH-1 incorporates the revisions released in Dec, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/october-2012/index.htm ) and the latest available data for Oct 2012. Manufacturing accounts for 67.0 percent of the production industries of the UK and decreased 2.1 percent in the 12 months ending in Oct 2012. Capital goods industries grew 2.0 percent in the 12 months ending in Oct 2012 and had been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 11.6 percent in the 12 months ending in Feb 2011. Mining and quarrying fell 20.9 percent in the 12 months ending in Oct 2012. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Apr 2011 to Oct 2012. With exception of 3.8 percent for consumer durable goods in Oct 2012 and most months for capital goods, 12-month percentage changes of all segments are negative from Jan to Oct 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
Oct	-3.0	-20.9	-2.1	-9.1	3.8	-5.1	2.0
Sep	-3.2	-17.0	-1.7	-10.4	0.7	-2.2	1.2
Aug	-1.2	0.3	-1.8	-1.0	-3.7	-4.7	2.7
Jul	-1.0	-2.5	-1.0	-2.7	-3.2	-4.6	5.0
Jun	-4.1	-6.2	-4.3	-5.2	-10.0	-6.0	0.7
May	-1.6	-8.7	-1.4	-3.8	-4.9	-5.1	2.9
Apr	-2.3	-14.2	-1.7	-5.9	-3.6	-5.4	2.8
Mar	-2.8	-9.5	-1.4	-8.7	-7.4	-1.7	0.8
Feb	-2.3	-8.9	-2.0	-4.2	-7.4	-0.8	-1.0
Jan	-3.7	-20.4	-0.5	-14.5	-6.2	0.7	3.1
2011
Dec	-2.6	-14.5	0.7	-14.4	-4.2	-0.6	6.2
Nov	-3.0	-13.8	-1.2	-11.6	0.2	-1.4	4.3
Oct	-2.4	-13.2	-0.6	-11.3	-1.7	-2.0	4.3
Sep	-1.7	-17.4	0.6	-11.4	-1.0	-1.5	6.4
Aug	-1.4	-16.4	0.6	-10.1	-0.6	0.4	4.0
Jul	-0.9	-16.0	1.9	-10.3	2.6	3.1	3.9
Jun	-0.2	-15.8	2.9	-9.7	7.8	1.3	7.3
May	-1.0	-20.7	3.3	-13.1	1.9	3.2	6.0
Apr	-0.9	-14.7	2.6	-11.2	1.2	4.0	5.3
Mar	0.1	-16.1	3.5	-10.4	2.5	0.4	9.9
Feb	2.0	-11.6	5.0	-7.2	1.0	0.9	11.6
Jan	3.5	-3.9	5.6	-3.4	3.7	-0.6	10.2
2011/ 2010	-0.7	-14.5	2.0	-10.3	1.1	0.6	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/october-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 0.8 percent in Oct 2012, with interruption of improvement in mining decreasing 17.7 percent in Sep and 3.9 percent in Oct. Manufacturing fell 1.3 percent in Oct and only capital goods increased in Oct by 1.9 percent with decline of 0.4 percent in capital goods. There was sharp recovery in Jul 2012 with high rates for all components such as 3.0 percent for the production index, 3.1 percent for manufacturing and 3.3 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
Oct	-0.8	-3.9	-1.3	-0.1	1.9	-3.0	-0.4
Sep	-2.1	-17.7	0.0	-10.0	1.3	0.4	0.5
Aug	-0.5	2.4	-1.2	1.4	-2.3	-0.3	-2.3
Jul	3.0	4.7	3.1	2.5	5.0	1.8	3.3
Jun	-2.4	2.6	-3.0	-1.0	-3.6	-1.2	-1.6
May	1.1	0.9	1.4	1.1	-0.5	0.4	2.3
Apr	-0.7	-4.8	-1.1	1.1	1.9	-2.9	-1.0
Mar	-0.4	-2.1	1.0	-5.3	1.0	-0.1	2.9
Feb	0.3	4.0	-1.3	5.2	-2.3	-0.8	-2.2
Jan	-0.6	-3.0	-0.3	-1.7	1.1	0.0	-1.1
2011
Dec	0.5	-2.7	1.1	-1.4	-0.9	1.2	0.6
Nov	-0.4	-1.6	-0.3	-0.4	1.3	-0.4	1.2
Oct	-1.1	0.8	-0.9	-1.6	-1.1	-0.1	-1.2
Sep	-0.1	-0.6	-0.1	-0.6	-3.1	-2.1	1.9
Aug	-0.3	-0.5	-0.5	-0.3	-1.9	-0.2	-0.1
Jul	-0.2	0.8	-0.3	-0.1	-2.3	0.2	-1.0
Jun	0.2	-0.1	-0.1	0.5	1.9	-0.3	0.6
May	0.5	-5.2	1.1	-1.2	0.9	0.1	2.3
Apr	-1.2	0.5	-0.9	-1.9	-2.1	0.8	-3.0
Mar	0.1	-1.4	0.3	-0.6	1.0	0.9	1.1
Feb	-1.2	-9.2	0.3	-6.1	-1.0	0.7	1.9
Jan	0.5	4.3	0.8	-1.6	3.3	-1.4	1.8
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/october-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 by the UK Office for National Statistics and shown in Table VH-3. The 12-month rate of output of the production industries of minus 3.0 percent was driven by negative contribution of 2.58 percentage points of mining with the subcomponent of oil and gas deducting 2.49 percentage points. Manufacturing deducted 1.45 percentage points. The contribution of manufacturing is strong because of its share of 67.0 percent in the production index with growth of minus 2.1 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing decreased 1.3 percent in Oct, subtracting 0.95 percentage points. Decrease of mining by 3.9 percent deducted 0.41 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	-3.0	-3.0	-0.8	-0.8
MNG	15.4	-20.9	-2.58	-3.9	-0.41
MNG 06	12.6	-26.9	-2.49	-4.4	-0.32
MFG	67.0	-2.1	-1.45	-1.3	-0.95
ELEC	9.6	9.1	0.83	4.5	0.44
WATER & SEW	8.0	2.4	0.20	1.1	0.10

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/october-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: wood and paper products (CC) deducted 0.48 percentage points with growth in 12 months of minus 9.3 percent; chemical and chemicals products (CE) deducted 0.58 percentage points with growth in 12 months of minus 9.4 percent; rubber and plastic products (CG) deducted 0.44 percentage points with growth in 12 months of minus 7.0 percent; machinery and equipment (CK) deducted 0.44 percentage points with growth in 12 months of minus 9.2 percent; and basic pharmaceutical products and preparations (CF), deducting 0.21 percentage points with 12-month growth of minus 4.4 percent; manufacture of food products, beverages and tobacco (CA) deducted 0.35 percentage points with 12-month growth of minus 2.7 percent. The highest positive contribution was 0.46 percentage points by transport equipment (CL), growing 6.0 percent in 12 months. Electrical products (CJ) added 0.30 percentage points with growth of 13.8 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	-2.7	-0.35	-2.4	-0.31
CB	2.0	-3.6	-0.07	0.2	0.00
CC	5.5	-9.3	-0.48	-0.6	-0.03
CD	0.8	-29.8	-0.22	-19.6	-0.13
CE	6.1	-9.4	-0.58	-0.8	-0.04
CF	6.1	-4.4	-0.21	-5.1	-0.25
CG	4.7	-9.2	-0.44	-2.2	-0.10
CH	8.6	4.1	0.37	-0.3	-0.03
CI	4.3	8.7	0.34	2.1	0.09
CJ	2.1	13.8	0.30	-2.8	-0.07
CK	4.8	-5.7	-0.37	-0.2	-0.01
CL	5.7	6.0	0.46	0.0	0.00
CM	4.5	-4.3	-0.20	-1.5	-0.07

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/october-2012/index.html

The UK’s trade account is shown in Table VH-5. In Oct 2012, the UK ran a deficit in trade of goods and services (total trade) of ₤3644 million. The deficit in trade of goods was ₤9539 million and ₤8474 million in goods excluding oil. A surplus in services of ₤5669 million contributed to the smaller overall deficit in goods and services (-₤9539 million plus ₤5895 million equal to -₤3644 million). Services have contributed to lower trade account deficits and also softened the impact of the global recession on the UK economy. Exports of goods and services decreased 0.8 percent in Oct 2012 and fell 2.7 percent in the quarter Aug-Oct 2012 relative to the same quarter a year earlier with imports increasing 1.9 percent in Oct and decreasing 0.1 percent in Aug-Oct 2012 relative to the same quarter a year earlier. Excluding oil, UK exports of goods decreased 2.0 percent in Oct 2012 and decreased 2.8 in Aug-Oct 2012 relative to a year earlier while imports increased 3.4 percent in Oct and decreased 0.8 percent in Aug-Oct 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 0.5 percent in Sep and fell 4.2 percent in Aug-Oct 2012 relative to a year earlier and imports decreased 0.3 percent in Oct and decreased 0.2 percent in Aug-Oct 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 Oct 2012	Month ∆%    Oct 2012	Aug-Oct 2012 ∆% Aug-Oct 2011
Total Trade
Exports	40,114	-0.8	-2.7
Imports	43,758	1.9	-0.1
Balance	-3,644
Trade in Goods
Exports	24,435	-1.0	-1.8
Imports	33,974	-2.5	-0.1
Balance	-9,539
Trade in Goods Excluding Oil
Exports	21,357	-2.0	-2.8
Imports	29,831	3.4	-0.8
Balance	-8,474
Trade in Services
Exports	15,679	-0.5	-4.2
Imports	9,784	-0.3	-0.2
Balance	5,895

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

© Carlos M. Pelaez, 2010, 2011, 2012