Peaking Valuation of Risk Financial Assets, Budget and Balance of Payments Deficits Threatening Risk Premium on Unsustainable United States Government Debt, World Financial Turbulence and Economic Slowdown with Global Recession Risk: Part II

 

Peaking Valuation of Risk Financial Assets, Budget and Balance of Payments Deficits Threatening Risk Premium on Unsustainable United States Government Debt, World Financial Turbulence and Economic Slowdown with Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2010, 2011, 2012

Executive Summary

IA United States International Trade

IA1 United States International Trade Deficit and Fiscal Imbalance

IA2 Import Export Prices

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

IIA Peaking Valuation of Risk Financial Assets since 2006

IIB Budget Deficits Threatening Risk Premium on Unsustainable United States Government Debt

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 the Debt Crisis of the 1980s

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	2.5	-1.9
UK	0.0	2.7* RPI 3.0	2.2* output 1.4** input -0.3*	7.8
Euro Zone	-0.6	2.2	2.1	11.8
Germany	0.9	1.9	1.4	5.4
France	0.0	1.6	1.9	10.5
Nether-lands	-1.4	3.2	4.0	5.6
Finland	-1.1	3.2	2.3	7.9
Belgium	-0.3	2.2	5.3	7.4
Portugal	-3.4	1.9	3.8	16.3
Ireland	-0.5	1.6	2.8	14.6
Italy	-2.4	2.6	2.2	11.1
Greece	-7.2	0.4	2.5	NA
Spain	-1.6	3.0	2.8	26.6

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 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). 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 at http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html 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, 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: 7.8 percent in the US but 18.2 percent for unemployment/underemployment or job stress of 29.5 million (see Table I-4 at http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/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, 2.5 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/2013/01/thirty-million-unemployed-or.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 (Section I at http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html and earlier 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(1.0173^1/4]^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 Dec was released on Fri Jan 4, 2013 (http://www.bls.gov/ces/) and analyzed in this blog (http://cmpassocregulationblog.blogspot.com/2013/01/thirty-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 Tendency
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  Sep PR	2.3 to 3.0 2.5 to 3.0	7.4 to 7.7 7.6 to 7.9	1.3 to 2.0 1.6 to 2.0	1.6 to 1.9 1.7 to 2.0
2014  Sep PR	3.0 to 3.5 3.0 to 3.8	6.8 to 7.3 6.7 to 7.3	1.5 to 2.0 1.6 to 2.0	1.6 to 2.0 1.8 to 2.0
2015 Sep	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 Sep PR	1.6 to 2.0 1.6 to 2.0	7.7 to 8.0 8.0 to 8.3	1.6 to 1.8 1.5 to 1.9	1.6 to 1.8 1.6 to 2.0
2013 Sep PR	2.0 to 3.2 2.3 to 3.5	6.9 to 7.8 7.0 to 8.0	1.3 to 2.0 1.5 to 2.1	1.5 to 2.0 1.6 to 2.0
2014 Sep PR	2.8 to 4.0 2.7 to 4.1	6.1 to 7.4 6.3 to 7.5	1.4 to 2.2 1.6 to 2.2	1.5 to 2.0 1.6 to 2.2
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

China is experiencing similar inflation behavior as the advanced economies in prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices recently as in Dec 2012 and in declining prices relative to a year earlier. As shown in Table IV-5, inflation of the price indexes for industry in Dec 2012 is minus 0.1 percent; 12-month inflation is minus 1.9 percent in Dec; and inflation in Jan-Dec 2012 relative to Jan-Dec 2011 is minus 1.7 percent. Inflation of segments in Dec 2012 in China is provided in Table IV-5 in column “Month Dec ∆%.” There were decreases of prices of mining & quarrying of 0.1 percent in Dec but decrease of 6.1 percent in 12 months. Prices of consumer goods increased 0.1 percent in Dec and increased 0.5 percent in 12 months. Prices of inputs in the purchaser price index decreased 0.1 percent in Dec and declined 2.4 percent in 12 months. Fuel and power decreased 0.3 percent in Dec and declined 2.5 percent in 12 months. An important category of inputs for exports is textile raw materials, increasing 0.1 percent in Dec and declining 1.5 percent in 12 months.

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

	Month     Dec ∆%	12-Month Dec ∆%	Jan-Dec 2012/Jan-Dec 2011 ∆%
I Producer Price Indexes	-0.1	-1.9	-1.7
Means of Production	-0.1	-2.7	-2.5
Mining & Quarrying	-0.1	-6.1	-2.4
Raw Materials	-0.2	-2.4	-2.0
Processing	-0.1	-2.5	-2.7
Consumer Goods	0.1	0.5	0.8
Food	0.3	0.9	1.4
Clothing	0.1	1.3	2.1
Daily Use Articles	0.0	0.8	0.9
Durable Consumer Goods	0.0	-0.8	-0.9
II Purchaser Price Indexes	-0.1	-2.4	-1.8
Fuel and Power	-0.3	-2.5	0.9
Ferrous Metals	0.0	-8.4	-7.1
Nonferrous Metals	0.1	-2.5	-5.5
Raw Chemical Materials	-0.4	-3.7	-3.9
Wood & Pulp	-0.2	-0.8	0.1
Building Materials	-0.2	-1.4	-0.3
Other Industrial Raw Materials	-0.1	-1.1	-1.0
Agricultural	0.5	1.6	0.2
Textile Raw Materials	0.1	-1.5	-0.9

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

China’s producer price inflation follows waves similar to those around the world but with declining trend since May 2012, as shown in Table IV-9. In the first wave, annual equivalent inflation was 6.4 percent in Jan-Jun 2011, driven by carry trades from zero interest rates to commodity futures. In the second wave, risk aversion unwound carry trades, resulting in annual equivalent inflation of minus 3.1 percent in Jul-Nov 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 2.4 percent in Dec 2011-Jan 2012. In the fourth wave, new carry trades resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. In the fifth wave, annual equivalent is minus 5.8 percent in May-Sep 2012. There are declining producer prices in China in Aug-Sep in contrast with increases worldwide. In a sixth wave, producer prices increased 0.2 percent in Oct 2012, which is equivalent to 2.4 percent in a year. In an eighth wave, annual equivalent inflation was minus 1.2 percent in Nov-Dec 2012.

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

	12-Month ∆%	Month ∆%
Dec 2012	-1.9	-0.1
Nov	-2.2	-0.1
AE ∆% Nov-Dec		-1.2
Oct	-2.8	0.2
AE ∆% Oct		2.4
Sep	-3.6	-0.1
Aug	-3.5	-0.5
Jul	-2.9	-0.8
Jun	-2.1	-0.7
May	-1.4	-0.4
AE ∆% May-Sep		-5.8
Apr	-0.7	0.2
Mar	-0.3	0.3
Feb	0.0	0.1
AE ∆% Feb-Apr		2.4
Jan	0.7	-0.1
Dec 2011	1.7	-0.3
AE ∆% Dec-Jan		-2.4
Nov	2.7	-0.7
Oct	5.0	-0.7
Sep	6.5	0.0
Aug	7.3	0.1
Jul	7.5	0.0
AE ∆% Jul-Nov		-3.1
Jun	7.1	0.0
May	6.8	0.3
Apr	6.8	0.5
Mar	7.3	0.6
Feb	7.2	0.8
Jan	6.6	0.9
AE ∆% Jan-Jun		6.4
Dec 2010	5.9	0.7

AE: Annual Equivalent

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

Chart IV-1 of the National Bureau of Statistics of China provides monthly and 12-month rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct, Nov, Dec 2011, Jan, Mar, Apr, May, Jun, Jul, Aug, Sep, Nov and Dec 2012 pulled down the 12-month rates to 5.0 percent in Oct 2011, 2.7 percent in Nov, 1.7 percent in Dec, 0.7 percent in Jan 2012, 0.0 percent in Feb, minus 0.3 percent in Mar, minus 0.7 percent in Apr, minus 1.4 percent in May, 2.1 in Jun, minus 2.9 percent in Jul, minus 3.5 percent in Aug, minus 3.6 percent in Sep. The increase of 0.2 percent in Oct 2012 pulled up the 12-month rate to minus 2.8 percent and the rate eased to minus 2.2 percent in Nov 2012 and minus 1.9 percent in Dec 2012.

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

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

Chart IV-2 of the National Bureau of Statistics of China provides monthly and 12-month inflation of the purchaser product indices for the industrial sector. Decreasing monthly inflation with four successive contractions from Oct 2011 to Jan 2012 and May-Aug 2012 pulled down the 12-month rate to minus 4.1 percent in Aug and Sep. Consecutive increases of 0.1 percent in Sep and Oct 2012 raised the 12-month rate to minus 3.3 percent in Oct 2012. The rate eased to minus 2.8 in Nov 2012 with decrease of 0.2 percent in Nov 2012 and minus 2.4 percent in Dec 2012 with monthly decrease of 0.1 percent.

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

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

China is highly conscious of food price inflation because of its high weight in the basket of consumption of the population. Consumer price inflation in China in Dec was 0.8 percent and 2.5 percent in 12 months, as shown in Table IV-7. Food prices increased 2.4 percent in Dec, increasing 4.2 percent in 12 months and 4.8 percent in Jan-Dec 2012 relative to Jan-Dec 2011 because of inclement winter weather. Another area of concern is housing inflation which was 0.1 in Dec but increased 3.0 percent in 12 months. Prices of services changed 0.0 percent in Dec and gained 2.5 percent in 12 months.

Table IV-7, China, Consumer Price Index

2012	Dec 12 Month   ∆%	Dec 12 Month  ∆%	Jan-Dec 2012   ∆% Jan-Dec 2011
Consumer Prices	0.8	2.5	2.6
Urban	0.8	2.5	2.7
Rural	0.9	2.5	2.5
Food	2.4	4.2	4.8
Non-food	0.0	1.7	1.6
Consumer Goods	1.1	2.5	2.9
Services	0.0	2.5	2.0
Commodity Categories:
Food	2.4	4.2	4.8
Tobacco, Liquor	0.2	1.5	2.9
Clothing	0.0	1.9	3.1
Household	0.1	1.7	1.9
Healthcare & Personal Articles	0.0	1.7	2.0
Transportation & Communication	-0.2	0.0	-0.1
Recreation, Education, Culture & Services	-0.2	1.1	0.5
Residence	0.1	3.0	2.1

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

Month and 12-month rates of change of consumer prices are provided in Table IV-11. There are waves of consumer price inflation in China similar to those around the world (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). In the first wave, consumer prices increased at the annual equivalent rate of 8.3 percent in Jan-Mar 2011, driven by commodity price increases resulting from unconventional monetary policy of zero interest rates. In the second wave, risk aversion unwound carry trades with annual equivalent inflation falling to the rate of 2.0 percent in Apr-Jun 2011. In the third wave, inflation returned at 2.9 percent with renewed interest in commodity exposures in Jul-Nov 2011. In the fourth wave, inflation returned at a high 5.8 percent annual equivalent in Dec 2011 to Mar 2012. In the fifth wave, annual equivalent inflation was minus 3.9 percent in Apr to Jun 2012. In the sixth wave, annual equivalent inflation rose to 4.1 percent in Jul-Sep 2012. In the seventh wave, inflation was minus 1.2 percent annual equivalent in Oct 2012 and 0.0 percent in Oct-Nov 2012. In the eighth wave, annual equivalent inflation was 5.5 percent in Nov-Dec 2012 primarily because of winter weather. Inflation volatility originating in unconventional monetary policy clouds investment and consumption decisions by business and households.

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

	Month ∆%	12-Month ∆%
Dec 2012	0.8	2.5
Nov	0.1	2.0
AE ∆% Nov-Dec	5.5
Oct	-0.1	1.7
AE ∆% Oct-Nov	0.0
Sep	0.3	1.9
Aug	0.6	2.0
Jul	0.1	1.8
AE ∆% Jul-Sep	4.1
Jun	-0.6	2.2
May	-0.3	3.0
Apr	-0.1	3.4
AE ∆% Apr to Jun	-3.9
Mar	0.2	3.6
Feb	-0.1	3.2
Jan	1.5	4.5
Dec 2011	0.3	4.1
AE ∆% Dec to Mar	5.8
Nov	-0.2	4.2
Oct	0.1	5.5
Sep	0.5	6.1
Aug	0.3	6.2
Jul	0.5	6.5
AE ∆% Jul to Nov	2.9
Jun	0.3	6.4
May	0.1	5.5
Apr	0.1	5.3
AE ∆% Apr to Jun	2.0	2.0
Mar	-0.2	5.4
Feb	1.2	4.9
Jan	1.0	4.9
AE ∆% Jan to Mar	8.3
Dec 2010	0.5	4.6

AE: Annual Equivalent

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

Chart IV-3 of the National Bureau of Statistics of China provides monthly and 12-month rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates. Consumer prices fell 0.2 percent in Nov 2011 after increasing only 0.1 percent in Oct but increased 0.3 percent in Dec and a high 1.5 percent in Jan 2012, declining 0.1 percent in Feb, rising 0.2 percent in Mar and declining 0.1 percent in Apr, 0.3 percent in May and 0.6 percent in Jun 2012 but increasing 0.1 percent in Jul, 0.6 percent in Aug 2012 and 0.3 percent in Sep 2012. Consumer prices fell 0.1 percent in Oct 2012. The decline of 0.1 percent in Feb 2012 pulled down the 12-month rate to 3.2 percent, which bounced back to 3.6 percent in Mar with the monthly increase of 0.2 percent and fell to 2.2 percent in Jun with increasing pace of monthly decline from Apr to Jun 2012. Even with increase of 0.1 percent in Jul 2012, consumer price inflation in 12 months fell to 1.8 percent in Jul 2012 but bounced back to 2.0 percent with increase of 0.6 percent in Aug. In Sep, increase of 0.3 percent still maintained 12-month inflation at 1.9 percent. The decline of 0.1 percent in Oct 2012 pulled down the 12-month rate to 1.7 percent, which is the lowest in Chart IV-3. Increase of 0.1 percent in Nov 2012 pulled up the 12-month rate to 2.0 percent. Abnormal increase of 0.8 percent in Dec 2012 because of winter weather pulled up the 12-month rate to 2.5 percent.

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

Source: National Bureau of Statistics of China

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

The producer price index of the euro zone decreased 0.2 percent in Dec 2012, increased 0.1 percent in Oct 2012, 0.2 percent in Sep, 0.9 percent in Sep and 0.3 percent in Aug, as shown in Table IV-9. In Jan-Mar 2012, producer prices increased cumulatively 2.0 percent or at annual equivalent rate of 8.3 percent. Energy inflation has oscillated with the shocks of risk aversion that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices fell 0.7 percent in Nov 2012 and fell 0.3 percent in Oct 2012 after 0.0 percent in Sep 2012, increased 2.6 percent in Aug, and 1.3 percent in Jul 2012 or at the annual equivalent rate of 17.2 percent in the quarter Jul-Sep 2012 and at 26.8 percent in Jul-Aug 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.4 percent. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Prices of capital goods have barely moved. Prices of durable consumer goods accelerated at annual equivalent rate of 3.3 percent in Jan-Mar 2012 but were flat in every month from Apr to Jun 2012, increasing 0.1 percent in both Aug and Jul 2012 but then remained unchanged in Sep 2012, increasing at 0.1 percent in Oct 2012 and Nov 2012. Purchasing managers’ indexes worldwide reflect increasing prices of inputs for business while sales prices are stagnant or declining. Unconventional monetary policy causes uncertainty in business decisions with shocks of declining net revenue margins during worldwide inflation waves (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html).

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

	Nov  2012	Oct 2012	Sep  2012	Aug 2012	Jul 2012	Jun 2012	May  2012
Industry ex Construction	-0.2	0.1	0.2	0.9	0.3	-0.5	-0.5
Industry ex Construction & Energy	-0.1	0.1	0.3	0.3	-0.1	-0.1	0.0
Intermediate Goods	-0.2	0.0	0.4	0.5	-0.3	-0.3	0.1
Energy	-0.7	-0.3	0.0	2.6	1.4	-1.8	-1.5
Capital Goods	0.1	0.1	0.0	0.0	0.0	0.1	0.1
Durable Consumer Goods	0.1	0.1	0.0	0.1	0.1	0.0	0.0
Nondurable Consumer Goods	0.1	0.2	0.4	0.4	0.2	0.1	-0.1

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

Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-10. The 12-month percentage change of industrial prices excluding construction fell from 4.3 percent in Dec 2011 to 1.6 percent in Jul 2012 but increased to 2.7 percent in both Aug and Sep 2012, falling to 2.6 percent in Oct 2012 and 2.1 percent in Nov 2012. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.5 percent in the 12 months ending in Jul 2012, increasing to 8.0 percent in Aug 2012 and 7.0 percent in Sep 2012 but falling to 5.9 percent in Oct 2012 and 4.1 percent in Nov 2012. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion. Business net revenue suffers wide oscillation preventing sound calculation of risk/returns and capital budgeting.

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

	Nov  2012	Oct 2012	Sep 2012	Aug 2012	Jul  2012	Jun  2012	May   2012
Industry ex Construction	2.1	2.6	2.7	2.7	1.6	1.8	2.3
Industry ex Construction & Energy	1.5	1.5	1.3	1.0	0.8	0.9	1.1
Intermediate Goods	1.4	1.2	0.8	0.3	-0.2	0.1	0.5
Energy	4.1	5.9	7.0	8.0	4.5	4.7	6.2
Capital Goods	1.0	0.9	0.9	0.9	1.0	1.1	1.2
Durable Consumer Goods	1.1	1.2	1.3	1.7	1.8	1.9	1.9
Nondurable Consumer Goods	2.3	2.4	2.4	2.2	2.0	1.9	1.9

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

Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html), as shown in Table IV-11. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 12.0 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent producer price inflation declined at minus 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.0 percent. In the third wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.8 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 8.3 percent with a high annual equivalent rate of 9.4 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal of commodity carry trades with equivalent annual inflation of minus 3.9 percent in Apr-Jun 2012. In the seventh wave, annual equivalent inflation jumped to 7.4 percent in Jul-Aug 2012. In the eighth wave, annual equivalent inflation retreated to 1.8 percent in Sep-Oct 2012. In the ninth wave, annual equivalent inflation was minus 2.4 percent in Nov 2012. The bottom part of Table IV-7 provides 12-month percentage changes from 1999 to 2010. The final row of Table IV-10 provides the average annual rate of producer-price inflation in the euro area at 2.6 percent in Dec from 1999 to 2011.

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

	Month ∆%	12-Month ∆%
Nov 2012	-0.2	2.1
AE ∆% Nov	-2.4
Oct	0.1	2.6
Sep	0.2	2.7
AE ∆% Sep-Oct	1.8
Aug	0.9	2.7
Jul	0.3	1.6
AE ∆% Jul-Aug	7.4
Jun	-0.5	1.8
May	-0.5	2.3
Apr	0.0	2.6
AE ∆% Apr-Jun	-3.9
Mar	0.5	3.5
Feb	0.6	3.7
Jan	0.9	3.9
AE ∆% Jan-Mar	8.3
Dec 2011	-0.2	4.3
Nov	0.3	5.4
Oct	0.1	5.5
AE ∆% Oct-Dec	0.8
Sep	0.3	5.8
Aug	-0.2	5.8
Jul	0.4	6.1
AE ∆% Jul-Sep	2.0
Jun	0.0	5.9
May	-0.2	6.2
AE ∆% May-Jun	-1.2
Apr	0.9	6.8
Mar	0.8	6.8
Feb	0.8	6.6
Jan	1.3	5.9
AE ∆% Jan-Apr	12.0
Dec 2010	0.8	5.4
Dec 2009		-2.9
Dec 2008		1.1
Dec 2007		4.7
Dec 2006		3.8
Dec 2005		4.5
Dec 2004		3.8
Dec 2003		0.8
Dec 2002		1.5
Dec 2001		-0.6
Dec 2000		4.6
Dec 1999		2.6
Average ∆% 1999-2011		2.6

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

Table IV-12 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 0.8 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 2.7 percent in Aug-Nov 2011 with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.0 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012, 2.4 percent in Aug-Sep 2012 and 2.4 percent in Aug-Oct 2012. In the eighth wave, annual equivalent inflation was minus 2.4 percent in Nov 2012. In the ninth wave, annual equivalent inflation was 3.7 percent in Dec 2012.

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

	Month ∆%	12-Month ∆%
Dec 2012	0.3	1.3
AE ∆% Nov	3.7
Nov	-0.2	1.4
AE ∆% Nov	-2.4
Oct	0.2	1.9
Sep	-0.3	1.9
Aug	0.7	2.1
AE ∆% Aug-Oct	2.4
Jul	-0.4	1.9
Jun	0.0	1.9
May	-0.1	2.0
AE ∆% May-Jul	-2.0
Apr	0.1	2.1
Mar	0.8	2.3
Feb	0.4	2.3
AE ∆% Feb-Apr	5.3
Jan	-0.4	2.3
Dec 2011	0.4	2.5
AE ∆% Dec-Jan	0.0
Nov	0.3	2.5
Oct	0.2	2.3
Sep	-0.1	2.2
Aug	0.5	2.2
AE ∆% Aug-Nov	2.7
Jul	-0.4	1.9
Jun	0.1	2.1
May	0.1	2.0
AE ∆% May-Jul	-0.8
Apr	0.3	2.1
Mar	0.8	2.0
Feb	0.5	1.7
Jan	-0.2	1.8
AE ∆% Jan-Apr	4.3
Dec 2010	0.5	1.8
Annual
2011		2.1
2010		1.5
2009		0.1
2008		2.8
2007		1.5
2006		1.6
2005		1.8
2004		2.1
2003		2.1
2002		1.9
2001		1.7
2000		1.7
1999		0.5
1998		0.7
1997		1.2
1996		2.0
1995		1.8
1994		1.6
1993		2.1
1992		2.4
1991		3.2

AE: Annual Equivalent

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130110

Table IV-12 provides in the lower panel the estimates of inflation by the Institut National de la Statistique et des Études Économiques (INSEE) for the years from 1991 to 2011. Inflation has been relatively moderate in France. The rise of inflation to 2.8 percent in 2008 was caused by the commodity price shock as investment funds shifted from other risk financial assets into carry trades driven by interest rates falling toward zero. INSEE estimates 2011 inflation at 2.1 percent.

Table IV-13 provides consumer price inflation in France and of various items in Dec 2012 and in the 12 months ending in Dec 2012. Inflation of all items was 0.3 percent in Dec 2012 and 1.3 percent in 12 months. Energy inflation fell 0.2 percent in Dec 2012 and increased 2.6 percent in 12 months. Transport and communications increased 3.0 percent in Dec 2012 and fell 5.2 percent in 12 months. Food and rentals and dwellings show the higher 12-month increases of 2.3 percent and 2.1 percent, respectively, behind 2.6 percent for energy.

Table IV-13, France, Consumer Price Index, Month and 12-Month Percentage Changes of Index and Components, ∆%

Dec 2012	Month ∆%	12-Month ∆%
All Items	0.3	1.3
Food	0.0	2.3
Manufactured Products	0.2	0.2
Energy	-0.2	2.6
Petroleum Products	-0.3	1.0
Services	0.7	1.3
Rentals, Dwellings	0.2	2.1
Transport and Communications	3.0	-5.2

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130110

Chart IV-4 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows headline and core consumer price inflation of France. Inflation rose during the commodity price shock of unconventional monetary policy. Risk aversion in late 2008 and beginning of 2009 caused collapse of valuation of commodity futures with resulting decline in inflation. Unconventional monetary policy with alternations of risk aversion resulted in higher inflation in France that stabilized in recent months until the increase of 0.2 percent in Oct 2011, 0.3 percent in Nov and 0.4 percent in Dec that were followed by decline of 0.4 percent in Jan 2012 and increases of 0.4 percent in Feb and 0.8 percent in Mar followed by 0.1 percent in Apr minus 0.1 percent in May and no change in Jun 2012 with marginal decline of 0.4 percent in Jul. Inflation returned with 0.7 percent in Aug 2012 but decline of 0.3 percent in Sep 2012 followed with increase of 0.2 percent in Oct 2012 and decrease of 0.2 percent in Nov 2012. Inflation in Dec 2012 was 0.3 percent. Both the headline and core indexes are showing negative slopes in the new environment of risk aversion that causes reversals of carry trades into commodity futures prices. The 12-month rate of inflation has declined from 2.5 percent in Dec 2011 to 1.3 percent in Dec 2012.

Chart IV-4, France, Consumer Price Index (IPC) and Core Consumer Price Index (ISJ) 12 Months Rates of Change

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130110

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/datamapper/index.php?db=WEO) to show GDP in dollars in 2011 and the growth rate of real GDP of the world and selected regional countries from 2012 to 2015. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 3.3 percent in 2012 but accelerating to 3.6 percent in 2013, 4.2 percent in 2014 and 4.4 percent in 2015. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,697 billion of world output of $69,899 billion, or 48.2 percent, but are projected to grow at much lower rates than world output, 1.9 percent on average from 2012 to 2015 in contrast with 3.9 percent for the world as a whole. While the world would grow 16.4 percent in the four years from 2012 to 2015, the G7 as a whole would grow 7.8 percent. The difference in dollars of 2011 is rather high: growing by 16.4 percent would add $11.5 trillion of output to the world economy, or roughly two times the output of the economy of Japan of $5,867 but growing by 7.8 percent would add $5.2 trillion of output to the world, or somewhat below the output of Japan in 2011. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2011 of $25,438 billion, or 36.4 percent of world output. The EMDEs would grow cumulatively 24.9 percent or at the average yearly rate of 5.7 percent, contributing $6.3 trillion from 2012 to 2015 or the equivalent of 86.8 percent of $7,298 billion of China in 2011. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,468 billion, or 19.3 percent of world output, which is equivalent to 39.9 percent of the combined output of the major advanced economies of the G7.

Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth

	GDP USD 2011	Real GDP ∆% 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015
World	69,899	3.3	3.6	4.2	4.4
G7	33,697	1.4	1.5	2.2	2.5
Canada	1,739	1.9	2.0	2.4	2.4
France	2,778	0.1	0.4	1.1	1.5
DE	3,607	0.9	0.9	1.4	1.4
Italy	2,199	-2.3	-0.7	0.5	1.2
Japan	5,867	2.2	1.2	1.1	1.2
UK	2,431	-0.4	1.1	2.2	2.6
US	15,076	2.2	2.1	2.9	3.4
Euro Area	13,114	-0.4	0.2	1.2	1.5
DE	3,607	0.9	0.9	1.4	1.4
France	2,778	0.1	0.4	1.1	1.5
Italy	2,199	-2.3	-0.7	0.5	1.2
POT	238	-3.0	-1.0	1.2	1.9
Ireland	221	0.4	1.4	2.5	2.9
Greece	299	-6.0	-4.0	0.0	2.8
Spain	1,480	-1.5	-1.3	1.0	1.6
EMDE	25,438	5.3	5.6	5.9	6.1
Brazil	2,493	1.5	3.9	4.2	4.2
Russia	1,850	3.7	3.8	3.9	3.9
India	1,827	4.9	6.0	6.4	6.7
China	7,298	7.8	8.2	8.5	8.5

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

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

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/datamapper/index.php?db=WEO). Table V-2 is constructed with the WEO database to provide rates of unemployment from 2011 to 2015 for major countries and regions. In fact, unemployment rates for 2011 in Table V-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. Estimated rates of unemployment for 2012 are particularly high for the countries with sovereign debt difficulties in Europe: 15.5 percent for Portugal (POT), 14.8 percent for Ireland, 23.8 percent for Greece, 24.9 percent for Spain and 10.6 percent for Italy, which is lower but still high. The G7 rate of unemployment is estimated at 7.5 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

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

	% Labor Force 2011	% Labor Force 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015
World	NA	NA	NA	NA	NA
G7	7.7	7.5	7.5	7.3	6.9
Canada	7.5	7.3	7.3	7.1	6.9
France	9.6	10.1	10.5	10.3	9.8
DE	6.0	5.2	5.3	5.2	5.2
Italy	8.4	10.6	11.1	11.3	11.0
Japan	4.6	4.5	4.4	4.5	4.4
UK	8.0	8.1	8.1	7.9	7.6
US	8.9	8.2	8.1	7.7	7.1
Euro Area	10.2	11.2	11.5	11.2	10.8
DE	6.0	5.2	5.3	5.2	5.2
France	9.6	10.1	10.5	10.3	9.8
Italy	8.4	10.6	11.1	11.3	11.0
POT	12.7	15.5	16.0	15.3	14.7
Ireland	14.4	14.8	14.4	13.7	13.1
Greece	17.3	23.8	25.4	24.5	22.4
Spain	21.7	24.9	25.1	24.1	23.2
EMDE	NA	NA	NA	NA	NA
Brazil	6.0	6.0	6.5	7.0	7.0
Russia	6.5	6.0	6.0	6.0	6.0
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

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

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog for IQ2012, IIQ2012 and IIIQ2012 available now for 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 (Section I and earlier at 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 SAAR: -0.1	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  SAAR: 3.1	2.6
Japan	QOQ: –0.9 SAAR: –3.5	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. In the 12 months ending in 2012, China’s exports increased 14.1 percent and imports 6.0 while in Jan-Dec 2012 exports increased 7.9 percent and imports increased 4.3 percent. Germany’s exports decreased 3.4 percent in the month of Nov 2012 and increased 0.0 percent in the 12 months ending in Nov 2012 while imports decreased 1.2 percent in the month of Nov and decreased 1.2 percent in the 12 months ending in Nov. Net trade contributed 1.4 percentage points to growth of Germany’s GDP in IIQ2012 and contributed 1.4 percentage points in IIIQ2012. The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, fell from 47.4 in Sep to 46.0 in Oct for the eighth consecutive month in contraction territory below 50.0 and much lower than the long-term average of the index of 52.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10278). New export orders fell for sixteen consecutive months at the fastest rate of decline since Apr 2009. UK’s exports increased 1.7 percent in Nov 2012 and decreased 1.0 percent in Sep-Nov 2012 relative to a year earlier while imports increased 1.0 percent in Nov and decreased 0.9 percent in Sep-Nov 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 decreased 2.8 percent in Nov while imports decreased 2.5 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012, adding 0.3 percentage points in IIIQ2012. US exports increased 1.0 percent in Nov 2012 and goods exports increased 4.6 percent in Jan-Nov relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012. US imports increased 3.8 percent in Nov 2012 and goods imports increased 3.7 percent in Jan-Nov 2012 relative to a year earlier. 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 M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	1.0 Nov	4.6 Jan-Nov	3.8 Nov	3.7 Jan-Nov
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 2.2 Nov 11.1 Dec	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 14.1 Dec 7.9 Jan-Dec	2.2 Jul -0.3 Aug 4.9 Sep -9.4 Oct 11.3 Oct 4.9 Dec	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 6.0 Dec 4.3 Jan-Dec
Euro Area	8.6 12-M Oct	8.6 Jan-Oct	7.0 12-M Oct	2.1 Jan-Oct
Germany	-3.4 Nov CSA	0.0 Nov	-3.7 Nov CSA	-1.2 Nov
France Nov	-2.8	-3.4	-2.5	-3.4
Italy Oct	0.0	12.0	0.8	0.9
UK	1.7 Nov	-1.0 Sep-Nov 12/Sep-Nov 11	1.0 Nov	-0.9 Sep-Nov 12/Sep-Nov 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.insee.fr/en/

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

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for 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 Millions Yens	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 Trade Volume	2.3	-12.5	13.9	5.0	2.5	4.5
Exports
DE	0.9	-15.2	13.0	4.6	1.5	3.3
DINGE	4.3	-7.8	15.3	5.3	3.5	5.7
Imports
DE	-1.1	-14.4	11.0	2.9	0.4	3.4
DINGE	8.6	-10.5	18.3	8.3	5.4	6.1
Real GDP**	1.3	-2.4	3.8	2.4	2.1	2.4
DE	0.0	-3.8	2.7	1.5	1.2	1.5
DINGE	5.6	2.2	7.3	5.3	4.9	5.2

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

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

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

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 53.7 in Dec from 53.6 in Nov, indicating expansion at a moderate rate but at the fastest pace since IQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). This index has remained above the contraction territory of 50.0 during 41 consecutive months. The index was driven by services with weaker expansion by manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). The employment index increased from 50.0 in Nov to 52.3 in Dec with continuing increases in input prices but at a marginally faster pace. David Hensley, Director of Global Economic Coordination at JP Morgan, finds encouraging signs in services while manufacturing vacillates but with sufficient overall strength that can continue in the first part of 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 50.2 in Dec from 48.6 in Nov, which is the first reading above 50 since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10543). New export business declined for the ninth consecutive month in Dec, but at the lowest rate of contraction since May 2012. 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=10543). The HSBC Brazil Composite Output Index, compiled by Markit, increased to 53.2 in Dec from 53.0 in Nov, indicating solid expansion at the fastest rate in nine months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 52.5 in Nov to 53.5 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). Andre Loes, Chief Economist, Brazil, at HSBC, finds improving expectations of economic activity in Brazil (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased from 52.2 in Nov to 51.1 in Dec, indicating slower improvement of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10508). Andre Loes, Chief Economist, Brazil at HSBC, finds continuing expansion in Brazil’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10508).

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 52.4 in Dec from 52.8 in Nov, which is the fastest growth rate since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10541). 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 index of new export orders increased from 50.3 in Nov to 52.6 in Dec, indicating expansion at a higher rate. Chris Williamson, Chief Economist at Markit, finds that manufacturing in the US is stronger at the end of the year and with expansion in countries such as Brazil and moderating sovereign debt crisis in Europe, US companies could benefit from stronger foreign demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10541). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 1.2 percentage points from 49.5 in Nov to 50.7 Dec Nov, which is the third reading above 50.0 in seven months (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders was unchanged at 50.3 in Dec from 50.3 in Nov. The index of exports increased 4.5 percentage points from 47.0 in Nov to 51.5 in Dec, moving into expansion territory. The Non-Manufacturing ISM Report on Business^® PMI increased 1.4 percentage points from 54.7 in Nov to 56.1 in Dec, indicating growth during 41 consecutive months, while the index of new orders increased 1.2 percentage points from 58.1 in Nov to 59.3 in Dec (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 Blog12/16/12
Producer Price Index	Nov 12-month NSA ∆%: 1.5; ex food and energy ∆% 2.2 Nov month SA ∆% = -0.8; ex food and energy ∆%: 0.1 Blog 12/16/12
PCE Inflation	Nov 12-month NSA ∆%: headline 1.4; ex food and energy ∆% 1.5 Blog 12/23-24/12
Employment Situation	Household Survey: Nov Unemployment Rate SA 7.8% Blog calculation People in Job Stress Dec: 29.5 million NSA, 18.6% of Labor Force Establishment Survey: Nov Nonfarm Jobs +155,000; Private +161,000 jobs created  Nov 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.0 Blog 1/6/13
Nonfarm Hiring	Nonfarm Hiring fell from 63.8 million in 2006 to 50.1 million in 2011 or by 13.7 million Private-Sector Hiring Oct 2012 4.352 million lower by 0.912 million than 5.264 million in Oct 2005 Blog 12/16/12
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2012 2.6 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 3.1 Blog 12/23-24/12
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 Real Personal Consumption Expenditures (RPCE): 0.6 12-month Nov NSA ∆%: RDPI: 2.5; RPCE ∆%: 2.1 Blog 12/23-24/2012
Quarterly Services Report	IIIQ12/IIIQ11 SA ∆%: Information 2.1 Professional 6.0 Administrative 3.9 Hospitals 7.4 Financial & Insurance 6.5 Blog 12/9/12
Employment Cost Index	Compensation Private IIIQ2012 SA ∆%: 0.5 Sep 12 months ∆%: 2.0 Blog 11/4/12
Industrial Production	Nov month SA ∆%: minus 1.1 Nov 12 months SA ∆%: 2.5 Manufacturing Nov SA ∆% 1.1 Nov 12 months SA ∆% 2.7, NSA 2.5 Capacity Utilization: 78.4 Blog 12/23-24/12
Productivity and Costs	Nonfarm Business Productivity IIIQ2012∆% SAAE 2.9; IIIQ2012/IIIQ2011 ∆% 1.7; Unit Labor Costs SAAE IIIQ2012 ∆% -1.9; IIIQ2012/IIIQ2011 ∆%: 0.1 Blog 12/9/2012
New York Fed Manufacturing Index	General Business Conditions From Nov -5.22 to Dec -8.10 New Orders: From Nov 3.08 to Dec -3.70 Blog 12/23-24/12
Philadelphia Fed Business Outlook Index	General Index from Nov -10.7 to Dec 8.1 New Orders from Nov minus 4.6 to Dec 10.7 Blog 12/23-24/12
Manufacturing Shipments and Orders	New Orders SA Nov ∆% 0.0 Ex Transport 0.2 Jan-Nov NSA New Orders 3.2 Ex transport 2.4 Blog 1/6/13
Durable Goods	Nov New Orders SA ∆%: 0.7; ex transport ∆%: 1.6 Jan-Nov New Orders NSA ∆%: 4.5; ex transport ∆% 2.8 Blog 12/23-24/12
Sales of New Motor Vehicles	Jan-Dec 2012 14,491,873; Jan-Dec 2011 12,777,939. Dec SAAR 15.37 million, Nov SAAR 15.54 million, Dec 2011 SAAR 13.61 million Blog 1/6/13
Sales of Merchant Wholesalers	Jan-Nov 2012/Jan-Nov 2011 NSA ∆%: Total 5.5; Durable Goods: 6.3; Nondurable Goods: 4.9 Blog 1/13/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Oct 12/Oct 11 NSA ∆%: Sales Total Business 6.3; Manufacturers 5.4 Retailers 5.4; Merchant Wholesalers 8.2 Blog 12/16/12
Sales for Retail and Food Services	Jan-Nov 2012/Jan-Nov 2011 ∆%: Retail and Food Services 5.5; Retail ∆% 5.2 Blog 12/16/12
Value of Construction Put in Place	Nov SAAR month SA ∆%: -0.3 Nov 12-month NSA: 7.9 Jan-Nov 2012 ∆% 9.2 Blog 1/6/13
Case-Shiller Home Prices	Oct 2012/Oct 2011 ∆% NSA: 10 Cities 3.4; 20 Cities: 4.3 ∆% Oct SA: 0.6 10 Cities 0.4 ; 20 Cities: 0.7 Blog 12/30/12
FHFA House Price Index Purchases Only	Oct SA ∆% 0.5; 12 month NSA ∆%: 5.6 Blog 12/30/12
New House Sales	Nov 2012 month SAAR ∆%: 4.4 Jan-Nov 2012/Jan-Nov 2011 NSA ∆%: 20.1 Blog 12/30/12
Housing Starts and Permits	Nov Starts month SA ∆%: -3.0 ; Permits ∆%: 3.6 Jan-Nov 2012/Jan-Nov 2011 NSA ∆% Starts 27.1; Permits  ∆% 32.8 Blog 12/23-24/12
Trade Balance	Balance Nov SA -$48731 million versus Oct -$42064 million Exports Nov SA ∆%: 1.0 Imports Nov SA ∆%: 3.8 Goods Exports Jan-Nov 2012/2011 NSA ∆%: 4.6 Goods Imports Jan-Nov 2012/2011 NSA ∆%: 3.7 Blog 1/13/13
Export and Import Prices	Dec 12-month NSA ∆%: Imports -1.5; Exports 1.1 Blog 1/13/13
Consumer Credit	Nov ∆% annual rate: 7.0 Blog 1/13/13
Net Foreign Purchases of Long-term Treasury Securities	Oct Net Foreign Purchases of Long-term Treasury Securities: $1.3 billion Major Holders of Treasury Securities: China $1161 billion; Japan $1135 billion; Total Foreign US Treasury Holdings Oct $5482 billion Blog 12/23-24/12
Treasury Budget	Fiscal Year 2013/2012 ∆% Dec: Receipts 10.8; Outlays 15.5; Individual Income Taxes 15.5 Deficit Fiscal Year 2011 $1,297 billion Deficit Fiscal Year 2012 $1,089,353 million Blog 1/13/2013
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:

1/6/13 http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-1 for Nov 2012 and percentage changes from the prior month and for Jan-Nov 2012 relative to Jan-Nov 2011. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 5.5 percent in Jan-Nov 2012 relative to Jan-Nov 2011 and increased 2.3 percent in Nov 2012 relative to Oct 2012. The value of total sales is quite high at $4515.6 billion, exceeding four trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Nov 2012 reached $2029.0 billion, over two trillion dollars for a year, increasing 2.7 percent in Nov relative to Oct and increasing 6.3 percent in Jan-Nov 2012 relative to Jan-Nov 2011. Sales of automotive products reached $367.7 billion in Jan-Nov 2012, increasing 2.8 percent in the month and increasing 22.3 percent relative to a year earlier. There is strong performance of 9.9 percent in machinery but much lower of 1.9 percent in electrical products. Sales of nondurable goods rose 4.9 percent over a year earlier. The influence of commodity prices returned as shown by increase of 7.8 percent in Nov and increase of 1.3 percent in Jan-Nov 2012 relative to a year earlier in farm products but decrease of 5.7 percent in petroleum products with increase of 0.1 percent in Nov. The final three columns in Table VA-1 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers increased 0.6 percent in Nov and increased 7.0 percent relative to a year earlier. Inventories of durable goods of $295.6 billion are 58.9 percent of total inventories of $501.6 billion and rose 8.4 percent relative to a year earlier. Automotive inventories increased 6.8 percent relative to a year earlier. Machinery inventories of $82.5 billion rose 18.4 percent relative to a year earlier. Inventories of nondurable goods of $206.1 billion are 41.1 percent of the total and increased 5.1 percent relative to a year earlier. Inventories of farm products decreased 3.1 percent in Nov relative to Oct and increased 17.2 percent relative to a year earlier. Inventories of petroleum products increased 1.3 percent in Nov and increased 3.1 percent relative to a year earlier.

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

2012	Sales $ Billions Jan-Nov 2012 NSA	Sales Nov ∆% SA	Sales∆% Jan-Nov 2012 from Jan-Nov 2011  NSA	INV $ Billions Nov 2012 NSA	INV  Nov ∆% SA	INV  ∆% Nov 2012 from Nov 2011 NSA
US Total	4515.5	2.3	5.5	501.6	0.6	7.0
Durable	2029.0	2.7	6.3	295.6	0.4	8.4
Automotive	367.7	2.8	22.3	47.6	0.4	6.8
Prof. Equip.	347.9	2.4	2.1	33.4	0.4	4.1
Computer Equipment	175.8	2.8	-0.6	12.9	-0.4	3.5
Electrical	347.9	2.0	1.9	42.1	0.5	1.4
Machinery	350.0	2.1	9.9	82.5	1.0	18.4
Not Durable	2486.5	2.0	4.9	206.1	0.8	5.1
Drugs	390.5	2.7	0.1	35.5	4.2	7.3
Apparel	133.6	5.0	6.2	20.3	-0.6	-5.1
Groceries	529.6	2.0	6.7	37.1	2.3	6.8
Farm Products	205.1	7.8	1.3	28.3	-3.1	17.2
Petroleum	707.6	-5.7	0.1	25.7	1.3	3.1

Note: INV: inventories

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

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

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

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

Chart VA-2 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Nov 2012. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop followed by increase to a higher level.

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

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

Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-2. The total for the US has remained almost without change at 1.19 in Nov 2012, 1.21 in Sep 2012 and 1.17 in Nov 2011. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.57 in Nov 2012, 1.60 in Oct 2012 and 1.52 in Nov 2011. Computer equipment operates with low inventory/sales ratios of 0.77 in Nov 2012, 0.80 in Oct 2012 and 0.74 in Nov 2011 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.88 in Nov 2012 and 0.89 in Sep 2012 which are almost equal to 0.89 in Nov 2011. There are exceptions such as 1.71 in Nov 2012 in apparel that is almost equal to 1.80 in Oct 2012 and lower than 1.97 in Nov 2011.

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

	Nov 2012	Oct 2012	Nov 2011
US Total	1.19	1.21	1.17
Durable	1.57	1.60	1.52
Automotive	1.34	1.37	1.43
Prof. Equip.	1.02	1.04	1.00
Comp. Equip.	0.77	0.80	0.74
Electrical	1.28	1.29	1.32
Machinery	2.58	2.60	2.26
Not Durable	0.88	0.89	0.89
Drugs	1.01	0.99	0.92
Apparel	1.71	1.80	1.97
Groceries	0.73	0.73	0.72
Farm Products	1.12	1.25	1.21
Petroleum	0.42	0.42	0.44

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

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars NSA are provided in Chart VA-3 of the US Census Bureau. Inventories resumed growth at a sharper rate after the global recession and are substantially higher than the peak before the contraction.

Chart VA-3, US, Inventories of Merchant Wholesalers, Millions of Dollars, NSA, Jan 1992-Nov 2012

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

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars SA are provided in Chart VA-4 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a much sharper slope than before the global recession.

Chart VA-4, US, Inventories of Merchant Wholesalers, Millions of Dollars, SA, Jan 1992-Nov 2012

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

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

Chart VA-5, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2003-2012

Source: US Census Bureau

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

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-3. The data are in seasonally-adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-3) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-3) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Nov 2012, revolving credit was $858 billion, or 30.1 percent of total consumer credit of $2769 billion, and non-revolving credit was $1910 billion, or 68.9 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.2 percent in annual data and sharp decline of 7.4 percent in revolving credit. Consumer credit rebounded in Sep 2012 with increase of total consumer credit at 5.3 percent, revolving credit at minus 0.7 percent and non-revolving credit at 9.1 percent. In Oct 2012, total consumer credit grew at 6.2 percent with increase of revolving credit at 4.8 percent and increase of non-revolving credit at 6.8 percent. Consumer credit rebounded in Nov 2012 with total credit growing at 7.0 percent, revolving credit at 1.1 percent and non-revolving credit at 9.6 percent.

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

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2012
Nov	7.0	1.1	9.6	2769	858	1910
Oct	6.2	4.8	6.8	2752	858	1895
Sep	5.3	-3.1	9.1	2738	854	1884
IIIQ	4.3	-0.7	6.6	2738	854	1884
IIQ	6.4	1.3	8.7	2709	856	1854
IQ	5.7	0.6	8.1	2669	853	1816
2011
IVQ	5.9	1.8	7.8	2632	851	1780
IIIQ	1.9	-1.2	3.4	2594	848	1746
2011	3.4	0.2	5.0	2632	851	1780
2010	-1.2	-7.4	2.5	2545	850	1695
2009	-4.5	-8.8	-1.8	2439	922	1517
2008	0.8	0.2	1.2	2549	1010	1539
2007	5.9	8.5	4.3	2529	1008	1521

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

Source: Board of Governors of the Federal Reserve System

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

Chart VA-6 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on consumer installment loans at commercial banks, new autos 48 month loans, not seasonally adjusted. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.

Chart VA-6, US, Total Consumer Credit Owned and Securitized SA and Financing Rate on Consumer Installment Loans at Commercial Banks NSA, Millions of Dollars and Percent, Jan 1972-Nov 2012

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

Chart VA-7 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on consumer installment loans at commercial banks, new autos 48 month loan, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012 but with significant fluctuations.

Chart VA-7, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on Consumer Installment Loans at Commercial Banks NSA, Feb 1972-Nov 2012

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

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/gor1210a.pdf). For fiscal 2013, the forecast is of growth of GDP between 1.3 and 1.8 percent, with domestic producer price inflation (Corporate Goods Price Index, CGPI) in the range of 0.1 to 0.7 percent and the all items CPI less fresh food of 0.2 to 0.6 percent. These forecasts are biannual in Apr and Oct.

Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year

Fiscal Year Date of Forecast	Real GDP	Domestic CGPI	CPI All Items Less Fresh Food
2011
Apr 2012	-0.2 to –0.2 [-0.2]	+1.7	0.0
Jan 2012	-0.4 to –0.3 [-0.4]	+1.8 to +1.9 [+1.8]	-0.1 to 0.0 [-0.1]
2012
Oct 2012	+1.4 to +1.6 [+1.5]	-1.2 to -0.9 [-1.1]	-0.1 to -0.1 [-0.1]
Jul 2012	+2.2 to +2.4 [+2.2]	-0.3 to 0.0 [-0.2]	+0.1 to +0.3 [+0.2]
Apr 2012	+2.1 to +2.4 [+2.3]	+0.4 to +0.7 [+0.6]	+0.1 to +0.4 [+0.3]
Jan 2012	+1.8 to +2.1 [+2.0]	-0.1 to +0.2 [+0.1]	0.0 to +0.2 [+0.1]
2013
Oct 2012	+1.3 to +1.8 [+1.6]	+0.1 to +0.7 [+0.5]	+0.2 to +0.6 [+0.4]
Jul 2012	+1.6 to +1.8 [+1.7]	+0.6 to +0.8 [+0.6]	+0.5 to +0.7 [+0.7]
Apr 2012	+1.6 to +1.8 [+1.7]	+0.7 to +0.9 [+0.8]	+0.5 to +0.7 [+0.7]
Jan 2012	+1.4 to +1.7 [+1.6]	+0.6 to 1.0 [+0.8]	+0.4 to +0.5 [+0.5]
2014
Oct 2012	+0.2 to +0.7] [+0.6]	+3.7 to +4.4 [+4.2]	+2.4 to +3.0 [+2.8]

Figures in brackets are the median of forecasts of Policy Board members

Source: Policy Board, Bank of Japan

http://www.boj.or.jp/en/mopo/outlook/gor1210a.pdf

Private-sector activity in Japan contracted at a marginal rate with the Markit Composite Output PMI^™ Index decreasing from 49.9 in Nov to 49.3 in Dec, which is marginally lower than 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10549). Paul Smith, economist at Markit and author of the report, finds that growth in services suggests strength but with weakness in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10549). The Markit Business Activity Index of Services increased marginally from 51.4 in Nov to 51.5 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10394). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 46.5 in Nov to 45.0 in Dec for the lowest reading in 44 months and the seventh consecutive month of contraction below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10470). Foreign orders fell for the ninth consecutive month with weakness in markets in Europe and China. Paul Smith, economist at Markit and author of the report, finds weakness in foreign and domestic demand with marked decline of output and particularly in new orders for capital goods (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10470).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Nov ∆% 0.0 12 months ∆% minus 0.9 Blog 12/16/12
Consumer Price Index	Nov NSA ∆% -0.4; Nov 12 months NSA ∆% -0.2 Blog 12/30/12
Real GDP Growth	IIIQ2012 ∆%: minus 0.9 on IIQ2012;  IIIQ2012 SAAR minus 3.5; ∆% from quarter a year earlier: 0.5 % Blog 12/16/12
Employment Report	Nov Unemployed 2.60 million Change in unemployed since last year: minus 210 thousand Unemployment rate: 4.1% Blog 12/30/12
All Industry Indices	Oct month SA ∆% 0.2 12-month NSA ∆% 0.1 Blog 12/23-24/12
Industrial Production	Nov SA month ∆%: -1.7 12-month NSA ∆% -5.8 Blog 12/30/12
Machine Orders	Total Oct ∆% -1.6 Private ∆%: -10.7 Oct ∆% Excluding Volatile Orders 2.8 Blog 12/16/12
Tertiary Index	Oct month SA ∆% minus 0.1 Oct 12 months NSA ∆% 1.1 Blog 12/16/12
Wholesale and Retail Sales	Nov 12 months: Total ∆%: -0.8 Wholesale ∆%: -1.5 Retail ∆%: 1.3 Blog 12/30/12
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:

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components from Jan to No 2012. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012.

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

2012	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Dec	56.1	54.3	53.8	50.0	64.6
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
Dec	50.6	52.0	51.2	47.3	49.0	48.8
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 51.6 in Nov to 51.8 in Dec for the fourth consecutive month of increasing output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest growth of 8 percent in IVQ2012 GDP relative to a year earlier (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). The HSBC Business Activity index decreased from 52.1 in Nov to 51.7 in Dec with continuing growth in services at a slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds strength in services from new orders and growth of employment (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 51.5 in Dec from 50.5 in Nov, indicating moderate activity, which is the highest reading since May 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10489). Weak export orders were attributed to weakness in Europe, Japan 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 with reduction of stocks and continuing government stimulus that is consistent with probable growth of GDP at 8.6 percent in 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10489).

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	Dec 12-month ∆%: minus 1.9 Dec month ∆%: minus 0.1 Blog 1/13/13
Consumer Price Index	Dec month ∆%: 0.8 Dec 12 months ∆%: 2.5 Blog 1/13/13
Value Added of Industry	Nov month ∆%: 0.86 Jan-Nov 2012/Jan-Nov 2011 ∆%: 10.0 Blog 12/16/12
GDP Growth Rate	Year IIIQ2012 ∆%: 7.4 Quarter IIQ2012 ∆%: 2.2 Blog 10/21/12
Investment in Fixed Assets	Nov month ∆%: 1.26 Total Jan-Nov 2012 ∆%: 20.7 Real estate development: 16.7 Blog 12/16/12
Retail Sales	Nov month ∆%: 1.47 Nov 12 month ∆%: 14.9 Jan-Nov ∆%: 14.2 Blog 12/16/12
Trade Balance	Dec balance $31.67 billion Exports 12M ∆% 14.1 Imports 12M ∆% 6.0 Cumulative Dec: $231.1 billion Blog 1/13/12

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

Table VC-1 provides China’s exports, imports, trade balance and percentage changes from Dec 2010 to Dec 2012. China’s trade growth strengthened in Dec 2012 with growth in 12 months of exports of 14.1 percent and of imports of 6.0 percent. China’s trade growth weakened again in Nov 2012 with growth of exports of 2.9 percent and no change in imports. China’s trade growth rebounded with growth of exports in 12 months of 11.6 percent in Oct 2012 and 9.9 percent in Sep 2012 after 2.7 percent in Aug 2012 and 1.0 percent in Jul 2012 while imports grew 2.4 percent in both Sep and Oct 2012, stagnating in Nov 2012. As a result, the monthly trade surplus increased from $25.2 billion in Jul 2012 to $31.9 billion in Oct 2012, declining to $19.6 billion in Nov 2012 but increasing to $31.67 billion in Dec 2012. China’s trade growth rebounded in Oct 2012 with growth of exports of 11.6 percent in 12 months and 2.4 percent for imports and trade surplus of $31.9 billion. The number that caught attention in financial markets was growth of 1.0 percent in exports in the 12 months ending in Jul 2012. Imports were also weak, growing 4.7 percent in 12 months ending in Jul 2012. Exports increased 11.3 percent in Jun 2012 relative to a year earlier while imports grew 6.3 percent. The rate of growth of exports fell to 4.9 percent in Apr 2012 relative to a year earlier and imports increased 0.3 percent but export growth was 15.3 percent in May and imports increased 12.7 percent. China reversed the large trade deficit of USD 31.48 billion in Feb 2012 with a surplus of $5.35 billion in Mar 2012, $18.42 billion in Apr 2012, $18.7 billion in May 2012, $31.7 billion in Jun 2012, $25.2 billion in Jul 2012, $26.7 billion in Aug 2012, $27.7 billion in Sep 2012, $31.9 billion in Oct 2012 and $19.6 billion in Nov 2012. Exports fell 0.5 percent in the 12 months ending in Jan while imports fell 15.3 percent for a still sizeable trade surplus of $27.3 billion. In Feb, exports increased 18.4 percent while imports jumped 39.6 percent for a sizeable deficit of $31.48 billion. There are distortions from the New Year holidays.

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

	Exports USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Dec 2012	199.36	14.1	167.69	6.0	31.67
Nov	179.4	2.9	159.8	0.0	19.6
Oct	175.57	11.6	143.58	2.4	31.99
Sep	186.35	9.9	158.68	2.4	27.67
Aug	177.97	2.7	151.31	-2.6	26.66
Jul	176.94	1.0	151.79	4.7	25.15
Jun	180.20	11.3	148.48	6.3	31.72
May	181.1	15.3	162.4	12.7	18.7
Apr	163.25	4.9	144.83	0.3	18.42
Mar	165.66	8.9	160.31	5.3	5.35
Feb	114.47	18.4	145.95	39.6	-31.48
Jan	149.94	-0.5	122.66	-15.3	27.28
Dec 2011	174.72	13.4	158.20	11.8	16.52
Nov	174.46	13.8	159.94	22.1	14.53
Oct	157.49	15.9	140.46	28.7	17.03
Sep	169.67	17.1	155.16	20.9	14.51
Aug	173.32	24.5	155.56	30.2	17.76
Jul	175.13	20.4	143.64	22.9	31.48
Jun	161.98	17.9	139.71	19.3	22.27
May	157.16	19.4	144.11	28.4	13.05
Apr	155.69	29.9	144.26	21.8	11.42
Mar	152.20	35.8	152.06	27.3	0.14
Feb	96.74	2.4	104.04	19.4	-7.31
Jan	150.73	37.7	144.27	51.0	6.46
Dec 2010	154.15	17.9	141.07	25.6	13.08

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

Table VC-2 provides cumulative exports, imports and the trade balance of China together with percentage growth of exports and imports. The trade balance in 2011 of $155.14 billion is lower than those from 2008 to 2010. China’s trade balance reached $231.1 billion in Jan-Dec 2012 with cumulative growth of exports of 7.9 percent and 4.3 percent of imports, which is much lower than 20.3 percent for exports and 24.9 percent for imports in 2011 and 31.3 percent for exports and 38.7 percent for imports in 2010. There is a rare cumulative deficit of $4.2 billion in Feb 2012 reversed to a small surplus in Mar 2012 and a higher surplus of $19.3 billion in Apr 2012, increasing to $37.9 billion in May, $68.9 billion in Jun 2012, $94.1 billion in Jul 2012, $120.8 billion in Aug 2012, $148.3 billion in Sep 2012, $180.24 billion in Oct 2012, $199.54 billion in Nov 2012 and $231.1 billion in Dec 2012. More observations are required to detect trends of Chinese trade but available data suggest deceleration that would be expected from the large share of trade with Europe.

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

	Exports USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Dec 2012	2049.66	7.9	1818.19	4.3	231.1
Nov	1850.3	7.3	1650.5	4.1	199.54
Oct	1670.90	7.8	1490.67	4.6	180.24
Sep	1495.39	7.4	1347.08	4.8	148.31
Aug	1309.11	7.1	1188.51	5.1	120.61
Jul	1131.24	7.8	1037.14	6.4	94.10
Jun	954.38	9.2	885.46	6.7	68.91
May	774.4	8.7	736.5	6.7	37.9
Apr	593.24	6.9	573.94	5.1	19.3
Mar	430.02	7.6	429.36	6.6	0.66
Feb	264.40	6.9	268.64	7.7	-4.24
Jan	149.94	-0.5	122.66	-15.3	27.28
Dec 2011	1,898.60	20.3	1,743.46	24.9	155.14
Nov	1,724.01	21.1	1585.61	26.4	138.40
Oct	1,549.71	22.0	1,425.68	26.9	124.03
Sep	1,392.27	22.7	1,285.17	26.7	107.10
Aug	1,222.63	23.6	1,129.90	27.5	92.73
Jul	1,049.38	23.4	973.17	26.9	76.21
Jun	874.3	24.0	829.37	27.6	44.93
May	712.37	25.5	689.41	29.4	22.96
Apr	555.30	27.4	545.02	29.6	10.28
Mar	399.64	26.5	400.66	32.6	-1.02
Feb	247.47	21.3	248.36	36.0	-0.89
Jan	150.7	37.7	144.27	51.0	6.46
Dec 2010	1577.93	31.3	1394.83	38.7	183.10

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

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.2
2007	2.1	7.6	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.4
2010	1.6	10.1	2.0
2011	2.7	10.2	1.4
2012*			-0.4
2013*			0.1
2014*			1.4

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 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 46.5 in Nov to 47.2 in Dec, which is the eleventh consecutive contraction; contraction spread in manufacturing and services throughout France, Italy and Spain but with growth in Germany (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10527). Chris Williamson, Chief Economist at Markit, finds that the data are consistent with sharper contraction in IVQ2012 but easing in all four of the largest economies (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10527). The Markit Eurozone Services Business Activity Index increased from 46.7 in Nov to 47.8 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10527). The Markit Eurozone Manufacturing PMI^® decreased marginally to 46.1 in Dec from 46.2 in Nov, which indicates contraction in seventeen consecutive months of deterioration of manufacturing business in the euro zone (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10479). New export orders declined in Dec for the eighteenth consecutive month with contracting demand within the euro area and deteriorating global markets. Chris Williamson, Chief Economist at Markit, finds that the survey data are consistent with decline of output at a quarterly rate of 1 percent in IVQ2012 but milder than in the autumn (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10479). Table EUR provides the regional data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2012 ∆% 0.1; IIIQ2012/IIIQ2011 ∆% 0.0 Blog 12/30/12
Unemployment	Nov 2012: 11.8% unemployment rate Nov 2012: 18.820 million unemployed Blog 1/13/13
HICP	Nov month ∆%: -0.2 12 months Nov ∆%: 2.2 Blog 12/16/12
Producer Prices	Euro Zone industrial producer prices Nov ∆%: -0.2 Nov 12-month ∆%: 2.1 Blog 1/13/13
Industrial Production	Oct month ∆%: -1.4; Oct 12 months ∆%: -3.6 Blog 12/16/12
Retail Sales	Nov month ∆%: 0.1 Nov 12 months ∆%: minus 2.6 Blog 1/13/13
Confidence and Economic Sentiment Indicator	Sentiment 87.0 Dec 2012 Consumer minus 26.5 Dec 2012 Blog 1/13/13
Trade	Jan-Oct 2012/Jan-Oct 2011 Exports ∆%: 8.6 Imports ∆%: 2.1 Oct 2012 12-month Exports ∆% 14.3 Imports ∆% 7.0 Blog 12/23-24/12

Links to blog comments in Table EUR:

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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

EUROSTAT estimates the rate of unemployment in the euro area at 11.8 percent in Nov 2012, as shown in Table VD-1. The number of unemployed in Nov 2012 was 18.820 million, which was 2.015 million higher than 16.805 million in Nov 2011. The rate of unemployment jumped from 10.6 percent in Nov 2011 to 11.8 percent in Nov 2012.

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

	Unemployment Rate %	Number Unemployed Millions
Nov 2012	11.8	18.820
Oct	11.7	18.707
Sep	11.6	18.487
Aug	11.5	18.291
Jul	11.5	18.209
Jun	11.4	18.111
May	11.3	17.916
Apr	11.2	17.737
Mar	11.0	17.477
Feb	10.9	17.256
Jan	10.8	17.072
Dec 2011	10.7	16.903
Nov	10.6	16.805
Oct	10.5	16.531
Sep	10.3	16.347
Aug	10.2	16.082
Jul	10.1	15.938
Jun	10.0	15.738
May	9.9	15.656
Apr	9.9	15.542
Mar	9.9	15.591
Feb	9.9	15.620
Jan	10.0	15.702
Dec 2010	10.1	15.806

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

Table VD-2 shows the disparity in rates of unemployment in the euro area with 11.8 percent for the region as a whole and 18.820 million unemployed but 5.4 percent in Germany and 2.281 million unemployed. At the other extreme is Spain with rate of unemployment of 26.6 percent and 6.157 million unemployed. The rate of unemployment of the European Union in Nov is 10.7 percent with 25.061 million unemployed.

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

Nov 2012	Unemployment Rate %	Unemployed Millions
Euro Zone	11.8	18.820
Germany	5.4	2.281
France	10.5	3.094
Netherlands	5.6	0.500
Finland	7.9	0.212
Portugal	16.3	0.884
Ireland	14.6	0.315
Italy	11.1	2.870
Greece	NA	NA
Spain	26.6	6.157
Belgium	7.4	0.366
European Union	10.7	25.061

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

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

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

Source: EUROSTAT

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

Advanced economies are experiencing weak demand. Table VD-3 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Nov 2012. Retail sales increased 0.1 percent in Nov 2012 and fell 2.6 percent in 12 months. The 12-month rates of growth have become negative since Mar 2011 with exception of 1.0 percent in Apr 2011, stability in Aug 2011 and 0.1 percent in Mar 2012. The lower part of Table VD-5 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 1999. Retail sales fell 2.4 percent in 2009 after falling 0.8 percent in 2008 and fell again by 0.6 percent in 2011. The average yearly rate of increase of retail sales from 1999 to 2007 was 2.0 percent but growth has not recovered. The average yearly rate of increase for the entire period 1999 to 2011 is lower at 1.1 percent.

Table VD-3, Euro Zone, Volume of Retail Sales, Deflated ∆%

	Month ∆%	12-Month ∆%
Nov 2012	0.1	-2.6
Oct	-0.7	-3.2
Sep	-0.8	-1.6
Aug	-0.2	-0.7
Jul	0.1	-1.3
Jun	0.1	-0.7
May	0.8	-0.6
Apr	-1.5	-3.4
Mar	0.3	0.1
Feb	-0.2	-2.0
Jan	1.2	-1.1
Dec 2011	-1.3	-1.8
Nov	-0.4	-1.4
Oct	0.1	-0.7
Sep	-0.3	-1.1
Aug	0.0	0.0
Jul	0.2	-0.4
Jun	0.8	-0.8
May	-1.7	-1.8
Apr	0.9	1.0
Mar	-1.1	-1.4
Feb	0.4	1.1
Jan	0.1	0.9
Annual ∆%
2011		-0.6
2010		0.9
2009		-2.4
2008		-0.8
2007		1.6
2006		2.2
2005		2.0
2004		1.5
2003		0.9
2002		1.2
2001		2.1
2000		2.5
1999		2.3
Average ∆% 1999-2007		2.0
Average ∆% 1999-2011		1.1

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

Growth rates of retail sales of the euro zone by major segments are in Table VD-4. Total sales increased 0.1 percent in Nov 2012 and declined 2.6 percent in the 12 months ending in Nov 2012. All 12-month and monthly percentage changes are negative.

Table VD-4, Euro Zone, Volume of Retail Sales by Products, ∆%

Nov 2012	Month ∆%	12-Month ∆%
Total	0.1	-2.6
Food, Drinks, Tobacco	-0.3	-2.1
Nonfood Products ex Automotive Fuel	0.0	-3.2
Automotive Fuel in Specialized Stores	1.2	-5.1

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

Month and 12-month percentage rates of change of retail sales by member countries of the euro zone are shown in Table VD-5 for Nov 2012. Retail sales are weak throughout the euro zone. The 12-month percentage changes are negative for all members in Table VD-5 with the exception of 1.2 percent for Finland, 4.5 percent for Belgium and 0.7 percent for Ireland. The 12-month percentage change for the UK, which is not a member of the euro zone, was 2.5 percent. The European Union’s 12-month percentage change was minus 2.6 percent.

Table VD-5, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Nov 2012	Month ∆%	12-Month ∆%
Euro Zone	0.1	-2.6
Germany	1.2	-0.9
France	-0.6	-1.1
Netherlands	NA	NA
Finland	2.2	1.2
Belgium	0.5	4.5
Portugal	-1.3	-5.2
Ireland	-1.3	0.7
Italy	NA	NA
Greece	NA	NA
Spain	-0.5	-9.6
UK	0.4	2.5
European Union	0.2	-1.3

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

The Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). This deterioration is shown in Table VD-6 with the index falling from 102.5 in Jul 2011 to 87.0 in Dec 2012 with improvement at the margin from 85.7 in Dec 2012. There is downward trend in 2012 with the index still above the minimum value of 69.1 reached in Mar 2009 but still below the average of 100.

Table VD-6, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-6.8	10.1	-13.1	-9.2	-17.9
Maximum	117.9 05-00	7.8 04-07	35.3     08-98	2.5 05-00	5.3 06-90	6.1 02-90
Minimum	69.1 03-09	-38.2 03-09	-27.3 03-09	-34.3 03-09	-24.9 01-93	-46.3 09-93
Dec 2012	87.0	-14.4	-9.8	-26.5	-15.8	-34.7
Nov	85.7	-15.0	-11.9	-26.9	-14.9	-35.6
Oct	84.3	-18.3	-12.1	-25.7	-17.4	-33.0
Sep	85.2	-15.9	-11.9	-25.9	-18.5	-31.7
Aug	86.1	-15.4	-10.8	-24.6	-17.2	-33.1
Jul	87.9	-15.1	-8.5	-21.5	-15.0	-28.5
Jun	89.9	-12.8	-7.4	-19.8	-14.4	-28.1
May	90.5	-11.4	-5.2	-19.3	-18.1	-30.2
Apr	92.8	-9.0	-2.4	-19.9	-11.1	-27.5
Mar	94.4	-7.1	-0.3	-19.1	-12.0	-26.5
Feb	94.5	-5.7	-0.9	-20.3	-14.0	-24.6
Jan	93.5	-7.0	-0.7	-20.7	-15.5	-28.1
Dec 2011	92.8	-7.2	-2.6	-21.3	-12.2	-28.9
Nov	93.5	-7.3	-2.0	-20.5	-11.2	-26.0
Oct	94.4	-6.6	-0.2	-20.1	-9.9	-27.3
Sep	94.6	-6.0	-0.3	-19.3	-9.9	-29.8
Aug	98.1	-2.9	3.4	-16.8	-8.8	-26.0
Jul	102.5	0.5	7.5	-11.5	-3.7	-27.2
Jun	104.9	3.1	9.7	-10.0	-2.7	-26.8

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

Source: European Commission Services

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

Source: European Commission Services

http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm

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

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

Table VE-DE, Germany, GDP 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. Tim Moore, Senior Economist at Markit and author of the report, finds growth in services compensating decline in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). 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 49.2 in Nov to 50.3 in Dec, indicating a level above the neutral zone of 50.0 after seven consecutive months below 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). 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 49.7 in Nov to 52.0 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 46.8 in Nov to 46.0 in Dec for the tenth consecutive month in contraction territory below 50.0 and lower than the average of 46.7 for 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10538). New export orders fell for eighteen consecutive months with weak demand from internal and external clients. Tim Moore, Senior Economist at Markit and author of the report, finds continuing weakness in Germany’s manufacturing that cannot maintain strong performance in the beginning of the cyclical expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10538).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 Nov 12-month NSA ∆%: 1.9 Blog 12/16/12
Producer Price Index	Nov month ∆%: 0.1 CSA, -0.1 NSA 12-month NSA ∆%: 1.4 Blog 12/23-24/12
Industrial Production	Mfg Oct month CSA ∆%: 0.4 12-month NSA: minus 3.2 Blog 1/13/13
Machine Orders	MFG Nov month ∆%: -1.8 Nov 12-month ∆%: -1.0 Blog 1/13/13
Retail Sales	Nov Month ∆% 1.2 12-Month ∆% -1.0 Blog 1/6/13
Employment Report	Unemployment Rate Nov 5.3% Blog 1/6/13
Trade Balance	Exports Nov 12-month NSA ∆%: 0.0 Imports Nov 12 months NSA ∆%: -1.2 Exports Nov month CSA ∆%: -3.4; Imports Nov month SA -3.7 Blog 1/13/13

Links to blog comments in Table DE:

1/6/13 http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html

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

11/25/12 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

The production industries index of Germany in Table VE-1 shows increase of 0.2 percent in Nov 2012 and decrease of 3.0 percent in the 12 months ending in Nov 2012. Germany’s production industries suffered decline of 7.3 percent in Dec 2008 relative to Dec 2007 and decline of 2.3 percent in 2009. Recovery was vigorous with 14.2 percent in the 12 months ending in Dec 2010. The first quarter of 2011 was quite strong when the German economy outperformed the other advanced economies. The performance of Germany’s production industries from 2002 to 2006 was vigorous with average rate of 4.5 percent. Data for the production industries index of Germany fluctuate sharply from month to month and also in 12-month rates

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

	12-Month ∆% NSA	Month ∆% Calendar SA
Nov 2012	-3.0	0.2
Oct	3.9	-2.0
Sep	-7.3	-1.2
Aug	-1.3	-0.4
Jul	2.2	1.2
Jun	3.9	-0.2
May	-6.8	1.6
Apr	-1.0	-2.2
Mar	-1.0	2.1
Feb	1.9	-0.5
Jan	4.3	0.5
Dec 2011	1.2	-2.0
Nov	4.6	0.2
Oct	0.4	0.4
Sep	5.5	-2.1
Aug	11.3	-0.2
Jul	6.5	3.0
Jun	0.0	-1.0
May	18.9	0.9
Apr	5.8	-0.3
Mar	10.3	0.8
Feb	16.4	1.2
Jan	16.0	0.8
Dec 2010	14.2
Dec 2009	-2.3
Dec 2008	-7.3
Dec 2007	-0.1
Dec 2006	2.5
Dec 2005	4.9
Dec 2004	5.3
Dec 2003	5.1
Dec 2002	2.0
Average ∆% per Year
Dec 1993 to Dec 2011	1.4
Dec 1993 to Dec 2000	1.5
Dec 1993 to Dec 2006	1.6
Dec 2002 to Dec 2006	4.5
Dec 2007 to Dec 2011	1.2

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

Table VE-2 provides monthly percentage changes of the German production industries index by components from Apr to Nov 2012. There was recovery in Nov 2012 with growth of 0.2 percent in production industries, 0.4 percent in manufacturing, 0.2 percent in intermediate goods and 1.4 percent in capital goods but declines of 2.1 of nondurable goods, 2.1 percent of nondurable goods and 3.3 percent of energy. There were four sharp declines in the monthly production industries index of 2.0 percent in Dec 2011, 2.2 percent in Apr 2012, 1.2 percent in Sep 2012 and 2.0 percent in Oct 2012. The declines of investment or capital goods were quite sharp with 1.4 percent in Dec 2011, 3.6 percent in Apr 2012, recovery by 2.2 percent in May 2012 but decline of 1.5 percent in Jul 2012, sharp decline of 3.3 percent in Sep 2012 and even sharper decline of 4.1 percent in Oct 2012. Durable goods fell in seven of eleven months from Dec 2011 to Oct 2012 and nondurable goods also fell in multiple months.

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

	Nov	Oct	Sep	Aug	Jul	Jun	May	Apr
Production Industries	0.2	-2.0	-1.2	-0.4	1.2	-0.2	1.6	-2.2
Industry	0.4	-2.0	-2.0	-0.3	1.5	-0.7	1.9	-2.1
Mfg	0.4	-2.0	-2.0	-0.3	1.5	-0.8	1.9	-2.1
Intermediate Goods	0.2	-0.1	-1.9	-1.0	-0.1	0.0	0.7	0.1
Capital Goods	1.4	-4.1	-3.3	0.1	3.9	-1.5	2.2	-3.6
Durable Goods	-2.6	-6.4	-1.1	-2.5	2.3	-0.1	3.0	-1.2
Nondurable Goods	-2.1	0.0	1.1	0.9	-1.0	-0.6	3.8	-4.0
Energy	-3.3	-1.7	4.9	0.3	-3.7	8.7	-2.5	-0.2

Seasonally Calendar Adjusted

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

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

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

	IND	MFG	INTG	CG	DG	NDG	EN
2012
Nov	-3.3	-3.2	-3.4	-3.4	-9.9	-2.0	0.5
Oct	3.1	3.2	2.3	3.2	0.0	5.9	7.0
Sep	-8.4	-8.3	-10.4	-7.3	-10.8	-5.7	7.6
Aug	-1.6	-1.5	-3.7	-0.1	-0.7	0.0	1.8
Jul	1.9	2.0	0.4	4.7	-3.5	-0.6	3.3
Jun	3.5	3.5	2.0	5.9	7.0	0.0	8.3
May	-7.0	-7.0	-6.7	-6.9	-11.0	-8.2	0.0
Apr	-1.1	-1.0	-1.2	1.1	-6.0	-6.0	0.8
Mar	-0.5	-0.4	-2.3	2.7	-6.5	-3.3	-6.2
Feb	3.2	3.3	1.4	7.1	-0.7	-2.1	0.2
Jan	5.9	5.7	4.2	9.5	4.3	1.1	-11.9
2011
Dec	1.4	1.4	2.5	1.0	-0.4	0.2	-16.4
Nov	4.9	5.1	3.9	7.9	1.9	0.0	-4.0
Oct	1.1	1.2	0.4	3.6	-2.7	-2.8	-7.2
Sep	6.4	6.5	6.4	8.9	3.6	0.2	-6.3
Aug	12.8	12.6	10.8	20.2	4.5	1.2	-3.5
Jul	8.0	8.1	6.5	13.1	7.7	-0.5	-8.1
Jun	0.9	0.9	1.6	2.0	-10.5	-2.0	-7.4
May	21.4	21.4	17.7	28.3	21.7	13.4	-12.0
Apr	7.4	7.5	5.9	11.1	4.9	2.2	-8.2
Mar	10.7	10.9	10.0	14.9	8.5	2.1	1.2
Feb	16.8	17.0	16.1	22.4	11.0	6.1	-2.2
Jan	16.8	17.1	16.7	23.2	11.2	4.2	-1.8
2010
Dec	17.5	17.6	14.5	26.3	9.1	2.9	4.8
Nov	13.8	13.8	13.1	19.0	7.9	3.6	2.9
Oct	9.9	10.1	10.1	13.9	6.5	0.9	0.2
Sep	9.5	9.3	12.1	10.0	7.9	1.7	-2.4
Aug	17.2	17.2	19.0	20.3	19.5	6.9	-2.1
Jul	9.1	8.8	12.7	8.7	7.2	0.9	-0.2
Jun	16.2	16.1	20.5	16.0	20.5	5.3	-2.5
May	13.3	13.3	20.2	11.6	10.7	1.7	12.8
Apr	14.9	14.8	21.8	15.3	8.5	0.0	9.9
Mar	14.2	14.5	20.4	11.7	11.8	6.4	7.2
Feb	7.1	7.5	10.8	7.0	7.4	-1.2	5.4
Jan	0.6	0.9	6.7	-3.4	-0.4	-3.9	3.3
Dec 2010	17.5	17.6	14.5	26.3	9.1	2.9	4.8
Dec 2009	-3.3	-3.2	3.3	-9.9	-0.1	1.1	3.8
Dec 2008	-7.6	-7.4	-14.4	-5.5	-11.2	3.7	-9.0
Dec 2007	0.1	-0.3	-0.6	2.5	-10.0	-2.6	1.7
Dec 2006	3.1	3.1	5.2	2.3	8.7	-1.0	-5.4
Dec 2005	5.8	5.8	3.5	8.9	3.2	2.2	0.6
Dec 2004	5.2	5.6	7.6	3.4	0.9	5.7	9.6
Dec 2003	5.5	5.3	5.6	6.3	1.6	4.6	0.3
Dec 2002	3.7	3.4	5.3	3.4	-5.9	2.2	-2.6

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

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

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

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

Source: Statistiche Bundesamt Deutschland

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

More detail is provided by Chart VE-2 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2008 to 2012. There could be some flattening in recent months probably leading into mild downturn as depicted by trend.

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

Source: Statistiche Bundesamt Deutschland

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

Table VE-4 provides month and 12-month rates of growth of manufacturing in Germany from Dec 2010 to Nov 2012. There are fluctuations in both monthly rates and in the past 12 months. Recovery is strong in Jan-Mar 2012 with cumulative growth of 1.8 percent at the high annual equivalent rate of 7.4 percent but the drop in Apr 2012 of 2.1 percent results in decline of 0.3 percent in the first four months of 2012 that pulls down the 12-month rate of Apr 2012 to minus 1.0 percent. Growth of 1.9 percent in May 2012 is insufficient to prevent decline of 7.0 percent in 12 months because production was quite strong in the first part of 2011. Manufacturing decreased 0.8 percent in Jun 2011 but the 12-month change was 3.5 percent. In Jul 2012, manufacturing grew 1.5 percent in the month and 2.0 percent in 12 months. Declining of manufacturing by 0.3 percent in Aug 2012 brought down the 12-month percentage change to minus 1.5 percent. In Oct, manufacturing output fell 2.0 percent, pulling down the 12-month rate to minus 8.3 percent. Manufacturing decreased 2.0 percent in Oct but increased 3.2 percent in 12 months. In Nov 2012, manufacturing increased 0.4 percent but fell 3.2 percent in 12 months.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Nov 2012	-3.2	0.4
Oct	3.2	-2.0
Sep	-8.3	-2.0
Aug	-1.5	-0.3
Jul	2.0	1.5
Jun	3.5	-0.8
May	-7.0	1.9
Apr	-1.0	-2.1
Mar	-0.4	1.1
Feb	3.3	0.3
Jan	5.7	0.4
Dec 2011	1.4	-1.5
Nov	5.1	-0.2
Oct	1.2	0.4
Sep	6.5	-2.1
Aug	12.6	-0.2
Jul	8.1	3.1
Jun	0.9	-1.1
May	21.4	1.3
Apr	7.5	0.4
Mar	10.9	0.6
Feb	17.0	1.4
Jan	17.1	-0.5
Dec	17.6	1.9

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

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

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

Source: Statistiche Bundesamt Deutschland

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

Several tables and charts facilitate analysis of machinery orders in Germany. Table VE-5 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany. The same behavior is observed for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and some negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. Total orders decreased 1.8 percent in Nov 2012 with increase of 1.4 percent in domestic orders and decrease of 4.1 percent of foreign orders. As in other countries, data on orders for manufacturing are highly volatile. All 12-month percentage changes from Jan 2012 to Sep 2012 in Table VE-5, with exception of 0.1 percent for Jan 2012 for domestic orders, are negative largely because of the unusual strength of the Germany economy in the beginning of 2011 but more recently because of slowing world economy in 2012. Oct 2012 was stronger with growth of total orders of 3.3 percent but decline of 1.0 percent in Nov 2012.

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

	Total 12 M	Total M	Foreign 12 M	Foreign M	Home 12 M	Home M
2012
Nov	-1.0	-1.8	2.2	-4.1	-4.7	1.3
Oct	3.3	3.8	6.4	6.6	-0.3	0.2
Sep	-9.3	-2.4	-6.6	-2.9	-12.5	-1.8
Aug	-4.5	-0.8	-2.2	0.0	-7.3	-1.7
Jul	-1.9	0.1	-0.6	-0.3	-3.4	0.6
Jun	-5.0	-1.3	-7.1	-1.0	-1.9	-1.7
May	-10.5	0.4	-3.1	1.8	-18.4	-1.3
Apr	-3.4	-1.4	-4.0	-3.0	-2.5	0.5
Mar	-2.0	2.8	-0.9	4.1	-3.3	1.4
Feb	-4.5	0.7	-4.9	2.0	-3.9	-0.9
Jan	-3.1	-1.6	-5.7	-4.2	0.1	1.7
2011
Dec	-0.2	0.9	-0.8	4.0	0.6	-2.8
Nov	-4.2	-3.1	-7.6	-5.1	0.0	-0.7
Oct	0.6	2.1	2.2	3.5	-1.3	0.4
Sep	2.4	-3.6	1.2	-4.2	3.8	-2.8
Aug	6.8	-0.9	4.3	-0.6	10.1	-1.1
Jul	5.6	-2.7	5.7	-6.6	5.6	2.4
Jun	3.8	1.4	8.0	11.8	-1.6	-9.7
May	22.7	2.2	16.2	-4.5	30.2	10.3
Apr	6.9	1.9	9.9	2.1	3.4	1.8
Mar	9.1	-3.0	11.9	-2.9	5.8	-3.2
Feb	21.5	0.8	24.8	-0.1	17.8	1.8
Jan	22.4	4.3	26.5	3.4	17.6	5.5
2010
Dec	22.2	-3.3	27.3	-3.4	15.8	-3.2
Nov	21.5	5.3	26.8	8.3	15.6	1.7
Oct	14.1	0.6	17.7	-0.3	10.4	1.7
Sep	13.9	-1.8	16.0	-3.6	11.6	0.4
Aug	23.5	3.3	31.9	5.5	14.4	0.6
Jul	14.2	-1.8	21.7	-2.1	6.3	-1.3
Jun	28.5	3.8	32.0	5.9	24.3	1.4
May	24.4	0.1	28.9	0.4	19.9	-0.1
Apr	29.3	2.2	33.0	2.1	25.2	2.1
Mar	29.4	5.7	32.3	6.2	26.4	5.1
Feb	23.4	-0.3	27.6	-0.1	18.6	-0.5
Jan	16.7	4.4	23.6	4.2	9.7	4.8
Dec 2009	9.2	-2.3	10.6	-2.6	7.4	-1.9
Dec 2008	-28.2	-7.2	-31.5	-9.8	-23.7	-4.1
Dec 2007	7.1	-1.6	9.1	-2.4	4.5	-0.6
Dec 2006	2.9	0.4	3.4	0.4	2.2	0.5
Dec 2005	4.9	-0.6	10.5	-1.1	-1.5	0.1
Dec 2004	12.7	6.6	12.9	8.4	12.7	4.9
Dec 2003	10.7	2.4	16.4	5.4	5.1	-0.8
Dec 2002	-0.2	-3.4	-0.8	-6.6	0.2	-0.3
Average ∆% 2003-2007	7.6		10.4		4.5
Average ∆% 2003-2011	3.6		5.1		1.9

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

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

Orders for capital goods of Germany are shown in Table VE-6. Total capital goods orders fell 3.1 percent in Nov 2012 with growth of 0.8 percent of domestic orders but decline of 5.5 percent of foreign orders. Total capital goods orders increased 3.5 percent in Oct 2012 with foreign orders increasing 5.7 percent and domestic orders increasing 0.9 percent. There has been evident deceleration from 2010 and early 2011 with growth rates falling from two digit levels to single digits and multiple negative changes. An important aspect of Germany’s economy shown in Tables VE-5 and VE-6 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007. Germany adopted fiscal and labor market reforms to increase productivity.

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

	Total 12 M	Total M	Foreign 12 M	Foreign M	Domestic 12 M	Domestic M
2012
Nov	-0.7	-3.1	2.5	-5.5	-5.6	0.8
Oct	3.2	4.2	5.1	6.2	0.2	0.9
Sep	-7.7	-0.7	-4.5	-0.3	-12.4	-1.4
Aug	-4.8	-2.4	-2.5	-1.1	-8.3	-4.2
Jul	0.0	-0.3	1.0	-0.9	-1.5	0.9
Jun	-7.5	-0.2	-10.9	0.2	-1.1	-0.8
May	-11.1	-0.3	-1.9	0.9	-22.9	-2.0
Apr	-2.3	-2.9	-3.7	-5.2	0.0	0.9
Mar	1.9	5.6	3.8	9.2	-1.1	0.1
Feb	-5.9	1.5	-7.4	1.5	-3.6	1.5
Jan	-3.6	-4.8	-6.0	-5.8	0.6	-3.2
2011
Dec	1.6	3.0	0.5	4.4	3.5	1.0
Nov	-5.9	-4.3	-9.4	-7.3	-0.1	0.6
Oct	3.6	3.7	7.5	6.0	-2.3	0.3
Sep	2.9	-3.6	1.8	-3.8	4.9	-3.3
Aug	6.3	0.0	3.5	0.4	11.1	-0.7
Jul	7.7	-7.6	6.9	-12.6	8.9	1.5
Jun	8.9	4.5	13.6	19.5	1.0	-14.7
May	26.8	3.3	18.0	-6.3	40.3	19.1
Apr	11.3	3.3	14.7	4.2	6.2	1.8
Mar	11.0	-5.5	13.7	-4.9	7.0	-6.3
Feb	29.4	2.7	33.1	1.5	23.9	4.6
Jan	26.4	3.1	32.4	3.2	17.5	2.9
2010
Dec	27.3	-4.8	31.0	-6.1	21.3	-2.7
Nov	30.1	8.9	35.9	13.4	21.5	2.1
Oct	20.6	0.0	23.9	-2.3	16.0	3.9
Sep	18.1	-2.9	20.4	-4.6	14.6	-0.1
Aug	29.3	6.4	42.8	8.6	12.0	2.9
Jul	14.1	-3.9	28.4	-4.8	-2.3	-2.6
Jun	33.5	6.2	41.3	9.8	22.2	0.7
May	25.9	1.5	35.6	0.7	13.6	2.7
Apr	30.1	1.2	40.1	1.7	17.4	0.4
Mar	26.2	7.7	33.8	9.0	16.1	5.9
Feb	20.3	-1.3	30.3	-0.2	8.1	-2.8
Jan	16.9	4.4	29.5	2.4	2.5	7.2
Dec 2009	8.1	-1.4	13.6	-1.5	0.5	-1.2
Dec 2008	-32.2	-7.2	-36.7	-9.9	-24.4	-3.5
Dec 2007	9.6	-0.6	11.6	-2.4	6.3	2.2
Dec 2006	3.6	2.3	3.8	2.9	3.1	1.4
Dec 2005	1.9	-2.2	9.8	-2.5	-8.5	-1.7
Dec 2004	19.4	11.2	18.6	12.2	20.5	9.8
Dec 2003	11.7	2.1	17.2	5.0	5.4	-1.6
Dec 2002	-2.8	-4.3	-3.7	-8.1	-1.8	0.2
Average ∆% 2003-2007	9.1		12.1		4.9
Average ∆% 2003-2011	4.3		5.9		2.2

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

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

Chart VE-4 of the German Statistisches Bundesamt Deutschland shows the sharp upward trend of total orders in manufacturing before the global recession. There is also an obvious upward trend in the recovery from the recession with Germany’s economy being among the most dynamic in the advanced economies until the slowdown beginning in the final months of 2011 and what could be stationary series from late 2011 into 2012 but risk of decline.

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

Source:  Statistisches Bundesamt Deutschland

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

Chart VE-5 of the German Statistisches Bundesamt Deutschland provides unadjusted volume of total orders in manufacturing and a trend curve. The final segment on the right could be the beginning of declining trend but it may be early to reach conclusions.

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

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

Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-7. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.6 percent and imports 13.2 percent. In Sep 2011, exports grew 10.5 percent relative to a year earlier and imports grew 12.0 percent. Growth rates in 12 months ending in Oct 2011 fell significantly to 3.6 percent for exports and 9.2 percent for imports. Lower prices may explain part of the decline in nominal values. Exports fell 3.4 percent in 12 months ending in Sep 2012, rebounding to growth of 10.5 percent in Oct 2012 and flat in Nov 2012. Imports decreased 3.6 percent in the 12 months ending in Sep 2012, rebounding to growth of 6.0 percent in Oct 2012 and decreasing 1.2 percent in Nov 2012. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.

Table VE-7, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%

	Exports EURO Billions	12- Month ∆%	Imports EURO Billions	12-Month ∆%
Nov 2012	94.1	0.0	77.1	-1.2
Oct	98.4	10.5	82.7	6.0
Sep	91.7	-3.4	74.8	-3.6
Aug	90.2	5.7	73.9	0.5
Jul	93.5	9.2	76.6	2.1
Jun	94.7	7.5	76.8	2.1
May	92.7	0.4	77.2	-0.5
Apr	87.1	3.1	72.7	-1.3
Mar	98.8	0.1	81.4	2.0
Feb	91.2	7.9	76.3	5.4
Jan	86.0	8.4	72.8	4.9
Dec 2011	84.8	4.7	72.3	5.6
Nov	94.1	7.4	78.0	5.8
Oct	89.1	3.6	78.1	9.2
Sep	95.0	10.5	77.7	11.7
Aug	85.3	14.6	73.5	13.2
Jul	85.6	5.2	75.0	9.7
Jun	88.1	3.3	75.2	5.6
May	92.4	21.2	77.5	17.4
Apr	84.5	12.4	73.7	18.5
Mar	98.7	15.3	79.8	15.1
Feb	84.5	20.8	72.4	27.6
Jan	79.3	25.2	69.4	26.0
Dec 2010	81.0	20.0	68.4	24.4
Nov	87.6	21.2	73.7	30.9
Oct	86.0	18.7	71.5	19.2
Sep	86.0	21.2	69.5	17.0
Aug	74.4	23.8	64.9	27.1
Jul	81.4	15.3	68.4	24.4
Jun	85.3	27.5	71.2	33.9
May	76.2	25.6	66.1	31.3
Apr	75.2	16.8	62.2	14.4
Mar	85.6	22.0	69.3	18.0
Feb	70.0	9.7	56.8	3.2
Jan	63.4	-0.3	55.1	-1.9
Dec 2009	67.5	1.2	55.0	-7.3
Dec 2008	66.7	-8.6	59.4	-5.1
Dec 2007	73.0	-0.6	62.5	-0.1
Dec 2006	73.4	10.2	62.6	8.5
Dec 2005	66.6	11.5	57.7	18.1
Dec 2004	59.7	9.2	48.9	10.8
Dec 2003	54.7	7.6	44.1	3.9
Dec 2002	50.8	5.5	42.5	6.4
Dec 2001	48.2	-3.7	39.9	-17.5
Dec 2000	50.0		48.4

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

Chart VE-6 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that is milder than earlier in the recovery but does not appear to be flattening.

Chart VE-6, Germany, Exports Original Value and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-7 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend that could be flattening.

Chart VE-7, Germany, Imports Original Value and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-8 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2008. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization followed by stronger trend in recent months and flattening recently.

Chart VE-8, Germany, Trade Balance Original and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Table VE-8 provides monthly rates of growth of exports and imports of Germany. Exports decreased 2.4 percent in Sep 2012 after increasing 2.3 percent in Aug 2012, growing again 0.2 percent in Nov 2012 and decreasing 3.4 percent in Nov 2012. Imports decreased 0.9 percent in Sep 2012 after increasing 0.3 percent in Aug 2012, growing 2.9 percent in Oct 2012 and declining 3.7 percent in Nov 2012. Export growth and import growth were vigorous in Jan-Mar 2011 when Germany’s economy outperformed most advanced economies but less dynamic and consistently in following months as world trade weakens.

Table VE-8, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted 

	Exports	Imports
Nov 2012	-3.4	-3.7
Oct	0.2	2.9
Sep	-2.4	-0.9
Aug	2.3	0.3
Jul	-0.2	0.1
Jun	-0.4	-2.0
May	3.8	5.1
Apr	-1.7	-4.1
Mar	0.8	0.6
Feb	1.5	2.8
Jan	2.5	1.2
Dec 2011	-2.8	-2.9
Nov	1.7	-0.1
Oct	-3.4	-0.4
Sep	1.5	0.1
Aug	3.2	0.3
Jul	-1.5	0.2
Jun	-0.1	0.0
May	2.0	1.3
Apr	-3.6	-0.4
Mar	5.6	2.2
Feb	1.4	1.7
Jan	0.8	4.1
Dec 2010	0.0	-3.0

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

There is extremely important information in Table VE-9 for the current sovereign risk crisis in the euro zone. Table VE-9 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Nov 2012. German exports to other European Union (EU) members are 56.3 percent of total exports in Nov 2012 and 57.1 percent in Jan-Nov 2012. Exports to the euro area are 37.2 percent in Nov and 37.6 percent in Jan-Nov. Exports to third countries are 43.7 percent of the total in Nov and 42.9 percent in Jan-Nov. There is similar distribution for imports. Exports to non-euro countries are decreasing 0.6 percent in Nov 2012 and increasing 3.9 percent in Jan-Nov 2012 while exports to the euro area are decreasing 5.7 percent in Nov and decreasing 1.7 percent in Jan-Nov 2012. Exports to third countries, accounting for 43.7 percent of the total in Nov 2012, are increasing 5.6 percent in Nov and 10.4 percent in Jan-Nov, accounting for 42.9 percent of the cumulative total in Jan-Nov 2012. Price competitiveness through devaluation could improve export performance and growth. Economic performance in Germany is closely related to its high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone. Germany could benefit from depreciation of the euro because of high share in its exports to countries not in the euro zone but breakdown of the euro zone raises doubts on the region’s economic growth that could affect German exports to other member states.

Table VE-9, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

	Nov 2012  € Billions	Nov 12-Month ∆%	Jan–Nov 2012 € Billions	Jan-Nov 2012/ Jan-Nov 2011 ∆%
Total Exports	94.1	0.0	1,018.4	4.3
A. EU Members	53.0 % 56.3	-4.0	581.5 % 57.1	0.2
Euro Area	35.0 % 37.2	-5.7	382.8 % 37.6	-1.7
Non-euro Area	18.0 % 19.1	-0.6	198.8 % 19.5	3.9
B. Third Countries	41.1 % 43.7	5.6	436.9 % 42.9	10.4
Total Imports	77.1	-1.2	842.2	1.4
C. EU Members	50.0 % 64.9	0.9	534.4 % 63.5	1.6
Euro Area	34.8 % 45.1	1.1	374.0 % 44.4	1.3
Non-euro Area	15.3 % 19.8	0.5	160.4 % 19.1	2.3
D. Third Countries	27.0 % 35.0	-4.9	307.8 % 36.6	1.1

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

Source:

Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2013/01/PE13_005_51.html;jsessionid=EAAD291DC09A1212A967AB76756E5FFC.cae2

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 44.3 in Nov to 44.6 in Dec, indicating significant contraction of private sector activity for a tenth consecutive month at slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10552). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that the economy performed in IVQ2012 at the slowest pace since IQ2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10552). The Markit France Services Activity index decreased from 45.8 in Nov to 45.2 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10552). The Markit France Manufacturing Purchasing Managers’ Index^® increased marginally to 44.6 in Dec from 44.5 in Nov, remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10535). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds continuing weakness in manufacturing with new orders because of weakness in both foreign and domestic demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10535). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Dec month ∆% 0.3 12 months ∆%: 1.3 1/13/13
PPI	Nov month ∆%: -0.5 Nov 12 months ∆%: 1.9 Blog 12/30/12
GDP Growth	IIIQ2012/IIQ2012 ∆%: 0.1 IIIQ2012/IIIQ2011 ∆%: 0.0 Blog 12/30/12
Industrial Production	Nov ∆%: Manufacturing 0.2 12-Month ∆%: Manufacturing minus 4.6 Blog 1/13/13
Consumer Spending	Nov Manufactured Goods ∆%: -0.2 Nov 12-Month Manufactured Goods ∆%: -1.0 Blog 12/30/12
Employment	IIIQ2012 Unemployed 2.826 million Unemployment Rate: 9.9% Employment Rate: 63.9% Blog 12/16/12
Trade Balance	Nov Exports ∆%: month -2.8, 12 months -3.4 Nov Imports ∆%: month -2.5, 12 months -3.4 Blog 1/13/13
Confidence Indicators	Historical averages 100 Dec Mfg Business Climate 89 Blog 12/30/12

Links to blog comments in Table FR:

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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

Table VF-1 provides longer historical perspective of manufacturing in France. There had been steady improvement in manufacturing output in France with three consecutive months of increases Jun-Aug 2012 with 0.3 percent in Jun 2012, 0.7 percent in Jul 2012 and 2.0 percent in Aug 2012 for cumulative quarterly increase of 3.0 percent at annual equivalent 12.7 percent. Improvement was interrupted by declines of manufacturing of 3.3 in Sep 2012 and 0.8 percent in Oct 2012 such that the cumulative from Jun 2012 to Oct 2012 is minus 1.2 percent and minus 3.7 percent in 12 months. Decline of manufacturing in four of the six months from Dec 2011 to May 2012 with cumulative decline of 3.7 percent from Dec 2011 to May 2012, or 7.2 percent annual equivalent, pulled down the 12-month percentage change to minus 4.7 percent in May 2012. In contrast, the cumulative increase of 3.0 percent in Jun-Aug 2012 pulled up the 12-month rate to only minus 0.4 percent in Aug 2012. In the quarter Dec 2011 to Feb 2012, manufacturing fell 2.8 at the annual equivalent rate of minus 10.7 percent. There is strength earlier in the recovery in 2010 and early 2011 with less strong performance in the latter part of 2011. Manufacturing fell 12.9 percent in 2008 during the global contraction and an additional 2.9 percent in 2009.

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

	Month ∆%	12-Month ∆%
Nov 2012	0.2	-4.6
Oct	-0.8	-3.7
Sep	-3.3	-2.5
Aug	2.0	-0.4
Jul	0.7	-2.7
Jun	0.3	-2.6
May	-1.3	-4.7
Apr	-0.7	-2.0
Mar	1.1	-1.2
Feb	-1.3	-3.9
Jan	0.3	-1.8
Dec 2011	-1.8	-0.3
Nov	1.1	1.5
Oct	0.4	2.1
Sep	-1.2	1.0
Aug	-0.3	3.6
Jul	0.8	2.9
Jun	-1.8	2.7
May	1.5	3.2
Apr	0.1	2.6
Mar	-1.6	3.5
Feb	0.8	6.8
Jan	1.9	6.1
Dec 2010	0.0	5.0
Dec 2009		-2.9
Dec 2008		-12.9
Dec 2007		-0.2
Dec 2006		2.4
Dec 2005		0.0
Dec 2004		1.4
Dec 2003		0.4
Dec 2002		-0.6
Dec 2001		-4.9
Dec 2000		5.2
Annual
Average ∆% Dec 1990-Dec 2000		1.7
Average ∆% Dec 2003-Jan 2008		1.5

Source:

Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130110

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

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130110

France has been running a trade deficit fluctuating around €6,000 million, as shown in Table VF-2. Exports decreased 2.8 percent in Nov 2012 while imports decreased 3.4 percent, resulting in marginal decrease of the trade deficit from revised €4710 million in Oct 2012 to €4334 million in Nov 2012.

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

	Exports	Imports	Trade Balance
Nov 2012	36,494	40,828	-4,334
Oct	37,534	42,244	-4,710
Sep	37,346	42,342	-4,996
Aug	38,063	43,720	-5,657
Jul	36,755	41,121	-4,366
Jun	36,300	42,753	-6,453
May	37,438	43,154	-5,716
Apr	36,555	42,841	-6,286
Mar	36,189	41,993	-5,804
Feb	36,882	43,341	-6,459
Jan	36,546	42,357	-5,811
Dec 2011	36,152	41,741	-5,589
Nov	37,435	42,252	-4,817
Oct	35,867	41,977	-6,110
Sep	35,643	42,515	-6,872
Aug	36,860	42,017	-5,157
Jul	35,302	41,769	-6,467
Jun	35,289	40,950	-5,661
May	34,888	41,723	-6,835
Apr	34,683	41,715	-7,032
Mar	35,279	41,715	-6,436
Feb	34,722	41,304	-6,582
Jan	34,404	41,209	-6,805
Dec 2010	33,956	39,685	-5,729

Source: France, Direction générale des douanes et droits indirects http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

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

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

	Exports Month ∆%	Exports 12-Month ∆%	Imports Month ∆%	Imports 12-Month ∆%
Nov 2012	-2.8	-3.4	-3.4	-3.4
Oct	0.5	4.6	-0.2	0.6
Sep	-1.9	4.8	-3.2	-0.4
Aug	3.6	3.3	6.3	4.1
Jul	1.3	4.1	-3.8	-1.6
Jun	-3.0	2.9	-0.9	4.4
May	2.4	7.3	0.7	3.4
Apr	1.0	5.4	2.0	2.7
Mar	-1.9	2.6	-3.1	0.7
Feb	0.9	6.2	2.3	4.9
Jan	1.1	6.2	1.5	2.8
Dec 2011	-3.4	6.5	-1.2	5.2
Nov	4.4	7.6	0.7	5.7
Oct	0.6	8.9	-1.3	15.5
Sep	-3.3	7.4	1.2	12.3
Aug	4.4	10.5	0.6	8.8
Jul	0.0	1.6	2.0	9.6
Jun	1.1	4.1	-1.9	10.0
May	0.6	16.4	0.0	16.9
Apr	-1.7	7.7	0.0	14.9
Mar	1.6	11.4	1.0	15.4
Feb	0.9	14.0	0.2	22.3
Jan	1.3	14.2	3.8	21.0
Dec 2011		6.5		5.1
Dec 2010		13.6		14.8
Dec 2009		-9.6		-1.8
Dec 2008		-6.8		-10.9
Dec 2007		6.1		8.4
Dec 2006		6.3		6.7
Dec 2005		11.4		15.1
Dec 2004		-3.8		5.7
Dec 2003		7.1		1.6

Source: France, Direction générale des douanes et droits indirects http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

Annual data for France’s exports, imports and trade balance are provided in Table VF-4. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €73,682 million in 2011. Annual growth rates of exports have not been sufficiently high to compensate for growth of imports driven in part by commodity price increases.

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

	Exports € Millions	∆%	Imports € Millions	∆%	Balance € Millions
Oct 2012 12 Months	443,102		509,828		-66,726
Year
2011	428,022	8.4	501,704	12.2	-73,682
2010	394,758	13.9	447,054	14.1	-52,296
2009	346,476	-17.0	391,856	-17.3	-45,389
2008	417,636	2.7	473,853	5.5	-56,217
2007	406,487	3.0	448,981	5.8	-42,494
2006	394,621	9.5	424,549	10.4	-29,928
2005	360,376	4.4	384,588	9.6	-24,212
2004	345,256	5.4	350,996	7.0	-5,740
2003	327,653		327,884		-231

Source: France, Direction générale des douanes et droits indirects http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

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 increased from 44.6 in Nov to 45.6 in Dec, indicating significant contraction of output of Italy’s services at a marginally lower rate for contraction during a year and a half (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10555). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that new business fell at a faster rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10555). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 45.1 in Nov to 46.7 in Dec for 17 consecutive months of contraction of Italy’s manufacturing but the highest reading in nine months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10494). Weak internal demand contributed more to contraction than foreign demand that declined only marginally. Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds a more encouraging reading with softer declines in output and new orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10494). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Dec month ∆%: 0.3 Dec 12-month ∆%: 2.4 Blog 1/6/13
Producer Price Index	Nov month ∆%: -0.1 Nov 12-month ∆%: 2.2 Blog 12/30/12
GDP Growth	IIIQ2012/IIQ2012 SA ∆%: minus 0.2 IIIQ2012/IIIQ2011 NSA ∆%: minus 2.4 Blog 12/16/12
Labor Report	Nov 2012 Participation rate 63.9% Employment ratio 56.8% Unemployment rate 11.1% Blog 1/13/13
Industrial Production	Oct month ∆%: minus 1.1 12 months ∆%: minus 6.2 Blog 12/16/12
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 Exports Sep month SA ∆%: minus 0.0; Imports Sep month minus ∆%: 0.8 Exports 12 months Sep NSA ∆%: 12.0 Imports 12 months NSA ∆%: 0.9 Blog 12/23-24/12

Links to blog comments in Table IT:

1/6/13 http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.2 percent in Dec 2006 to 11.1 percent in Nov 2012. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %
Nov 2012	63.9	56.8	11.1
Oct	64.0	56.9	11.1
Sep	63.8	56.9	10.8
Aug	63.7	57.1	10.5
Jul	63.9	57.1	10.5
Jun	63.8	57.0	10.6
May	63.7	57.0	10.4
Apr	63.6	56.9	10.5
Mar	63.5	56.9	10.3
Feb	63.3	56.9	10.0
Jan	63.1	56.9	9.7
Dec 2011	62.9	56.9	9.5
Nov	62.7	56.8	9.4
Oct	62.6	56.9	8.8
Sep	62.4	56.8	8.9
Aug	62.4	57.0	8.4
Jul	62.3	57.1	8.3
Jun	62.0	57.0	8.0
May	62.0	57.0	8.0
Apr	61.8	56.9	7.8
Mar	62.2	57.1	7.9
Feb	61.8	56.8	7.9
Jan	61.9	56.8	8.1
Dec 2010	62.1	56.9	8.2
Dec 2009	62.3	57.1	8.3
Dec 2008	62.4	58.0	6.9
Dec 2007	63.1	58.9	6.5
Dec 2006	62.5	58.6	6.2
Dec 2005	62.5	57.8	7.5
Dec 2004	62.5	57.4	7.9

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/78959

Table VG-2 provides more detail on the labor report for Italy in Nov 2012. The level of employment decreased 42,000 from Oct to Nov 2012 and fell 37,000 Nov 2011 to Nov 2012. Unemployment increased 2,000 in Nov 2012 and increased 507,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 37.1 percent in Nov 2012 for ages 15 to 24.

Table VG-2, Italy, Labor Report

Nov 2012	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22.873	-42	-0.2	-37	-0.2
UNE	2.870	-2	-0.1	507	21.4
INA   15-64	14.279	39	0.3	-499	-3.4
EMP %	56.8		-0.1		0.0
UNE %	11.1		0.0		1.8
Youth UNE %  15-24	37.1		0.7		5.0
INA % 15-64	36.1		0.1		-1.2

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

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/78959

Chart VG-1 of the Istituto Nazionale di Statistica provides the rate of unemployment in Italy. The rate stabilized in 2011 at around 8 percent until mid year and then climbed to 11.1 percent in Nov 2012.

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

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level dropped from slightly above 23 million in 2011, climbing back to 23 million May-Jul 2012 and fell to 22.873 million in Nov 2012.

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

Source: Istituto Nazionale di Statistica

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

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

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

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

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2012/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 50.2 in Nov to 48.9 in Dec with interruption of growth by marginal contraction for the first time since Dec 2010 during inclement snow weather (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10559). Chris Williamson, Chief Economist at Markit, finds that combined services, manufacturing and construction survey data suggests possible contraction of UK GDP of 0.2 percent in IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10559). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 49.1 in Nov to 51.4 in Dec with the first reading above 50 after seven consecutive months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10539). The PMI registered average 49.5 in IVQ2012, which is higher than 48.1 in IIIQ2012 and higher than the average of 49.2 for 2012. New export orders continued to fall as in all months in 2012 with weakness in the euro area that is the United Kingdom’s major export destination. Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI^®, finds that conditions improved in Dec but contraction in IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10539). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Nov month ∆%: 0.2 Nov 12-month ∆%: 2.7 Blog 12/23-24/12
Output/Input Prices	Output Prices: Nov 12-month NSA ∆%: 2.2; excluding food, petroleum ∆%: 1.4 Input Prices: Nov 12-month NSA ∆%: -0.3 Excluding ∆%: -0.1 Blog 12/23-24/12
GDP Growth	IIIQ2012 prior quarter ∆% 0.9; year earlier same quarter ∆%: 0.0 Blog 12/30/12
Industrial Production	Nov 2012/Nov 2011 ∆%: Production Industries minus 2.4; Manufacturing minus 2.1 Blog 1/13/13
Retail Sales	Nov month ∆%: 0.0 Oct 12-month ∆%: 0.9 Blog 12/23-24/12
Labor Market	Aug-Oct Unemployment Rate: 7.8%; Claimant Count 4.8%; Earnings Growth 1.8% Blog 12/23-24/12
Trade Balance	Balance Oct minus ₤3466 million Exports Nov ∆%: 1.7; Sep-Nov ∆%: -1.0 Imports Nov ∆%: 1.0 Sep-Nov ∆%: -0.9 Blog 1/13/13

Links to blog comments in Table UK:

12/30/12 http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html

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 provides the output of production industries with revisions. Table VH-1 incorporates the revisions released in Dec, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/november-2012/index.html) and the latest available data for Nov 2012. Manufacturing accounts for 67.0 percent of the production industries of the UK and decreased 2.1 percent in the 12 months ending in Nov 2012. Capital goods industries grew 1.7 percent in the 12 months ending in Nov 2012 and had been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 11.6 percent in the 12 months ending in Feb 2011. Mining and quarrying fell 13.0 percent in the 12 months ending in Nov 2012. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Apr 2011 to Nov 2012. With exception of 3.8 percent for consumer durable goods in Oct 2012, most months for capital goods, Sep to Nov 2012 for consumer durables and 0.3 percent for manufacturing in Aug 2012, 12-month percentage changes of all segments are negative from Jan to Nov 2012. Energy and mining have been drivers of decline. The lower part of Table VH-1 provides rates of change of yearly values. Manufacturing output fell 9.7 percent in 2009 after falling 2.5 percent in 2008 but grew at 3.8 percent in the initial phase of the recovery in 2010 and 2.0 percent in 2011.

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

	PROD IND	MNG	MFG	ENGY	CON DUR	CON NDUR	CAP
2012
Nov	-2.4	-13.0	-2.1	-6.2	0.2	-5.9	1.7
Oct	-3.0	-21.2	-2.0	-9.0	3.8	-5.0	-1.9
Sep	-3.2	-17.0	-1.7	-10.4	0.7	-2.2	1.2
Aug	-1.2	0.3	-1.8	-1.0	-3.7	-4.7	2.7
Jul	-1.0	-2.5	-1.0	-2.7	-3.2	-4.6	5.0
Jun	-4.1	-6.2	-4.3	-5.2	-10.0	-6.0	0.7
May	-1.6	-8.7	-1.4	-3.8	-4.9	-5.1	2.9
Apr	-2.3	-14.2	-1.7	-5.9	-3.6	-5.4	2.8
Mar	-2.8	-9.5	-1.4	-8.7	-7.4	-1.7	0.8
Feb	-2.3	-8.9	-2.0	-4.2	-7.4	-0.8	-1.0
Jan	-3.7	-20.4	-0.5	-14.5	-6.2	0.7	3.1
2011
Dec	-2.6	-14.5	0.7	-14.4	-4.2	-0.6	6.2
Nov	-3.0	-13.8	-1.2	-11.6	0.2	-1.4	4.3
Oct	-2.4	-13.2	-0.6	-11.3	-1.7	-2.0	4.3
Sep	-1.7	-17.4	0.6	-11.4	-1.0	-1.5	6.4
Aug	-1.4	-16.4	0.6	-10.1	-0.6	0.4	4.0
Jul	-0.9	-16.0	1.9	-10.3	2.6	3.1	3.9
Jun	-0.2	-15.8	2.9	-9.7	7.8	1.3	7.3
May	-1.0	-20.7	3.3	-13.1	1.9	3.2	6.0
Apr	-0.9	-14.7	2.6	-11.2	1.2	4.0	5.3
Mar	0.1	-16.1	3.5	-10.4	2.5	0.4	9.9
Feb	2.0	-11.6	5.0	-7.2	1.0	0.9	11.6
Jan	3.5	-3.9	5.6	-3.4	3.7	-0.6	10.2
2011/ 2010	-0.7	-14.5	2.0	-10.3	1.1	0.6	6.5
2010/ 2009	2.1	-4.3	3.8	-3.0	-4.1	-0.5	10.2
2009/ 2008	-9.1	-9.0	-9.7	-6.6	-6.7	-0.8	-10.2
2008/ 2007	-2.8	-6.2	-2.5	-3.1	-5.6	-1.6	-3.0
2007/2006	0.5	-2.7	0.9	-1.5	1.1	-1.6	2.6

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

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

Percentage changes in the production industries and major components in a month relative to the prior month are shown in Table VH-2. The production industries were relatively weak in Sep 2012 after strong performance in Jul 2012 and weakness in Aug 2012 with growth in Nov 2012. The overall index of production industries increased 0.3 percent in Nov 2012 with improvement in mining increasing 8.7 percent in Nov. Manufacturing fell 1.3 percent in Oct and fell 0.3 percent in Nov and capital goods increased 1.0 percent in Nov. There was sharp recovery in Jul 2012 with high rates for all components such as 3.0 percent for the production index, 3.1 percent for manufacturing and 3.3 percent for capital goods.

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

	PROD IND	MNG	MFG	ENGY	CON DUR	CON NDUR	CAP
2012
Nov	0.3	8.7	-0.3	2.7	-2.2	-1.4	1.0
Oct	-0.9	-4.3	-1.3	0.0	1.9	-2.9	-0.5
Sep	-2.1	-17.7	0.0	-10.0	1.3	0.4	0.5
Aug	-0.5	2.4	-1.2	1.4	-2.3	-0.3	-2.3
Jul	3.0	4.7	3.1	2.5	5.0	1.8	3.3
Jun	-2.4	2.6	-3.0	-1.0	-3.6	-1.2	-1.6
May	1.1	0.9	1.4	1.1	-0.5	0.4	2.3
Apr	-0.7	-4.8	-1.1	1.1	1.9	-2.9	-1.0
Mar	-0.4	-2.1	1.0	-5.3	1.0	-0.1	2.9
Feb	0.3	4.0	-1.3	5.2	-2.3	-0.8	-2.2
Jan	-0.6	-3.0	-0.3	-1.7	1.1	0.0	-1.1
2011
Dec	0.5	-2.7	1.1	-1.4	-0.9	1.2	0.6
Nov	-0.4	-1.6	-0.3	-0.4	1.3	-0.4	1.2
Oct	-1.1	0.8	-0.9	-1.6	-1.1	-0.1	-1.2
Sep	-0.1	-0.6	-0.1	-0.6	-3.1	-2.1	1.9
Aug	-0.3	-0.5	-0.5	-0.3	-1.9	-0.2	-0.1
Jul	-0.2	0.8	-0.3	-0.1	-2.3	0.2	-1.0
Jun	0.2	-0.1	-0.1	0.5	1.9	-0.3	0.6
May	0.5	-5.2	1.1	-1.2	0.9	0.1	2.3
Apr	-1.2	0.5	-0.9	-1.9	-2.1	0.8	-3.0
Mar	0.1	-1.4	0.3	-0.6	1.0	0.9	1.1
Feb	-1.2	-9.2	0.3	-6.1	-1.0	0.7	1.9
Jan	0.5	4.3	0.8	-1.6	3.3	-1.4	1.8
2010
Dec	0.1	-1.9	-0.8	1.9	3.6	0.4	-1.2

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

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

Weights of components of the production index and contributions by components to the monthly and 12-month percentage changes of volume are provided by the UK Office for National Statistics and shown in Table VH-3. The 12-month rate of output of the production industries of minus 2.4 percent was driven by negative contribution of 1.58 percentage points of mining with the subcomponent of oil and gas deducting 1.63 percentage points. Manufacturing deducted 1.46 percentage points. The contribution of manufacturing is strong because of its share of 67.0 percent in the production index with growth of minus 2.1 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing decreased 0.3 percent in Nov, subtracting 0.23 percentage points. Increase of mining by 8.7 percent in Nov added 0.87 percentage points.

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

	Weight %	Volume 12-Month ∆% Ending in Nov 2012	% Point Contrib.	Volume Month ∆% Nov 2012	% Point Contrib.
PROD IND	100.0	-2.4	-2.4	0.3	0.3
MNG	15.4	-13.0	-1.58	8.7	0.87
MNG 06	12.6	-17.8	-1.63	11.3	0.79
MFG	67.0	-2.1	-1.46	-0.3	-0.23
ELEC	9.6	4.4	0.41	-4.1	-0.43
WATER & SEW	8.0	2.4	0.20	0.6	0.06

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

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

Table VH-4 provides the breakdown of manufacturing 12-month and monthly growth and percentage contributions. Several negative contributions to 12-month growth were by: wood and paper products (CC) deducted 0.38 percentage points with growth in 12 months of minus 7.5 percent; chemical and chemicals products (CE) deducted 0.41 percentage points with growth in 12 months of minus 6.1 percent; rubber and plastic products (CG) deducted 0.29 percentage points with growth in 12 months of minus 6.1 percent; machinery and equipment (CK) deducted 0.08 percentage points with growth in 12 months of minus 1.2 percent; and basic pharmaceutical products and preparations (CF), deducting 0.25 percentage points with 12-month growth of minus 5.3 percent; manufacture of food products, beverages and tobacco (CA) deducted 0.60 percentage points with 12-month growth of minus 4.6 percent. The highest positive contribution was 0.54 percentage points by transport equipment (CL), growing 6.8 percent in 12 months. Electrical products (CJ) added 0.14 percentage points with growth of 6.6 percent in 12 months and basic metals and metal products (CH) added 0.31 percentage points with growth in 12 months of 3.4 percent.

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

Sub-sector	% of production	Month on same month a year ago growth (%) Nov 12	Contribution to production (% points)	Month on prior month growth (%)   Nov 12	Contribution to production (% points)
CA	11.9	-4.6	-0.60	-1.1	-0.13
CB	2.0	-4.6	-0.09	-4.1	-0.09
CC	5.5	-7.5	-0.38	-0.6	-0.03
CD	0.8	-21.7	-0.16	14.3	0.08
CE	6.1	-6.8	-0.41	-0.7	-0.04
CF	6.1	-5.3	-0.25	-0.4	-0.02
CG	4.7	-6.1	-0.29	2.2	0.10
CH	8.6	3.4	0.31	-2.7	-0.27
CI	4.3	3.2	0.13	-3.4	-0.15
CJ	2.1	6.6	0.14	-6.4	-0.16
CK	4.8	-1.2	-0.08	3.6	0.22
CL	5.7	6.8	0.54	3.1	0.26
CM	4.5	-6.6	-0.32	-0.3	-0.01

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

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

The UK’s trade account is shown in Table VH-5. In Nov 2012, the UK ran a deficit in trade of goods and services (total trade) of ₤3466 million. The deficit in trade of goods was ₤9164 million and ₤7714 million in goods excluding oil. A surplus in services of ₤5698 million contributed to the smaller overall deficit in goods and services (-₤9164 million plus ₤5698 million equal to -₤3466 million). Services have contributed to lower trade account deficits and also softened the impact of the global recession on the UK economy. Exports of goods and services increased 1.7 percent in Nov 2012 and fell 1.0 percent in the quarter Sep-Nov 2012 relative to the same quarter a year earlier with imports increasing 1.0 percent in Nov and decreasing 1.0 percent in Sep-Nov 2012 relative to the same quarter a year earlier. Excluding oil, UK exports of goods increased 2.4 percent in Nov 2012 and increased 8.8 in Sep-Nov 2012 relative to a year earlier while imports increased 0.4 percent in Nov and decreased 0.2 percent in Sep-Nov 2012 relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports decreased 0.2 percent in Nov and fell 0.7 percent in Sep-Nov 2012 relative to a year earlier and imports increased 0.3 percent in Nov and decreased 1.5 percent in Sep-Nov 2012 relative to a year earlier.

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

	₤ Million SA Nov 2012	Month ∆%    Nov 2012	Sep-Nov 2012 ∆% Sep-Nov 2011
Total Trade
Exports	40,322	1.7	-1.0
Imports	43,788	1.0	-0.9
Balance	-3,466
Trade in Goods
Exports	24,809	2.9	-1.2
Imports	33,973	1.1	-0.8
Balance	-9,164
Trade in Goods Excluding Oil
Exports	21,868	2.4	0.8
Imports	29,582	0.4	-0.2
Balance	-7,714
Trade in Services
Exports	15,513	-0.2	-0.7
Imports	9,815	0.3	-1.5
Balance	5,698

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

© Carlos M. Pelaez, 2010, 2011, 2012, 2013