United States Commercial Banks Assets and Liabilities, Threatening Risk Premium on United States Government Debt, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Housing Collapse, World Financial Turbulence and Economic Slowdown with Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2010, 2011, 2012
Executive Summary
IA United States Commercial Banks Assets and Liabilities
IA1 Transmission of Monetary Policy
IA2 Functions of Banks
IA3 United States Commercial Banks Assets and Liabilities
IB Collapse of United States Dynamism of Income Growth and Employment Creation
II United States Housing Collapse
IIA United States New House Sales
IIB United States House Prices
IIC Factors of United States Housing Collapse
III World Financial Turbulence
IIIA Financial Risks
IIIE Appendix Euro Zone Survival Risk
IIIF Appendix on Sovereign Bond Valuation
IV Global Inflation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
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
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 | 2.6 | 1.8 | 1.5 | 7.7 |
| Japan | 0.5 | -0.2 | -0.9 | 4.1 |
| China | 7.4 | 2.0 | -2.2 | |
| UK | 0.0 | 2.7* | 2.2* output | 7.8 |
| Euro Zone | -0.6 | 2.2 | 2.6 | 11.7 |
| Germany | 0.9 | 1.9 | 1.5 | 5.4 |
| France | 0.0 | 1.6 | 1.9 | 10.7 |
| Nether-lands | -1.4 | 3.2 | 4.5 | 5.5 |
| Finland | -1.1 | 3.2 | 2.8 | 7.7 |
| Belgium | -0.3 | 2.2 | 4.5 | 7.5 |
| Portugal | -3.4 | 1.9 | 4.6 | 16.3 |
| Ireland | -0.5 | 1.6 | 3.0 | 14.7 |
| Italy | -2.4 | 2.6 | 2.2 | 11.1 |
| Greece | -7.2 | 0.4 | 4.1 | NA |
| Spain | -1.6 | 3.0 | 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/november-2012/index.html **Core
PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-prices-indices/november-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 2.6 percent in IIIQ2012 relative to IIIQ2011 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2012/pdf/gdp3q12_3rd.pdf See I Mediocre and Decelerating United States Economic Growth and earlier 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 0.2 percent in IVQ2011 relative to IVQ2010 and contracted 1.6 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 10.4 percent in IIIQ2011, increasing at the SAAR of 0.3 percent in IVQ 2011, increasing at the SAAR of 5.7 percent in IQ2012 and decreasing at 0.1 percent in IIQ2012 but contracting at the SAAR of 3.5 percent in IIIQ2012 (see Section VB at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html ); the UK grew at 0.9 percent in IIIQ2012 relative to IIQ2012 and GDP changed 0.0 percent in IIIQ2012 relative to IIIQ2011 (see Section VH and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_2.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 at http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html and earlier at 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 at http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html
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 at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier at http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/december-2012/index.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 1.8 percent in the US, -0.2 percent for Japan, 2.0 percent for China, 2.2 percent for the Euro Zone 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/2012/12/mediocre-and-decelerating-united-states_24.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 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html), weak hiring with the loss of 10 million full-time jobs (see Section I at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html and earlier 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 http://cmpassocregulationblog.blogspot.com/2012/12/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.
Charles Evans, President of the Federal Reserve Bank of Chicago, proposed an “economic state-contingent policy” or “7/3” approach (Evans 2012 Aug 27):
“I think the best way to provide forward guidance is by tying our policy actions to explicit measures of economic performance. There are many ways of doing this, including setting a target for the level of nominal GDP. But recognizing the difficult nature of that policy approach, I have a more modest proposal: I think the Fed should make it clear that the federal funds rate will not be increased until the unemployment rate falls below 7 percent. Knowing that rates would stay low until significant progress is made in reducing unemployment would reassure markets and the public that the Fed would not prematurely reduce its accommodation.
Based on the work I have seen, I do not expect that such policy would lead to a major problem with inflation. But I recognize that there is a chance that the models and other analysis supporting this approach could be wrong. Accordingly, I believe that the commitment to low rates should be dropped if the outlook for inflation over the medium term rises above 3 percent.
The economic conditionality in this 7/3 threshold policy would clarify our forward policy intentions greatly and provide a more meaningful guide on how long the federal funds rate will remain low. In addition, I would indicate that clear and steady progress toward stronger growth is essential.”
Evans (2012Nov27) modified the “7/3” approach to a “6.5/2.5” approach:
“I have reassessed my previous 7/3 proposal. I now think a threshold of 6-1/2 percent for the unemployment rate and an inflation safeguard of 2-1/2 percent, measured in terms of the outlook for total PCE (Personal Consumption Expenditures Price Index) inflation over the next two to three years, would be appropriate.”
The Federal Open Market Committee (FOMC) decided at its meeting on Dec 12, 2012 to implement the “6.5/2.5” approach (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm):
“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 asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
Unconventional monetary policy will remain in perpetuity, or QE∞, changing to a “growth mandate.” There are two reasons explaining unconventional monetary policy of QE∞: insufficiency of job creation to reduce unemployment/underemployment at current rates of job creation; and growth of GDP at 1.5 percent, which is well below 3.0 percent estimated by Lucas (2011May) from 1870 to 2010. Unconventional monetary policy interprets the dual mandate of low inflation and maximum employment as mainly a “growth mandate” of forcing economic growth in the US at a rate that generates full employment. A hurdle to this “growth mandate” is that the US economy grew at 6.2 percent on average during cyclical expansions in the postwar period while growth has been at only 2.2 percent on average in the cyclical expansion in the 13 quarters from IIIQ2009 to IIIQ2012. Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.
First, reduction of the unemployment rate to normal would take between 15 and 43.3 years depending on the definition (http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html). The US labor force stood at 154.088 million in Oct 2011 and at 155.779 million in Oct 2012, not seasonally adjusted, for increase of 1.691 million, or 140,917 per month. The US labor force stood at 153.683 million in Nov 2011 and 154.953 million in Nov 2012, not seasonally adjusted, for increase of 1.270 million or 105,833 per month. The average increase of 125,778 new nonfarm jobs per month in the US from Mar to Oct 2012 is insufficient even to absorb 140,917 new entrants per month into the labor force. The difference between the average increase of 125,778 new nonfarm jobs per month in the US from Mar to Oct 2012 and the 105,833 average monthly increase in the labor force from Nov 2011 to Nov 2012 is 19,945 monthly new jobs net of absorption of new entrants in the labor force. There are 28.6 million in job stress in the US currently. The provision of 19,945 new jobs per month net of absorption of new entrants in the labor force would require 1434 months to provide jobs for the unemployed and underemployed (28.6 million divided by 19,945) or 119 years (1434 divided by 12). Net job creation of 19,945 jobs per month only adds 239,340 jobs in a year. The civilian labor force of the US in Nov 2012 not seasonally adjusted stood at 154.953 million with 11.404 million unemployed or effectively 18.094 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 4.2 years. Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.748 million for new net job creation of 3.656 million that at the current rate would take 15 years. Under the calculation in this blog there are 18.094 million unemployed by including those who ceased searching because they believe there is no job for them. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 10.346 million jobs net of labor force growth that at the current rate would take 43.2 years. These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply.
Second, calculations show that actual US GDP growth is around 1.7 percent per year that will perpetuate unemployment/underemployment (Section I at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html). This rate of 1.7 percent is well below trend growth of 3 percent per year from 1870 to 2010, which has been always recovered after events such as wars and recessions (Lucas 2011May). Weakness of growth is shown by the exceptional one-time contributions to growth from items that are not aggregate demand, 2.53 percentage points contributed by inventory change to growth of 4.1 percent in IVQ2011 and 0.64 percentage points contributed by expenditures in national defense together with 0.73 points of inventory accumulation to growth of 3.1 percent in IIIQ2012. Deducting inventory accumulation and one-time national defense expenditures adjusts IIIQ2012 growth to annual 1.73 percent. Cumulative growth of 2.0 percent in IQ2012, 1.3 percent in IIQ2012 and adjusted 1.73 percent in IIIQ2012 annualizes to 1.7 percent in the first three quarters of 2012 {([(1.02)1/4(1.013)1/4(1.01731/4]4/3 -1)100 = 1.7%}. The actual rate required to reduce unemployment/underemployment to normal is even higher than 3 percent in historical trend.
In fact, it is evident to the public that this policy will be abandoned if inflation costs rise. There is concern of the production and employment costs of controlling future inflation. Even if there is no inflation, QE∞ cannot be abandoned because of the fear of rising interest rates. The economy would operate in an inferior allocation of resources and suboptimal growth path, or interior point of the production possibilities frontier where the optimum of productive efficiency and wellbeing is attained, because of the distortion of risk/return decisions caused by perpetual financial repression. Not even a second-best allocation is feasible with the shocks to efficiency of financial repression in perpetuity.
The statement of the FOMC at the conclusion of its meeting on Dec 12, 2012, revealed the following policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm):
“Release Date: December 12, 2012
For immediate release
Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in 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 will 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 purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee 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 and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain 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 Treasury and agency mortgage-backed securities, 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 asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
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 $85 billion of bond purchases per month: “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 purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month.”
3. Advance Guidance on “6 ¼ 2 ½ “Rule. Policy will be accommodative even after the economy recovers satisfactorily: “o 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 asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
4. Monitoring and Policy Focus on Jobs. The FOMC reconsiders its policy continuously in accordance with available information: “The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
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 that is actually a target of growth forecast. 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 Dec 12, 2012. The Fed releases the data with careful explanations (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf). Columns “∆% GDP,” “∆% PCE Inflation” and “∆% Core PCE Inflation” are changes “from the fourth quarter of the previous year to the fourth quarter of the year indicated.” The GDP report for IIIQ2012 is analyzed in I Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/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_24.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html). The Bureau of Economic Analysis (BEA) provides the third estimate of IIIQ2012 GDP with the advance estimate of IVQ2012 and annual for 2012 to be released on Jan 30 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm See Section I at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.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 Nov 2012 at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html. The next report on “Personal Income and Outlays” for Dec will be released at 8:30 AM on Jan 31, 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 Nov report at http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html; 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 (http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html). “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/fomcprojtabl20121212.pdf).
It is instructive to focus on 2012 and 2013 as 2014, 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 Dec 12, 2012 and the second row “PR” the projection of the Sep 13, 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 and 1.7 to 1.8 percent at the Dec 12, 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 but reduced to 2.3 to 3.0 percent at the Dec 12, 2012 meeting.
2. 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, lowering the projection to 7.8 to 7.9 percent at the Dec 12, 2012 meeting. 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 and reduced to 7.4 to 7.7 percent at the Dec 12 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 and 1.6 to 1.7 percent at the Dec 12, 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 and lowered to 1.7 to 1.9 percent at the Dec 12, 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 | ||||
| 2012 Sep PR | 1.7 to 1.8 1.7 to 2.0 | 7.8 to 7.9 8.0 to 8.2 | 1.6 to 1.7 1.7. to 1.8 | 1.6 to 1.7 1.7 to 1.9 |
| 2013 | 2.3 to 3.0 | 7.4 to 7.7 | 1.3 to 2.0 | 1.6 to 1.9 1.7 to 2.0 |
| 2014 | 3.0 to 3.5 | 6.8 to 7.3 | 1.5 to 2.0 | 1.6 to 2.0 |
| 2015 | 3.0 to 3.7 3.0 to 3.8 | 6.0 to 6.6 6.0 to 6.8 | 1.7 to 2.0 1.8 to 2.0 | 1.8 to 2.0 1.9 to 2.0 |
| Longer Run Sep 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 | 1.6 to 2.0 | 7.7 to 8.0 | 1.6 to 1.8 | 1.6 to 1.8 |
| 2013 | 2.0 to 3.2 | 6.9 to 7.8 | 1.3 to 2.0 | 1.5 to 2.0 |
| 2014 | 2.8 to 4.0 | 6.1 to 7.4 | 1.4 to 2.2 | 1.5 to 2.0 |
| 2015 Sep PR | 2.5 to 4.2 2.5 to 4.2 | 5.7 to 6.8 5.7 to 6.9 | 1.5 to 2.2 1.8 to 2.3 | 1.7 to 2.2 1.8 to 2.3 |
| Longer Run Sep PR | 2.2 to 3.0 2.2 to 3.0 | 5.0 to 6.0 5.0 to 6.3 | 2.0 2.0 |
Notes: UEM: unemployment; PR: Projection
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.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 decision making 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 See Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 99-116). 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/fomcprojtabl20121212.pdf). There are 19 participants expecting the rate to remain at 0 to ¼ percent in 2012 and none to be higher. Not much change is expected in 2013 either with 17 participants anticipating the rate at the current target of 0 to ¼ percent and only two expecting higher rates. The rate would still remain at 0 to ¼ percent in 2014 for 14 participants with three expecting the rate to be in the range of 1.0 to 2.0 percent, one participant expecting rates at 0.5 to 1.0 percent and one participant 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, nine participants expect rates to be below 1.0 percent while nine expect rates from 1.0 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 | 19 | |||||
| 2013 | 17 | 1 | 1 | |||
| 2014 | 14 | 1 | 3 | 1 | ||
| 2015 | 1 | 8 | 6 | 1 | 3 | |
| Longer Run | 19 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.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 | 2 |
| 2014 | 3 |
| 2015 | 13 |
| 2016 | 1 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf
Unconventional monetary policy of zero interest rates and quantitative easing has been used in Japan and now also in the US. Table IV-5 provides the consumer price index of Japan, with inflation of minus 0.2 percent in 12 months ending in Nov, increase of minus 0.4 percent NSA (not-seasonally-adjusted) in Nov and increase of 0.1 percent SA (seasonally-adjusted) in the month of Nov. Inflation of consumer prices in the first four months of 2012 annualizes at 2.1 percent SA and 3.0 percent NSA. Annual equivalent inflation in the first three months of 2012 is 2.8 percent SA and 3.7 percent NSA. There are negative percentage changes in most of the 12-month rates in 2011 with the exception of Jul and Aug both with 0.2 percent and stability in Sep. All monthly and 12-month rates of inflation are nonnegative in the first four months of 2012. There are eight years of deflation and one of zero inflation in the 12-month rate of inflation in Dec from 1995 to 2010. This experience is entirely different from that of the US that shows long-term inflation. It is difficult to justify unconventional monetary policy because of risks of deflation similar to that experienced in Japan. Fear of deflation as had occurred during the Great Depression and in Japan was used as an argument for the first round of unconventional monetary policy with 1 percent interest rates from Jun 2003 to Jun 2004 and quantitative easing in the form of withdrawal of supply of 30-year securities by suspension of the auction of 30-year Treasury bonds with the intention of reducing mortgage rates. For fear of deflation see Pelaez and Pelaez, International Financial Architecture (2005), 18-28, and Pelaez and Pelaez, The Global Recession Risk (2007), 83-95. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html
Table IV-5, Japan, Consumer Price Index, All Items ∆%
| ∆% Month SA | ∆% Month NSA | ∆% 12-Month NSA | |
| Nov 2012 | 0.1 | -0.4 | -0.2 |
| Oct | -0.2 | 0.0 | -0.4 |
| Sep | 0.1 | 0.1 | -0.3 |
| Aug | -0.2 | 0.1 | -0.4 |
| Jul | 0.0 | -0.3 | -0.4 |
| Jun | -0.4 | -0.5 | -0.2 |
| May | -0.4 | -0.3 | 0.2 |
| Apr | 0.0 | 0.1 | 0.4 |
| Mar | 0.1 | 0.5 | 0.5 |
| Feb | 0.3 | 0.2 | 0.3 |
| Jan | 0.3 | 0.2 | 0.1 |
| Dec 2011 | 0.1 | 0.0 | -0.2 |
| Nov | -0.1 | -0.6 | -0.5 |
| Oct | 0.0 | 0.1 | -0.2 |
| Sep | -0.1 | 0.0 | 0.0 |
| Aug | -0.2 | 0.1 | 0.2 |
| Jul | 0.3 | 0.0 | 0.2 |
| Jun | -0.1 | -0.2 | -0.4 |
| May | -0.1 | 0.0 | -0.4 |
| Apr | -0.1 | 0.1 | -0.4 |
| Mar | 0.0 | 0.3 | -0.5 |
| Feb | 0.1 | 0.0 | -0.5 |
| Jan | 0.0 | -0.1 | -0.6 |
| Dec 2010 | -0.2 | –0.3 | 0.0 |
| Dec 2009 | -1.7 | ||
| Dec 2008 | 0.4 | ||
| Dec 2007 | 0.7 | ||
| Dec 2006 | 0.3 | ||
| Dec 2005 | -0.1 | ||
| Dec 2004 | 0.2 | ||
| Dec 2003 | -0.4 | ||
| Dec 2002 | -0.3 | ||
| Dec 2001 | -1.2 | ||
| Dec 2000 | -0.2 | ||
| Dec 1999 | -1.1 | ||
| Dec 1998 | 0.6 | ||
| Dec 1997 | 1.8 | ||
| Dec 1996 | 0.6 | ||
| Dec 1995 | -0.3 | ||
| Dec 1994 | 0.7 | ||
| Dec 1993 | 1.0 | ||
| Dec 1992 | 1.2 | ||
| Dec 1991 | 2.7 | ||
| Dec 1990 | 3.8 | ||
| Dec 1989 | 2.6 | ||
| Dec 1988 | 1.0 | ||
| Dec 1987 | 0.8 | ||
| Dec 1986 | -0.3 | ||
| Dec 1985 | 1.9 | ||
| Dec 1984 | 2.6 | ||
| Dec 1983 | 1.7 | ||
| Dec 1982 | 2.0 | ||
| Dec 1981 | 4.3 | ||
| Dec 1980 | 6.9 | ||
| Dec 1979 | 5.6 | ||
| Dec 1978 | 3.9 | ||
| Dec 1977 | 5.0 | ||
| Dec 1976 | 10.5 | ||
| Dec 1975 | 7.8 | ||
| Dec 1974 | 21.0 | ||
| Dec 1973 | 18.3 | ||
| Dec 1972 | 5.7 | ||
| Dec 1971 | 4.8 |
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/cpi/1581.htm
Chart IV-1 of the Statistics Bureau of the Ministry of Internal Affairs and Communications of Japan provides the consumer price index for all items and regions of Japan monthly from 1971 to 2012 with 2010=100. There was inflation in Japan during the 1970s and 1980s similar to other countries and regions. The index shows stability after the 1990s with sporadic cases of deflation. Slower growth with sporadic inflation has been characterized as a “lost decade” in Japan (see Pelaez and Pelaez, The Global Recession Risk (2007), 82-115).
Chart IV-1, Japan, Consumer Price Index All Items, All Japan, Index 2010=100, Monthly, 1970-2012
Sources: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/cpi/1581.htm
Chart IV-2 provides the US consumer price index NSA from 1913 to 2012. The dominating characteristic is the increase in slope during the Great Inflation from the middle of the 1960s through the 1970s. There is long-term inflation in the US and no evidence of deflation risks.
Chart IV-2, US, Consumer Price Index, All Items, NSA, 1913-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
Chart IV-3 of the Statistics Bureau of the Ministry of Internal Affairs and Communications of Japan provides 12-month percentage changes of the consumer price index for all items and regions of Japan monthly from 1971 to 2012. Japan experienced the same inflation waves of the United States during the Great Inflation of the 1970s followed by similar low inflation after the inflation-control increase of interest rates in the early 1980s. Numerous cases of negative inflation or deflation are observed after the 1990s.
Chart IV-3, Japan, CPI All Items, All Japan, 12-Month ∆%, 1971-2012
Sources: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/cpi/1581.htm
Chart IV-4 provides 12-month percentage changes of the US consumer price index from 1914 to 2012. There are actually three waves of inflation in the second half of the 1960s, in the mid 1970s and again in the late 1970s. Table IV-5 provides similar inflation waves in the economy of Japan with 18.3 percent in 1973 and 21.0 percent in 1974. The Great Inflation of the 1970s is analyzed in various comments of this blog (http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html) and in Appendix I. Inflation rates then stabilized in the US in a range with only two episodes above 5 percent. There are isolated cases of deflation concentrated over extended periods only during the 1930s. There is no case in United States economic history for unconventional monetary policy because of fear of deflation. There are cases of long-term deflation without lost decades or depressions. Delfim Netto (1958) partly reprinted in Pelaez (1973) conducted two classical nonparametric tests (Mann 1945, Wallis and Moore 1941; see Kendall and Stuart 1968) with coffee-price data in the period of free markets from 1857 to 1906 with the following conclusions (Pelaez, 1976a, 280):
“First, the null hypothesis of no trend was accepted with high confidence; secondly, the null hypothesis of no oscillation was rejected also with high confidence. Consequently, in the nineteenth century international prices of coffee fluctuated but without long-run trend. This statistical fact refutes the extreme argument of structural weakness of the coffee trade.”
The conventional theory that the terms of trade of Brazil deteriorated over the long term is without reality (Pelaez 1976a, 280-281):
“Moreover, physical exports of coffee by Brazil increased at the high average rate of 3.5 per cent per year. Brazil's exchange receipts from coffee-exporting in sterling increased at the average rate of 3.5 per cent per year and receipts in domestic currency at 4.5 per cent per year. Great Britain supplied nearly all the imports of the coffee economy. In the period of the free coffee market, British export prices declined at the rate of 0.5 per cent per year. Thus, the income terms of trade of the coffee economy improved at the relatively satisfactory average rate of 4.0 per cent per year. This is only a lower bound of the rate of improvement of the terms of trade. While the quality of coffee remained relatively constant, the quality of manufactured products improved significantly during the fifty-year period considered. The trade data and the non-parametric tests refute conclusively the long-run hypothesis. The valid historical fact is that the tropical export economy of Brazil experienced an opportunity of absorbing rapidly increasing quantities of manufactures from the "workshop" countries. Therefore, the coffee trade constituted a golden opportunity for modernization in nineteenth-century Brazil.”
Imlah (1958) provides decline of British export prices at 0.5 percent in the nineteenth century and there were no lost decades, depressions or unconventional monetary policies in the highly dynamic economy of England that provided the world’s growth impulse.
Chart IV-4, US, Consumer Price Index, All Items, NSA, 12-Month Percentage Change 1914-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
Chart IV-5 provides the US consumer price index excluding food and energy from 1957 (when it first becomes available) to 2012. There is long-term inflation in the US without episodes of deflation that would justify symmetric inflation targets to increase inflation from low levels.
IV-5, US, Consumer Price Index Excluding Food and Energy, NSA, 1957-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
Chart IV-6 provides 12-month percentage changes of the consumer price index excluding food and energy from 1958 (when it first becomes available) to 2012. There are three waves of inflation in the 1970s during the Great Inflation. There is no episode of deflation.
Chart IV-6, US, Consumer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 1958-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
More detail on the consumer price index of Japan in Nov is shown in Table IV-6. Inflation in the 12 months ending in Nov 2012 has been driven by items rich in commodities such as 3.1 percent in fuel, light and water charges with decrease of 0.3 percent in the month of Nov. There is similar behavior in the preliminary estimate for Dec for the Ku Area of Tokyo with decrease of 0.3 percent of fuel, light and water charges and increase of 5.4 percent in 12 months. There is no increase in any items in the consumer price index in Nov. There is mild deflation in the CPI excluding food, alcoholic beverages and energy with minus 0.5 percent in the 12 months ending in Nov and minus 0.3 percent in Nov. The CPI excluding imputed rent fell 0.4 percent in Nov and decreased 0.1 percent in 12 months. The all-items CPI estimate for Dec of the Ku-Area of Tokyo was unchanged in Dec and declined 0.6 percent in 12 months.
Table IV-6, Japan, Consumer Price Index, ∆%
| 2012 | Nov 2012/Oct 2012 ∆% | Year ∆% |
| CPI All Items | -0.4 | -0.2 |
| CPI Excluding Fresh Food | -0.3 | -0.1 |
| CPI Excluding Food, Alcoholic Beverages and Energy | -0.3 | -0.5 |
| CPI Goods | -0.5 | -0.3 |
| CPI Services | -0.2 | 0.0 |
| CPI Excluding Imputed Rent | -0.4 | -0.1 |
| CPI Fuel, Light, Water Charges | -0.3 | 3.1 |
| CPI Transport & Communications | -0.7 | 0.2 |
| CPI Ku-Area Tokyo All Items | 0.0 | -0.6 |
| Fuel, Light, Water Charges Ku Area Tokyo | -0.3 | 5.4 |
Note: Ku-area Tokyo CPI data preliminary for Dec 2012
Sources: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/cpi/1581.htm
There are waves of inflation of producer prices in France as everywhere in the world economy (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html), as shown in Table IV-7. There was a first wave of sharply increasing inflation in the first four months of 2011 originating in the surge of commodity prices driven by carry trades from zero interest rates to commodity futures risk positions. Producer price inflation in the first four months of 2011 was at the annual equivalent rate of 11.7 percent. In the second wave, producer prices fell 0.5 percent in May and another 0.1 percent in Jun for annual equivalent inflation in May-Jun of minus 3.5 percent. In the third wave from Jul to Sep, annual equivalent producer price inflation was 2.8 percent. In the fourth wave Oct-Dec 2011, annual equivalent producer price inflation was 2.4 percent. In the fifth wave Jan-Mar 2012, average annual inflation rose to 8.3 percent during carry trades from zero interest rates to commodity futures. In the sixth wave in Apr-Jun 2012, annual equivalent inflation fell at the rate of 7.7 percent during unwinding of carry trades because of increasing risk aversion. In the seventh wave, carry trades returned under more relaxed risk aversion with producer price inflation in France at 8.1 percent in annual equivalent in Jul-Oct 2012. In the eighth wave, return of risk aversion caused unwinding carry trade and annual equivalent inflation of minus 5.8 percent in Nov 2012. The bottom part of Table IV-11 shows producer price inflation at 3.5 percent in the 12 months ending in Dec 2005 and again at 5.2 percent in the 12 months ending in Dec 2007. Producer prices fell in 2008 and 2009 during the global contraction and decline of commodity prices but returned at 5.4 percent in the 12 months ending in Dec 2010.
Table IV-7, France, Producer Price Index for the French Market, ∆%
| Month | 12 Months | |
| Nov 2012 | -0.5 | 1.9 |
| AE ∆% Nov | -5.8 | |
| Oct | 0.5 | 2.8 |
| Sep | 0.3 | 2.8 |
| Aug | 1.3 | 2.7 |
| Jul | 0.5 | 1.4 |
| AE ∆% Jul-Oct | 8.1 | |
| Jun | -0.8 | 1.3 |
| May | -1.1 | 2.1 |
| Apr | -0.1 | 2.7 |
| AE ∆% Apr-Jun | -7.7 | |
| Mar | 0.5 | 3.8 |
| Feb | 0.8 | 4.2 |
| Jan | 0.7 | 4.2 |
| AE ∆% Jan-Mar | 8.3 | |
| Dec 2011 | -0.2 | 4.6 |
| Nov | 0.4 | 5.6 |
| Oct | 0.4 | 5.7 |
| AE ∆% Oct-Dec | 2.4 | |
| Sep | 0.3 | 6.1 |
| Aug | 0.0 | 6.2 |
| Jul | 0.4 | 6.3 |
| AE ∆% Jul-Sep | 2.8 | |
| Jun | -0.1 | 6.1 |
| May | -0.5 | 6.2 |
| AE ∆% May-Jun | -3.5 | |
| Apr | 1.0 | 6.7 |
| Mar | 0.9 | 6.7 |
| Feb | 0.8 | 6.3 |
| Jan | 1.0 | 5.6 |
| AE ∆% Jan-Apr | 11.7 | |
| Dec 2010 | 0.8 | 5.4 |
| Dec 2009 | 0.1 | -2.9 |
| Dec 2008 | -1.5 | -0.2 |
| Dec 2007 | 0.6 | 5.2 |
| Dec 2006 | -0.2 | 2.9 |
| Dec 2005 | 0.2 | 3.5 |
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=25&date=20121227
Chart IV-7 of the Institut National de la Statistique et des Études Économiques of France provides the behavior of the producer price index of France for the various segments: import prices, foreign markets, domestic market and all markets. All the components exhibit the rise to the peak in 2008 driven by carry trades from zero interest rates of unconventional monetary policy that was of such an impulse as to drive increases in commodity prices during the global recession. Prices collapsed with the flight out of financial risk assets such as commodity positions to government obligations. Commodity price increases returned with zero interest rates and subdued risk aversion. The shock of confidence of the current European sovereign risk moderated exposures to financial risk that influenced the flatter curve of France’s producer prices followed by another mild trend of increase and moderation in Dec 2011 and then renewed inflation in the first quarter of 2012 with a new pause in Apr 2012, decline in May-Jun 2012, the jump in Jul-Oct 2012 and the decline in Nov 2012.
Chart IV-7, France, Producer Price Index (PPI)
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=25&date=20121227
France’s producer price index for the domestic market is shown in Table IV-8 for Nov 2012. The segment of prices of coke and refined petroleum decreased 3.0 percent in Nov 2012 and increased 4.7 percent in 12 months. Manufacturing prices, with the highest weight in the index, decreased 0.6 percent in Nov and rose 1.6 percent in 12 months. Mining prices decreased 0.3 percent in Nov and increased 3.6 percent in 12 months. Waves of inflation originating in carry trades from unconventional monetary policy of zero interest rates (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html) tend to deteriorate sales prices of productive activities relative to prices of inputs and commodities with adverse impact on operational margins and thus on production, investment and hiring.
Table IV-8, France, Producer Price Index for the Domestic Market, %
| Nov 2012 | Weight | Month ∆% | 12 Months ∆% |
| Total | 1000 | -0.5 | 1.9 |
| Mining | 130 | -0.3 | 3.6 |
| Mfg | 870 | -0.6 | 1.6 |
| Food Products, Beverages, Tobacco | 188 | 0.3 | 3.9 |
| Coke and Refined Petroleum | 70 | -3.0 | 4.7 |
| Electrical, Electronic | 92 | 0.0 | 1.0 |
| Transport | 79 | 0.1 | 0.5 |
| Other Mfg | 441 | -0.5 | 0.2 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=25&date=20121227
Italy’s producer price inflation in Table IV-9 also has the same waves in 2011 and into 2012 observed for many countries (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). The annual equivalent producer price inflation in the first wave Jan-Apr 2011 was 10.7 percent, which was driven by increases in commodity prices resulting from the carry trades from zero interest rates to risk financial assets, in particular leveraged positions in commodities. In the second wave, producer price inflation was minus 0.2 percent in May and flat in Jun for annual equivalent inflation rate in May-Jun 2011 of minus 1.2 percent. In the third wave, annual equivalent inflation was 2.4 percent in Jul-Sep 2011 in a pause of risk aversion. With the return of risk aversion in the fourth wave coinciding with the worsening sovereign debt crisis in Europe, annual equivalent inflation was 0.4 percent in Oct-Dec 2011. Inflation accelerated in the fifth wave in Jan and Feb 2012 to annual equivalent 7.4 percent and annual equivalent of 6.6 percent in Jan-Mar. In the sixth wave, annual equivalent inflation in Mar-Apr was at 4.3 percent. In the seventh wave, risk aversion originating in world economic slowdown and financial turbulence softened carry trades with annual equivalent inflation falling to minus 2.4 percent in May-Jun 2012. In the eighth wave, more aggressive carry trades into commodity futures exposures resulted in increase of inflation at annual equivalent 4.1 percent in Jul-Sep 2012 and 6.8 percent in Jul-Aug 2012. In the ninth wave, risk aversion caused unwinding carry trades with annual equivalent inflation of minus 2.0 percent in Sep-Nov 2012.
Table IV-9, Italy, Industrial Prices, Internal Market
| Month ∆% | 12-Month ∆% | |
| Nov 2012 | -0.1 | 2.2 |
| Oct | -0.3 | 2.6 |
| Sep | -0.1 | 2.8 |
| AE ∆% Sep-Nov | -2.0 | |
| Aug | 0.9 | 3.0 |
| Jul | 0.2 | 2.2 |
| AE ∆% Jul-Aug | 6.8 | |
| Jun | -0.1 | 2.2 |
| May | -0.3 | 2.3 |
| AE ∆% May-Jun | -2.4 | |
| Apr | 0.3 | 2.5 |
| Mar | 0.4 | 2.8 |
| AE ∆% Mar-Apr | 4.3 | |
| Feb | 0.4 | 3.2 |
| Jan | 0.8 | 3.5 |
| AE ∆% Jan-Feb | 7.4 | |
| Dec 2011 | 0.0 | 3.9 |
| Nov | 0.3 | 4.7 |
| Oct | -0.2 | 4.7 |
| AE ∆% Oct-Dec | 0.4 | |
| Sep | 0.2 | 4.7 |
| Aug | 0.1 | 4.8 |
| Jul | 0.3 | 4.9 |
| AE ∆% Jul-Sep | 2.4 | |
| Jun | 0.0 | 4.6 |
| May | -0.2 | 4.8 |
| AE ∆% May-Jun | -1.2 | |
| Apr | 0.7 | 5.6 |
| Mar | 0.8 | 6.2 |
| Feb | 0.7 | 5.8 |
| Jan | 1.2 | 5.3 |
| AE ∆% Jan-Apr | 10.7 | |
| Dec 2010 | 0.7 | 4.7 |
| Year | ||
| 2011 | 5.0 | |
| 2010 | 3.0 | |
| 2009 | -5.4 | |
| 2008 | 5.9 | |
| 2007 | 3.3 | |
| 2006 | 5.2 | |
| 2005 | 4.0 | |
| 2004 | 2.7 | |
| 2003 | 1.6 | |
| 2002 | 0.2 | |
| 2001 | 1.9 | |
| Average ∆% 2000-2011 | 2.5 |
Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/78666
Chart IV-15 of the Istituto Nazionale di Statistica provides 12-month percentage changes of the producer price index of Italy. Rates of change in 12 months stabilized from Jul to Nov 2011 and then fell to 3.5 percent in Jan 2012 with increases of 0.8 percent in the month of Jan 2012 and 0.4 percent in Feb. Inflation was 0.4 percent in Mar 2012 and 2.8 percent in 12 months. The decline of annual equivalent inflation from 7.4 percent in Jan-Feb 2012 to 4.3 percent in Mar-Apr pulled down 12-month inflation to 2.8 percent in Mar and 2.5 percent in Apr. Percentage declines of inflation of 0.3 percent in May and 0.1 percent in Jun pulled down the 12-month rate of inflation to 2.2 percent in Jun 2012. Renewed inflation of 0.2 percent in Jul 2012 and 0.9 percent in Aug 2012 pulled up the 12-month rate to 3.0 percent in Jul 2012. The decline of producer prices by 0.1 percent in Sep 2012 followed by declines of 0.3 percent in Oct 2012 and 0.1 percent in Nov 2012 pulled down the 12-month rate to 2.2 percent in Nov 2012.
Chart IV-8, Italy, Producer Price Index 12-Month Percentage Changes
Source: Istituto Nazionale di Statistica
Monthly and 12-month inflation of the producer price index of Italy and individual components is provided in Table IV-10. Energy prices decreased 1.0 percent in Nov 2012 and rose 6.9 percent in 12 months. Producer-price inflation is positive for most components in the month of Nov with the exception of decline of 0.1 percent in intermediate goods and 1.0 percent in energy that were strong enough to bring down inflation to minus 0.1 percent in Nov 2012 relative to Oct 2012. There is higher inflation in 12 months of 2.2 percent for nondurable goods than 1.2 percent for durable goods.
Table IV-10, Italy, Industrial Prices, Internal Market, ∆%
| Nov 2012/ | Nov 2012/ | |
| Total | -0.1 | 2.2 |
| Consumer Goods | 0.3 | 2.1 |
| Durable Goods | 0.1 | 1.2 |
| Nondurable | 0.3 | 2.2 |
| Capital Goods | 0.0 | 0.7 |
| Intermediate | -0.1 | 0.9 |
| Energy | -1.0 | 6.9 |
Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/78666
V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/datamapper/index.php?db=WEO) to show GDP in dollars in 2011 and the growth rate of real GDP of the world and selected regional countries from 2012 to 2015. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 3.3 percent in 2012 but accelerating to 3.6 percent in 2013, 4.2 percent in 2014 and 4.4 percent in 2015. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,697 billion of world output of $69,899 billion, or 48.2 percent, but are projected to grow at much lower rates than world output, 1.9 percent on average from 2012 to 2015 in contrast with 3.9 percent for the world as a whole. While the world would grow 16.4 percent in the four years from 2012 to 2015, the G7 as a whole would grow 7.8 percent. The difference in dollars of 2011 is rather high: growing by 16.4 percent would add $11.5 trillion of output to the world economy, or roughly two times the output of the economy of Japan of $5,867 but growing by 7.8 percent would add $5.2 trillion of output to the world, or somewhat below the output of Japan in 2011. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2011 of $25,438 billion, or 36.4 percent of world output. The EMDEs would grow cumulatively 24.9 percent or at the average yearly rate of 5.7 percent, contributing $6.3 trillion from 2012 to 2015 or the equivalent of 86.8 percent of $7,298 billion of China in 2011. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,468 billion, or 19.3 percent of world output, which is equivalent to 39.9 percent of the combined output of the major advanced economies of the G7.
Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth
| GDP USD 2011 | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | |
| 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 1.4 percent in IQ2012 and 3.4 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 0.0 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 0.1 percent, which is much lower than 5.7 percent in IQ2012. Growth of 3.9 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 0.5 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 0.8 percent, 3.1 percent at SAAR and 2.6 percent relative to IIIQ2011 (Section I http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) but with substantial unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html) and weak hiring (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). In IQ2012, UK GDP fell 0.3 percent, increasing 0.2 percent relative to a year earlier. UK GDP fell 0.4 percent in IIQ2012 and decreased 0.3 percent relative to a year earlier. UK GDP increased 0.9 percent in IIIQ2012 and fell 0.0 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 0.2 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 0.1 percent and increased 0.0 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: 1.4 SAAR: 5.7 | 3.4 |
| China | 1.8 | 8.1 |
| Euro Area | 0.0 | -0.1 |
| Germany | 0.5 | 1.7 |
| France | 0.0 | 0.2 |
| Italy | -0.8 | -1.4 |
| United Kingdom | -0.3 | 0.2 |
| IIQ2012/IQ2012 | IIQ2012/IIQ2011 | |
| United States | QOQ: 0.3 SAAR: 1.3 | 2.1 |
| Japan | QOQ: 0.0 | 3.9 |
| 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 | -0.3 |
| IIIQ2012/ IIQ2012 | IIIQ2012/ IIIQ2011 | |
| United States | QOQ: 0.8 | 2.6 |
| Japan | QOQ: –0.9 | 0.5 |
| China | 2.2 | 7.4 |
| Euro Area | -0.1 | -0.6 |
| Germany | 0.2 | 0.4 |
| France | 0.1 | 0.0 |
| Italy | -0.2 | -2.4 |
| United Kingdom | 0.9 | 0.0 |
QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate
Source: Country Statistical Agencies
http://www.bea.gov/national/index.htm#gdp
There is evidence of deceleration of growth of world trade and even contraction in more recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP Section VB at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html). Japan’s exports decreased 4.1 percent in the 12 months ending in Nov, 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 increased 0.8 percent in the 12 months ending in Nov, 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. In Nov 2012, China’s exports increased 2.9 percent in 12 months and 7.3 percent in Jan-Nov 2012 while imports were unchanged in Nov 2012 and increased 4.1 percent in Jan-Nov 2012. Germany’s exports increased 0.3 percent in the month of Oct and increased 10.6 percent in the 12 months ending in Oct while imports increased 2.5 percent in the month of Oct and increased 6.0 percent in the 12 months ending in Oct. 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 decreased 0.8 percent in Oct and decreased 2.7 percent in Aug-Oct 2012 relative to a year earlier while imports increased 1.9 percent in Oct and decreased 0.1 percent in Aug-Oct 2012 relative to a year earlier. Net trade deducted 0.9 percentage points from UK GDP growth in IIQ2012 and added 0.5 percentage points in IIIQ2012. France’s exports increased 0.7 percent in Oct while imports decreased 0.2 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012, adding 0.3 percentage points in IIIQ2012. US exports decreased 3.6 percent in Oct 2012 and goods exports increased 4.7 percent in Jan-Oct relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012. The Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI™) seasonally adjusted increased to 54.2 in Dec from 52.8 in Nov, which was the sharpest improvement in eight months, indicating mild expansion of manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10465).
New export orders registered 54.8 in Dec from 53.6 in Nov. New export orders registered 54.8 in Dec from 50.3 in Nov, indicating expansion at a higher rate. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with impulse to US economic growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10465).
In the six months ending in Nov 2012, United States national industrial production accumulated increase of 0.3 percent at the annual equivalent rate of 0.6 percent, which is much lower than 2.5 percent growth in 12 months. Capacity utilization for total industry in the United States fell increased 0.7 percentage points in Nov to 78.4 percent from 77.7 percent in Oct, which is 1.9 percentage points lower than the long-run average from 1972 to 2011. Manufacturing increased 1.1 percent in Nov seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months, and increased 0.1 percent in the six months ending in Nov or at the annual equivalent rate of 0.2 percent (Section VA and earlier http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal_18.html). Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.
Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points
| Exports | Exports 12 M ∆% | Imports | Imports 12 M ∆% | |
| USA | -3.6 Oct | 4.7 Jan-Oct | -2.1 Oct | 3.8 Jan-Oct |
| Japan | Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1 | Nov 0.8 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 2.9 Nov 7.3 Jan-Nov | 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 0.0 Nov 4.1 Jan-Nov |
| Euro Area | 8.6 12-M Oct | 8.6 Jan-Oct | 7.0 12-M Oct | 2.1 Jan-Oct |
| Germany | 0.3 Oct CSA | 10.6 Oct | 2.5 Oct CSA | 6.0 Oct |
| France Oct | 0.7 | 4.9 | -0.2 | 0.6 |
| Italy Oct | 0.0 | 12.0 | 0.8 | 0.9 |
| 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 | 0.38 | |||
| Japan | -0.3 IIQ2012 -2.9 IIIQ2012 | |||
| Germany | 1.4 IIQ2012 1.4 IIIQ2012 | |||
| France | -0.4 IIQ2012 0.3 IIIQ2012 | |||
| UK | -0.9 IIQ2012 0.5 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.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 Nov 2012. The share of Asia in Japan’s trade is more than one half, 54.8 percent of exports and 45.9 percent of imports. Within Asia, exports to China are 17.2 percent of total exports and imports from China 23.7 percent of total imports. The second largest export market for Japan in Oct 2012 is the US with share of 18.7 percent of total exports and share of imports from the US of 8.1 percent in total imports. Western Europe has share of 10.3 percent in Japan’s exports and of 11.4 percent in imports. Rates of growth of exports of Japan in Nov are sharply negative for all countries and regions with the exception of 5.3 percent for exports to the US, 11.0 percent for Mexico and 19.2 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 4.1 percent in Nov 2012 while imports increased 0.8 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Nov are negative for some trading partners: minus 5.5 percent for the US, minus 4.5 percent for the Middle East and minus 14.2 percent for Australia. Imports from Asia increased 3.6 percent in the 12 months ending in Nov while imports from China increased 5.8 percent.
Table V-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yens
| Nov 2012 | Exports | 12 months ∆% | Imports Millions Yens | 12 months ∆% |
| Total | 4,983,900 | -4.1 | 5,937,332 | 0.8 |
| Asia | 2,729,189 | -2.5 | 2,726,959 | 3.6 |
| China | 858,693 | -14.5 | 1,406,156 | 5.8 |
| USA | 933,760 | 5.3 | 479,933 | -5.5 |
| Canada | 59,616 | -11.6 | 90,043 | 10.8 |
| Brazil | 33,595 | -10.4 | 91,728 | 0.6 |
| Mexico | 74,434 | 11.0 | 31,446 | 20.9 |
| Western Europe | 513,037 | -21.2 | 676,894 | 3.6 |
| Germany | 131,431 | -14.1 | 190,133 | 7.7 |
| France | 37,419 | -25.5 | 107,427 | 24.5 |
| UK | 89,427 | -34.4 | 56,689 | 16.2 |
| Middle East | 183,230 | 19.2 | 1,034,102 | -4.5 |
| Australia | 120,513 | -1.5 | 338,643 | -14.2 |
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 | 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’ IndexTM (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 54.2 in Dec from 52.8 in Nov, which was the sharpest improvement in eight months, indicating mild expansion of manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10465).
New export orders registered 54.8 in Dec from 53.6 in Nov. New export orders registered 54.8 in Dec from 50.3 in Nov, indicating expansion at a higher rate. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with impulse to US economic growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10465). 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 | Nov 12 months NSA ∆%: 1.8; ex food and energy ∆%: 1.9 Nov month ∆%: -0.3; ex food and energy ∆%: 0.1 |
| Producer Price Index | Nov 12-month NSA ∆%: 1.5; ex food and energy ∆% 2.2 |
| PCE Inflation | Nov 12-month NSA ∆%: headline 1.4; ex food and energy ∆% 1.5 |
| Employment Situation | Household Survey: Nov Unemployment Rate SA 7.7% |
| Nonfarm Hiring | Nonfarm Hiring fell from 63.8 million in 2006 to 50.1 million in 2011 or by 13.7 million |
| GDP Growth | BEA Revised National Income Accounts IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2012 2.6 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 3.1 |
| Real Private Fixed Investment | SAAR IIIQ2012 0.9 ∆% IVQ2007 to IIIQ2012: minus 12.6% Blog 12/23-24/12 |
| Personal Income and Consumption | Nov month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.8 |
| Quarterly Services Report | IIIQ12/IIIQ11 SA ∆%: Financial & Insurance 6.5 |
| Employment Cost Index | Compensation Private IIIQ2012 SA ∆%: 0.5 |
| Industrial Production | Nov month SA ∆%: minus 1.1 Manufacturing Nov SA ∆% 1.1 Nov 12 months SA ∆% 2.7, NSA 2.5 |
| 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 Nov -5.22 to Dec -8.10 |
| Philadelphia Fed Business Outlook Index | General Index from Nov -10.7 to Dec 8.1 |
| 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 |
| Durable Goods | Nov New Orders SA ∆%: 0.7; ex transport ∆%: 1.6 |
| 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-Oct 2012/Jan-Oct 2011 NSA ∆%: Total 5.5; Durable Goods: 6.4; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Oct 12/Oct 11 NSA ∆%: Sales Total Business 6.3; Manufacturers 5.4 |
| Sales for Retail and Food Services | Jan-Nov 2012/Jan-Nov 2011 ∆%: Retail and Food Services 5.5; Retail ∆% 5.2 |
| Value of Construction Put in Place | Oct SAAR month SA ∆%: 1.4 Oct 12-month NSA: 10.8 Jan-Oct 2012 ∆% 9.3 |
| Case-Shiller Home Prices | Oct 2012/Oct 2011 ∆% NSA: 10 Cities 3.4; 20 Cities: 4.3 |
| FHFA House Price Index Purchases Only | Oct SA ∆% 0.5; |
| New House Sales | Nov 2012 month SAAR ∆%: 4.4 |
| Housing Starts and Permits | Nov Starts month SA ∆%: -3.0 ; Permits ∆%: 3.6 |
| Trade Balance | Balance Oct SA -$44240 million versus Sep -$40277 million |
| Export and Import Prices | Nov 12-month NSA ∆%: Imports -1.6; Exports 0.7 |
| Consumer Credit | Oct ∆% annual rate: 6.2 |
| Net Foreign Purchases of Long-term Treasury Securities | Oct Net Foreign Purchases of Long-term Treasury Securities: $1.3 billion |
| Treasury Budget | Fiscal Year 2013/2012 ∆% Nov: Receipts 9.7; Outlays 15.8; Individual Income Taxes 12.5 Deficit Fiscal Year 2012 $1,089,353 million Blog 12/16/2012 |
| 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 | Nov 2012 SAAR ∆%: Securities 0.9 Loans -2.7 Cash Assets 55.6 Deposits 5.5 Blog 12/30/12 |
| 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 | IIIQ2012 -$128 B %GDP 3.3 Blog 12/23-24/12 |
Links to blog comments in Table USA:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
12/9/12 http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html
11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html
11/4/12 http://cmpassocregulationblog.blogspot.com/2012/11/twenty-eight-million-unemployed-or.html
8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html
VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/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 | Real GDP | Domestic CGPI | CPI All Items Less Fresh Food |
| 2011 | |||
| Apr 2012 | -0.2 to –0.2 | +1.7 | 0.0 |
| Jan 2012 | -0.4 to –0.3 | +1.8 to +1.9 | -0.1 to 0.0 |
| 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 | +0.4 to +0.7 | +0.1 to +0.4 |
| Jan 2012 | +1.8 to +2.1 | -0.1 to +0.2 | 0.0 to +0.2 |
| 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 | +0.7 to +0.9 | +0.5 to +0.7 |
| Jan 2012 | +1.4 to +1.7 | +0.6 to 1.0 | +0.4 to +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 |
| Corporate Goods Prices | Nov ∆% 0.0 |
| Consumer Price Index | Nov NSA ∆% -0.4; Nov 12 months NSA ∆% -0.2 |
| Real GDP Growth | IIIQ2012 ∆%: minus 0.9 on IIQ2012; IIIQ2012 SAAR minus 3.5; |
| Employment Report | Nov Unemployed 2.60 million Change in unemployed since last year: minus 210 thousand |
| All Industry Indices | Oct month SA ∆% 0.2 Blog 12/23-24/12 |
| Industrial Production | Nov SA month ∆%: -1.7 |
| Machine Orders | Total Oct ∆% -1.6 Private ∆%: -10.7 |
| Tertiary Index | Oct month SA ∆% minus 0.1 |
| Wholesale and Retail Sales | Nov 12 months: |
| Family Income and Expenditure Survey | Nov 12-month ∆% total nominal consumption 0.1, real 0.2 Blog 12/30/12 |
| Trade Balance | Exports Nov 12 months ∆%: minus 4.1 Imports Nov 12 months ∆% 0.8 Blog 12/23-24/12 |
Links to blog comments in Table JPY:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.html
In Nov 2012, industrial production in Japan decreased 1.7 percent and decreased 5.8 percent in the 12 months ending in Nov 2012, as shown in Table VB-1. In the eight months Apr-Nov 2012, industrial production fell cumulative 9.7 or at the annual equivalent rate of 14.2 percent. As a result, growth of industrial production in 12 months fell from 14.2 percent in Mar 2012 to minus 5.8 percent in Nov 2012. Japan’s industrial production increased during two consecutive months by revised 2.3 percent in Dec 2011 and revised 0.9 percent in Jan 2012, reducing the percentage decline in 12 months from minus 3.0 percent in Dec to minus 1.6 percent in Jan 2012 and positive 1.5 percent in Feb. Monthly industrial production had climbed in every month since the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, with exception of Sep 2011 but fell again in Nov by 1.7 percent. Industrial production was higher in 12 months for the first month in Aug 2011 by 1.6 percent and again in Oct by 0.9 percent but fell 2.9 percent in Nov and 3.0 percent in Dec 2011 relative to a year earlier. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 16.4 percent in 2010. The annual average in calendar year 2011 fell 2.3 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011.
Table VB-1, Japan, Industrial Production ∆%
| ∆% Month SA | ∆% 12 Months NSA | |
| Nov 2012 | -1.7 | -5.8 |
| Oct | 1.6 | -4.5 |
| Sep | -4.1 | -8.1 |
| Aug | -1.6 | -4.6 |
| Jul | -1.0 | -0.8 |
| Jun | 0.4 | -1.5 |
| May | -3.4 | 6.0 |
| Apr | -0.2 | 12.9 |
| Mar | 1.3 | 14.2 |
| Feb | -1.6 | 1.5 |
| Jan | 0.9 | -1.6 |
| Dec 2011 | 2.3 | -3.0 |
| Nov | -1.7 | -2.9 |
| Oct | 1.8 | 0.9 |
| Sep | -1.9 | -2.4 |
| Aug | 0.9 | 1.6 |
| Jul | 1.1 | -1.7 |
| Jun | 3.8 | -0.6 |
| May | 5.8 | -4.6 |
| Apr | 2.4 | -12.7 |
| Mar | -16.2 | -12.4 |
| Feb | 1.1 | 4.5 |
| Jan | 1.2 | 6.1 |
| Dec 2010 | 2.4 | 5.9 |
| Calendar Year | ||
| 2011 | -2.3 | |
| 2010 | 16.4 | |
| 2009 | -21.9 | |
| 2008 | -3.4 |
Source: http://www.meti.go.jp/english/statistics/index.html
The employment report for Japan in Nov 2012 is in Table VB-2. The rate of unemployment seasonally adjusted decreased to 4.2 percent in Sep 2012 from 4.3 percent in Jul 2012 and remained at 4.2 percent in Oct 2012, declining to 4.1 percent in Nov 2012. The rate of unemployment not seasonally adjusted fell to 4.0 in Nov 2012 and 0.3 percentage points from a year earlier. The employment rate at 56.7 percent in Nov 2012 and fell 0.0 percentage points from a year earlier.
Table VB-2, Japan, Employment Report Nov 2012
| Unemployed | 2.60 million |
| Change since last year | -210 thousand; ∆% –7.5 |
| Unemployment rate | 4.1% SA 0.0; NSA 4.0%, -0.3 from earlier year |
| Population ≥ 15 years | 110.98 million |
| Change since last year | ∆% -0.1 |
| Labor Force | 65.56 million |
| Change since last year | ∆% –0.4 |
| Employed | 62.97 million |
| Change since last year | ∆% -0.1 |
| Labor force participation rate | 59.1 |
| Change since last year | -0.1 |
| Employment rate | 56.7.0% |
| Change since last year | 0.0 |
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications http://www.stat.go.jp/english/data/roudou/154.htm
Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2010 to 2012. The sharp decline in Sep 2011 was the best reading in 2011 but the rate increased in the final quarter of the year, declining in Feb 2012 and stabilizing in Mar 2012 but increasing to 4.6 percent in Apr 2012 and declining again to 4.4 percent in May 2012 and 4.3 percent in both Jun and Jul 2012 with further decline to 4.2 percent in Aug, Sep and Oct 2012 and 4.1 percent in Nov 2012.
Chart VB-1, Japan, Unemployment Rate
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/data/roudou/154.htm
During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid 1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for 1968, 1975, 1980 and 1985 and yearly from 1990 to 2011. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.4 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, while the participation rate fell from 60.4 percent to 59.6 percent, falling to 59.3 percent in 2011, and the employment rate fell from 58.1 percent to 56.6 percent in 2010 and 56.5 percent in 2011. The global recession adversely affected labor markets in advanced economies.
Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %
| Unemployment Rate | Participation | Employment Rate | |
| 1968 | 1.2 | 65.9 | 65.1 |
| 1975 | 1.9 | 63.0 | 61.9 |
| 1980 | 2.0 | 63.3 | 62.0 |
| 1985 | 2.6 | 63.0 | 61.4 |
| 1990 | 2.1 | 63.3 | 61.9 |
| 1991 | 2.1 | 63.8 | 62.4 |
| 1992 | 2.2 | 64.0 | 62.6 |
| 1993 | 2.5 | 63.8 | 62.2 |
| 1994 | 2.9 | 63.8 | 61.8 |
| 1995 | 3.2 | 63.4 | 61.4 |
| 1996 | 3.4 | 63.5 | 61.4 |
| 1997 | 3.4 | 63.7 | 61.5 |
| 1998 | 4.1 | 63.3 | 60.7 |
| 1999 | 4.7 | 62.9 | 59.9 |
| 2000 | 4.7 | 62.4 | 59.5 |
| 2001 | 5.0 | 62.0 | 58.9 |
| 2002 | 5.4 | 61.2 | 57.9 |
| 2003 | 5.3 | 60.8 | 57.6 |
| 2004 | 4.7 | 60.4 | 57.6 |
| 2005 | 4.4 | 60.4 | 57.7 |
| 2006 | 4.1 | 60.4 | 57.9 |
| 2007 | 3.9 | 60.4 | 58.1 |
| 2008 | 4.0 | 60.2 | 57.8 |
| 2009 | 5.1 | 59.9 | 56.9 |
| 2010 | 5.1 | 59.6 | 56.6 |
| 2011 | 4.6 | 59.3 | 56.5 |
Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications http://www.stat.go.jp/english/data/roudou/154.htm
The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months, which can be appreciated in the chart in the link in parentheses but followed by decline in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012 with recovery in Jul and Aug 2012, interrupted in Sep-Oct 2012 and new increases in Nov 2012 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption increased 0.2 percent in real terms in Nov 2012 and increased 0.1 percent in nominal terms relative to a year earlier. There are several segments of decreasing real consumption: food declining 0.7 percent in real terms and 1.2 percent in nominal terms, housing declining 0.8 percent in real terms and 1.1 percent in nominal terms, furniture and household utensils declining 1.6 percent in real terms and 3.6 percent in nominal terms and education declining 14.9 percent in real terms and 14.6 percent in nominal terms. Real household income increased 2.1 percent; real disposable income increased 1.1 percent; and real consumption expenditures increased 1.8 percent.
Table VB-4, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier
| Nov 2012 | Nominal | Real |
| Households of Two or More Persons | ||
| Total Consumption | 0.1 | 0.2 |
| Excluding Housing, Vehicles & Remittance | 0.5* | |
| Food | -1.2 | -0.7 |
| Housing | -1.1 | -0.8 |
| Fuel, Light & Water Charges | 3.9 | 0.8 |
| Furniture & Household Utensils | -3.6 | -1.6 |
| Clothing & Footwear | 4.4 | 4.8 |
| Medical Care | 0.8 | 1.5 |
| Transport and Communications | 4.4 | 4.2 |
| Education | -14.6 | -14.9 |
| Culture & Recreation | -0.2 | 0.6 |
| Other Consumption Expenditures | 0.5 | 0.6* |
| Workers’ Households | ||
| Income | 2.0 | 2.1 |
| Disposable Income | 1.0 | 1.1 |
| Consumption Expenditures | 1.7 | 1.8 |
*Real: nominal deflated by CPI excluding imputed rent
Source: http://www.stat.go.jp/english/data/kakei/156.htm
Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 5.7 percent in IQ2012 with private consumption contributing 2.8 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth_16.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 0.1 percent and contribution of 0.2 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.5 percent and personal consumption contracted at 1.0 percent. Nominal consumption increased 4.3 percent in May 2012 but at a lower 1.5 percent in Jun 2012, 1.2 percent in Jul 2012 and 1.4 percent in Aug 2012, decreasing 1.2 percent in Sep 2012 and 0.5 percent in Oct 2012 and increasing 0.1 percent in Nov 2012. Real consumption expenditures increased 4.0 percent in May 2012 but at a lower 1.6 percent in Jun 2012, 1.7 percent in Jul 2012 and 1.8 percent in Aug 2012, declining 0.9 percent in Sep 2012 and 0.1 percent in Oct 2012 but increasing 0.2 percent in Nov 2012. Both nominal and real consumption expenditures increased in 2009, 0.3 percent and 2.1 percent, respectively.
Table VB-5, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier
| Nominal Consumption Expenditures | Real Consumption Expenditures | |
| Nov 2012 | 0.1 | 0.2 |
| Oct | -0.5 | -0.1 |
| Sep | -1.2 | -0.9 |
| Aug | 1.4 | 1.8 |
| Jul | 1.2 | 1.7 |
| Jun | 1.5 | 1.6 |
| May | 4.3 | 4.0 |
| Apr | 3.2 | 2.6 |
| Mar | 4.1 | 3.4 |
| Feb | 2.7 | 2.3 |
| Jan | -2.1 | -2.3 |
| Dec 2011 | 0.3 | 0.5 |
| Nov | -3.8 | -3.2 |
| Oct | -0.6 | -0.4 |
| Sep | -1.9 | -1.9 |
| Aug | -3.9 | -4.1 |
| Jul | -1.8 | -2.1 |
| Jun | -3.9 | -3.5 |
| May | -1.6 | -1.2 |
| Apr | -2.5 | -2.0 |
| Mar | -8.8 | -8.2 |
| Feb | -0.1 | 0.5 |
| Jan | -0.9 | -0.3 |
| Dec 2010 | -3.2 | -3.3 |
| Dec 2009 | 0.3 | 2.1 |
Source: http://www.stat.go.jp/english/data/kakei/156.htm
Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 5.7 percent in IQ2012 with private consumption contributing 2.8 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth_16.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 0.1 percent and contribution of 0.2 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.5 percent and personal consumption contracted at 1.0 percent. Nominal consumption increased 4.3 percent in May 2012 but at a lower 1.5 percent in Jun 2012, 1.2 percent in Jul 2012 and 1.4 percent in Aug 2012, decreasing 1.2 percent in Sep 2012 and 0.5 percent in Oct 2012 and increasing 0.1 percent in Nov 2012. Real consumption expenditures increased 4.0 percent in May 2012 but at a lower 1.6 percent in Jun 2012, 1.7 percent in Jul 2012 and 1.8 percent in Aug 2012, declining 0.9 percent in Sep 2012 and 0.1 percent in Oct 2012 but increasing 0.2 percent in Nov 2012. Both nominal and real consumption expenditures increased in 2009, 0.3 percent and 2.1 percent, respectively.
Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012 and beginning of IIIQ2012. Table VB-6 provides Japan’s wholesale and retail sales. Retail sales increased 1.3 percent in the 12 months ending in Nov 2012. Total sales decreased 0.8 percent in the 12 months ending in Nov 2012. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through Jun 2012 but fell again by 0.7 percent in Jul 2012, increasing 1.7 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 1.3 percent in Nov 2012.
Table VB-6, Japan, Wholesale and Retail Sales 12 Month ∆%
| Total | Wholesale | Retail | |
| Nov 2012 | -0.8 | -1.5 | 1.3 |
| Oct | -1.4 | -1.4 | -1.2 |
| Sep | -3.6 | -4.9 | 0.4 |
| Aug | -2.6 | -4.2 | 1.7 |
| Jul | -3.1 | -4.0 | -0.7 |
| Jun | -2.8 | -3.8 | 0.2 |
| May | 2.5 | 2.1 | 3.6 |
| Apr | 1.7 | 0.3 | 5.7 |
| Mar | 2.9 | 0.5 | 10.3 |
| Feb | -0.1 | -1.3 | 3.4 |
| Jan | -2.0 | -3.5 | 1.8 |
| Dec 2011 | -0.8 | -2.0 | 2.5 |
| Nov | -2.3 | -2.4 | -2.2 |
| Oct | 1.1 | 0.8 | 1.9 |
| Sep | 0.3 | 0.8 | -1.1 |
| Aug | 3.1 | 5.2 | -2.6 |
| Jul | 2.3 | 3.0 | 0.6 |
| Jun | 3.1 | 3.8 | 1.2 |
| May | 1.3 | 2.3 | -1.3 |
| Apr | -2.6 | -1.7 | -4.8 |
| Mar | -1.3 | 1.2 | -8.3 |
| Feb | 5.3 | 7.2 | 0.1 |
| Jan | 3.3 | 4.6 | 0.1 |
| Dec 2010 | 3.5 | 5.7 | -2.1 |
| Calendar Year | |||
| 2011 | 1.0 | 1.8 | -1.2 |
| 2010 | 1.5 | 1.1 | 2.5 |
| 2009 | -20.5 | -25.6 | -2.3 |
| 2008 | 1.2 | 1.5 | 0.3 |
Source: http://www.meti.go.jp/english/statistics/index.html
VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/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. | 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=10452) is improving. The overall Flash China Manufacturing PMI™ increased marginally from 50.5 in Nov to 50.9 in Dec for a fourteen-month high while the Flash China Manufacturing Output Index decreased from 51.3 in Nov to 50.5 in Dec, both in expansion territory above 50.0. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the economy of China is improving because of internal demand while still requiring further easing policy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10452).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 | Nov 12-month ∆%: minus 2.2 Nov month ∆%: minus 0.1 |
| Consumer Price Index | Nov month ∆%: 0.1 Nov 12 months ∆%: 2.0 |
| Value Added of Industry | Nov month ∆%: 0.86 Jan-Nov 2012/Jan-Nov 2011 ∆%: 10.0 |
| GDP Growth Rate | Year IIIQ2012 ∆%: 7.4 |
| Investment in Fixed Assets | Nov month ∆%: 1.26 Total Jan-Nov 2012 ∆%: 20.7 Real estate development: 16.7 |
| Retail Sales | Nov month ∆%: 1.47 Jan-Nov ∆%: 14.2 |
| Trade Balance | Nov balance $19.6 billion Cumulative Nov: $199.54 billion |
Links to blog comments in Table CNY:
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.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 | 10.1 | 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 46.5 in Nov to 47.3 in Dec, for eleven consecutive declines and fifteen drops in sixteen months, with Oct registering the lowest reading since IIQ2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10458). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with GDP declining even by more than contraction of 0.1 percent in IIIQ2012 but improving outlook for return to growth next year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10458). 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 CNY, China, Economic Indicators
| Price Indexes for Industry | Nov 12-month ∆%: minus 2.2 Nov month ∆%: minus 0.1 |
| Consumer Price Index | Nov month ∆%: 0.1 Nov 12 months ∆%: 2.0 |
| Value Added of Industry | Nov month ∆%: 0.86 Jan-Nov 2012/Jan-Nov 2011 ∆%: 10.0 |
| GDP Growth Rate | Year IIIQ2012 ∆%: 7.4 |
| Investment in Fixed Assets | Nov month ∆%: 1.26 Total Jan-Nov 2012 ∆%: 20.7 Real estate development: 16.7 |
| Retail Sales | Nov month ∆%: 1.47 Jan-Nov ∆%: 14.2 |
| Trade Balance | Nov balance $19.6 billion Cumulative Nov: $199.54 billion |
Links to blog comments in Table CNY:
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
10/21/12 http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united.html
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 49.2 in Nov to 50.5 in Dec, which is the highest reading in eight months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10456). The pace of decline of new export orders for manufacturing was at the lowest in nine months, with some respondents finding enhanced demand in Asia and the US but continuing weakness in Europe. Paul Smith, Senior Economist at Markit, finds the data consistent with stagnating GDP in IVQ2012 primarily because of weakness in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10456). 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 | Nov month NSA ∆%: -0.1 |
| Producer Price Index | Nov month ∆%: 0.1 CSA, -0.1 NSA |
| Industrial Production | Mfg Oct month CSA ∆%: -2.4 |
| Machine Orders | MFG Oct month ∆%: 3.9 |
| Retail Sales | Oct Month ∆% -0.8 12-Month ∆% -2.8 Blog 12/2/12 |
| Employment Report | Unemployment Rate Sep 5.4% |
| Trade Balance | Exports Oct 12-month NSA ∆%: 10.6 Blog 12/16/12 |
Links to blog comments in Table DE:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
12/9/12 http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html
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
8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.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 IIIQ1949 to IIIQ2012 is quite high at 3.2 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 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using third 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* | 3.2 |
| 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 |
*Third Quarter on Third Quarter
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
The Markit Flash France Composite Output Index increased marginally from 44.3 in Nov to 45.0 in Dec for the highest reading in four months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10453). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest the weakest quarter in output in four years (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10453).
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 | Nov month ∆% -0.2 |
| PPI | Nov month ∆%: -0.5 Blog 12/30/12 |
| GDP Growth | IIIQ2012/IIQ2012 ∆%: 0.1 |
| Industrial Production | Oct ∆%: |
| Consumer Spending | Nov Manufactured Goods |
| Employment | IIIQ2012 Unemployed 2.826 million |
| Trade Balance | Oct Exports ∆%: month 0.7, 12 months 4.9 Oct Imports ∆%: month -0.2, 12 months 0.6 Blog 12/23-24/12 |
| Confidence Indicators | Historical averages 100 Dec Mfg Business Climate 89 Blog 12/30/12 |
Links to blog comments in Table FR:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html
Table VF-1 provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IIIQ1949 to IIIQ2012 is quite high at 3.2 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 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using third quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.
Table VF-1, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012
| Period | Average ∆% |
| 1949-2012* | 3.2 |
| 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 |
*Third Quarter on Third Quarter
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
Growth of GDP in a quarter relative to the prior quarter is provided for France in Table VF-2. GDP grew 0.1 percent in IIIQ2012. The French economy grew 0.0 percent in IVQ2011 and IQ2012, declining 0.1 percent in IIQ2011. Growth in the nine quarters of expansion from IIIQ2009 to IIIQ2011 accumulated 3.7 percent at the annual equivalent rate of 1.6 percent. Growth from IVQ2011 to IIIQ2012 was 0.0 percent. Recovery has been much weaker than the cumulative 2.7 percent in the four quarters of 2006. Weak recoveries in advanced economies have prevented full utilization of labor, capital and productive resources.
Table VF-2, France, Quarterly Real GDP Growth, Quarter on Prior Quarter ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 0.0 | -0.1 | 0.1 | |
| 2011 | 0.9 | 0.1 | 0.2 | 0.0 |
| 2010 | 0.3 | 0.7 | 0.4 | 0.4 |
| 2009 | -1.7 | 0.0 | 0.1 | 0.5 |
| 2008 | 0.3 | -0.6 | -0.5 | -1.6 |
| 2007 | 0.6 | 0.5 | 0.4 | 0.3 |
| 2006 | 0.7 | 1.0 | 0.1 | 0.9 |
| 2005 | 0.1 | 0.3 | 0.5 | 0.7 |
| 2004 | 0.5 | 0.8 | 0.4 | 0.9 |
| 2003 | 0.3 | 0.0 | 0.7 | 0.6 |
| 2002 | 0.7 | 0.5 | 0.2 | -0.1 |
| 2001 | 0.5 | 0.3 | 0.2 | -0.4 |
| 2000 | 1.1 | 0.7 | 0.5 | 1.0 |
| 1999 | 0.6 | 0.9 | 1.0 | 1.2 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
Growth rates of France’s real GDP in a quarter relative to the same quarter a year earlier are shown in Table VF-3. France has not recovered the rates of growth in excess of 2 percent prior to the global recession. GDP fell 4.3 percent in IQ2009, 3.7 percent in IIQ2009, 3.1 percent in IIIQ2009 and 1.0 percent in IVQ2009. Growth in IVQ2011 relative to IVQ2010 was 1.2 percent and GDP growth declined to 0.2 percent in IQ2012, 0.1 percent in IIQ2012 relative to the same quarter a year earlier and 0.0 percent in IIIQ2012 relative to a year earlier.
Table VF-3, France, Real GDP Growth Current Quarter Relative to Same Quarter Year Earlier ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 0.2 | 0.1 | 0.0 | |
| 2011 | 2.4 | 1.7 | 1.5 | 1.2 |
| 2010 | 1.0 | 1.6 | 1.9 | 1.8 |
| 2009 | -4.3 | -3.7 | -3.1 | -1.0 |
| 2008 | 1.6 | 0.5 | -0.5 | -2.3 |
| 2007 | 2.6 | 2.1 | 2.5 | 1.9 |
| 2006 | 2.3 | 3.0 | 2.5 | 2.7 |
| 2005 | 2.1 | 1.7 | 1.9 | 1.7 |
| 2004 | 1.8 | 2.6 | 2.3 | 2.5 |
| 2003 | 0.9 | 0.4 | 0.8 | 1.6 |
| 2002 | 0.6 | 0.9 | 0.9 | 1.3 |
| 2001 | 2.6 | 2.2 | 1.9 | 0.5 |
| 2000 | 4.3 | 4.1 | 3.6 | 3.3 |
| 1999 | 2.9 | 2.8 | 3.2 | 3.7 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
Percentage changes and contributions of segments of GDP in France are provided in Table VF-4. Internal demand contributed 0.2 percentage points to GDP growth in IIIQ2012, 0.1 percentage points to GDP growth in IIQ2012, 0.0 percentage points in IQ2011 and 0.3 percentage points in IVQ2011. Net foreign trade added 0.3 percentage points in IIIQ2012 after deducting 0.4 percentage points in IIQ2012 and 0.1 percentage points in IQ2012, adding 0.8 percentage points in IVQ2011.
Table VF-4, France, Contributions to GDP Growth, Calendar and Seasonally Adjusted, %
| ∆% from Prior Period | IVQ 2011 | IQ | IIQ | IIIQ 2012 | 2011 | 2012 |
| GDP | 0.0 | 0.0 | -0.1 | 0.1 | 1.7 | 0.1 |
| Imports | -1.0 | 0.3 | 1.6 | -0.5 | 5.2 | 0.2 |
| Household Consump. | -0.1 | 0.1 | -0.2 | 0.2 | 0.2 | -0.1 |
| Govt. | 0.2 | 0.5 | 0.5 | 0.4 | 0.2 | 1.3 |
| GFCF | 1.3 | -0.9 | 0.4 | -0.3 | 3.5 | 0.5 |
| Exports | 1.8 | -1.5 | 0.5 | -0.6 | 5.1 | -0.3 |
| % Point | ||||||
| Internal Demand ex Inventory Changes | 0.3 | 0.0 | 0.1 | 0.2 | 0.9 | 0.4 |
| Inventory Changes | -1.0 | 0.0 | 0.2 | -0.4 | 0.8 | -0.9 |
| Net Foreign Trade | 0.8 | -0.1 | -0.4 | 0.3 | 0.0 | 0.6 |
Notes: Consump.: Consumption; Gvt.: Government; GFCF: Gross Fixed Capital Formation; Contribus.: Contributions
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques provides percentage point contributions to GDP growth. GDP grew sharply into IQ2011 and then stalled in IIQ2011. Final consumption was the key negative contributor to GDP growth in IIQ2011. GDP growth strengthened in IIIQ2011 with the impulse originating in final consumption. Net trade and gross fixed capital formation (GFCF) drove GDP growth in IVQ2011. Final consumption and inventory change were positive contributors to GDP growth in IQ2012 with subtractions by GFCF (Gross Fixed Capital Formation) and net trade. Net trade subtracted from growth in IIQ2012. Net trade and final consumption drove growth of GDP in IIIQ2012.
Chart VF-1, France, Percentage Point Contributions to GDP Growth
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228
The Aug monthly report of household expenditures in consumption goods for France is in Table VF-5. Total consumption increased 0.2 percent in Nov 2012 after decreasing 0.1 percent in Oct. Consumption of manufactured products decreased 0.2 percent in Nov 2012 after decreasing 0.0 percent in Oct. Total consumption decreased 0.2 percent in Nov 2012 relative to Nov 2011 and consumption of manufactured goods decreased 1.0 percent in Nov 2012 relative to Nov 2011. Internal demand is weak throughout most advanced economies
Table VF-5, France, Household Expenditures in Consumption Goods, Month ∆% Chained Billion Euros Trading-Days SA
| Total | Food | Eng. Goods | Energy | Mfg | |
| Nov 2012 | 0.2 | -0.5 | -0.3 | 2.7 | -0.2 |
| Nov 2012/Nov 2011 | -0.2 | -1.3 | -1.8 | 6.5 | -1.0 |
| Oct | -0.1 | -0.5 | 0.2 | 0.0 | 0.0 |
| Sep | 0.1 | -0.1 | 0.2 | 0.1 | 0.1 |
| Aug | -0.7 | -0.2 | -0.6 | -2.1 | -0.8 |
| Jul | 0.4 | 0.1 | 0.6 | 0.3 | 0.4 |
| Jun | 0.3 | 1.1 | -0.1 | -0.1 | 0.5 |
| May | 0.3 | 0.1 | 1.9 | -3.1 | 1.3 |
| Apr | 0.5 | -0.6 | -2.4 | 10.1 | -1.4 |
| Mar | -2.6 | -2.1 | 0.9 | -11.5 | -0.5 |
| Feb | 2.2 | 1.2 | -0.8 | 11.6 | 0.5 |
| Jan | -0.3 | 1.3 | -2.5 | 2.6 | -0.8 |
| Dec 2011 | -0.3 | -1.0 | 1.0 | -2.3 | -0.1 |
| Nov | 0.0 | 0.1 | 0.5 | -1.7 | 0.1 |
| Oct | 0.0 | -0.6 | 0.8 | -0.8 | 0.1 |
| Sep | -0.2 | 0.4 | 0.3 | -2.8 | -0.1 |
| Aug | 0.8 | 0.3 | 0.5 | 2.9 | 0.9 |
| Jul | -0.3 | 0.3 | -0.8 | -0.2 | -0.3 |
| Jun | 0.6 | -1.0 | 0.9 | 3.2 | 0.5 |
| May | 0.2 | -0.5 | -0.5 | 3.0 | -0.7 |
| Apr | -1.6 | 1.0 | -1.9 | -6.2 | -1.0 |
| Mar | -0.7 | -0.2 | -1.1 | -0.3 | -0.8 |
| Feb | 0.3 | 0.5 | 1.2 | -2.3 | 0.8 |
| Jan | -1.1 | -0.4 | -0.6 | -4.1 | -0.5 |
| Dec 2010 | 0.6 | 0.3 | 0.3 | 2.1 | 0.2 |
Eng. Goods: Engineered Goods
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20121228
Chart VF-2 of Institut National de la Statistique et des Études Économiques of France provides growth of total consumption in France. Internal demand is not supporting overall economic growth. Two-thirds of the increase of consumption in Feb 2012 is attributed to higher consumption of energy during bitter cold weather and the drop in Mar reversed expenditures in energy under milder weather. There is downward trend of monthly consumption with fluctuations.
Chart VF-2, France, Total Consumption of Goods, Billions of Euros Trading and Seasonally Adjusted and Quarterly ∆%
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20121228
Table VF-6 shows the INSEE business climate manufacturing indicator. The headline synthetic index decreased from 91 in Jun to 89 in Jul but increased to 90 in both Aug and Sep, declining to 85 in Oct and rebounding to 88 in Nov and 89 in Dec. The final row shows general production expectations deteriorating from minus 32 in Jun to minus 44 in Jul and Aug, minus 52 in Sep, minus 55 in Oct but minus 42 in Nov and minus 38 in Dec 2012, which is still well below the average since 1976 of minus 9. The indicator of demand and export order levels fell from minus 30 in Jun to minus 36 in Jul but then improved to minus 27 in Aug and minus 27 in Sep, declining to -38 in Oct, improving marginally to minus 35 in Nov and minus 36 in Dec, which is still well below the average since 1976 of minus 12.
Table VF-6, France, Business Climate Indicators of INSEE
| Mfg 2012 | Average since 1976 | Sep | Oct | Nov | Dec |
| Synthetic Index | 100 | 90 | 85 | 88 | 89 |
| Recent Changes in Output | 5 | -21 | -23 | -16 | -10 |
| Finished- Goods Inventory Level | 13 | 7 | 17 | 15 | 12 |
| Demand and Total Order Levels | -17 | -28 | -41 | -34 | -37 |
| Demand and Export Order Levels | -13 | -27 | -38 | -35 | -36 |
| Personal Production Expectations | 5 | -5 | -9 | -7 | -9 |
| General Production Expectations | -9 | -52 | -55 | -42 | -38 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20121221
Chart VF-3 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the business climate synthetic index of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012, marginally reversed in Nov 2012 with stability in Dec 2012.
Chart VF-3, France, INSEE Industrial Business Climate Synthetic Index
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20121221
Chart VF-4 of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov 2011 is showing declining trend in Jan 2012 with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012 with new improvement in Aug 2012 followed by decline in Sep-Oct 2012 followed by rebound in Nov 2012 and stability in Dec 2012.
Chart VF-4, INSEE Business Climate Manufacturing Turning Point Indicator
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20121221
Chart VF-5 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows the indexes of general production expectations, personal production expectations and recent changes in output. All three indexes fell during the past three contractions after 1991, 2001 and 2008. The indexes are showing downward trend in 2011 that continued in Nov, Dec and Jan 2012 with slight reversal in Feb and significant improvement in Mar followed by weakens in Apr through Jul 2012 and stability in Aug-Sep 2012 and new decline in Oct 2012 followed by improvement in Nov 2012 and stability in Dec 2012.
Chart VF-5, Climate Manufacturing General Production, Personal Production and Recent Changes in Output of INSEE, SA %
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20121221
VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.5 percent in IQ2012 to minus 2.4 percent in IIIQ2012. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates.
Table VG-IT, Italy, GDP and Expenditure Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier
| GDP | Imports | Consumption | GFCF | Exports | |
| 2012 | |||||
| IIIQ | -2.4 | -7.8 | -3.7 | -9.8 | 1.6 |
| IIQ | -2.3 | -7.6 | -3.5 | -9.6 | 2.5 |
| IQ | -1.3 | -9.0 | -2.8 | -7.9 | 1.9 |
| 2011 | |||||
| IVQ | -0.5 | -6.8 | -1.6 | -3.7 | 3.3 |
| IIIQ | 0.4 | 0.3 | -0.5 | -2.2 | 5.9 |
| IIQ | 1.0 | 3.4 | 0.6 | -0.2 | 7.1 |
| IQ | 1.3 | 8.9 | 0.9 | 0.7 | 10.9 |
| 2010 | |||||
| IVQ | 2.2 | 15.4 | 0.8 | 2.3 | 13.3 |
| IIIQ | 1.9 | 13.0 | 1.0 | 4.3 | 12.2 |
| IIQ | 1.9 | 13.2 | 0.5 | 2.3 | 12.0 |
| IQ | 1.1 | 7.3 | 0.5 | -0.8 | 7.3 |
| 2009 | |||||
| IVQ | -3.5 | -6.4 | -0.1 | -7.5 | -9.3 |
| IIIQ | -5.0 | -12.1 | -0.9 | -12.6 | -16.3 |
| IIQ | -6.6 | -17.8 | -1.3 | -13.7 | -21.4 |
| IQ | -6.9 | -17.2 | -1.6 | -12.7 | -22.9 |
| 2008 | |||||
| IVQ | -3.0 | -8.2 | -0.9 | -8.3 | -10.3 |
| IIIQ | -1.9 | -5.0 | -0.8 | -4.5 | -3.9 |
| IIQ | -0.2 | -0.1 | -0.3 | -1.5 | 0.4 |
| IQ | 0.5 | 1.7 | 0.1 | -1.0 | 2.9 |
GFCF: Gross Fixed Capital Formation
Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/77009
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 |
| Producer Price Index | Nov month ∆%: -0.1 Blog 12/30/12 |
| GDP Growth | IIIQ2012/IIQ2012 SA ∆%: minus 0.2 |
| Labor Report | Oct 2012 Participation rate 64.0% Employment ratio 56.9% Unemployment rate 11.1% Blog 12/2/12 |
| Industrial Production | Oct month ∆%: minus 1.1 |
| Retail Sales | Oct month ∆%: -1.0 Sep 12-month ∆%: -3.8 Blog 12/23-24/12 |
| Business Confidence | Mfg Dec 88.9, Aug 87.5 Construction Dec 79.5, Jul 81.6 Blog 12/30/12 |
| Trade Balance | Balance Oct SA €1321 million versus Sep €1541 |
Links to blog comments in Table IT:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
12/2/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html
Italy’s index of business confidence in manufacturing and construction is provided in Table VG-1. There has been improvement of manufacturing confidence below the historical average of 100 from 87.5 in Aug with reading of 88.5 in Sep, declining marginally to 87.8 in Oct 2012 and improving to 88.5 in Nov 2012 and 88.9 in Dec 2012. Order books improved from minus 42 in May to minus 40 in Aug-Sep with marginal decline to minus 42 in Oct 2012, minus 43 in Nov 2012 and minus 42 in Dec 2012. There is mild improvement in construction with an increase of the index from 81.6 in Aug 2012 to 85.8 in Sep followed by decline to 81.1 in Oct, 79.7 in Nov 2012 and 79.5 in Dec 2012.
Table VG-1, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100
| Dec | Nov | Oct | Sep | Aug | |
| Mfg Confidence | 88.9 | 88.5 | 87.8 | 88.5 | 87.5 |
| Order Books | -42 | -43 | -42 | -40 | -40 |
| Stocks Finished Products | -2 | 0 | 1 | 1 | 2 |
| Production | -5 | -4 | -5 | -6 | -7 |
| Construction Confidence | 79.5 | 79.6 | 81.0 | 85.8 | 81.6 |
| Order Books | -51 | -50 | -48 | -47 | -44 |
| Employment | -18 | -17 | -18 | -5 | -17 |
Mfg: manufacturing
Source: Istituto Nazionale di Statistica
http://www.istat.it/it/archivio/78593
VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.0 percent in 2009 after dropping 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 0.9 percent in 2011. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.7 percent on average between 1948 and 2011, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.3 percent as advanced economies struggle with weak internal demand and world trade.
Table VH-UK, UK, Gross Domestic Product, ∆%
| ∆% on Prior Year | |
| 1998 | 3.5 |
| 1999 | 3.2 |
| 2000 | 4.2 |
| 2001 | 2.9 |
| 2002 | 2.4 |
| 2003 | 3.8 |
| 2004 | 2.9 |
| 2005 | 2.8 |
| 2006 | 2.6 |
| 2007 | 3.6 |
| 2008 | -1.0 |
| 2009 | -4.0 |
| 2010 | 1.8 |
| 2011 | 0.9 |
| Average ∆% per Year | |
| 1948-2011 | 2.7 |
| 1948-1959 | 2.9 |
| 1960-1969 | 3.3 |
| 1970-1979 | 2.5 |
| 1980-1989 | 3.2 |
| 1990-1999 | 2.6 |
| 2000-2011 | 1.7 |
| 2000-2007 | 3.0 |
| 2009-2011 | 1.3 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.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 | Nov month ∆%: 0.2 |
| Output/Input Prices | Output Prices: Nov 12-month NSA ∆%: 2.2; excluding food, petroleum ∆%: 1.4 |
| GDP Growth | IIIQ2012 prior quarter ∆% 0.9; year earlier same quarter ∆%: 0.0 |
| Industrial Production | Oct 2012/Oct 2011 ∆%: Production Industries minus 3.0; Manufacturing minus 2.1 |
| Retail Sales | Nov month ∆%: 0.0 |
| Labor Market | Aug-Oct Unemployment Rate: 7.8%; Claimant Count 4.8%; Earnings Growth 1.8% |
| Trade Balance | Balance Oct minus ₤3644 million |
Links to blog comments in Table UK:
12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html
12/9/12 http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html
The UK Office for National Statistics has revised the national accounts since 1998 (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/impact-of-changes-in-national-accounts-and-economic-commentary-for-q2-2011/index.html). The new data, additions and revisions are analyzed here. Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the third estimate for IIIQ2012 (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html). The UK Office for National Statistics provides a summary of the third estimate (http://www.ons.gov.uk/ons/dcp171778_293832.pdf):
“• UK gross domestic product (GDP) in volume terms increased by 0.9 per cent between the second and third quarter of 2012, revised from the previously estimated increase of 1.0 per cent.
• Output of the production industries rose by 0.7 per cent revised down from the previously estimated 0.9 per cent increase. Manufacturing output rose by 0.7 per cent, revised down from the previously estimated increase of 0.9 per cent.
• Output of the service industries rose by 1.2 per cent, revised down from the previously estimated increase of 1.3 per cent.
• Output of the construction industry fell by 2.5 per cent, revised up from the previously estimated 2.6 per cent fall.
• Household final consumption expenditure increased by 0.4 per cent in volume terms in the latest quarter, revised down from the previously estimated increase of 0.6 per cent.
• In current price terms, compensation of employees rose by 0.7 per cent in the third quarter of 2012, revised down from the previously estimated increase of 1.4 per cent.
• The households' saving ratio was 7.7 per cent in 2012 quarter three, up from 7.4 per cent in the previous quarter.”
Growth in IIIQ2012 interrupted three consecutive quarters of contraction of GDP on the prior quarter from IVQ2011 to IQ2012 with cumulative contraction of 1.0 percent at annual equivalent rate of 1.3 percent {([(1-0.003)(1-0.003)(1-0.004)]4/3 – 1)100 = -1.3%}.
Most advanced economies are underperforming relative to the period before the global recession.
Table VH-1, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%
| IQ | IIQ | IIIQ | IV | |
| 2012 | -0.3 | -0.4 | 0.9 | |
| 2011 | 0.4 | 0.1 | 0.6 | -0.3 |
| 2010 | 0.6 | 0.7 | 0.6 | -0.4 |
| 2009 | -1.5 | -0.2 | 0.4 | 0.4 |
| 2008 | 0.1 | -0.9 | -1.8 | -2.1 |
| 2007 | 1.1 | 1.2 | 1.2 | 0.2 |
| 2006 | 0.5 | 0.3 | 0.2 | 0.9 |
| 2005 | 0.6 | 1.2 | 0.8 | 1.1 |
| 2004 | 0.7 | 0.2 | 0.0 | 0.6 |
| 2003 | 0.6 | 1.2 | 1.2 | 1.2 |
| 2002 | 0.4 | 0.8 | 0.8 | 0.9 |
| 2001 | 1.3 | 0.7 | 0.5 | 0.4 |
| 2000 | 1.0 | 1.4 | 0.3 | 0.2 |
| 1999 | 0.5 | 0.3 | 1.7 | 1.3 |
| 1998 | 0.8 | 0.7 | 0.6 | 0.9 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.6 percent in IVQ2008, 6.1 percent in IQ2009, 5.4 percent in IIQ2009 and 3.3 percent in IIIQ2009. (3) The economy bounced strongly with 2.1 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.5 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.5 percent in IVQ2010 to 1.3 percent in IQ2011, 0.8 percent in IIQ2011, 0.7 percent in IIIQ2011 and 0.9 percent in IVQ2011 but only 0.2 percent in IQ2012, contraction of 0.3 percent in IIQ2012 relative to IQ2011 and stagnation in IIIQ2012. In IQ2012, GDP fell 0.3 percent for a second consecutive quarter and increased 0.2 percent relative to a year earlier. In IIQ2012, GDP fell 0.4 percent relative to IQ2012 and fell 0.3 percent relative to a year earlier. In IIIQ2012, GDP increased 0.9 percent but stagnated relative to the same quarter a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging.
Table VH-2, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%
| IQ | IIQ | IIIQ | IV | |
| 2012 | 0.2 | -0.3 | 0.0 | |
| 2011 | 1.3 | 0.8 | 0.7 | 0.9 |
| 2010 | 1.2 | 2.1 | 2.4 | 1.5 |
| 2009 | -6.1 | -5.4 | -3.3 | -0.9 |
| 2008 | 2.7 | 0.5 | -2.4 | -4.6 |
| 2007 | 2.6 | 3.6 | 4.6 | 3.8 |
| 2006 | 3.7 | 2.7 | 2.1 | 2.0 |
| 2005 | 1.5 | 2.5 | 3.3 | 3.8 |
| 2004 | 4.4 | 3.4 | 2.2 | 1.6 |
| 2003 | 3.3 | 3.6 | 4.0 | 4.3 |
| 2002 | 2.0 | 2.2 | 2.5 | 3.1 |
| 2001 | 3.3 | 2.5 | 2.8 | 2.9 |
| 2000 | 4.4 | 5.6 | 4.1 | 2.9 |
| 1999 | 2.8 | 2.4 | 3.5 | 4.0 |
| 1998 | 4.0 | 3.7 | 3.3 | 3.1 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Growth rates of gross value added (GVA) and components of gross value added in a quarter from the preceding quarter are provided in Table VH-3. The first row of the table provides the weights of components. Growth of GVA in IIIQ2012 resulted from sharp contraction of construction by 2.5 percent with total production increasing revised 0.7 percent and manufacturing revised 0.7 percent while services increased 1.2 percent. Contraction of GVA of 0.4 percent in IIQ2012 resulted from sharp contraction of 2.8 percent of construction with decline of total production by 0.9 percent and of manufacturing by 1.0 percent while services contracted 0.1 percent. Contraction of GVA of 0.3 percent in IQ2012 resulted from sharp contraction of construction by 6.4 percent and contraction of total production by 0.3 percent with manufacturing contracting 0.2 percent while services crawled 0.3 percent. Contraction of GVA of 0.3 percent in IVQ2011 resulted from sharp contraction of 1.3 percent in total production, with manufacturing declining 1.0 percent. Even services fell by 0.2 percent in IVQ2011. Growth of 0.6 percent in IIIQ2011 originated almost entirely in growth by services of 0.8 percent with mild contraction by other components. Growth in 2011 originated mostly in services. GVA contracted 0.5 percent in IVQ2010, 0.3 percent in IVQ2011, 0.2 percent in IQ2012 and 0.4 percent in IIQ2012. All components are negative in IVQ2011 with exception of 0.1 percent for construction and services fell 0.2 percent while all components are negative in IQ2012 with meager growth of services of 0.3 percent and contraction of manufacturing by 0.2. All components are negative in IIQ2012 with output falling 0.9 percent, construction 2.8 percent and services 0.1 percent. In contrast, all components are positive in IIIQ2012 with exception of contraction of construction by 2.5 percent.
Table VH-3, UK, GDP and Gross Value Added by Components, ∆% on Prior Quarter
| GVA | Total | Mfg | CONS | Services | |
| Weights* | 1000 | 156 | 105 | 68 | 770 |
| IIIQ3 | 0.9 | 0.7 | 0.7 | -2.5 | 1.2 |
| IIQ12 | -0.4 | -0.9 | -1.0 | -2.8 | -0.1 |
| IQ12 | -0.2 | -0.3 | -0.2 | -6.4 | 0.3 |
| IVQ11 | -0.3 | -1.3 | -1.0 | 0.1 | -0.2 |
| IIIQ11 | 0.6 | -0.2 | -0.3 | -0.1 | 0.8 |
| IIQ11 | 0.1 | -1.2 | 0.2 | 1.3 | 0.3 |
| IQ11 | 0.5 | -0.1 | 0.7 | 0.0 | 0.6 |
| IVQ10 | -0.5 | 0.1 | 0.5 | -1.8 | -0.4 |
| IIIQ10 | 0.6 | 0.4 | 1.6 | 2.9 | 0.4 |
| IIQ10 | 0.9 | 1.4 | 1.9 | 6.3 | 0.2 |
| IQ10 | 0.4 | 1.1 | 0.8 | 2.3 | 0.2 |
| IV09 | 0.5 | 0.3 | 1.1 | 0.5 | 0.6 |
| III09 | 0.3 | -1.1 | -0.4 | -0.1 | 0.5 |
| II09 | -0.2 | 0.0 | 0.2 | -2.6 | 0.0 |
| I09 | -1.5 | -4.3 | -5.2 | -5.8 | -0.5 |
| IV08 | -2.2 | -4.9 | -5.2 | -5.8 | -1.4 |
| III08 | -1.7 | -1.1 | -1.3 | -3.0 | -1.6 |
| II08 | -0.8 | -1.1 | -1.6 | -2.0 | -0.6 |
| I08 | 0.1 | -0.3 | 0.4 | 1.6 | 0.0 |
Note: GVA: Gross Values Added; CONS: construction’ MFG: manufacturing
*Weights (2009) may not add because of rounding and exclusion of Agriculture, Forestry and Fishing with weight of 6. Output components are valued at basic prices while GDP is valued at market prices. The preliminary estimate places GDP next to gross value added by components because it is the only contribution to change in GDP.
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Growth of UK value added by components on a quarter relative to the prior quarter is provided in Table VH-4. Total production increased 0.7 percent in IIIQ2012 with growth of manufacturing of 0.7 percent. Government and other services grew 1.6 percent. Total production fell 0.9 percent in IIQ2012 with manufacturing falling 1.0 percent and construction dropping 2.8 percent. Total production fell 0.3 percent in IQ2012 with manufacturing declining 0.2 percent while construction fell 6.4 percent and services increased 0.3 percent. Total production fell 1.3 percent in IVQ2011 with manufacturing declining 1.0 percent. Services fell 0.2 percent in IVQ2011 and grew 0.3 percent in IQ2012, reducing the support of economic activity in prior quarters.
VH-4, UK, Quarter on Quarter Growth of Value Added by Output Components, ∆% on Prior Quarter
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Agriculture | 8.5 | -0.1 | -3.3 | -1.2 | -0.9 | -2.0 | 4.2 |
| Total Production | -0.1 | -1.2 | -0.2 | -1.3 | -0.3 | -0.9 | 0.7 |
| Manufacturing | 0.7 | 0.2 | -0.3 | -1.0 | -0.2 | -1.0 | 0.7 |
| Extraction | -4.1 | -7.1 | -1.6 | -1.7 | -3.4 | -3.5 | 2.1 |
| Electricity, gas and air | -4.4 | -3.0 | 2.3 | -4.4 | 1.2 | 4.5 | -2.2 |
| Water & sewerage | 5.6 | -0.9 | 0.3 | 0.2 | 1.2 | -2.6 | 2.6 |
| Construction | 0.0 | 1.3 | -0.1 | 0.1 | -6.4 | -2.8 | -2.5 |
| Total Services | 0.6 | 0.3 | 0.8 | -0.2 | 0.3 | -0.1 | 1.2 |
| Distn, hotels & catering | 0.9 | 0.4 | 0.2 | -0.7 | 0.1 | 0.2 | 1.9 |
| Transport, storage & comms | -0.4 | 0.4 | 1.1 | -1.2 | 1.0 | -1.5 | 0.2 |
| Business services & finance | 0.6 | 0.3 | 1.3 | 0.2 | -0.1 | 0.0 | 0.9 |
| Government & other | 1.0 | 0.2 | 0.3 | 0.2 | 0.7 | 0.2 | 1.6 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
In IIIQ2012, growth of services contributed 1.0 percentage points, as shown in Table VH-5, which is the driver of growth of GDP of 0.9 percent. In IIQ2012, total production deducted 0.1 percentage points with manufacturing deducting 0.1 percentage points, construction deducting 0.2 percentage points and total services deducted 0.1 percentage points. In IQ2012, mining and quarrying (extraction) subtracted 0.1 percentage points and construction deducted 0.5 percentage points with the only positive contribution being 0.2 percentage points by services. Total production subtracted 0.2 percentage points from growth in IVQ2011 with manufacturing subtracting 0.1 percentage points. There were equal subtractions of 0.1 percentage points by utilities and distribution, hotels and catering. Growth in IIIQ2011 originated in contribution of 1.0 percentage points by services of which 0.3 percentage points by business services and finance and 0.4 percentage points by government.
Table VH-5, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Output Components, %
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Agriculture | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total Production | 0.0 | -0.2 | 0.0 | -0.2 | 0.0 | -0.1 | 0.1 |
| Manufacturing | 0.1 | 0.0 | 0.0 | -0.1 | 0.0 | -0.1 | 0.1 |
| Extraction | -0.1 | -0.1 | 0.0 | 0.0 | -0.1 | -0.1 | 0.0 |
| Electricity, gas and air | -0.1 | 0.0 | 0.0 | -0.1 | 0.0 | 0.1 | 0.0 |
| Water & sewerage | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Construction | 0.0 | 0.1 | 0.0 | 0.0 | -0.5 | -0.2 | -0.2 |
| Total Services | 0.5 | 0.2 | 0.6 | -0.1 | 0.2 | -0.1 | 1.0 |
| Distn, hotels & catering | 0.1 | 0.0 | 0.0 | -0.1 | 0.0 | 0.0 | 0.3 |
| Transport, storage & comms | 0.0 | 0.0 | 0.1 | -0.1 | 0.1 | -0.2 | 0.0 |
| Business services & finance | 0.2 | 0.1 | 0.4 | 0.0 | 0.0 | 0.0 | 0.3 |
| Government & other | 0.3 | 0.0 | 0.1 | 0.0 | 0.2 | 0.0 | 0.4 |
Components may not add because of rounding.
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Table VH-6 provides UK growth of value added by output components in a quarter relative to the same quarter a year earlier for 2011 and 2012. There was significant deceleration in growth of total production from 1.9 percent in IQ2011 to minus 2.9 percent in IQ2012, minus 2.7 percent in IIQ2012 and minus 1.8 percent in IIIQ2012. Manufacturing growth fell from 4.7 percent in IQ2011 to minus 2.4 percent in IIQ2012 and minus 1.5 percent in IIIQ2012. Construction growth fell from 7.4 percent in IQ2011 to minus 9.1 percent in IIQ2012 and minus 11.2 percent in IIIQ2012. Total services grew at positive rates in the range from 0.8 percent in IIQ2012 to 1.6 percent in IVQ2011. Growth of services supports economic activity in the United Kingdom.
Table VH-6, UK, Growth of Value Added by Output Components, ∆% on Same Quarter of Prior Year
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Agriculture | -4.8 | -3.0 | -4.3 | 3.6 | -5.4 | -7.2 | 0.1 |
| Total Production | 1.9 | -0.7 | -1.3 | -2.7 | -2.9 | -2.7 | -1.8 |
| Manufacturing | 4.7 | 2.9 | 1.0 | -0.4 | -1.3 | -2.4 | -1.5 |
| Extraction | -10.6 | -17.1 | -16.6 | -13.8 | -13.2 | -9.8 | -6.4 |
| Electricity, gas and air | -2.7 | -5.1 | 0.8 | -9.2 | -3.9 | 3.4 | -1.1 |
| Water & sewerage | 7.1 | 3.9 | 3.6 | 5.2 | 0.8 | -0.9 | 1.3 |
| Construction | 7.4 | 2.3 | -0.7 | 1.2 | -5.3 | -9.1 | -11.2 |
| Total Services | 0.9 | 1.0 | 1.4 | 1.6 | 1.2 | 0.8 | 1.3 |
| Distn, hotels & catering | 0.8 | 1.0 | 0.7 | 0.8 | -0.1 | -0.3 | 1.5 |
| Transport, storage & comms | 1.1 | 1.0 | 1.2 | -0.1 | 1.3 | -0.6 | -1.4 |
| Business services & finance | 1.3 | 1.2 | 2.1 | 2.4 | 1.7 | 1.4 | 0.9 |
| Government & other | 0.4 | 0.8 | 1.0 | 1.8 | 1.5 | 1.5 | 2.8 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Total production subtracted from value added by output components in a quarter relative to the same quarter in all quarters from IIQ2011 to IIIQ2012, as shown in Table VH-7. Manufacturing deducted 0.1 percentage points in IIIQ2012 and deducted in all quarters from IVQ2011 to IIIQ2012 with exception of zero contribution in IVQ2011. Total services added 1.0 percentage points in IIIQ2012 and contributed in all quarters from IQ2011 to IIIQ2012 in the range of 0.6 to 1.2 percentage points. The concern is with the decline of GDP at minus 0.3 percent in the final quarter of 2011, 0.3 percent in the first quarter of 2012 and 0.4 percent in the second quarter of 2012.
VH-7, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Output Components, %
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Agriculture | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Total Production | 0.3 | -0.1 | -0.2 | -0.4 | -0.5 | -0.4 | -0.3 |
| Manufacturing | 0.5 | 0.3 | 0.1 | 0.0 | -0.1 | -0.3 | -0.2 |
| Extraction | -0.2 | -0.4 | -0.4 | -0.3 | -0.3 | -0.2 | -0.1 |
| Electricity, gas and air | 0.0 | -0.1 | 0.0 | -0.1 | -0.1 | 0.0 | 0.0 |
| Water & sewerage | 0.1 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 |
| Construction | 0.5 | 0.2 | -0.1 | 0.1 | -0.4 | -0.7 | -0.8 |
| Total Services | 0.7 | 0.8 | 1.1 | 1.2 | 0.9 | 0.6 | 1.0 |
| Distn, hotels & catering | 0.1 | 0.1 | 0.1 | 0.1 | 0.0 | 0.0 | 0.2 |
| Transport, storage & comms | 0.1 | 0.1 | 0.1 | 0.0 | 0.1 | -0.1 | -0.1 |
| Business services & finance | 0.4 | 0.3 | 0.6 | 0.7 | 0.5 | 0.4 | 0.3 |
| Government & other | 0.1 | 0.2 | 0.2 | 0.4 | 0.3 | 0.3 | 0.6 |
Components may not add because of rounding.
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Quarter-on-quarter growth of value added by expenditure components is in Table VH-8. Household final consumption expenditure grew 0.4 percent in IIIQ2012 relative to IIQ2012 and central government consumption at 0.8 percent. Gross capital formation increased 0.5 percent in IIIQ2012 but gross fixed capital formation (GFCF) decreased 0.2 percent. Business investment has been growing at high rates in the range from 1.4 percent in IIQ2012 to 4.6 percent in IIQ2011 with two declines of 2.0 percent in IQ2011 and 2.7 percent in IQ2012 but growth of 3.8 percent in IIIQ2012. Exports grew 1.2 percent in IIIQ2012 while imports fell 0.4 percent.
VH-8, UK, Quarter on Quarter Growth of Value Added by Expenditure Components, ∆% on Prior Quarter
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Household final consumption expenditure | -1.3 | -0.3 | -0.2 | 0.2 | 0.5 | 0.2 | 0.4 |
| NPISH final consumption expenditure | -0.1 | 5.6 | -1.9 | 0.1 | 0.1 | 6.7 | -1.6 |
| General government final consumption expenditure | 0.0 | 0.4 | 0.1 | -0.1 | 3.2 | -1.1 | 0.8 |
| Gross capital formation | -1.9 | 3.7 | 4.3 | -4.7 | -5.0 | 3.9 | 0.5 |
| - of which GFCF | -2.0 | -0.4 | 0.3 | -0.4 | 0.6 | -0.5 | -0.2 |
| - of which Bus. Investment | -2.0 | 4.6 | 2.3 | 2.6 | -2.7 | 1.4 | 3.8 |
| Exports | 1.4 | -1.9 | 0.0 | 2.9 | -1.7 | -1.1 | 1.2 |
| less Imports | -2.6 | -0.2 | 0.1 | 1.6 | -0.1 | 1.7 | -0.4 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Table VH-9 provides contributions to value added by expenditure components in a quarter relative to the prior quarter. In IIIQ2012, household final consumption expenditure contributed 0.2 percentage points to growth, business investment 0.3 percentage points, exports 0.4 percentage points and net trade 0.5 percentage points. Net trade deducted 0.9 percentage points in IIQ2012 and deducted 0.5 percentage points in IQ2012. Gross fixed capital formation (GFCF) did not add percentage points in IIIQ2012.
Table VH-9, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Expenditure Components, %
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Household final consumption expenditure | -0.8 | -0.2 | -0.1 | 0.1 | 0.3 | 0.1 | 0.2 |
| NPISH final consumption expenditure | 0.0 | 0.1 | -0.1 | 0.0 | 0.0 | 0.2 | 0.0 |
| General government final consumption expenditure | 0.0 | 0.1 | 0.0 | 0.0 | 0.7 | -0.3 | 0.2 |
| Gross capital formation | -0.3 | 0.5 | 0.7 | -0.7 | -0.7 | 0.6 | 0.1 |
| - of which GFCF | -0.3 | -0.1 | 0.0 | -0.1 | 0.1 | -0.1 | 0.0 |
| - of which Bus. Investment | -0.2 | 0.4 | 0.2 | 0.2 | -0.2 | 0.1 | 0.3 |
| Exports | 0.4 | -0.6 | 0.0 | 0.9 | -0.5 | -0.4 | 0.4 |
| less Imports | -0.9 | -0.1 | 0.0 | 0.5 | 0.0 | 0.5 | -0.1 |
| Net trade | 1.3 | -0.5 | 0.0 | 0.4 | -0.5 | -0.9 | 0.5 |
Components may not add because of rounding.
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Table VH-10 provides UK growth of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption grew 1.3 percent in IIIQ2012 after growing 0.7 percent in IIQ2012 and 0.2 percent in IQ2011. Final consumption expenditure by nonprofit institutions serving households grew 5.1 percent in IIIQ2012 and has been growing at high rates. General government final consumption expenditure grew 2.8 percent in IIIQ2012 and increased strongly in prior quarters. Gross fixed capital formation (GFCF) fell 0.1 percent in IIQ2012 and 0.7 percent IIIQ2012. Business investment grew 5.1 percent in IIIQ2012 and at high rates in prior quarter. Exports grew 1.3 percent in IIIQ2012 with imports growing 2.8 percent.
Table VH-10, UK, Growth of Value Added by Expenditure Components, ∆% on Same Quarter of Prior Year
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Household final consumption expenditure | -0.4 | -1.6 | -1.5 | -1.6 | 0.2 | 0.7 | 1.3 |
| NPISH final consumption expenditure | 5.8 | 8.3 | 4.5 | 3.7 | 3.8 | 4.9 | 5.1 |
| General government final consumption expenditure | -0.7 | -0.4 | 0.4 | 0.4 | 3.6 | 2.1 | 2.8 |
| Gross capital formation | -2.2 | 2.7 | -1.3 | 1.1 | -2.1 | -1.9 | -5.4 |
| - of which GFCF | -3.7 | -1.4 | -3.8 | -2.5 | 0.0 | -0.1 | -0.7 |
| - of which Bus. Investment | -4.8 | 5.7 | 4.4 | 7.7 | 6.9 | 3.6 | 5.1 |
| Exports | 9.9 | 3.7 | 2.7 | 2.3 | -0.8 | 0.0 | 1.3 |
| less Imports | 3.8 | 0.7 | -1.2 | -1.2 | 1.4 | 3.3 | 2.8 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Table VH-11 provides contribution of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure contributed 0.8 percentage points in IIIQ2012 and government final consumption expenditure 0.6 percentage points. The contribution of gross fixed capital formation (GFCF) was nil in IIQ2012 and deducted 0.1 percentage points in IIIQ2012. Business investment contributed 0.4 percentage points in IIIQ2012 and has contributed in all quarter from IIQ2011 to IIIQ2012. Net trade deducted 0.5 percentage points in IIIQ2012, 1.0 percentage points in IIQ2012 and 0.7 percentage points in IQ2012.
VH-11, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Expenditure Components, %
| Component | 2011 Q1 | 2011 Q2 | 2011 Q3 | 2011 Q4 | 2012 Q1 | 2012 Q2 | 2012 Q3 |
| Household final consumption expenditure | -0.2 | -1.0 | -0.9 | -1.0 | 0.1 | 0.4 | 0.8 |
| NPISH final consumption expenditure | 0.1 | 0.2 | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 |
| General government final consumption expenditure | -0.2 | -0.1 | 0.1 | 0.1 | 0.8 | 0.5 | 0.6 |
| Gross capital formation | -0.3 | 0.4 | -0.2 | 0.2 | -0.3 | -0.3 | -0.9 |
| - of which GFCF | -0.6 | -0.2 | -0.6 | -0.4 | 0.0 | 0.0 | -0.1 |
| - of which Bus. Investment | -0.4 | 0.4 | 0.4 | 0.6 | 0.5 | 0.3 | 0.4 |
| Exports | 2.9 | 1.1 | 0.8 | 0.7 | -0.2 | 0.0 | 0.4 |
| less Imports | 1.2 | 0.2 | -0.4 | -0.4 | 0.4 | 1.0 | 0.9 |
| Net trade | 1.7 | 0.9 | 1.2 | 1.1 | -0.7 | -1.0 | -0.5 |
Components may not add because of rounding.
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Table VH-12 provides growth of value added by expenditure components in a year relative to the prior year. Household final consumption grew 2.8 percent in 2007, contracted 1.6 percent in 2008 and 3.0 percent in 2009, recovered with growth of 1.3 percent in 2010 and fell 1.3 percent in 2011. Gross fixed capital formation grew 8.2 percent in 2007 but fell 4.6 percent in 2008 and 13.7 percent in 2010, recovering with 10.0 percent in 2010 but declining by 2.9 percent in 2011. Business investment increased 10.9 percent in 2007, falling 14.4 percent in 2009 but growing 3.2 percent in 2011. Trade was adversely affected by the global recession with exports falling 8.2 percent in 2009 and imports 11.0 percent. In 2011, UK exports grew 4.6 percent while imports increased 0.5 percent.
Table VH-12, UK, Growth of Value Added by Expenditure Components, ∆% on Prior Year
| Component | 2007 | 2008 | 2009 | 2010 | 2011 |
| Household final consumption expenditure | 2.8 | -1.6 | -3.0 | 1.3 | -1.3 |
| NPISH final consumption expenditure | 0.2 | -2.2 | -4.6 | 2.1 | 5.5 |
| General government final consumption expenditure | 0.6 | 1.6 | 0.8 | 0.4 | -0.1 |
| Gross capital formation | 11.0 | -6.2 | -19.2 | 10.0 | 0.0 |
| - of which GFCF | 8.2 | -4.6 | -13.7 | 3.5 | -2.9 |
| - of which Bus. Investment | 10.9 | -0.2 | -14.4 | -0.4 | 3.2 |
| Exports | -2.5 | 1.2 | -8.2 | 6.4 | 4.6 |
| less Imports | -1.7 | -1.8 | -11.0 | 8.0 | 0.5 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
Contributions of value added by expenditure components in a year relative to the prior year are in Table VH-13. Household final consumption added 1.8 percentage points in 2007 but deducted 0.8 percentage points in 2011. The contribution of gross fixed capital formation (GFCF) fell from 1.3 percentage points in 2007 to deduction of 0.4 percentage points in 2011. Net trade added 1.2 percentage points in 2011 and added 0.9 percentage points in 2008 and 1.1 percentage points in 2009 during the global recession.
VH-13, UK, Contribution to Growth on Prior Year of Value Added by Expenditure Components, %
| Component | 2007 | 2008 | 2009 | 2010 | 2011 |
| Household final consumption expenditure | 1.8 | -1.0 | -1.8 | 0.8 | -0.8 |
| NPISH final consumption expenditure | 0.0 | -0.1 | -0.1 | 0.1 | 0.1 |
| General government final consumption expenditure | 0.1 | 0.4 | 0.2 | 0.1 | 0.0 |
| Gross capital formation | 1.8 | -1.1 | -3.2 | 1.4 | 0.0 |
| - of which GFCF | 1.3 | -0.8 | -2.3 | 0.5 | -0.4 |
| - of which Bus. Investment | 0.9 | 0.0 | -1.3 | 0.0 | 0.3 |
| Exports | -0.8 | 0.4 | -2.5 | 1.8 | 1.4 |
| less Imports | -0.6 | -0.6 | -3.6 | 2.4 | 0.2 |
| Net trade | -0.2 | 0.9 | 1.1 | -0.6 | 1.2 |
Components may not add because of rounding.
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html
© Carlos M. Pelaez, 2010, 2011, 2012
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