Recovery without Hiring, United States Industrial Production, Contraction of GDP in Europe and Japan, World Devaluation Wars, Collapse of United States Dynamism of Income Growth and Employment Creation, World Economic Slowdown and Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2010, 2011, 2012, 2013
Executive Summary
I Recovery without Hiring
IA1 Hiring Collapse
IA2 Labor Underutilization
IA3 Ten Million Fewer Full-time Job
IA4 Youth and Middle-Aged Unemployment
IB Collapse of United States Dynamism of Income Growth and Employment Creation
II United States Industrial Production
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
IV Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table IV-1, updated with every blog comment, provides the latest annual data for GDP, consumer price index (CPI) inflation, producer price index (PPI) inflation and unemployment (UNE) for the advanced economies, China and the highly-indebted European countries with sovereign risk issues. The table now includes the Netherlands and Finland that with Germany make up the set of northern countries in the euro zone that hold key votes in the enhancement of the mechanism for solution of sovereign risk issues (Peter Spiegel and Quentin Peel, “Europe: Northern Exposures,” Financial Times, Mar 9, 2011 http://www.ft.com/intl/cms/s/0/55eaf350-4a8b-11e0-82ab-00144feab49a.html#axzz1gAlaswcW). Newly available data on inflation is considered below in this section. Data in Table IV-1 for the euro zone and its members are updated from information provided by Eurostat but individual country information is provided in this section as soon as available, following Table IV-1. Data for other countries in Table IV-1 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section V World Economic Slowdown following with individual country and regional data tables.
Table IV-1, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates
| GDP | CPI | PPI | UNE | |
| US | 1.5 | 1.7 | 1.3 | 7.9 |
| Japan | 0.3 | -0.1 | -0.2 | 4.2 |
| China | 7.9 | 2.5 | -1.9 | |
| UK | 0.0 | 2.7* | 2.0* output | 7.7 |
| Euro Zone | -0.9 | 2.2 | 2.1 | 11.7 |
| Germany | 0.4 | 2.0 | 1.5 | 5.3 |
| France | -0.3 | 1.5 | 1.7 | 10.6 |
| Nether-lands | -0.9 | 3.4 | 4.2 | 5.8 |
| Finland | -1.6 | 3.5 | 3.0 | 7.7 |
| Belgium | -0.4 | 2.1 | 6.4 | 7.5 |
| Portugal | -3.8 | 2.1 | 3.6 | 16.5 |
| Ireland | -0.8 | 1.6 | 2.2 | 14.7 |
| Italy | -2.7 | 2.6 | 2.0 | 11.2 |
| Greece | -6.0 | 0.3 | 2.1 | NA |
| Spain | -1.8 | 3.0 | 2.7 | 26.1 |
Notes: GDP: rate of growth of GDP; CPI: change in consumer price inflation; PPI: producer price inflation; UNE: rate of unemployment; all rates relative to year earlier
*Office for National Statistics http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2013/index.html **Core
PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/; 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 1.5 percent in IVQ2012 relative to IVQ2011 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp4q12_adv.pdf See II Mediocre and Decelerating United States Economic Growth at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html). Japan’s GDP fell 0.3 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 0.6 percent in IVQ 2011, increasing at the SAAR of 6.0 percent in IQ2012 and decreasing at 1.0 percent in IIQ2012 but contracting at the SAAR of 3.8 percent in IIIQ2012 and contracting at the SAAR of 0.4 percent in IVQ2012 (see Section VB earlier at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html); the UK grew at minus 0.3 percent in IVQ2012 relative to IIIQ2012 and GDP changed 0.0 percent in IVQ2012 relative to IVQ2011 (see Section VH at http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets_27.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html); and the Euro Zone grew at minus 0.6 percent in IVQ2012 and minus 0.9 percent in IVQ2012 relative to IVQ2011 (see Section VD and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/twenty-eight-million-unemployed-or.html). These are stagnating or “growth recession” rates, which are positive or about nil growth rates with some contractions that are insufficient to recover employment. The rates of unemployment are quite high: 7.7 percent in the US but 19.4 percent for unemployment/underemployment or job stress of 31.4 million (see Table I-4 at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html), 4.2 percent for Japan (see Section VB at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_2.html), 7.7 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 1.7 percent in the US, -0.1 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/2013/02/united-states-unsustainable-fiscal.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 (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html), weak hiring with the loss of 10 million full-time jobs (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.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/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html); (4) the timing, dose, impact and instruments of normalizing monetary and fiscal policies (see http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html 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 2.1 percent on average in the cyclical expansion in the 14 quarters from IIIQ2009 to IVQ2012. Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.
First, the average increase of 165,900 new nonfarm jobs per month in the US from Mar to Dec 2012 or 166,000 created in Jan 2013 is insufficient even to absorb 113,167 new entrants per month into the labor force. The difference between the average increase of 165,900 new private nonfarm jobs per month in the US from Mar to Dec 2012 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 52,733 monthly new jobs net of absorption of new entrants in the labor force. There are 31.4 million in job stress in the US currently. The provision of 52,733 new jobs per month net of absorption of new entrants in the labor force would require 595 months to provide jobs for the unemployed and underemployed (31.4 million divided by 52,733) or 49.6 years (595 divided by 12). The civilian labor force of the US in Jan 2013 not seasonally adjusted stood at 154.794 million with 13.181 million unemployed or effectively 20.354 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 1.6 years (1 million divided by product of 52,733 by 12, which is 632,796). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.740 million (0.05 times labor force of 154.794 million) for new net job creation of 5.441 million (13.181 million unemployed minus 7.740 million unemployed at rate of 5 percent) that at the current rate would take 8.6 years (5.441 million divided by 632,796). Under the calculation in this blog there are 20.354 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 12.614 million jobs net of labor force growth that at the current rate would take 19.9 years (12.614 million minus 0.05(161.967 million) divided by 632,796, using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in the US fell from 146.743 million in Oct 2007 to 141.614 million in Jan 2013, by 5.129 million, or 3.5 percent, while the noninstitutional population increased from 232.715 million in Oct 2007 to 244.663 million in Jan 2013, by 11.948 million or increase of 5.1 percent, using not seasonally adjusted data. There is actually not sufficient job creation to merely absorb new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. Second, calculations show that GDP growth is 1.7 to 1.9 percent. Excluding growth at the SAAR of 2.5 percent in IIQ2011 and 4.1 percent in IVQ2011 while converting growth in IIIQ2012 to 1.3 percent by deducting from 3.1 percent one-time inventory accumulation of 0.73 percentage points and national defense expenditures of 0.64 percentage points and converting growth in IVQ2012 by adding 1.27 percentage points of inventory divestment and 1.28 percentage points of national defense expenditure reductions to obtain 2.54 percent, the US economy grew at 1.7 percent in the remaining six quarters {[(1.00025x1.0032x1.005x1.0032x1.0077x0.0063)4/6 – 1]100 = 1.7%} with declining growth trend in three consecutive quarters from 4.1 percent in IVQ2011, to 2.0 percent in IQ2012, 1.3 percent in IIQ2012, 3.1 percent in IIIQ2012 that is more like 1.73 percent without inventory accumulation and national defense expenditures and -0.1 percent in IVQ2012 that is more likely 2.54 percent by adding 1.27 percentage points of inventory divestment and 1.28 percentage points of national defense expenditures. Weakness of growth is more clearly shown by adjusting 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; 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; and deduction of 1.27 percentage points of inventory divestment and 1.28 percentage points of national defense expenditure reductions. The Bureau of Economic Analysis (BEA) of the US Department of Commerce released on Wed Jan 30, 2012, the first or advanced estimate of GDP for IVQ2012 at minus 0.1 percent seasonally-adjusted annual rate (SAAR) (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp4q12_adv.pdf). In the four quarters of 2012, the US economy is growing at the annual equivalent rate of 1.9 percent {([(1.021/4(1.013)1/4(1.0173)1/4(1.0254)1/4]-1)100 = 1.89%} by excluding inventory accumulation of 0.73 percentage points and exceptional defense expenditures of 0.64 percentage points from growth 3.1 percent at SAAR in IIIQ2012 to obtain adjusted 1.73 percent SSAR and adding 1.28 percentage points of national defense expenditure reductions and 1.27 percentage points of inventory divestment to growth of minus 0.1 percent SAAR in IVQ2012 to obtain 2.54 percent.
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) practically unchanged in the statement at the conclusion of its meeting on Jan 30, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130130a.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 IVQ2012 is analyzed at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html (and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) and the PCE inflation data from the report on personal income and outlays (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html). The Bureau of Economic Analysis (BEA) provides the advance estimate of IVQ2012 GDP and annual for 2012 with the second estimate be released on Feb 28 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm See http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier 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 at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and the report 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 Jan will be released at 8:30 AM on Mar 1, 2013 (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/2013/02/thirty-one-million-unemployed-or.html). The report for Jan 2013 will be released on Mar 8, 2013 (http://www.bls.gov/ces/) and analyzed in this blog on Mar 10, 2013. “Longer term projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy” (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf).
It is instructive to focus on 2012 and 2013 as 2014, 2015 and longer term are too far away, and there is not much information even on what will happen in 2013 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC but the second block of numbers provides the range of projections by FOMC participants. The first row for each year shows the projection introduced after the meeting of Dec 12, 2012 and the second row “PR” the projection of the Sep 13, 2012 meeting. There are three major changes in the view.
1. Growth “∆% GDP.” The FOMC has reduced the forecast of GDP growth in 2012 from 3.3 to 3.7 percent in Jun 2011 to 2.5 to 2.9 percent in Nov 2011 and 2.2 to 2.7 percent at the Jan 25 meeting but increased it to 2.4 to 2.9 percent at the Apr 25, 2012 meeting, reducing it to 1.9 to 2.4 percent at the Jun 20, 2012 meeting and further to 1.7 to 2.0 percent at the Sep 13, 2012 meeting and 1.7 to 1.8 percent at the Dec 12, 2012 meeting. GDP growth in 2013 has been increased to 2.5 to 3.0 percent at the meeting on Sep 13
2012 from 2.2 to 2.8 percent at the meeting on Jun 20, 2012 but reduced to 2.3 to 3.0 percent at the Dec 12, 2012 meeting.
2. Rate of Unemployment “UNEM%.” The FOMC increased the rate of unemployment from 7.8 to 8.2 percent in Jun 2011 to 8.5 to 8.7 percent in Nov 2011 but has reduced it to 8.2 to 8.5 percent at the Jan 25 meeting and further down to 7.8 to 8.0 percent at the Apr 25, 2012 meeting but increased it to 8.0 to 8.2 percent at the Jun 20, 2012 meeting and did not change it at 8.0 to 8.2 at the meeting on Sep 13, 2012, lowering the projection to 7.8 to 7.9 percent at the Dec 12, 2012 meeting. The rate of unemployment for 2013 has been changed to 7.6 to 7.9 percent at the Sep 13 meeting compared with 7.5 to 8.0 percent at the Jun 20 meeting and reduced to 7.4 to 7.7 percent at the Dec 12 meeting.
3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 1.5 to 2.0 percent in Jun 2011 to virtually the same of 1.4 to 2.0 percent in Nov 2011 but has reduced it to 1.4 to 1.8 percent at the Jan 25 meeting but increased it to 1.9 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.2 to 1.7 percent at the Jun 20, 2012 meeting. The interval was increased to 1.7 to 1.8 percent at the Sep 13, 2012 meeting and 1.6 to 1.7 percent at the Dec 12, 2012 meeting.
4. Core Inflation “∆% Core PCE Inflation.” Core inflation is PCE inflation excluding food and energy. There is again not much of a difference of the projection for 2012 in Jun 2011 of 1.4 to 2.0 percent and the Nov 2011 projection of 1.5 to 2.0 percent, which has been reduced slightly to 1.5 to 1.8 percent at the Jan 25 meeting but increased to 1.8 to 2.0 percent at the Apr 25, 2012 meeting, reducing it to 1.7 to 2.0 percent at the Jun 20, 2012 meeting. The projection was virtually unchanged at 1.7 to 1.9 percent at the Sep 13 meeting. For 2013, the projection for core inflation was changed from 1.6 to 2.0 percent at the Jun 20, 2012 meeting to 1.7 to 2.0 percent at the Sep 13, 2012 meeting and lowered to 1.7 to 1.9 percent at the Dec 12, 2012 meeting.
Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, June 2012 and Sep 2012
| ∆% GDP | UNEM % | ∆% PCE Inflation | ∆% Core PCE Inflation | |
| Central | ||||
| 2012 Sep PR | 1.7 to 1.8 1.7 to 2.0 | 7.8 to 7.9 8.0 to 8.2 | 1.6 to 1.7 1.7. to 1.8 | 1.6 to 1.7 1.7 to 1.9 |
| 2013 | 2.3 to 3.0 | 7.4 to 7.7 | 1.3 to 2.0 | 1.6 to 1.9 1.7 to 2.0 |
| 2014 | 3.0 to 3.5 | 6.8 to 7.3 | 1.5 to 2.0 | 1.6 to 2.0 |
| 2015 | 3.0 to 3.7 3.0 to 3.8 | 6.0 to 6.6 6.0 to 6.8 | 1.7 to 2.0 1.8 to 2.0 | 1.8 to 2.0 1.9 to 2.0 |
| Longer Run Sep PR | 2.3 to 2.5 2.3 to 2.5 | 5.2 to 6.0 5.2 to 6.0 | 2.0 2.0 | |
| Range | ||||
| 2012 | 1.6 to 2.0 | 7.7 to 8.0 | 1.6 to 1.8 | 1.6 to 1.8 |
| 2013 | 2.0 to 3.2 | 6.9 to 7.8 | 1.3 to 2.0 | 1.5 to 2.0 |
| 2014 | 2.8 to 4.0 | 6.1 to 7.4 | 1.4 to 2.2 | 1.5 to 2.0 |
| 2015 Sep PR | 2.5 to 4.2 2.5 to 4.2 | 5.7 to 6.8 5.7 to 6.9 | 1.5 to 2.2 1.8 to 2.3 | 1.7 to 2.2 1.8 to 2.3 |
| Longer Run Sep PR | 2.2 to 3.0 2.2 to 3.0 | 5.0 to 6.0 5.0 to 6.3 | 2.0 2.0 |
Notes: UEM: unemployment; PR: Projection
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf
Another important decision at the FOMC meeting on Jan 25, 2012, is formal specification of the goal of inflation of 2 percent per year but without specific goal for unemployment (http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm):
“Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.
The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.
Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.
The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.
The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.
In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. ”
The probable intention of this specific inflation goal is to “anchor” inflationary expectations. Massive doses of monetary policy of promoting growth to reduce unemployment could conflict with inflation control. Economic agents could incorporate inflationary expectations in their decisions. As a result, the rate of unemployment could remain the same but with much higher rate of inflation (see Kydland and Prescott 1977 and Barro and Gordon 1983; http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html See Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 99-116). Strong commitment to maintaining inflation at 2 percent could control expectations of inflation.
The FOMC continues its efforts of increasing transparency that can improve the credibility of its firmness in implementing its dual mandate. Table IV-3 provides the views by participants of the FOMC of the levels at which they expect the fed funds rate in 2012, 2013, 2014 and the in the longer term. Table IV-3 is inferred from a chart provided by the FOMC with the number of participants expecting the target of fed funds rate (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf). There are 19 participants expecting the rate to remain at 0 to ¼ percent in 2012 and none to be higher. Not much change is expected in 2013 either with 17 participants anticipating the rate at the current target of 0 to ¼ percent and only two expecting higher rates. The rate would still remain at 0 to ¼ percent in 2014 for 14 participants with three expecting the rate to be in the range of 1.0 to 2.0 percent, one participant expecting rates at 0.5 to 1.0 percent and one participant expecting rates from 2.0 to 3.0. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels until late in 2014. For 2015, nine participants expect rates to be below 1.0 percent while nine expect rates from 1.0 to 4.5 percent. In the long-run, all 19 participants expect rates to be between 3.0 and 4.5 percent.
Table IV-3, US, Views of Target Federal Funds Rate at Year-End of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012
| 0 to 0.25 | 0.5 to 1.0 | 1.0 to 1.5 | 1.0 to 2.0 | 2.0 to 3.0 | 3.0 to 4.5 | |
| 2012 | 19 | |||||
| 2013 | 17 | 1 | 1 | |||
| 2014 | 14 | 1 | 3 | 1 | ||
| 2015 | 1 | 8 | 6 | 1 | 3 | |
| Longer Run | 19 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf
Additional information is provided in Table IV-4 with the number of participants expecting increasing interest rates in the years from 2012 to 2015. It is evident from Table IV-4 that the prevailing view in the FOMC is for interest rates to continue at low levels in future years. This view is consistent with the economic projections of low economic growth, relatively high unemployment and subdued inflation provided in Table IV-2.
Table IV-4, US, Views of Appropriate Year of Increasing Target Federal Funds Rate of Federal Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012
| Appropriate Year of Increasing Target Fed Funds Rate | Number of Participants |
| 2012 | 1 |
| 2013 | 2 |
| 2014 | 3 |
| 2015 | 13 |
| 2016 | 1 |
Source: http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf
There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Feb 2013. Current prices paid were rising at an accelerating rate from 35.79 in Jan 2011 to 69.89 in May 2011 but the rate of increase dropped significantly to 25.88 in Feb 2012, increasing sharply to 50.62 in Mar in the commodity price shock but falling to 45.78 in Apr, 37.35 in May, 19.59 in Jun and 7.41 in Jul as risk aversion caused decline of commodity prices. At the margin, the index of prices paid rose to 16.47 in Aug and 19.15 in Sep in yet net another bout of carry trade but eased to 17.20 in Oct, 14.61 in Nov and 16.13 in Dec 2012 with renewed risk aversion. The index of current prices paid increased to 22.58 in Jan 2013 and 26.26 in Feb 2013. The index of current prices received also fell sharply from 27.96 in May 2011 to 4.49 in Oct 2011, meaning that prices were increasing at a very low rate and then rose to 13.58 in Mar 2012, increasing to 19.28 in Apr but declining to 12.05 in May, 1.03 in Jun, 3.70 in Jul, 2.35 in Aug, which is also relatively low, near the border of contraction at 0.0, and 5.32 in Sep 2012, easing to 4.30 in Oct 2012 and increasing to 5.62 in Nov 2012, falling to 1.08 in Dec 2012 and increasing to 10.75 in Jan 2013 and 8.08 in Feb 2013. In the expectations for the next six months, the index of prices paid also declined from 68.82 in May 2011 to 56.98 in Dec 2011, rising to 66.67 in Mar 2012 but declining to 50.60 in Apr 2012, increasing to 57.83 in May and falling to 34.02 in Jun 2012, 35.80 in Jul and 31.76 in Aug but increasing to 40.43 in Sep 2012 and 44.09 in Oct 2012, declining to 39.33 in Nov 2012 and rising to 51.61 in Dec 2012, decreasing to 38.71 in Jan 2013 and 44.4 in Feb 2013. Expected prices received also rose in the first five months of 2011, declining from 35.48 in May 2011 to 15.22 in Aug 2011 but then rising to 32.10 in Mar 2012 and declining to 22.89 in Apr and May 2012, 17.53 in Jun, 16.05 in Jul and 14.12 in Aug but increasing to 23.40 in Sep 2012 and 24.73 in Oct 2012, declining to 15.73 in Nov 2012, rising to 25.81 in Dec 2012 and declining to 21.51 in Jan 2013 and 13.13 in Feb 2013. Unconventional monetary policy of zero interest rates and quantitative easing has increased the volatility of inflation via carry trades, creating uncertainty in financial and economic decisions.
Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA
| Current Prices Paid | Current Prices Received | Six Months Prices Paid | Six Months Prices Received | |
| Feb 2013 | 26.26 | 8.08 | 44.44 | 13.13 |
| Jan | 22.58 | 10.75 | 38.71 | 21.51 |
| Dec 2012 | 16.13 | 1.08 | 51.61 | 25.81 |
| Nov | 14.61 | 5.62 | 39.33 | 15.73 |
| Oct | 17.20 | 4.30 | 44.09 | 24.73 |
| Sep | 19.15 | 5.32 | 40.43 | 23.40 |
| Aug | 16.47 | 2.35 | 31.76 | 14.12 |
| Jul | 7.41 | 3.70 | 35.80 | 16.05 |
| Jun | 19.59 | 1.03 | 34.02 | 17.53 |
| May | 37.35 | 12.05 | 57.83 | 22.89 |
| Apr | 45.78 | 19.28 | 50.60 | 22.89 |
| Mar | 50.62 | 13.58 | 66.67 | 32.10 |
| Feb | 25.88 | 15.29 | 62.35 | 34.12 |
| Jan | 26.37 | 23.08 | 53.85 | 30.77 |
| Dec 2011 | 24.42 | 3.49 | 56.98 | 36.05 |
| Nov | 18.29 | 6.10 | 36.59 | 25.61 |
| Oct | 24.47 | 4.49 | 40.45 | 17.98 |
| Sep | 32.61 | 8.70 | 53.26 | 22.83 |
| Aug | 28.26 | 2.17 | 42.39 | 15.22 |
| Jul | 43.33 | 5.56 | 51.11 | 30.00 |
| Jun | 56.12 | 11.22 | 55.10 | 19.39 |
| May | 69.89 | 27.96 | 68.82 | 35.48 |
| Apr | 57.69 | 26.92 | 56.41 | 38.46 |
| Mar | 53.25 | 20.78 | 71.43 | 36.36 |
| Feb | 45.78 | 16.87 | 55.42 | 27.71 |
| Jan | 35.79 | 15.79 | 60.00 | 42.11 |
Source: http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html
Inflation in advanced economies has been fluctuating in waves at the production level with alternating surges and moderation of commodity price shocks. Table IV-6 provides month and 12-month percentage rates of inflation of Japan’s corporate goods price index (CGPI). Inflation measured by the CGPI increased 0.4 percent in Jan 2013 as in many European countries and fell 0.2 percent in 12 months. Measured by 12-month rates, CGPI inflation increased from minus 0.2 percent in Jul 2010 to a high of 2.2 percent in Jul-Aug 2011 and declined to minus 0.2 percent in Jan 2013. Calendar-year inflation for 2012 is minus 0.9 percent and 1.5 percent for 2011, which is the highest after declines in 2009 and 2010 but lower than 4.6 percent in the commodity shock driven by zero interest rates during the global recession in 2008. Inflation of the corporate goods prices follows waves similar to those in other indices around the world (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). In the first wave, annual equivalent inflation reached 5.9 percent in Jan-Apr 2011, driven by commodity price shocks of the carry trade from zero interest rates to commodity futures. In the second wave, carry trades were unwound because of risk aversion caused by the European debt crisis, resulting in average annual equivalent inflation of minus 1.2 percent in May-Jun 2011. In the third wave, renewed risk aversion caused annual equivalent decline of the CGPI of minus 2.2 percent in Jul-Nov 2011. In the fourth wave, continuing risk aversion resulted in annual equivalent inflation of minus 0.6 percent in Dec 2011 to Jan 2012. In the fifth wave, renewed risk appetite resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation dropped to minus 5.8 percent in May-Jul 2012. In the seventh wave, annual equivalent inflation jumped to 2.4 percent in Aug-Sep 2012. In the eighth wave, annual equivalent inflation was minus 1.8 percent in Oct-Nov 2012 in a new round of risk aversion. In the ninth wave, annual equivalent inflation returned at 3.7 percent in Dec 2012-Jan 2013. Unconventional monetary policies of zero interest rates and quantitative easing have created a difficult environment for economic and financial decisions with significant inflation volatility.
Table IV-6, Japan, Corporate Goods Price Index (CGPI) ∆%
| Month | Year | |
| Jan 2013 | 0.4 | -0.2 |
| Dec 2012 | 0.2 | -0.7 |
| AE ∆% Dec-Jan | 3.7 | |
| Nov | 0.0 | -0.9 |
| Oct | -0.3 | -1.0 |
| AE ∆% Oct-Nov | -1.8 | |
| Sep | 0.2 | -1.5 |
| Aug | 0.2 | -1.9 |
| AE ∆% Aug-Sep | 2.4 | |
| Jul | -0.4 | -2.2 |
| Jun | -0.7 | -1.5 |
| May | -0.4 | -0.8 |
| AE ∆% May-Jul | -5.8 | |
| Apr | -0.1 | -0.6 |
| Mar | 0.5 | 0.3 |
| Feb | 0.2 | 0.4 |
| AE ∆% Feb-Apr | 2.4 | |
| Jan | -0.1 | 0.3 |
| Dec 2011 | 0.0 | 0.8 |
| AE ∆% Dec-Jan | -0.6 | |
| Nov | -0.1 | 1.3 |
| Oct | -0.8 | 1.3 |
| Sep | -0.2 | 2.0 |
| Aug | -0.1 | 2.2 |
| Jul | 0.3 | 2.2 |
| AE ∆% Jul-Nov | -2.2 | |
| Jun | 0.0 | 1.9 |
| May | -0.2 | 1.6 |
| AE ∆% May-Jun | -1.2 | |
| Apr | 0.8 | 1.8 |
| Mar | 0.6 | 1.3 |
| Feb | 0.1 | 0.7 |
| Jan | 0.4 | 0.6 |
| AE ∆% Jan-Apr | 5.9 | |
| Dec 2010 | 0.5 | 1.2 |
| Nov | -0.1 | 0.9 |
| Oct | -0.1 | 0.9 |
| Sep | 0.0 | -0.1 |
| Aug | -0.1 | 0.0 |
| Jul | 0.0 | -0.2 |
| Calendar Year | ||
| 2012 | -0.9 | |
| 2011 | 1.5 | |
| 2010 | -0.1 | |
| 2009 | -5.3 | |
| 2008 | 4.6 |
AE: annual equivalent
Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1301.pdf
Chart IV-1 of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan from 1970 to 2012. Percentage changes of inflation of services are not as sharp as those of goods. Japan had the same sharp waves of inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). Behavior of the CGPI of Japan in the 1970s mirrors the Great Inflation episode in the United States with waves of inflation rising to two digits. Both political pressures and errors abounded in the unhappy stagflation of the 1970s also known as the US Great Inflation (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). Inflation also collapsed in the beginning of the 1980s as a result of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid 2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.
Chart IV-1, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1970-2013
Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html#
There is similar behavior of year-on-year percentage changes of the US producer price index from 1970 to 2012 in Chart IV-2 of the US Bureau of Labor Statistics as in Chart IV-1 with the domestic goods CGPI. The behavior of the CGPI of Japan in the 1970s is quite similar to that of the US PPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.
Chart IV-2, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1970-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
Finer detail is provided by Chart IV-3 of the domestic CGPI from 2008 to 2013. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion.
Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2012
Source: Bank of Japan
http://www.stat-search.boj.or.jp/index_en.html#
There is similar behavior of the US producer price index from 2008 to 2012 in Chart IV-4 as in the domestic CGPI in Chart IV-3. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-4 followed by increasing slope during periods of risk appetite. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.
Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009.
Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, 2008-2013
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
Japan imports primary commodities and raw materials. As a result, the import corporate goods price index in Chart IV-6 shows an upward trend after the rise during the global recession in 2008 driven by carry trades from fed funds rates collapsing to zero into commodity futures and decline during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan.
Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, 2008-2013
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2012. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from interest rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).
Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2013
Source: Bank of Japan
http://www.stat-search.boj.or.jp/ssi/cgi-bin/famecgi2?cgi=$graphwnd_en
The producer price index of the US from 1970 to 2012 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.
Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/ppi/data.htm
Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. Petroleum and coal with weight of 5.7 percent increased 3.3 percent in Jan 2013 and increased 6.3 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 1.1 percent in Jan 2013 and decreased 0.4 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income.
Table IV-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%
| Jan 2013 | Weight | Month ∆% | 12 Month ∆% |
| Total | 1000.0 | 0.4 | -0.2 |
| Food, Beverages, Tobacco, Feedstuffs | 137.5 | -0.1 | 0.7 |
| Petroleum & Coal | 57.4 | 3.3 | 6.3 |
| Production Machinery | 30.8 | -1.1 | -0.4 |
| Electronic Components | 31.0 | 0.0 | -2.0 |
| Electric Power, Gas & Water | 52.7 | -0.7 | 4.2 |
| Iron & Steel | 56.6 | 0.0 | -8.9 |
| Chemicals | 92.1 | 1.4 | 0.3 |
| Transport | 136.4 | 0.0 | -2.0 |
Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1301.pdf
Percentage point contributions to change of the corporate goods price index (CGPI) in Sep 2012 are provided in Table IV-8 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.4 percent in Jan 2013, the energy shock resulting from carry trades is evident in the contribution of 0.22 percentage points by petroleum and coal products in new carry trades of exposures in commodity futures. The exports CGPI increased 0.4 percent on the basis of the contract currency with contribution of 0.14 percentage points by metals & related products and 0.12 percentage points by chemicals & related products. The imports CGPI increased 0.3 percent on the contract currency basis. Petroleum, coal & natural gas added 0.13 percentage points because of new carry trades into energy commodity exposures while other primary products and manufactured goods added 0.08 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions.
Table IV-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index
| Groups Jan 2013 | Contribution to Change Percentage Points |
| A. Domestic Corporate Goods Price Index | Monthly Change: |
| Petroleum & Coal Products | 0.22 |
| Chemicals & Related Products | 0.13 |
| Nonferrous Metals | 0.12 |
| Scrap & Waste | 0.06 |
| Agriculture, Forestry & Fishery | -0.11 |
| B. Export Price Index | Monthly Change: |
| Metals & Related Products | 0.14 |
| Chemicals & Related Products | 0.12 |
| C. Import Price Index | Monthly Change: 0.3 % contract currency basis |
| Petroleum, Coal & Natural Gas | 0.13 |
| Other Primary Products & Manufactured Goods | 0.08 |
| Electric & Electronic Products | 0.05 |
| General Purpose, Production & Business Oriented Machinery | -0.09 |
Source: Bank of Japan http://www.boj.or.jp/en/
http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1301.pdf
Inflation in the UK is somewhat higher than in many advanced economies, deserving more detailed analysis. Table IV-9 provides 12-month percentage changes of UK output prices for all manufactured products, excluding food, beverage and petroleum and excluding duty. The 12-month rates rose significantly in 2011 in all three categories, reaching 6.3 percent for all manufactured products in Sep 2011 but declining to 5.7 percent in Oct, 5.4 in Nov and down to 1.8 percent in Jul 2012, increasing marginally to 2.3 percent in Aug 2012, 2.5 percent in Sep, 2.6 in Oct, 2.1 percent in Nov 2012, 2.2 percent in Dec 2012 and 2.0 percent in Jan 2013. Output price inflation is highly sensitive to commodity prices as shown by the increase by 6.7 percent in 2008 when oil prices rose over $140/barrel even in the midst of a global recession driven by the carry trade from zero interest rates to oil futures. The mirage episode of false deflation in 2001 and 2002 is also captured by output prices for the UK, which was originated in decline of commodity prices (see Barsky and Killian 2004) but was used as an argument for unconventional monetary policy of zero interest rates and quantitative easing during the past decade.
Table IV-9, UK Output Prices 12 Months ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Jan 2013 | 2.0 | 1.4 | 1.8 |
| Dec 2012 | 2.2 | 1.5 | 1.9 |
| Nov | 2.1 | 1.4 | 1.8 |
| Oct | 2.6 | 1.4 | 2.3 |
| Sep | 2.5 | 1.2 | 2.2 |
| Aug | 2.3 | 1.2 | 1.9 |
| Jul | 1.8 | 1.2 | 1.5 |
| Jun | 2.0 | 1.7 | 1.7 |
| May | 2.8 | 2.1 | 2.5 |
| Apr | 3.3 | 2.3 | 3.1 |
| Mar | 3.7 | 2.5 | 3.5 |
| Feb | 4.1 | 3.0 | 4.1 |
| Jan | 4.0 | 2.4 | 4.0 |
| Dec 2011 | 4.8 | 3.0 | 4.8 |
| Nov | 5.4 | 3.1 | 5.6 |
| Oct | 5.7 | 3.3 | 5.9 |
| Sep | 6.3 | 3.7 | 6.4 |
| Aug | 6.0 | 3.5 | 6.2 |
| Jul | 6.1 | 3.4 | 6.2 |
| Jun | 5.8 | 3.2 | 5.9 |
| May | 5.4 | 3.4 | 5.5 |
| Apr | 5.6 | 3.6 | 5.8 |
| Mar | 5.6 | 3.1 | 5.5 |
| Feb | 5.3 | 3.1 | 5.2 |
| Jan | 5.0 | 3.3 | 5.0 |
| Dec 2010 | 4.2 | 2.7 | 4.0 |
| Year ∆% | |||
| 2012 | 2.8 | 1.8 | 2.5 |
| 2011 | 5.6 | 3.4 | 5.7 |
| 2010 | 4.2 | 3.0 | 3.9 |
| 2009 | 1.6 | 2.5 | 1.0 |
| 2008 | 6.7 | 3.7 | 6.7 |
| 2007 | 2.4 | 1.4 | 2.1 |
| 2006 | 2.0 | 1.5 | 2.0 |
| 2005 | 1.9 | 1.0 | 1.9 |
| 2004 | 1.0 | -0.3 | 0.6 |
| 2003 | 0.6 | 0.1 | 0.5 |
| 2002 | -0.1 | -0.4 | -0.1 |
| 2001 | -0.3 | -0.6 | -0.3 |
| 2000 | 1.4 | -0.5 | 0.8 |
| 1999 | 0.6 | -1.0 | -0.3 |
| 1998 | 0.0 | -0.9 | -0.9 |
| 1997 | 0.9 | 0.3 | 0.1 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
Monthly and annual equivalent rates of change of output prices are shown in Table IV-10. There are waves of inflation similar to those in other countries (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). In the first wave, annual equivalent inflation was 12.0 percent in Jan-Apr 2011 with relaxed risk aversion in commodity markets. In the second wave, intermittent risk aversion resulted in annual equivalent inflation of 2.0 percent in May-Oct 2011. In the third wave, alternation of risk aversion resulted in annual equivalent inflation of 1.6 percent in Nov 2011 to Jan 2012. In the fourth wave, the energy commodity shock processed through carry trades caused the jump of annual equivalent inflation to 7.9 percent in Feb-Apr 2012. A fifth wave occurred in May-Jun 2012 with decline of output inflation by 5.3 percent annual equivalent in an environment of risk aversion that caused decline of commodity prices. A sixth wave under commodity shocks induced by carry trades from zero interest rates resulted in annual equivalent inflation of 4.5 percent in Jul-Sep 2012 and 4.0 percent in Jul-Oct 2012. In the seventh wave, annual equivalent inflation in Nov-Dec 2012 fell to minus 2.4 percent. In the eighth wave, annual equivalent inflation returned at 2.4 percent in Jan 2013.
Table IV-10, UK Output Prices Month ∆% NSA
| All Manufactured Products | Excluding Food, Beverage and | All Excluding Duty | |
| Jan 2013 | 0.2 | 0.2 | 0.2 |
| ∆% AE Jan | 2.4 | 2.4 | 2.4 |
| Dec 2012 | -0.1 | 0.0 | -0.1 |
| Nov | -0.3 | -0.1 | -0.2 |
| ∆% AE Nov-Dec | -2.4 | -0.6 | -1.8 |
| Oct | 0.2 | 0.1 | 0.2 |
| Sep | 0.5 | 0.3 | 0.5 |
| Aug | 0.5 | 0.1 | 0.6 |
| Jul | 0.1 | -0.1 | 0.1 |
| ∆% AE Jul-Oct | 4.0 | 1.2 | 4.3 |
| Jun | -0.6 | -0.2 | -0.6 |
| May | -0.3 | -0.1 | -0.4 |
| ∆% AE May-Jun | -5.3 | -1.8 | -5.8 |
| Apr | 0.7 | 0.6 | 0.5 |
| Mar | 0.6 | 0.1 | 0.5 |
| Feb | 0.6 | 0.5 | 0.6 |
| ∆% AE Feb-Apr | 7.9 | 4.9 | 6.6 |
| Jan | 0.4 | 0.3 | 0.3 |
| Dec 2011 | -0.2 | -0.1 | -0.2 |
| Nov | 0.2 | -0.1 | 0.2 |
| ∆% AE Nov-Jan | 1.6 | 0.4 | 1.2 |
| Oct | 0.0 | -0.1 | 0.1 |
| Sep | 0.3 | 0.3 | 0.2 |
| Aug | 0.0 | 0.1 | 0.1 |
| Jul | 0.3 | 0.4 | 0.3 |
| Jun | 0.2 | 0.2 | 0.2 |
| May | 0.2 | 0.2 | 0.2 |
| ∆% AE May-Oct | 2.0 | 2.2 | 2.2 |
| Apr | 1.1 | 0.8 | 0.9 |
| Mar | 1.1 | 0.5 | 1.1 |
| Feb | 0.5 | 0.0 | 0.5 |
| Jan | 1.1 | 0.8 | 1.1 |
| Jan-Apr | 12.0 | 6.5 | 11.4 |
| Dec 2010 | 0.5 | 0.0 | 0.6 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
Input prices in the UK have been more dynamic than output prices until the current event of risk aversion, as shown by Table IV-11, but with sharp oscillations because of the commodity and raw material content. The 12-month rates of increase of input prices, even excluding food, tobacco, beverages and petroleum, are very high, reaching 18.1 percent in Sep 2011 for materials and fuels purchased and 13.3 percent excluding food, beverages and petroleum. Inflation in 12 months of materials and fuels purchased moderated to 5.4 percent in Mar 2012 and 4.1 percent excluding food, tobacco, beverages and petroleum with the rates falling further in Apr to 1.1 percent for materials and fuels purchased and 2.2 percent excluding food, tobacco, beverages and petroleum. Input-price inflation collapsed in the 12 months ending in Jul 2012 to minus 2.6 percent for materials and fuels purchased and minus 1.5 percent excluding food, beverages and tobacco. Inflation returned at 1.2 percent in the 12 months ending in Aug 2012 but minus 0.5 percent excluding food, tobacco, beverages and petroleum. Inflation of input prices in Sep 2012 was minus 0.8 percent and minus 0.8 percent excluding food, beverages and petroleum. In Nov 2012, inflation of input prices of all manufacturing and materials purchased was minus 0.1 percent in 12 months and minus 0.1 percent in 12 months excluding food, tobacco, beverages and petroleum. Inflation of materials and fuels purchased in 12 months was 0.5 percent in Dec 2012 and 0.0 percent excluding tobacco, beverages and petroleum. Inflation of inputs returned with 1.8 percent in the 12 months ending in Jan 2013 and 0.6 percent excluding various items. There is only comparable experience with 22.2 percent inflation of materials and fuels purchased in 2008 and 16.9 percent excluding food, beverages and petroleum followed in 2009 by decline of 3.8 percent by materials and fuels purchased and increase of 1.6 percent for the index excluding items. UK input and output inflation is sensitive to commodity price increases driven by carry trades from zero interest rates. The mirage of false deflation is also observed in input prices in 1997-9 and then again from 2001 to 2003.
Table IV-11, UK, Input Prices 12-Month ∆% NSA
| All Manufacturing Materials and Fuels Purchased | Excluding Food, Tobacco, Beverages and Petroleum | |
| Jan 2013 | 1.8 | 0.6 |
| Dec 2012 | 0.5 | 0.0 |
| Nov | -0.1 | -0.2 |
| Oct | 0.2 | -0.4 |
| Sep | -0.8 | -0.8 |
| Aug | 1.2 | -0.5 |
| Jul | -2.6 | -1.5 |
| Jun | -2.2 | -0.3 |
| May | 0.1 | 1.1 |
| Apr | 1.1 | 2.2 |
| Mar | 5.4 | 4.1 |
| Feb | 7.7 | 5.7 |
| Jan | 6.5 | 5.6 |
| Dec 2011 | 8.9 | 7.2 |
| Nov | 13.8 | 10.2 |
| Oct | 14.5 | 11.0 |
| Sep | 18.1 | 13.3 |
| Aug | 16.3 | 13.0 |
| Jul | 18.5 | 13.3 |
| Jun | 16.8 | 12.6 |
| May | 16.3 | 11.4 |
| Apr | 17.9 | 12.2 |
| Mar | 14.8 | 10.3 |
| Feb | 14.9 | 10.7 |
| Jan | 14.2 | 10.5 |
| Dec 2010 | 13.1 | 9.0 |
| Year ∆% | ||
| 2012 | 1.3 | 1.2 |
| 2011 | 15.4 | 11.3 |
| 2010 | 9.9 | 5.7 |
| 2009 | -3.8 | 1.6 |
| 2008 | 22.2 | 16.9 |
| 2007 | 2.9 | 2.4 |
| 2006 | 9.8 | 7.2 |
| 2005 | 11.0 | 6.9 |
| 2004 | 3.3 | 1.6 |
| 2003 | 1.2 | -0.6 |
| 2002 | -4.4 | -4.8 |
| 2001 | -1.2 | -1.2 |
| 2000 | 7.4 | 3.7 |
| 1999 | -1.3 | -3.6 |
| 1998 | -9.1 | -4.6 |
| 1997 | -8.2 | -6.3 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
Table IV-20 provides monthly percentage changes of UK input prices for materials and fuels purchased and excluding food, tobacco, beverages and petroleum. There are strong waves of inflation of input prices in the UK similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). In the first wave, input prices rose at the high annual equivalent rate of 35.6 percent in Jan-Apr 2011, driven by carry trades from unconventional monetary policy into commodity exposures. In the second wave, alternating risk aversion caused annual equivalent inflation of minus 3.1 percent in May-Oct 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 1.2 percent in Nov-Dec 2011. In the fourth wave, annual equivalent inflation of input prices in the UK surged at 18.1 percent in Jan-Mar 2012 under relaxed risk aversion. In the fifth wave, annual equivalent inflation was minus 21.9 percent in Apr-Jun 2012 because of collapse of commodity prices during increasing risk aversion. In the sixth wave, annual equivalent inflation of materials and fuels purchased jumped to 14.0 percent in Jul-Aug 2012. In the seventh wave, annual equivalent inflation moderated to 1.6 percent in Sep-Nov 2012. In the eighth wave, annual equivalent inflation in Dec 2012-Jan 2012 is 8.1 percent.
Table IV-12, UK Input Prices Month ∆%
| All Manufacturing Materials and Fuels Purchased NSA | Excluding Food, Tobacco, Beverages and Petroleum SA | |
| Jan 2013 | 1.3 | 0.4 |
| Dec 2012 | 0.0 | -0.3 |
| ∆% Dec-Jan | 8.1 | 0.6 |
| Nov | 0.1 | 0.3 |
| Oct | 0.2 | 0.1 |
| Sep | 0.1 | 0.2 |
| ∆% Sep-Nov | 1.6 | 2.4 |
| Aug | 2.0 | 1.0 |
| Jul | 0.2 | -0.3 |
| ∆% Jul-Aug | 14.0 | 4.3 |
| Jun | -2.1 | -0.2 |
| May | -2.6 | -0.8 |
| Apr | -1.4 | 0.1 |
| ∆% Apr-Jun | -21.9 | -3.6 |
| Mar | 1.6 | -0.7 |
| Feb | 2.5 | 0.8 |
| Jan | 0.1 | -0.1 |
| ∆% AE Jan-Mar | 18.1 | 0.0 |
| Dec 2011 | -0.6 | -0.7 |
| Nov | 0.4 | 0.1 |
| ∆% AE Nov-Dec | -1.2 | -3.6 |
| Oct | -0.8 | -0.5 |
| Sep | 2.1 | 0.6 |
| Aug | -1.9 | 0.1 |
| Jul | 0.6 | 0.9 |
| Jun | 0.1 | 1.0 |
| May | -1.6 | -0.1 |
| ∆% AE May-Oct | -3.1 | 4.1 |
| Apr | 2.8 | 2.0 |
| Mar | 3.8 | 1.0 |
| Feb | 1.4 | 1.0 |
| Jan | 2.3 | 1.5 |
| ∆% AE Jan-Apr | 35.6 | 17.8 |
| Dec 2010 | 3.9 | 1.9 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of manufactured products, shown in Table IV-13. There are high contributions of 0.49 percentage points by food products, 0.71 percentage points by tobacco and alcohol, 0.24 percentage points by computer, electrical and optical and 0.42 percentage points by other manufactured products. There are diversified sources of contributions to 12 months output price inflation such as 0.14 percentage points by clothing, textile and leather and 0.14 percentage points by transport equipment. In general, contributions by products rich in commodities are the drivers of inflation. There were diversified contributions in percentage points to monthly inflation: 0.06 percentage points by food products, 0.07 percentage points by other manufactured products and 0.03 percentage points by transport equipment. The increase of petroleum prices by 0.4 percent contributed 0.04 percentage points to monthly inflation of manufactured products and increase of 0.2 percent by clothing added 0.02 percentage points.
Table IV-13, UK, Contributions to Month and 12-Month Change in Prices of All Manufactured Products, Percentage Points, NSA
| Jan 2013 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total % | 2.0 | 0.2 | ||
| Food Products | 0.49 | 3.0 | 0.06 | 0.4 |
| Tobacco & Alcohol | 0.71 | 6.6 | -0.02 | -0.1 |
| Clothing, Textile & Leather | 0.14 | 1.2 | 0.02 | 0.2 |
| Paper and Printing | -0.03 | -0.9 | 0.00 | 0.1 |
| Petroleum | -0.15 | -1.2 | 0.04 | 0.4 |
| Chemical & Pharmaceutical | 0.05 | 0.5 | -0.02 | -0.2 |
| Metal, Machinery & Equipment | -0.01 | -0.2 | 0.00 | 0.0 |
| Computer, Electrical & Optical | 0.24 | 2.8 | 0.01 | 0.1 |
| Transport Equipment | 0.14 | 1.4 | 0.03 | 0.3 |
| Other Manufactured Products | 0.42 | 2.4 | 0.07 | 0.4 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
The UK Office for National Statistics also provides contributions in percentage points to the monthly and 12-month rates of inflation of input prices, shown in Table IV-14. Crude oil is a large factor with deduction of 0.13 percentage points from the 12-month rate and contribution of 0.79 percentage points to the monthly rate in Jan 2013. Inflation also transfers to the domestic economy through the prices of imported inputs: imported metals deducted 0.46 percentage points from the 12-month rate and added 0.11 percentage points to the Jan rate. Domestic food added 1.67 percentage points to the 12-month rate and deducted 0.04 percentage points to the Jan rate. Reversals of commodity exposures in carry trades during risk aversion are a major source of financial instability.
Table IV-14, UK, Contributions to Month and 12-Month Change in Prices of Inputs, Percentage Points NSA
| Jan 2013 | 12 Months | 12 Months ∆% | Month % Points | Month ∆% |
| Total | 1.8 | 1.3 | ||
| Fuel | 0.53 | 5.2 | 0.08 | 0.8 |
| Crude Oil | -0.13 | -0.5 | 0.79 | 3.1 |
| Domestic Food Materials | 1.67 | 16.4 | -0.04 | -0.3 |
| Imported Food Materials | 0.22 | 3.9 | -0.01 | -0.2 |
| Other Domestic Produced Materials | 0.01 | 0.2 | 0.03 | 0.8 |
| Imported Metals | -0.46 | -5.6 | 0.11 | 1.6 |
| Imported Chemicals | -0.02 | -0.2 | 0.06 | 0.6 |
| Imported Parts and Equipment | -0.04 | -0.2 | 0.15 | 1.0 |
| Other Imported Materials | 0.03 | 0.3 | 0.13 | 1.4 |
Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/january-2013/index.html
Consumer price inflation in the UK is shown in Table IV-15. The CPI index increased 0.5 percent in Dec 2012 and 2.7 percent in 12 months. The same inflation waves (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html) are present in UK CPI inflation. In the first wave in Jan-Apr 2011, annual equivalent inflation was at a high 6.5 percent. In the second wave in May-Jul 2011, annual equivalent inflation fell to only 0.4 percent. In the third wave in Aug-Nov 2011, annual equivalent inflation returned at 4.6 percent. In the fourth wave in Dec 2011 to Jan 2012, annual equivalent inflation was minus 0.6 percent because of decline of 0.5 percent in Jan 2012. In the fifth wave, annual equivalent inflation increased to 6.2 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was minus 3.0 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation in Jul-Dec 2012 was 4.5 percent and 6.2 percent in Oct 2012 with the rate in Oct caused mostly by increases in university tuition payments. In the ninth wave, annual equivalent inflation was minus 5.8 percent in Jan 2013.
Table IV-15, UK, Consumer Price Index All Items, Month and 12-Month ∆%
| Month ∆% | 12 Months ∆% | |
| Jan 2013 | -0.5 | 2.7 |
| AE ∆% Jan | -5.8 | |
| Dec 2012 | 0.5 | 2.7 |
| Nov | 0.2 | 2.7 |
| Oct | 0.5 | 2.7 |
| Sep | 0.4 | 2.2 |
| Aug | 0.5 | 2.5 |
| Jul | 0.1 | 2.6 |
| AE ∆% Jul-Dec | 4.5 | |
| Jun | -0.4 | 2.4 |
| May | -0.1 | 2.8 |
| AE ∆% May-Jun | -3.0 | |
| Apr | 0.6 | 3.0 |
| Mar | 0.3 | 3.5 |
| Feb | 0.6 | 3.4 |
| AE ∆% Feb-Apr | 6.2 | |
| Jan | -0.5 | 3.6 |
| Dec 2011 | 0.4 | 4.2 |
| AE ∆% Dec-Jan | -0.6 | |
| Nov | 0.2 | 4.8 |
| Oct | 0.1 | 5.0 |
| Sep | 0.6 | 5.2 |
| Aug | 0.6 | 4.5 |
| AE ∆% Aug-Nov | 4.6 | |
| Jul | 0.0 | 4.4 |
| Jun | -0.1 | 4.2 |
| May | 0.2 | 4.5 |
| May-Jul | 0.4 | |
| Apr | 1.0 | 4.5 |
| Mar | 0.3 | 4.0 |
| Feb | 0.7 | 4.4 |
| Jan | 0.1 | 4.0 |
| AE ∆% Jan-Apr | 6.5 | |
| Dec 2010 | 1.0 | 3.7 |
| Nov | 0.4 | 3.3 |
| Oct | 0.3 | 3.2 |
| Sep | 0.0 | 3.1 |
| Aug | 0.5 | 3.1 |
| Jul | -0.2 | 3.1 |
| Jun | 0.1 | 3.2 |
| May | 0.2 | 3.4 |
| Apr | 0.6 | 3.7 |
| Mar | 0.6 | 3.4 |
| Feb | 0.4 | 3.0 |
| Jan | -0.2 | 3.5 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2013/index.html
Inflation has been unusually high in the UK since 2006, as shown in Table IV-16. There were no rates of inflation close to 2.0 percent in the period from 1997 to 2004. Inflation has exceeded 2 percent since 2005, reaching 3.6 percent in 2008, 3.3 percent in 2010, 4.5 percent in 2011 and 2.8 percent in 2012.
Table IV-16, UK, Consumer Price Index, Annual ∆%
| 1997 | 1.8 |
| 1998 | 1.6 |
| 1999 | 1.3 |
| 2000 | 0.8 |
| 2001 | 1.2 |
| 2002 | 1.3 |
| 2003 | 1.4 |
| 2004 | 1.3 |
| 2005 | 2.1 |
| 2006 | 2.3 |
| 2007 | 2.3 |
| 2008 | 3.6 |
| 2009 | 2.2 |
| 2010 | 3.3 |
| 2011 | 4.5 |
| 2012 | 2.8 |
http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2013/index.html
Table IV-17 provides the analysis of inflation in Jan 2013 by the UK Office for National Statistics. The driver of monthly inflation of minus 0.5 percent is decrease of 5.4 percent in clothing and footwear, deducting 0.37 percentage points. Food & nonalcoholic beverages increased 4.3 percent, contributing 0.19 percentage points and transport decreased 0.6 percent, deducting 0.09 percentage points. Contributions of percentage points to the 12-month rate of consumer price inflation of 2.7 percent are provided by the final two columns in Table IV-18. Food and nonalcoholic beverages increased 4.3 percent in 12 months, adding 0.47 percentage points. Education increased 3.8 percent in Dec, adding 0.42 percentage points to the 12-month inflation of consumer prices. Education increased 19.7 percent, adding 0.38 percentage points. The UK Office for National Statistics explains as follows (http://www.ons.gov.uk/ons/dcp171778_286398.pdf pages 3-4):
“The CPI rose by 0.5 per cent between September and October this year. By far the largest upward contribution to the 1-month change came from: education: prices, overall, rose by 19.1 per cent between September and October. This is more than twice the size of the next biggest monthly increase for education prices since CPI records began in 1996. The increase was due predominantly to a significant rise in undergraduate tuition fees, where the maximum annual tuition fees for new UK and EU students in England rose to £9,000.”
Table IV-17, UK, Consumer Price Index Month and Twelve-month ∆% and Percentage Point Contributions to Change by Components
| Jan 2013 | Month ∆% | Percentage Point Contribution | 12 Months ∆% | Percentage Point Contribution |
| CPI All Items | -0.5 | 2.7 | ||
| Food & Non-Alcoholic Beverages | 0.1 | 0.01 | 4.2 | 0.47 |
| Alcohol & Tobacco | 4.3 | 0.19 | 8.5 | 0.37 |
| Clothing & Footwear | -5.4 | -0.37 | 0.2 | 0.01 |
| Housing & Household Services | -0.1 | -0.02 | 3.5 | 0.51 |
| Furniture & Household Goods | -2.3 | -0.13 | 0.8 | 0.05 |
| Health | 0.2 | 0.00 | 2.2 | 0.05 |
| Transport | -0.6 | -0.09 | 1.3 | 0.21 |
| Communication | 1.0 | 0.03 | 3.5 | 0.10 |
| Recreation & Culture | -0.1 | -0.02 | 0.5 | 0.07 |
| Education | 0.0 | 0.00 | 19.7 | 0.38 |
| Restaurants & Hotels | 0.0 | 0.00 | 3.2 | 0.37 |
| Miscellaneous Goods & Services | -0.7 | -0.07 | 1.4 | 0.13 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2013/index.html
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) and the update of Jan 2013 (http://www.imf.org/external/pubs/ft/weo/2013/update/01/index.htm) 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 3.2 percent in 2012 but accelerating to 3.5 percent in 2013, 4.1 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 3.8 percent for the world as a whole. While the world would grow 16.1 percent in the four years from 2012 to 2015, the G7 as a whole would grow 7.6 percent. The difference in dollars of 2011 is rather high: growing by 16.1 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 7.6 percent would add $5.3 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 24.6 percent or at the average yearly rate of 5.7 percent, contributing $6.3 trillion from 2012 to 2015 or the equivalent of 86.3 percent of $7,298 billion of China in 2011. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output adds to $13,468 billion, or 19.3 percent of world output, which is equivalent to 39.9 percent of the combined output of the major advanced economies of the G7.
Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth
| GDP USD 2011 | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | |
| World | 69,899 | 3.3 | 3.6 | 4.2 | 4.4 |
| G7 | 33,697 | 1.4 | 1.5 | 2.2 | 2.5 |
| Canada | 1,739 | 1.9 | 2.0 | 2.4 | 2.4 |
| France | 2,778 | 0.1 | 0.4 | 1.1 | 1.5 |
| DE | 3,607 | 0.9 | 0.9 | 1.4 | 1.4 |
| Italy | 2,199 | -2.3 | -0.7 | 0.5 | 1.2 |
| Japan | 5,867 | 2.2 | 1.2 | 1.1 | 1.2 |
| UK | 2,431 | -0.4 | 1.1 | 2.2 | 2.6 |
| US | 15,076 | 2.2 | 2.1 | 2.9 | 3.4 |
| Euro Area | 13,114 | -0.4 | 0.2 | 1.2 | 1.5 |
| DE | 3,607 | 0.9 | 0.9 | 1.4 | 1.4 |
| France | 2,778 | 0.1 | 0.4 | 1.1 | 1.5 |
| Italy | 2,199 | -2.3 | -0.7 | 0.5 | 1.2 |
| POT | 238 | -3.0 | -1.0 | 1.2 | 1.9 |
| Ireland | 221 | 0.4 | 1.4 | 2.5 | 2.9 |
| Greece | 299 | -6.0 | -4.0 | 0.0 | 2.8 |
| Spain | 1,480 | -1.5 | -1.3 | 1.0 | 1.6 |
| EMDE | 25,438 | 5.3 | 5.6 | 5.9 | 6.1 |
| Brazil | 2,493 | 1.5 | 3.9 | 4.2 | 4.2 |
| Russia | 1,850 | 3.7 | 3.8 | 3.9 | 3.9 |
| India | 1,827 | 4.9 | 6.0 | 6.4 | 6.7 |
| China | 7,298 | 7.8 | 8.2 | 8.5 | 8.5 |
Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries); POT: Portugal
Source: IMF World Economic Outlook databank http://www.imf.org/external/datamapper/index.php?db=WEO
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 IVQ2012 available now for all countries. Growth is weak throughout most of the world. Japan’s GDP increased 1.5 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 fell 0.2 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.0 percent, which is much lower than 6.0 percent in IQ2012. Growth of 3.8 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 1.0 percent in IIIQ2012 at the SAAR of minus 3.8 percent and increased 0.4 percent relative to a year earlier. Japan’s GDP contracted 0.1 percent in IVQ2012 at the SAAR of minus 0.4 percent and increased 0.3 percent relative to a year earlier. China grew at 1.8 percent in IIQ2012, which annualizes to 7.4 percent relative to a year earlier. China grew at 2.2 percent in IIIQ2012, which annualizes at 9.1 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 2.0 percent, which annualizes at 8.2 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. 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 7.9 percent in IVQ2012 relative to IVQ2011. 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, 7.4 percent in IIIQ2012 relative to IIIQ2011 and 7.9 percent in IVQ2012 relative to year earlier. 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. In IVQ2012, euro area GDP fell 0.6 percent relative to the prior quarter and fell 0.9 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. Germany’s GDP contracted 0.9 percent in IVQ2012 and fell 0.9 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 0.5 percent in IQ2012 at the SAAR of 2.0 percent and grew 5.4 percent relative to a year earlier. 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. In IVQ2012, GDP grew 0.0 percent,
-0.1 percent at SAAR and 1.5 percent relative to IVQ2011 (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) but with substantial unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/01/thirty-million-unemployed-or.html) and weak hiring (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). In IQ2012, UK GDP fell 0.2 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. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and was flat relative to a year earlier. Italy has experienced decline of GDP in six consecutive quarters from IIIQ2011 to IVQ2012. Italy’s GDP fell 0.8 percent in IQ2012 and declined 1.3 percent relative to IQ2011. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.3 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. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.7 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. France’s GDP fell 0.3 percent in IVQ2012 and declined 0.3 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: 1.5 SAAR: 6.0 | 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 | -1.3 |
| United Kingdom | -0.2 | 0.2 |
| IIQ2012/IQ2012 | IIQ2012/IIQ2011 | |
| United States | QOQ: 0.3 SAAR: 1.3 | 2.1 |
| Japan | QOQ: -0.2 | 3.8 |
| 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 | -2.3 |
| United Kingdom | -0.4 | -0.3 |
| IIIQ2012/ IIQ2012 | IIIQ2012/ IIIQ2011 | |
| United States | QOQ: 0.8 | 2.6 |
| Japan | QOQ: –1.0 | 0.4 |
| 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 |
| IVQ2012/IIIQ2012 | IVQ2012/IVQ2011 | |
| United States | QOQ: 0.0 | 1.5 |
| Japan | QOQ: -0.1 SAAR: -0.4 | 0.3 |
| China | 2.0 | 7.9 |
| Euro Area | -0.6 | -0.9 |
| Germany | -0.6 | 0.1 |
| France | -0.3 | -0.3 |
| Italy | -0.9 | -2.7 |
| United Kingdom | -0.3 | 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 (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier 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 and earlier 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 5.8 percent in the 12 months ending in Dec, 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 1.9 percent in the 12 months ending in Dec, 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 1.1 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.8 percentage points from GDP growth in IIIQ2012 and deducted 0.6 percentage points from GDP growth in IVQ2012. 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 Dec 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. In Jan 2013, China exports increased 17.3 percent relative to a year earlier and imports 19.6 percent. Germany’s exports increased 0.3 percent in the month of Dec 2012 and decreased 6.9 percent in the 12 months ending in Dec 2012 while imports decreased 1.3 percent in the month of Dec and decreased 7.3 percent in the 12 months ending in Dec. Net trade contributed 1.4 percentage points to growth of Germany’s GDP in IIQ2012 and contributed 1.4 percentage points in IIIQ2012. Net trade deducted 0.9 percentage points from UK GDP growth in IIQ2012 and added 0.5 percentage points in IIIQ2012. France’s exports increased 3.1 percent in Dec while imports increased 5.4 percent and net trade deducted 0.3 percentage points from GDP growth in IIQ2012, adding 0.3 percentage points in IIIQ2012 and 0.1 percentage points in IVQ2012. US exports increased 2.1 percent in Dec 2012 and goods exports increased 4.5 percent in Jan-Dec relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012 and deducted 0.25 percentage points in IVQ2012. US imports decreased 2.7 percent in Dec 2012 and goods imports increased 3.0 percent in Jan-Dec 2012 relative to a year earlier. In the six months ending in Jan 2013, United States national industrial production accumulated increase of 0.7 percent at the annual equivalent rate of 1.4 percent, which is lower than 2.1 percent growth in 12 months. Business equipment fell 0.7 percent in Aug 2012, decreased 0.2 percent in Sep, decreased 1.2 percent in Oct, increased 3.1 percent in Nov, increased 1.3 percent in Dec and 0.1 percent in Jan 2013, growing 6.9 percent in the 12 months ending in Jan 2013 and at the annual equivalent rate of 2.7 percent in the six months ending in Jan 2013. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/current/): “The capacity utilization rate for total industry decreased in January to 79.1 percent, a rate that is 1.1 percentage points below its long-run (1972--2012) average.” United States industry is apparently decelerating. Manufacturing decreased 0.4 percent in Jan 2013 seasonally adjusted, increasing 2.0 percent not seasonally adjusted in 12 months, and increased 0.9 percent in the six months ending in Jan 2013 or at the annual equivalent rate of 1.8 percent. Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.
Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points
| Exports | Exports 12 M ∆% | Imports | Imports 12 M ∆% | |
| USA | 2.1 Dec | 4.5 Jan-Dec | -2.7 Dec | 3.0 Jan-Dec |
| Japan | Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1 | Dec 1.9 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 -11.7 Jan 13 | 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 17.3 Jan 13 7.9 Jan-Dec | 2.2 Jul -0.3 Aug 4.9 Sep -9.4 Oct 11.3 Oct 4.9 Dec -12.5 Jan 13 | 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 19.6 Jan 13 4.3 Jan-Dec |
| Euro Area | -3.1 12-M Dec | 7.4 Jan-Dec | -5.9 12-M Dec | 1.7 Jan-Dec |
| Germany | 0.3 Dec CSA | -6.9 Dec | -1.3 Dec CSA | -7.3 Dec |
| France Dec | 3.1 | 4.7 | 5.4 | 3.8 |
| Italy Dec | -0.5 | -3.7 | 1.3 | -6.4 |
| UK | 1.9 Dec | -3.9 Oct-Dec 12/Oct-Dec 11 | 0.9 Dec | -0.4 Oct-Dec 12/Oct-Dec 11 |
| Net Trade % Points GDP Growth | % Points | |||
| USA | IVQ2012 -0.25 IIIQ2012 +0.38 | |||
| Japan | -1.1 IIQ2012 -2.8 IIIQ2012 -0.6 IVQ2012 | |||
| Germany | 1.4 IIQ2012 1.4 IIIQ2012 | |||
| France | -0.3 IIQ2012 0.3 IIIQ2012 0.1 IVQ2012 | |||
| UK | -0.9 IIQ2012 0.5 IIIQ2012 |
Sources: http://www.census.gov/foreign-trade/ http://www.bea.gov/iTable/index_nipa.cfm
http://www.customs.go.jp/toukei/latest/index_e.htm http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
http://english.customs.gov.cn/publish/portal191/ http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1 http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp
http://www.statistics.gov.uk/hub/index.html
The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for Nov 2012. The share of Asia in Japan’s trade is more than one half, 54.7 percent of exports and 44.2 percent of imports. Within Asia, exports to China are 17.1 percent of total exports and imports from China 20.8 percent of total imports. The second largest export market for Japan in Oct 2012 is the US with share of 18.9 percent of total exports and share of imports from the US of 8.1 percent in total imports. Western Europe has share of 10.6 percent in Japan’s exports and of 9.8 percent in imports. Rates of growth of exports of Japan in Dec are sharply negative for all countries and regions with the exception of minus 0.8 percent for exports to the US, 9.6 percent for Mexico and 4.7 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 5.8 percent in Dec 2012 while imports increased 1.9 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Dec are negative for some trading partners: minus 23.0 percent for Brazil, minus 7.8 percent for the Australia and minus 12.8 percent for Canada. Imports from Asia increased 1.5 percent in the 12 months ending in Dec while imports from China decreased 2.1 percent.
Table V-5, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yens
| Dec 2012 | Exports | 12 months ∆% | Imports Millions Yens | 12 months ∆% |
| Total | 5,300,269 | -5.8 | 5,941,799 | 1.9 |
| Asia | 2,898,370 | -5.6 | 2,625,794 | 1.5 |
| China | 906,068 | -15.8 | 1,237,933 | -2.1 |
| USA | 999,867 | -0.8 | 480,237 | 2.8 |
| Canada | 62,133 | -16.2 | 76,220 | -12.8 |
| Brazil | 35,562 | -19.6 | 69,076 | -23.0 |
| Mexico | 73,067 | 9.6 | 31,169 | 27.9 |
| Western Europe | 561,585 | -12.3 | 581,703 | 6.2 |
| Germany | 138,631 | -9.2 | 150,737 | -2.4 |
| France | 42,566 | -16.8 | 77,603 | 7.4 |
| UK | 94,643 | -10.2 | 46,201 | 4.9 |
| Middle East | 196,273 | 4.7 | 1,251,587 | 2.1 |
| Australia | 130,850 | -2.0 | 355,690 | -7.8 |
Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm
World trade projections of the IMF are in Table V-6. There is significantly slower growth of the volume of world trade of goods and services from 5.9 percent in 2011 to 2.8 percent in 2012 and 3.8 percent in 2013, increasing to 5.5 percent in 2014. World trade would slow sharply for advanced economies while emerging and developing economies (EMDE) experience slower growth. World economic slowdown is more challenging with lower growth of world trade.
Table V-6, IMF, Projections of World Trade, ∆%
| 2011 | 2012 | 2013 | 2014 | |
| World Trade Volume (Goods and Services) | 5.9 | 2.8 | 3.8 | 5.5 |
| Imports | ||||
| AE | 4.6 | 1.2 | 2.2 | 4.1 |
| EMDE | 8.4 | 6.1 | 6.5 | 7.8 |
| Exports | ||||
| AE | 5.6 | 2.1 | 2.8 | 4.5 |
| EMDE | 6.6 | 3.6 | 5.5 | 6.9 |
Source: International Monetary Fund World Economic Outlook databank update http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx http://www.imf.org/external/pubs/ft/survey/so/2013/NEW012313A.htm http://www.imf.org/external/pubs/ft/weo/2013/update/01/index.htm
The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, decreased to 53.3 in Jan from 53.7 in Dec, indicating expansion at a moderate rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10694). This index has remained above the contraction territory of 50.0 during 42 consecutive months. Output increased in both index services and manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10694). The employment index increased from 51.8 in Dec to 52.5 in Jan 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 the beginning of 2012 in new business, backlog of orders and increasing employment (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10694). The JP Morgan Global Manufacturing PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 51.5 in Jan from 50.1 in Dec, which is the second reading above 50 since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10666). New export business declined for the tenth consecutive month in Jan, but at the lowest rate of contraction since May 2012. David Hensley, Director of Global Economics Coordination at JP Morgan, finds improving global manufacturing in the new year that could improve in coming months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10666). The HSBC Brazil Composite Output Index, compiled by Markit, increased to 54.9 in Jan from 53.2 in Dec, indicating solid expansion at the fastest rate in eleven months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10643). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 53.5 in Dec to 54.5 in Jan (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10643). Andre Loes, Chief Economist, Brazil, at HSBC, finds improving expectations of economic activity in Brazil with the index at the highest reading since Feb 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10643). The HSBC Brazil Purchasing Managers’ IndexTM (PMI™) increased from 51.1 in Dec to 53.2 in Jan, indicating the highest output reading in 23 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10628). Andre Loes, Chief Economist, Brazil at HSBC, finds continuing expansion in Brazil’s manufacturing in the new year with strength in output and new orders (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10628).
VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI™) seasonally adjusted increased to 56.1 in Jan from 54.0 in Dec, which was the highest reading since Mar 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10595).
New export orders registered 51.3 in Jan from 52.6 in Dec, indicating expansion at a slower rate. Chris Williams, Chief Economist at Markit, finds that the survey data with highest rate of expansion in about two years are consistent with impulse to US economic growth at a rate of 1.5 percent for quarter and increase of 15,000 manufacturing jobs per month (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10595). The Markit US Manufacturing Purchasing Managers’ Index™ (PMI™) increased to 55.8 in Jan from 54.0 in Dec, which is the fastest growth rate since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10663). 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 decreased from 52.6 in Dec to 51.5 in Jan, indicating expansion at a slower rate. Chris Williamson, Chief Economist at Markit, finds that manufacturing in the US is improving and could support growth of the US economy in IQ2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10663). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® increased 2.9 percentage points from 50.2 in Dec to 53.1 in Jan (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 3.6 percentage points from 49.7 in Dec to 53.3 in Jan. The index of exports decreased 1.0 percentage points from 51.5 in Dec to 50.5 in Jan, remaining in expansion territory. The Non-Manufacturing ISM Report on Business® PMI decreased 0.5 percentage points from 55.7 in Dec to 52.2 in Jan, indicating growth during 42 consecutive months, while the index of new orders decreased 3.9 percentage points from 58.3 in Dec to 54.4 in Jan (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 | Dec 12 months NSA ∆%: 1.7; ex food and energy ∆%: 2.22 Dec month ∆%: 0.0; ex food and energy ∆%: 0.1 |
| Producer Price Index | Dec 12-month NSA ∆%: 1.3; ex food and energy ∆% 2.0 |
| PCE Inflation | Dec 12-month NSA ∆%: headline 1.3; ex food and energy ∆% 1.4 |
| Employment Situation | Household Survey: Nov Unemployment Rate SA 7.9% |
| Nonfarm Hiring | Nonfarm Hiring fell from 63.8 million in 2006 to 50.1 million in 2011 or by 13.7 million |
| GDP Growth | BEA Revised National Income Accounts IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2011 2.6 IVQ2012/IVQ2011 1.5 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 3.1 IVQ2012 SAAR -0.1 |
| Real Private Fixed Investment | SAAR IVQ2012 9.7 ∆% IVQ2007 to IIIQ2012: minus 10.6% Blog 2/3/13 |
| Personal Income and Consumption | Dec month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 2.7 |
| Quarterly Services Report | IIIQ12/IIIQ11 SA ∆%: Financial & Insurance 6.5 |
| Employment Cost Index | Compensation Private IVQ2012 SA ∆%: 0.5 |
| Industrial Production | Jan month SA ∆%: -0.1 Manufacturing Dec SA ∆% -0.4 Dec 12 months SA ∆% 1.7, NSA 2.0 |
| Productivity and Costs | Nonfarm Business Productivity IVQ2012∆% SAAE -1.9; IVQ2012/IVQ2011 ∆% 0.5; Unit Labor Costs SAAE IVQ2012 ∆% 4.6; IVQ2012/IVQ2011 ∆%: 2.1 Blog 2/10/2013 |
| New York Fed Manufacturing Index | General Business Conditions From Jan -7.78 to Feb +10.04 |
| Philadelphia Fed Business Outlook Index | General Index from Dec 4.6 to Jan -5.8 |
| Manufacturing Shipments and Orders | New Orders SA Dec ∆% 1.8 Ex Transport 0.2 Jan-Dec NSA New Orders 3.0 Ex transport 2.1 |
| Durable Goods | Dec New Orders SA ∆%: 4.6; ex transport ∆%: 1.3 |
| Sales of New Motor Vehicles | Jan 2013 1,043,103; Jan 2012 913,287. Jan 13 SAAR 15.29 million, Dec 12 SAAR 15.37 million, Jan 2012 SAAR 13.98 million Blog 2/10/13 |
| Sales of Merchant Wholesalers | Jan-Dec 2012/Jan-Dec 2011 NSA ∆%: Total 5.1; Durable Goods: 5.5; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Dec 12/Dec 11 NSA ∆%: Sales Total Business 1.6; Manufacturers 1.9 |
| Sales for Retail and Food Services | Jan 2013/Jan 2012 ∆%: Retail and Food Services 6.2; Retail ∆% 6.2 |
| Value of Construction Put in Place | Dec SAAR month SA ∆%: 0.9 Dec 12-month NSA: 7.4 Jan-Dec 2012 ∆% 9.2 |
| Case-Shiller Home Prices | Nov 2012/Nov 2011 ∆% NSA: 10 Cities 4.5; 20 Cities: 5.5 |
| FHFA House Price Index Purchases Only | Nov SA ∆% 0.6; |
| New House Sales | Dec 2012 month SAAR ∆%: minus 7.3 |
| Housing Starts and Permits | Dec Starts month SA ∆%: 12.1 ; Permits ∆%: 0.3 |
| Trade Balance | Balance Dec SA -$38539 million versus Nov -$48613 million |
| Export and Import Prices | Jan 12-month NSA ∆%: Imports -1.3; Exports 1.1 |
| Consumer Credit | Dec ∆% annual rate: 6.3 |
| Net Foreign Purchases of Long-term Treasury Securities | Dec Net Foreign Purchases of Long-term Treasury Securities: $64.2 billion |
| Treasury Budget | Fiscal Year 2013/2012 ∆% Jan: Receipts 12.4; Outlays 3.5; Individual Income Taxes 16.0 Deficit Fiscal Year 2012 $1,089,353 million Blog 2/17/2013 |
| CBO Budget and Economic Outlook | 2012 Deficit $1089 B 7.0% GDP Debt 11,280 B 72.5% GDP 2013 Deficit $845 B, Debt 12,229 B 76.3% GDP Blog 8/26/12 11/18/12 2/10/13 |
| Commercial Banks Assets and Liabilities | Dec 2012 SAAR ∆%: Securities 22.6 Loans 6.3 Cash Assets -19.1 Deposits 20.7 Blog 1/27/13 |
| 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:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
2/3/13 http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html
1/27/13 http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets.html
1/20/13 http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.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
11/18/12 http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html
8/26/12 http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with_26.html
Growth rates and levels of sales in millions of dollars of manufacturers, retailers and merchant wholesalers are provided in Table VA-1. Total business sales increased 0.3 percent in Dec after increasing 0.9 percent in Nov and increased 1.6 percent in the 12 months ending in Dec 2012. Sales of manufacturers increased 0.4 percent in Dec after increasing 0.3 percent in Nov and increased 1.9 percent in the 12 months ending in Dec. Retailers’ sales increased 0.4 percent in Dec, increased 0.4 percent in Nov and increased 2.1 percent in 12 months ending in Dec. Sales of merchant wholesalers increased 0.0 percent in Dec, increasing 2.2 percent in Nov and increased 0.7 percent in 12 months ending in Dec. These data are not adjusted for price changes such that they reflect increases in both quantities and prices.
Table VA-1, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers
| Dec 12/ Nov 12 | Dec 2012 | Nov 12/ Oct 12 ∆% SA | Dec 12/ Dec 11 | |
| Total Business | 0.3 | 1,290,154 | 0.9 | 1.6 |
| Manufacturers | 0.4 | 465,586 | 0.3 | 1.9 |
| Retailers | 0.4 | 423,302 | 0.4 | 2.1 |
| Merchant Wholesalers | 0.0 | 401,266 | 2.2 | 0.7 |
Source: US Census Bureau http://www.census.gov/mtis/
Chart VA-1 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and recovery in the final segment above the peak before the global recession. Data are not adjusted for price changes.
Chart VA-1, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Dec 2012
US Census Bureau http://www.census.gov/mtis/
Chart VA-2 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment.
Chart VA-2, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Dec 2012
US Census Bureau http://www.census.gov/mtis/
Businesses added cautiously to inventories to replenish stocks. Retailers added 0.5 percent to inventories in Dec 2012 and 0.3 percent in Nov with growth of 8.1 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.1 percent in Dec, 0.2 percent in Nov and 5.1 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.28 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.
Table VA-2, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios
| Inventory Change | Dec 12 | Dec 12/ Nov 12 ∆% SA | Nov 12/ Oct 12 ∆% SA | Dec 12/ Dec 11 ∆% NSA |
| Total Business | 1,601,757 | 0.1 | 0.2 | 5.1 |
| Manufacturers | 598,525 | 0.1 | 0.0 | 2.5 |
| Retailers | 503,755 | 0.5 | 0.3 | 8.1 |
| Merchant | 499,477 | -0.1 | 0.4 | 5.4 |
| Inventory/ | Dec 12 | Dec 2012 SA | Nov 2012 SA | Oct 2011 SA |
| Total Business | 1,601,757 | 1.27 | 1.28 | 1.26 |
| Manufacturers | 598,525 | 1.27 | 1.27 | 1.28 |
| Retailers | 503,755 | 1.38 | 1.38 | 1.33 |
| Merchant Wholesalers | 499,477 | 1.19 | 1.19 | 1.17 |
Source: US Census Bureau http://www.census.gov/mtis/
Chart VA-3 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Dec 2012. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.
Chart VA-3, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Dec 2012
US Census Bureau http://www.census.gov/mtis/
Chart VA-4 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Dec 2012 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are significantly higher than in the peak before the global recession.
Chart VA-4, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Dec 2012
US Census Bureau http://www.census.gov/mtis/
Inventories follow business cycles. When recession hits sales inventories pile up, declining with expansion of the economy. In a fascinating classic opus, Lloyd Meltzer (1941, 129) concludes:
“The dynamic sequences (I) through (6) were intended to show what types of behavior are possible for a system containing a sales output lag. The following conclusions seem to be the most important:
(i) An economy in which business men attempt to recoup inventory losses will always undergo cyclical fluctuations when equilibrium is disturbed, provided the economy is stable.
This is the pure inventory cycle.
(2) The assumption of stability imposes severe limitations upon the possible size of the marginal propensity to consume, particularly if the coefficient of expectation is positive.
(3) The inventory accelerator is a more powerful de-stabilizer than the ordinary acceleration principle. The difference in stability conditions is due to the fact that the former allows for replacement demand whereas the usual analytical formulation of the latter does not. Thus, for inventories, replacement demand acts as a de-stabilizer. Whether it does so for all types of capital goods is a moot question, but I believe cases may occur in which it does not.
(4) Investment for inventory purposes cannot alter the equilibrium of income, which depends only upon the propensity to consume and the amount of non-induced investment.
(5) The apparent instability of a system containing both an accelerator and a coefficient of expectation makes further investigation of possible stabilizers highly desirable.”
Chart VA-5 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012.
Chart VA-5, Total Business Inventories/Sales Ratios 2002 to 2011
Source: US Census Bureau
http://www2.census.gov/retail/releases/historical/mtis/img/mtisbrf.gif
Sales of retail and food services increased 0.1 percent in Jan 2013 after increasing 0.5 percent in Dec 2012 seasonally adjusted (SA), growing 6.2 percent in Jan 2013 relative to Jan 2012 not seasonally adjusted (NSA), as shown in Table VA-3. Excluding motor vehicles and parts, retail sales increased 0.2 percent in Jan 2013, increasing 0.3 percent in Dec 2012 SA and increasing 5.0 percent NSA in Jan 2013 relative to a year earlier. Sales of motor vehicles and parts decreased 0.1 percent in Jan 2013 after increasing 1.2 percent in Dec 2012 SA and increasing 12.1 percent NSA in Jan 2013 relative to a year earlier. Gasoline station sales increased 0.2 percent SA in Jan 2013 after decreasing 1.7 percent in Dec 2012 in oscillating prices of gasoline that are moderating, increasing 1.4 percent in Jan 2013 relative to a year earlier.
Table VA-3, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%
| Jan/ Dec ∆% SA | Dec/Nov ∆% SA | Jan 2013 Million Dollars NSA | Jan 2013 from Jan 2012 ∆% NSA | |
| Retail and Food Services | 0.1 | 0.5 | 382,917 | 6.2 |
| Excluding Motor Vehicles and Parts | 0.2 | 0.3 | 312,595 | 5.0 |
| Motor Vehicles & Parts | -0.1 | 1.2 | 70,322 | 12.1 |
| Retail | 0.1 | 0.4 | 340,447 | 6.2 |
| Building Materials | 0.3 | 0.3 | 19,790 | 5.7 |
| Food and Beverage | 0.0 | 0.3 | 52,440 | 4.5 |
| Grocery | 0.6 | 0.0 | 47,938 | 4.8 |
| Health & Personal Care Stores | -1.0 | 1.1 | 22,936 | 0.7 |
| Clothing & Clothing Accessories Stores | -0.3 | 1.2 | 15,119 | 5.9 |
| Gasoline Stations | 0.2 | -1.7 | 41,923 | 1.4 |
| General Merchandise Stores | 1.1 | 0.0 | 46,350 | 0.0 |
| Food Services & Drinking Places | 0.0 | 1.4 | 42,470 | 6.5 |
Source: US Census Bureau http://www.census.gov/wholesale/index.html
Chart VA-6 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been increasing strongly monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.
Chart VA-6, US, Percentage Change of Retail and Food Services Sales
Source: US Census Bureau
http://www2.census.gov/retail/releases/historical/marts/img/martsbrf.gif
Chart VA-7 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jan 2013 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.
Chart VA-7, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jan 2013, Millions of Dollars
Source: US Census Bureau
Chart VA-8 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jan 2013. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.
Chart VA-8, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jan 2013, Millions of Dollars
Source: US Census Bureau
Twelve-month rates of growth of US sales of retail and food services in Jan from 2000 to 2013 are shown in Table VA-4. Nominal sales have been dynamic since 2011 after decline of 9.3 percent in 2009 and increase of 1.5 percent in 2010. It is difficult to separate price and quantity effects in these nominal data.
Table VA-4, US, Percentage Change in 12-Month Sales for Retail and Food Services, ∆% NSA
| Jan | 12 Months ∆% |
| 2013 | 6.2 |
| 2012 | 6.5 |
| 2011 | 7.1 |
| 2010 | 1.5 |
| 2009 | -9.3 |
| 2008 | 4.3 |
| 2007 | 3.3 |
| 2006 | 8.7 |
| 2005 | 4.2 |
| 2004 | 4.9 |
| 2003 | 5.0 |
| 2002 | 1.9 |
| 2001 | 6.1 |
| 2000 | 8.4 |
Source: US Census Bureau
http://www.census.gov/wholesale/index.html
Chart IA2-1 provides prices of total US imports 2001-2013. Prices fell during the contraction of 2001. Import price inflation accelerated after unconventional monetary policy of near zero interest rates in 2003-2004 and quantitative easing by withdrawing supply with the suspension of 30-year Treasury bond auctions. Slow pace of adjusting fed funds rates from 1 percent by increments of 25 basis points in 17 consecutive meetings of the Federal Open Market Committee (FOMC) between Jun 2004 and Jun 2006 continued to give impetus to carry trades. The reduction of fed funds rates toward zero in 2008 fueled a spectacular global hunt for yields that caused commodity price inflation in the middle of a global recession. After risk aversion in 2009 because of the announcement of TARP (Troubled Asset Relief Program) creating anxiety on “toxic assets” in bank balance sheets (see Cochrane and Zingales 2009), prices collapsed because of unwinding carry trades. Renewed price increases returned with zero interest rates and quantitative easing. Monetary policy impulses in massive doses have driven inflation and valuation of risk financial assets in wide fluctuations over a decade.
Chart IA2-1, US, Prices of Total US Imports 2001=100, 2001-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-2 provides 12-month percentage changes of prices of total US imports from 2001 to 2013. The only plausible explanation for the wide oscillations is by the carry trade originating in unconventional monetary policy. Import prices jumped in 2008 during deep and protracted global recession driven by carry trades from zero interest rates to long, leveraged positions in commodity futures. Carry trades were unwound during the financial panic in the final quarter of 2008 that resulted in flight to government obligations. Import prices jumped again in 2009 with subdued risk aversion because US banks did not have unsustainable toxic assets. Import prices then fluctuated as carry trades were resumed during periods of risk appetite and unwound during risk aversion resulting from the European debt crisis.
Chart IA2-2, US, Prices of Total US Imports, 12-Month Percentage Changes, 2001-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-3 provides prices of US imports from 1982 to 2013. There is no similar episode to that of the increase of commodity prices in 2008 during a protracted and deep global recession with subsequent collapse during a flight into government obligations. Trade prices have been driven by carry trades created by unconventional monetary policy in the past decade.
Chart IA2-3, US, Prices of Total US Imports, 2001=100, 1982-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-4 provides 12-month percentage changes of US total imports from 1982 to 2013. There have not been wide consecutive oscillations as the ones during the global recession of IVQ2007 to IIQ2009.
Chart IA2-4, US, Prices of Total US Imports, 12-Month Percentage Changes, 1982-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-5 provides the index of US export prices from 2001 to 2013. Import and export prices have been driven by impulses of unconventional monetary policy in massive doses. The most recent segment in Chart IA2-5 shows declining trend resulting from a combination of the world economic slowdown and the decline of commodity prices as carry trade exposures are unwound because of risk aversion to the sovereign debt crisis in Europe.
Chart IA2-5, US, Prices of Total US Exports, 2001=100, 2001-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-6 provides prices of US total exports from 1982 to 2013. The rise before the global recession from 2003 to 2008, driven by carry trades, is also unique in the series and is followed by another steep increase after risk aversion moderated in IQ2009.
Chart IA2-6, US, Prices of Total US Exports, 2001=100, 1982-2013
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Chart IA2-7 provides 12-month percentage changes of total US exports from 1982 to 2013. The uniqueness of the oscillations around the global recession of IVQ2007 to IIQ2009 is clearly revealed.
Chart IA2-7, US, Prices of Total US Exports, 12-Month Percentage Changes, 1982-2013
Source:
Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm
Twelve-month percentage changes of US prices of exports and imports are provided in Table IA2-1. Import prices have been driven since 2003 by unconventional monetary policy of near zero interest rates influencing commodity prices according to moods of risk aversion. In a global recession without risk aversion until the panic of Sep 2008 with flight to government obligations, import prices increased 21.4 percent in the 12 months ending in Jul 2008, 18.1 percent in the 12 months ending in Aug 2008, 13.1 percent in the 12 months ending in Sep 2008, 4.9 percent in the twelve months ending in Oct 2008 and fell 5.9 percent in the 12 months ending in Nov 2008 when risk aversion developed in 2008 until mid 2009 (http://www.bls.gov/mxp/data.htm). Import prices rose again sharply in Nov 2010 by 4.1 percent and in Nov 2011 by 0.1 percent in the presence of zero interest rates with relaxed mood of risk aversion until carry trades were unwound in May 2011 and following months as shown by decrease of import prices by 1.4 percent in the 12 months ending in Nov 2012 and 1.8 percent in Dec 2012 and decrease of 0.3 percent in prices of exports in the 12 months ending in Dec 2012. Import prices increased 13.6 percent in the 12 months ending in Jan 2008, fell 12.5 percent in the 12 months ending in Jan 2009 and increased 11.4 percent in the 12 months ending in Jan 2010. Fluctuations are much sharper in imports because of the high content of oil that as all commodities futures contracts increases sharply with zero interest rates and risk appetite, contracting under risk aversion. There is similar behavior of prices of imports ex fuels, exports and exports ex agricultural goods but less pronounced than for commodity-rich prices dominated by carry trades from zero interest rates. A critical event resulting from unconventional monetary policy driving higher commodity prices by carry trades is the deterioration of the terms of trade, or export prices relative to import prices, that has adversely affected US real income growth relative to what it would have been in the absence of unconventional monetary policy. Europe, Japan and other advanced economies have experienced similar deterioration of their terms of trade. Because of unwinding carry trades of commodity futures as a result of risk aversion, import prices decreased 1.3 percent in the 12 months ending in Jan 2013, export prices increased 1.1 percent and prices of nonagricultural exports were unchanged. Imports excluding fuel were unchanged in the 12 months ending in Jan 2013. At the margin, prices in world exports and imports are decreasing or increasing moderately because of unwinding carry trades in a temporary mood of risk aversion.
Table IA2-1, US, Twelve-Month Percentage Rates of Change of Prices of Exports and Imports
| Imports | Imports Ex Fuels | Exports | Exports Non-Ag | |
| Jan 2013 | -1.3 | 0.0 | 1.1 | 0.0 |
| Jan 2012 | 6.9 | 2.9 | 2.6 | 3.2 |
| Jan 2011 | 5.6 | 3.4 | 7.0 | 5.4 |
| Jan 2010 | 11.4 | 1.3 | 3.5 | 3.3 |
| Jan 2009 | -12.5 | -0.3 | -3.4 | -2.7 |
| Jan 2008 | 13.6 | 3.5 | 6.8 | 4.9 |
| Jan 2007 | 0.0 | 2.8 | 4.1 | 3.3 |
| Jan 2006 | 8.7 | 0.9 | 2.7 | 2.6 |
| Jan 2005 | 5.7 | 3.0 | 4.0 | 5.1 |
| Jan 2004 | 2.2 | 1.5 | 2.6 | 1.6 |
| Jan 2003 | 5.8 | 0.1 | 1.4 | 1.0 |
| Jan 2002 | -8.9 | NA | -2.8 | -2.9 |
| Jan 2001 | 2.8 | NA | 1.1 | 0.9 |
Source: Bureau of Labor Statistics http://www.bls.gov/mxp/
Table IIA2-2 provides 12-month percentage changes of the import price index all commodities from 2001 to 2013. Interest rates moving toward zero during unconventional monetary policy in 2008 induced carry trades into highly-leveraged commodity derivatives positions that caused increased in 12-month percentage changes of import prices of around 20 percent. The flight into dollars and Treasury securities by fears of toxic assets in banks in the proposal of TARP (Cochrane and Zingales 2009) caused reversion of carry trades and collapse of commodity futures. Twelve-month percentage changes of import prices at the end of 2012 and into 2013 occurred during another bout of risk aversion.
Table IA2-2, US, Twelve-Month Percentage Changes of Import Price Index All Commodities, 2001-2013
| Year | Jan | Feb | Mar | Apr | Jul | Oct | Nov | Dec |
| 2001 | 2.8 | 0.2 | -1.6 | -0.7 | -4.1 | -7.4 | -8.8 | -9.1 |
| 2002 | -8.9 | -8.3 | -5.6 | -3.6 | -1.7 | 1.9 | 2.5 | 4.2 |
| 2003 | 5.8 | 7.5 | 6.8 | 1.8 | 2.3 | 0.8 | 2.3 | 2.4 |
| 2004 | 2.2 | 0.9 | 1.1 | 4.6 | 5.6 | 9.9 | 9.0 | 6.7 |
| 2005 | 5.7 | 6.1 | 7.6 | 8.4 | 8.2 | 8.2 | 6.4 | 8.0 |
| 2006 | 8.7 | 6.9 | 4.5 | 5.8 | 7.0 | -1.0 | 1.3 | 2.5 |
| 2007 | 0.0 | 1.2 | 2.8 | 2.1 | 2.8 | 9.1 | 12.0 | 10.6 |
| 2008 | 13.6 | 13.5 | 15.2 | 16.9 | 21.4 | 4.9 | -5.9 | -10.1 |
| 2009 | -12.5 | -12.7 | -14.9 | -16.4 | -19.1 | -5.6 | 3.4 | 8.6 |
| 2010 | 11.4 | 11.3 | 11.2 | 11.2 | 4.9 | 3.9 | 4.1 | 5.3 |
| 2011 | 5.6 | 7.6 | 10.3 | 11.9 | 13.7 | 11.1 | 10.1 | 8.5 |
| 2012 | 6.9 | 5.1 | 3.5 | 0.8 | -3.3 | 0.0 | -1.4 | -1.9 |
| 2013 | -1.3 |
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
There is finer detail in one-month percentage changes of imports of the US in Table IA2-3. Carry trades into commodity futures induced by interest rates moving to zero in unconventional monetary policy caused sharp monthly increases in import prices for cumulative increase of 13.8 percent from Mar to Jul 2008 at average rate of 2.6 percent per month or annual equivalent in five months of 36.4 percent (3.1 percent in Mar 2008, 2.8 percent in Apr 2008, 2.8 percent in May 2008, 3.0 percent in Jun 2008 and 1.4 percent in Jul 2008, data from http://www.bls.gov/mxp/data.htm). There is no other explanation for increases in import prices during sharp global recession and contracting world trade. Import prices then fell 23.4 percent from Aug 2008 to Jan 2009 or at the annual equivalent rate of minus 41.4 percent in the flight to US government securities in fear of the need to buy toxic assets from banks in the TARP program (Cochrane and Zingales 2009). Risk aversion during the first sovereign debt crisis of the euro area in May-Jun 2010 caused decline of US import prices at the annual equivalent rate of 11.4 percent. US import prices have been driven by combinations of carry trades induced by unconventional monetary policy and bouts of risk aversion (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html).
Table IA2-3, US, One-Month Percentage Changes of Import Price Index All Commodities, 2001-2013
| Year | Jan | Feb | Mar | Apr | Aug | Sep | Oct | Nov | Dec |
| 2001 | 0.0 | -0.6 | -1.6 | -0.5 | -0.1 | -0.1 | -2.3 | -1.5 | -1.0 |
| 2002 | 0.2 | 0.0 | 1.3 | 1.6 | 0.3 | 0.7 | 0.0 | -0.9 | 0.6 |
| 2003 | 1.8 | 1.7 | 0.6 | -3.1 | 0.0 | -0.5 | 0.1 | 0.5 | 0.7 |
| 2004 | 1.5 | 0.4 | 0.8 | 0.2 | 1.5 | 0.5 | 1.6 | -0.3 | -1.4 |
| 2005 | 0.6 | 0.9 | 2.2 | 0.9 | 1.4 | 2.1 | 0.1 | -1.9 | 0.0 |
| 2006 | 1.2 | -0.8 | -0.1 | 2.1 | 0.5 | -2.2 | -2.5 | 0.4 | 1.1 |
| 2007 | -1.2 | 0.4 | 1.6 | 1.4 | -0.3 | 0.6 | 1.5 | 3.2 | -0.2 |
| 2008 | 1.5 | 0.2 | 3.1 | 2.8 | -3.1 | -3.6 | -6.0 | -7.4 | -4.6 |
| 2009 | -1.3 | 0.0 | 0.5 | 1.1 | 1.5 | 0.2 | 0.8 | 1.5 | 0.2 |
| 2010 | 1.2 | -0.1 | 0.4 | 1.1 | 0.4 | 0.0 | 1.1 | 1.7 | 1.4 |
| 2011 | 1.5 | 1.7 | 3.0 | 2.6 | -0.4 | -0.1 | -0.4 | 0.7 | 0.0 |
| 2012 | 0.0 | 0.0 | 1.4 | -0.1 | 1.2 | 1.0 | 0.3 | -0.7 | -0.5 |
| 2013 | 0.6 |
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-8 shows the US monthly import price index of all commodities excluding fuels from 2001 to 2013. All curves of nominal values follow the same behavior under the influence of unconventional monetary policy. Zero interest rates without risk aversion result in jumps of nominal values while under strong risk aversion even with zero interest rates there are declines of nominal values.
Chart IA2-8, US, Import Price Index All Commodities Excluding Fuels, 2001=100, 2001-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-9 provides 12-month percentage changes of the US import price index excluding fuels between 2001 and 2013. There is the same behavior of carry trades driving up without risk aversion and down with risk aversion prices of raw materials, commodities and food in international trade during the global recession of IVQ2007 to IIQ2009 and in previous and subsequent periods.
Chart IA2-9, US, Import Price Index All Commodities Excluding Fuels, 12-Month Percentage Changes, 2002-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-10 provides the monthly US import price index ex petroleum from 2001 to 2013. Prices including or excluding commodities follow the same fluctuations and trends originating in impulses of unconventional monetary policy of zero interest rates.
Chart IA2-10, US, Import Price Index ex Petroleum, 2001=100, 2001-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-11 provides the US import price index ex petroleum from 1982 to 2013. There is the same unique hump in 2008 caused by carry trades from zero interest rates to prices of commodities and raw materials.
Chart IA2-11, US, Import Price Index ex Petroleum, 2001=100, 1982-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-12 provides 12-month percentage changes of the import price index ex petroleum from 1986 to 2013. The oscillations caused by the carry trade in increasing prices of commodities and raw materials without risk aversion and subsequently decreasing them during risk aversion are quite unique.
Chart IA2-12, US, Import Price Index ex Petroleum, 12-Month Percentage Changes, 1986-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart Ia2-13 of the US Energy Information Administration shows the price of WTI crude oil since the 1980s. Chart IA2-13 captures commodity price shocks during the past decade. The costly mirage of deflation was caused by the decline in oil prices during the recession of 2001. The upward trend after 2003 was promoted by the carry trade from near zero interest rates. The jump above $140/barrel during the global recession in 2008 at $145.29/barrel on Jul 3, 2008, can only be explained by the carry trade promoted by monetary policy of zero fed funds rate. After moderation of risk aversion, the carry trade returned with resulting sharp upward trend of crude prices. Risk aversion resulted in another drop in recent weeks followed by some recovery.
Chart IA2-13, US, Crude Oil Futures Contract
Source: US Energy Information Administration
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D
The price index of US imports of petroleum and petroleum products in shown in Chart IA2-14. There is similar behavior of the curves all driven by the same impulses of monetary policy.
Chart IA2-14, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 2001-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-15 provides the price index of petroleum and petroleum products from 1982 to 2013. The rise in prices during the global recession in 2008 and the decline after the flight to government obligations is unique in the history of the series. Increases in prices of trade in petroleum and petroleum products were induced by carry trades and declines by unwinding carry trades in flight to government obligations.
Chart IA2-15, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 1982-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-16 provides 12-month percentage changes of the price index of US imports of petroleum and petroleum products from 1982 to 2013. There were wider oscillations in this index from 1999 to 2001 (see Barsky and Killian 2004 for an explanation).
Chart IA2-16, US, Import Price Index of Petroleum and Petroleum Products, 12-Month Percentage Changes, 1982-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
The price index of US exports of agricultural commodities is in Chart IA2-17 from 2001 to 2013. There are similar fluctuations and trends as in all other price index originating in unconventional monetary policy repeated over a decade. The most recent segment in 2011 has declining trend in a new flight from risk resulting from the sovereign debt crisis in Europe followed by declines in Jun 2012 and Nov 2012 with stability in Dec 2012 to Jan 2013.
Chart IA2-17, US, Exports Price Index of Agricultural Commodities, 2001=100, 2001-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-18 provides the price index of US exports of agricultural commodities from 1982 to 2013. The increase in 2008 in the middle of deep, protracted contraction was induced by unconventional monetary policy. The decline from 2008 into 2009 was caused by unwinding carry trades in a flight to government obligations. The increase into 2011 and current pause were also induced by unconventional monetary policy in waves of increases during relaxed risk aversion and declines during unwinding of positions because of aversion to financial risk.
Chart IA2-18, US, Exports Price Index of Agricultural Commodities, 2001=100, 1982-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-19 provides 12-month percentage changes of the index of US exports of agricultural commodities from 1986 to 2013. The wide swings in 2008, 2009 and 2011 are only explained by unconventional monetary policy inducing carry trades from zero interest rates to commodity futures and reversals during risk aversion.
Chart IA2-19, US, Exports Price Index of Agricultural Commodities, 12-Month Percentage Changes, 1986-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-20 shows the export price index of nonagricultural commodities from 2001 to 2013. Unconventional monetary policy of zero interest rates drove price behavior during the past decade. Policy has been based on the myth of stimulating the economy by climbing the negative slope of an imaginary short-term Phillips curve.
Chart IA2-20, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 2001-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Chart IA2-21 provides a longer perspective of the price index of US nonagricultural commodities from 1982 to 2013. Increases and decreases around the global contraction after 2007 were caused by carry trade induced by unconventional monetary policy.
Chart IA2-21, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 1982-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Finally, Chart IA2-22 provides 12-month percentage changes of the price index of US exports of nonagricultural commodities from 1986 to 2013. The wide swings before, during and after the global recession beginning in 2007 were caused by carry trades induced by unconventional monetary policy.
Chart IA2-22, US, Exports Price Index of Nonagricultural Commodities, 12-Month Percentage Changes, 1986-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/mxp/data.htm
Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting at the moment from risk flight to US dollar denominated assets. Net foreign purchases of US long-term securities (row C in Table VA-5) increased from minus $54.4 billion in Nov 2012 to $64.2 billion in Dec 2012. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-5) in Nov 2012 of $61.5 billion increased to $76.5 billion in Dec 2012. Net US (residents) purchases of long-term foreign securities (row B in Table VA-5) decreased from minus $9.1 billion in Nov to minus $12.3 billion in Dec. In Dec 2012,
C = A + B = $76.5 billion - $12.3 billion = $64.2 billion
There are minor rounding errors. There is increasing demand in Table VA-5 in Dec in A1 private purchases by residents overseas of US long-term securities of $67.3 billion of which increases in A11 Treasury securities of $21.5 billion, increase in A12 of $18.9 billion in agency securities, increase by $1.6 billion of corporate bonds and increase of $25.3 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $9.1 billion with increase of Treasury securities of $8.4 billion in Dec. Official purchases of agency securities increased $1.1 billion in Nov and decreased $0.8 billion in Dec. Row D shows decrease in Dec in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills decreased $1.2 billion (row D11) with foreign official holdings decreasing $10.7 billion while the category “other” increased $6.3 billion. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses.
Table VA-5, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA
| Dec 2011 12 Months | Dec 2012 12 Months | Nov 2012 | Dec 2012 | |
| A Foreign Purchases less Sales of | 493.4 | 547.7 | 61.5 | 76.5 |
| A1 Private | 322.6 | 334.7 | 60.9 | 67.3 |
| A11 Treasury | 288.4 | 182.0 | 29.1 | 21.5 |
| A12 Agency | 57.6 | 93.0 | 1.6 | 18.9 |
| A13 Corporate Bonds | -44.0 | -34.0 | 8.6 | 1.6 |
| A14 Equities | 20.6 | 93.7 | 21.7 | 25.3 |
| A2 Official | 170.7 | 213.0 | 0.5 | 9.1 |
| A21 Treasury | 144.2 | 199.8 | -2.7 | 8.4 |
| A22 Agency | 23.3 | -2.9 | 1.1 | -0.8 |
| A23 Corporate Bonds | -1.2 | 7.9 | 2.3 | 0.9 |
| A24 Equities | 4.5 | 8.3 | -0.2 | 0.6 |
| B Net US Purchases of LT Foreign Securities | -124.3 | -27.9 | -9.1 | -12.3 |
| B1 Foreign Bonds | -52.6 | 12.0 | -2.8 | -7.5 |
| B2 Foreign Equities | -71.7 | -39.9 | -6.3 | -4.8 |
| C Net Foreign Purchases of US LT Securities | 369.0 | 519.8 | 52.4 | 64.2 |
| D Increase in Foreign Holdings of Dollar Denominated Short-term | -95.0 | 58.4 | 2.9 | -5.6 |
| D1 US Treasury Bills | -62.0 | 13.4 | 4.5 | -11.9 |
| D11 Private | 42.7 | -1.7 | 0.4 | -1.2 |
| D12 Official | -104.7 | 15.1 | 4.1 | -10.7 |
| D2 Other | -33.0 | 44.9 | -1.6 | 6.3 |
C = A + B;
A = A1 + A2
A1 = A11 + A12 + A13 + A14
A2 = A21 + A22 + A23 + A24
B = B1 + B2
D = D1 + D2
Sources: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticpress.aspx
Table VA-6 provides major foreign holders of US Treasury securities. China is the largest holder with $1202.8 billion in Dec 2012, increasing 4.4 percent from $1151.9 billion in Dec 2011. Japan increased its holdings from $1058.4 billion in Dec 2011 to $1120.2 billion in Dec 2012 or by 5.8 percent likely in part by intervention to buy dollars against the yen to depreciate the overvalued yen/dollar rate that diminishes the competitiveness of Japan. Total foreign holdings of Treasury securities rose from $5007.4 billion in Dec 2011 to $5555.4 billion in Dec 2012, or 10.9 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):
“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”
Table VA-6, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period
| Dec 2012 | Nov 2012 | Dec 2011 | |
| Total | 5555.4 | 5537.4 | 5007.4 |
| China | 1202.8 | 1183.1 | 1151.9 |
| Japan | 1120.2 | 1117.7 | 1058.4 |
| Oil Exporters | 262.5 | 259.1 | 261.1 |
| Brazil | 251.5 | 255.9 | 226.9 |
| Caribbean Banking Centers | 250.0 | 263.5 | 227.2 |
| Taiwan | 198.8 | 199.1 | 177.3 |
| Switzerland | 193.9 | 192.7 | 142.4 |
| Russia | 157.6 | 166.2 | 149.5 |
| Luxembourg | 150.5 | 148.3 | 147.6 |
| United Kingdom | 142.0 | 133.5 | 114.3 |
| Hong Kong | 141.8 | 141.2 | 121.7 |
| Belgium | 140.0 | 138.5 | 135.2 |
| Foreign Official Holdings | 4006.6 | 4009.0 | 3621.0 |
| A. Treasury Bills | 372.7 | 383.5 | 357.6 |
| B. Treasury Bonds and Notes | 3633.9 | 3625.5 | 3263.4 |
Source: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticsec2.aspx#ussecs
Table VA-7 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2013 fiscal year to Jan 2013; federal fiscal data for the years from 2009 to 2012; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2012. Receipts increased 12.4 percent in the cumulative fiscal year 2013 for Jan 2013 relative to the cumulative in fiscal year 2012. Individual income taxes increased 16.0 percent relative to the same period a year earlier. Outlays increased 3.5 percent relative to a year earlier. Total revenues of the US from 2009 to 2012 accumulate to $9019 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,111 billion, or $14.1 trillion, with the deficit accumulating to $5092 billion, or $5.1 trillion. Revenues decreased 6.6 percent from $9653 billion in the four years from 2005 to 2008 to $9019 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and also by growth of only 2.1 percent on average in the cyclical expansion from IIIQ2009 to IVQ2012, which is much lower than 6.2 percent on average in cyclical expansions since the 1950s (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html). Weakness of growth and employment creation is analyzed in IB Collapse of United States Dynamism of Income Growth and Employment Creation. There are 31.4 million people without jobs or underemployed that is equivalent to 18.4 percent of the US effective labor force (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html) and hiring is significantly below the earlier cyclical expansion before 2007 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,111 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.6 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5092 billion in 2009-2012. Federal revenue was 15.4 percent of GDP on average in the years from 2009 to 2012, which is well below 18.0 percent of GDP on average from 1970 to 2010. Federal outlays were 24.1 percent of GDP on average from 2009 to 2012, which is well above 21.9 percent of GDP on average from 1970 to 2010. The lower part of Table IIB-4 shows that debt held by the public swelled from $5803 billion in 2008 to $11,280 billion in 2012, by $5477 billion or 94.3 percent. Debt held by the public as percent of GDP or economic activity jumped from 40.5 percent in 2008 to 72.5 percent in 2012, which is well above the average of 37.0 percent from 1970 to 2010. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.
Table VA-7, US, Treasury Budget in Fiscal Year to Date Million Dollars
| Jan 2013 | Fiscal Year 2013 | Fiscal Year 2012 | ∆% |
| Receipts | 887,778 | 789,756 | 12.4 |
| Outlays | 1,178,193 | 1,138,899 | 3.5 |
| Deficit | -290,415 | -349,142 | NA |
| Individual Income Taxes | 468,365 | 403,794 | 16.0 |
| Social Insurance | 187,193 | 174,859 | 7.1 |
| Receipts | Outlays | Deficit (-), Surplus (+) | |
| $ Billions | |||
| 2012 | 2,449 | 3,538 | -1,089 |
| Fiscal Year 2011 | 2,302 | 3,599 | -1,297 |
| Fiscal Year 2010 | 2,163 | 3,456 | -1,293 |
| Fiscal Year 2009 | 2,105 | 3,518 | -1,413 |
| Total 2009-2012 | 9,019 | 14,111 | -5,092 |
| Average % GDP 2009-2012 | 15.4 | 24.1 | -8.7 |
| Fiscal Year 2008 | 2,524 | 2,983 | -459 |
| Fiscal Year 2007 | 2,568 | 2,729 | -161 |
| Fiscal Year 2006 | 2,407 | 2,655 | -248 |
| Fiscal Year 2005 | 2,154 | 2,472 | -318 |
| Total 2005-2008 | 9,653 | 10,839 | -1,186 |
| Average % GDP 2005-2008 | 17.9 | 20.1 | -2.2 |
| Debt Held by the Public | Billions of Dollars | Percent of GDP | |
| 2005 | 4,592 | 36.9 | |
| 2006 | 4,829 | 36.6 | |
| 2007 | 5,035 | 36.3 | |
| 2008 | 5,803 | 40.5 | |
| 2009 | 7,545 | 54.1 | |
| 2010 | 9,019 | 62.8 | |
| 2011 | 10,128 | 67.7 | |
| 2012 | 11,280 | 72.5 |
Sources: http://www.fms.treas.gov/mts/index.html CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5.
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. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:
“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.
The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.
Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”
The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”
Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year
| Fiscal Year | Real GDP | Domestic CGPI | CPI All Items Less Fresh Food |
| 2011 | |||
| Apr 2012 | -0.2 to –0.2 | +1.7 | 0.0 |
| Jan 2012 | -0.4 to –0.3 | +1.8 to +1.9 | -0.1 to 0.0 |
| 2012 | |||
| Oct 2012 | +1.4 to +1.6 [+1.5] | -1.2 to -0.9 [-1.1] | -0.1 to -0.1 [-0.1] |
| Jul 2012 | +2.2 to +2.4 [+2.2] | -0.3 to 0.0 [-0.2] | +0.1 to +0.3 [+0.2] |
| Apr 2012 | +2.1 to +2.4 | +0.4 to +0.7 | +0.1 to +0.4 |
| Jan 2012 | +1.8 to +2.1 | -0.1 to +0.2 | 0.0 to +0.2 |
| 2013 | |||
| Oct 2012 | +1.3 to +1.8 [+1.6] | +0.1 to +0.7 [+0.5] | +0.2 to +0.6 [+0.4] |
| Jul 2012 | +1.6 to +1.8 [+1.7] | +0.6 to +0.8 [+0.6] | +0.5 to +0.7 [+0.7] |
| Apr 2012 | +1.6 to +1.8 | +0.7 to +0.9 | +0.5 to +0.7 |
| Jan 2012 | +1.4 to +1.7 | +0.6 to 1.0 | +0.4 to +0.5 |
| 2014 | |||
| Oct 2012 | +0.2 to +0.7] [+0.6] | +3.7 to +4.4 [+4.2] | +2.4 to +3.0 [+2.8] |
Figures in brackets are the median of forecasts of Policy Board members
Source: Policy Board, Bank of Japan
http://www.boj.or.jp/en/mopo/outlook/gor1210a.pdf
Private-sector activity in Japan expanded at a marginal rate with the Markit Composite Output PMI™ Index increasing from 49.3 in Dec to 50.4 in Jan, which is the first reading above the no-change 50.0 since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10632). Paul Smith, economist at Markit and author of the report, finds that growth in services but with weakness in manufacturing could provide some support for marginal growth in the beginning of 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10632). The Markit Business Activity Index of Services remained unchanged at 51.5 in Jan and also 51.5 in Dec, indicating moderate growth of the private services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10632). Paul Smith, Senior Economist at Markit and author of the report, finds signs of moderate growth in the beginning of 2013 with demand for services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10632). Markit/JMMA Purchasing Managers’ Index™ (PMI™), seasonally adjusted, increased from 45.0 in Dec to 47.7 in Jan for the eighth consecutive month of contraction below 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10609). Foreign orders fell for the tenth consecutive month with weakness in markets in China. Paul Smith, economist at Markit and author of the report, finds weakness in the beginning of 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10609).Table JPY provides the country data table for Japan.
Table JPY, Japan, Economic Indicators
| Historical GDP and CPI | 1981-2010 Real GDP Growth and CPI Inflation 1981-2010 |
| Corporate Goods Prices | Jan ∆% +0.4 |
| Consumer Price Index | Dec NSA ∆% 0.1; Dec 12 months NSA ∆% -0.1 |
| Real GDP Growth | IVQ2012 ∆%: minus 0.1 on IIIQ2012; IVQ2012 SAAR minus 0.1; |
| Employment Report | Dec Unemployed 2.59 million Change in unemployed since last year: minus 170 thousand |
| All Industry Indices | Nov month SA ∆% -0.3 Blog 1/27/13 |
| Industrial Production | Dec SA month ∆%: 2.5 |
| Machine Orders | Total Dec ∆% -1.6 Private ∆%: -9.8 Dec ∆% Excluding Volatile Orders 2.8 |
| Tertiary Index | Dec month SA ∆% 1.4 |
| Wholesale and Retail Sales | Dec 12 months: |
| Family Income and Expenditure Survey | Dec 12-month ∆% total nominal consumption -0.8, real -0.7 Blog 2/3/13 |
| Trade Balance | Exports Dec 12 months ∆%: minus 5.8 Imports Dec 12 months ∆% 1.9 Blog 1/27/13 |
Links to blog comments in Table JPY:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
2/3/13 http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html
1/27/13 http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets.html
8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.html
Japan’s GDP decreased 0.1 percent in IVQ2012 relative to IIIQ2012, seasonally adjusted, as shown in Table VB-1 that incorporates the latest estimates and revisions. IQ2012 GDP growth was revised to 1.5 percent; IIQGDP growth was revised to -0.2 percent; and IIIQ2012 growth was revised to -1.0 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.3 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell in IQ2011 by 1.8 percent and fell again 0.9 percent in IIQ2011 as a result of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP growth grew at 1.3 percent in IIIQ2010 and fell 0.3 percent in IVQ2010. The deepest quarterly contractions in the recession were 3.2 percent in IVQ2008 and 4.0 percent in IQ2009.
Table VB-1, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 1.5 | -0.2 | -1.0 | -0.1 |
| 2011 | -1.8 | -0.9 | 2.5 | 0.2 |
| 2010 | 1.4 | 1.0 | 1.3 | -0.3 |
| 2009 | -4.0 | 1.7 | 0.0 | 1.9 |
| 2008 | 0.7 | -1.2 | -1.1 | -3.2 |
| 2007 | 1.0 | 0.1 | -0.4 | 0.9 |
| 2006 | 0.4 | 0.4 | 0.0 | 1.3 |
| 2005 | 0.2 | 1.3 | 0.4 | 0.2 |
| 2004 | 1.1 | -0.1 | 0.2 | -0.2 |
| 2003 | -0.5 | 1.2 | 0.4 | 1.1 |
| 2002 | -0.2 | 1.0 | 0.6 | 0.4 |
| 2001 | 0.7 | -0.2 | -1.1 | -0.1 |
| 2000 | 1.7 | 0.2 | -0.3 | 0.7 |
| 1999 | -0.9 | 0.4 | -0.1 | 0.4 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Table VB-2 provides contributions to real GDP at seasonally-adjusted annual rates (SAAR). The SAAR of GDP in IVQ2012 was -0.4 percent {[(1-0.001)4 – 1]100 = -0.4%}: 1.1 percentage points from growth of personal consumption expenditures (PC) less 0.7 percentage points of gross fixed capital formation (CFCF) less 0.6 percentage points of net trade (exports less imports) less 0.6 percentage points of private inventory investment (PINV) plus 0.5 percentage points of government consumption, with a minor rounding error. The SAAR of GDP in IIIQ2011 was revised to a high 10.4 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.3 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 1.2 percentage points from GDP growth in IIIQ2012 but added 1.1 percentage points to GDP growth in IVQ2012.
Table VB-2, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| GDP | PC | GFCF | Trade | PINV | GOVC | |
| 2012 | ||||||
| I | 6.0 | 2.9 | -0.2 | 0.7 | 1.4 | 1.2 |
| II | -1.0 | 0.0 | 1.2 | -1.1 | -1.5 | 0.3 |
| III | -3.8 | -1.2 | -1.3 | -2.8 | 1.1 | 0.3 |
| IV | -0.4 | 1.1 | -0.7 | -0.6 | -0.6 | 0.5 |
| 2011 | ||||||
| I | -7.1 | -3.1 | -0.4 | -0.9 | -2.6 | 0.1 |
| II | -3.4 | 2.0 | -0.3 | -4.1 | -1.3 | 0.2 |
| III | 10.4 | 3.4 | 1.2 | 3.3 | 2.2 | 0.2 |
| IV | 0.6 | 1.2 | 3.8 | -2.9 | -1.7 | 0.3 |
| 2010 | ||||||
| I | 5.9 | 1.7 | 0.2 | 2.3 | 2.2 | -0.5 |
| II | 4.1 | -0.1 | 0.8 | 0.2 | 2.1 | 1.1 |
| III | 5.4 | 3.2 | 0.8 | 0.1 | 1.1 | 0.3 |
| IV | -1.3 | -0.7 | -0.6 | -0.4 | 0.0 | 0.4 |
| 2009 | ||||||
| I | -15.1 | -2.0 | -1.9 | -4.4 | -7.6 | 0.8 |
| II | 6.9 | 4.0 | -3.2 | 7.4 | -2.0 | 0.6 |
| III | 0.0 | 0.1 | -1.5 | 2.0 | -1.6 | 1.0 |
| IV | 7.7 | 3.5 | 0.3 | 2.7 | 0.7 | 0.3 |
| 2008 | ||||||
| I | 2.8 | 1.5 | 0.4 | 1.2 | -0.4 | 0.0 |
| II | -4.8 | -3.3 | -2.3 | 0.5 | 1.2 | -0.8 |
| III | -4.1 | -0.4 | -1.0 | -0.1 | -2.7 | 0.0 |
| IV | -12.3 | -2.8 | -4.5 | -11.4 | 5.8 | 0.3 |
| 2007 | ||||||
| I | 4.1 | 0.9 | 0.5 | 1.2 | 1.2 | 0.4 |
| II | 0.4 | 0.5 | -1.6 | 0.7 | 0.1 | 0.5 |
| III | -1.4 | -0.9 | -1.7 | 2.0 | -0.6 | -0.2 |
| IV | 3.5 | 0.3 | 0.3 | 1.4 | 1.0 | 0.6 |
Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Long-term economic growth in Japan was significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade has deducted from GDP growth in seven of the nine quarters from IVQ2010 IVQ2012. The only strong contribution of net trade was 3.3 percent in IIIQ2011. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.
Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %
| Net Trade | Exports | Imports | |
| 2012 | |||
| I | 0.7 | 2.0 | -1.4 |
| II | -1.1 | 0.0 | -1.1 |
| III | -2.8 | -3.1 | 0.3 |
| IV | -0.6 | -2.2 | 1.6 |
| 2011 | |||
| I | -0.9 | -0.2 | -0.8 |
| II | -4.1 | -4.4 | 0.3 |
| III | 3.3 | 5.2 | -1.9 |
| IV | -2.9 | -1.9 | -1.0 |
| 2010 | |||
| I | 2.3 | 3.6 | -1.4 |
| II | 0.2 | 2.8 | -2.6 |
| III | 0.1 | 1.1 | -0.9 |
| IV | -0.4 | 0.0 | -0.4 |
| 2009 | |||
| I | -4.4 | -16.3 | 12.0 |
| II | 7.4 | 4.7 | 2.7 |
| III | 2.0 | 5.1 | -3.1 |
| IV | 2.7 | 4.1 | -1.4 |
| 2008 | |||
| I | 1.2 | 2.2 | -1.0 |
| II | 0.5 | -1.6 | 2.1 |
| III | -0.1 | 0.1 | -0.2 |
| IV | -11.4 | -10.2 | -1.2 |
| 2007 | |||
| I | 1.2 | 1.7 | -0.5 |
| II | 0.7 | 1.6 | -0.8 |
| III | 2.0 | 1.4 | 0.6 |
| IV | 1.4 | 2.1 | -0.7 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
Japan’s percentage growth of GDP not seasonally-adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 relative to the same quarter a year earlier and decline of 1.6 percent in IIQ2011. GDP fell 0.5 percent in IIIQ2011 relative to a year earlier and fell 0.3 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.4 percent in IQ2012 relative to a year earlier. Growth of 3.8 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.4 percent in IIIQ2012 relative to a year earlier and 0.3 percent in IVQ2012 relative to a year earlier. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen that erode the country’s competitiveness in world markets.
Table VB-4, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 3.4 | 3.8 | 0.4 | 0.3 |
| 2011 | 0.0 | -1.6 | -0.5 | -0.3 |
| 2010 | 4.9 | 4.4 | 6.0 | 3.3 |
| 2009 | -9.4 | -6.6 | -5.6 | -0.5 |
| 2008 | 1.4 | -0.1 | -0.6 | -4.7 |
| 2007 | 2.8 | 2.3 | 2.0 | 1.6 |
| 2006 | 2.6 | 1.3 | 0.9 | 2.0 |
| 2005 | 0.4 | 1.4 | 1.5 | 1.9 |
| 2004 | 4.0 | 2.6 | 2.2 | 0.7 |
| 2003 | 1.7 | 1.8 | 1.5 | 1.8 |
| 2002 | -1.6 | -0.2 | 1.4 | 1.6 |
| 2001 | 1.6 | 0.9 | 0.0 | -1.0 |
| 2000 | 2.7 | 2.4 | 2.2 | 1.8 |
| 1999 | -0.3 | 0.1 | -0.1 | -0.5 |
Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html
The tertiary activity index of Japan increased 1.4 percent SA in Dec 2012 and increased 0.2 percent NSA in the 12 months ending in Dec 2012, as shown in Table VB-5. The tertiary activity index of Japan seasonally adjusted fell at the annual equivalent rate of minus 4.1 percent in Jan-Apr 2012 for cumulative decline of 1.4 percent but increased 2.6 percent not seasonally adjusted in the 12 months ending in Apr 2012, as shown in Table VB-5. The tertiary activity index fell 0.3 percent in the six months from Jun to Nov 2012 or at the annual equivalent rate of minus 0.6 percent. There was strong impact from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in the decline of the tertiary activity index by 5.4 percent in Mar 2011 and 3.4 percent in 12 months. The performance of the tertiary sector in the quarter Jul-Sep 2011 was weak: increase of 0.4 percent in Jul, increase of 0.1 percent in Aug and decline of 0.2 percent in Sep, after increasing 1.2 percent in Jun. The not seasonally adjusted index increased 4.2 percent in the 12 months ending in Mar 2012 but the 12-month percentage rate dropped to 0.1 percent in Sep 2012, increasing 1.3 percent in the 12 months ending in Oct 2012, 1.1 percent in the 12 months ending in Nov 2012 and 0.2 percent in the 12 months ending in Dec 2012. Most of the growth occurred in the quarter from Apr to Jun 2011 with gain of 4.3 percent or at annual equivalent rate of 18.1 percent.
Table VB-5, Japan, Tertiary Activity Index, ∆%
| Month ∆% SA | 12 Months ∆% NSA | |
| Dec 2012 | 1.4 | 0.2 |
| Nov | -0.4 | 1.1 |
| Oct | 0.2 | 1.4 |
| Sep | 0.2 | 0.1 |
| Aug | 0.3 | 0.6 |
| Jul | -0.6 | 0.9 |
| Jun | 0.1 | 0.8 |
| May | 0.9 | 3.2 |
| Apr | -0.2 | 2.6 |
| Mar | -0.6 | 4.2 |
| Feb | 0.0 | 2.4 |
| Jan | -0.6 | 0.4 |
| Dec 2011 | 1.6 | 1.2 |
| Nov | -0.8 | -0.3 |
| Oct | 0.6 | 0.9 |
| Sep | -0.2 | 0.1 |
| Aug | 0.1 | 0.8 |
| Jul | 0.4 | 0.1 |
| Jun | 1.2 | 1.0 |
| May | 0.9 | -0.2 |
| Apr | 2.1 | -2.3 |
| Mar | -5.4 | -3.4 |
| Feb | 0.3 | 2.0 |
| Jan | 0.5 | 1.0 |
| Dec 2010 | -0.2 | 1.8 |
| Nov | 0.6 | 2.5 |
| Oct | 0.2 | 0.5 |
| Sep | -0.4 | 1.3 |
| Aug | 0.1 | 2.3 |
| Jul | 0.7 | 1.6 |
| Jun | 0.1 | 1.0 |
| May | -0.3 | 1.2 |
| Dec 2009 | -5.2 | |
| Dec 2008 | -3.3 | |
| Dec 2007 | -0.3 | |
| Dec 2006 | 0.6 | |
| Dec 2005 | 2.6 | |
| Dec 2004 | 1.6 | |
| Calendar Year | ||
| 2012 | 1.4 | |
| 2011 | 0.1 | |
| 2010 | 1.3 | |
| 2009 | -5.2 | |
| 2008 | -1.0 | |
| 2007 | 1.0 | |
| 2006 | 1.8 | |
| 2005 | 1.9 | |
| 2004 | 1.8 |
Source:
http://www.meti.go.jp/english/statistics/index.html
Month and 12-month rates of growth of the tertiary activity index of Japan and components in Dec 2012 are provided in Table VB-6. Electricity, gas, heat supply and water increased 4.9 percent in Dec and increased 0.7 percent in the 12 months ending in Dec. Wholesale and retail trade decreased 0.1 percent in the month of Dec and decreased 1.6 percent in 12 months. Information and communications increased 0.5 percent Dec and decreased 0.2 percent in 12 months.
Table VB-6, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%
| Dec 2012 | Weight | Month ∆% SA | 12 Months ∆% NSA |
| Tertiary Index | 10,000.0 | 1.4 | 0.2 |
| Electricity, Gas, Heat Supply & Water | 372.9 | 4.9 | 0.7 |
| Information & Communications | 951.2 | 0.5 | -0.2 |
| Wholesale & Retail Trade | 2,641.2 | -0.1 | -1.6 |
| Finance & Insurance | 971.1 | 4.1 | 2.1 |
| Real Estate & Goods Rental & Leasing | 903.4 | 0.7 | 0.1 |
| Scientific Research, Professional & Technical Services | 551.3 | 2.8 | 2.3 |
| Accommodations, Eating, Drinking | 496.0 | -3.4 | -0.3 |
| Living-Related, Personal, Amusement Services | 552.7 | -1.4 | -0.3 |
| Learning Support | 116.9 | 0.1 | 0.7 |
| Medical, Health Care, Welfare | 921.1 | -0.2 | 1.6 |
| Miscellaneous ex Government | 626.7 | 2.0 | 1.9 |
Source: http://www.meti.go.jp/english/statistics/index.html
VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components from Jan to No 2012. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012. Improvement continued with 56.1 in Dec 2012 and 56.2 in Jan 2013.
Table CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| Total Index | New Orders | Interm. | Subs Prices | Exp | |
| Jan 2013 | 56.2 | 53.7 | 58.2 | 50.9 | 61.4 |
| Dec 2012 | 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, 55.6 in Nov 2012, 56.1 in Dec 2012 and 56.2 in Jan 2013.
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, 50.6 in Nov-Dec 2012 and 50.4 in Jan 2013. 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, 51.2 in Nov 2012-Dec 2012 and 51.6 in Jan 2013. 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, 49.9 in Dec 2012 and 47.8 in Jan 2013.
Table CIPMMFG, China, Manufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| IPM | PI | NOI | INV | EMP | SDEL | |
| Jan 2013 | 50.4 | 51.3 | 51.6 | 50.1 | 47.8 | 50.0 |
| Dec 2012 | 50.6 | 52.0 | 51.2 | 47.3 | 49.9 | 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, 50.6 in Nov 2012 and 50.4 in Jan 2013 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 of China’s GDP in the four quarters of 2012 relative to the same period in 2011 was 7.8 percent, as shown in Table VC-GDP. Secondary industry accounts for 45.3 percent of GDP of which industry alone for 40.1 percent in the first three quarters of 2012 and construction with the remaining 6.7 percent in the first three quarters of 2012. Tertiary industry accounts for 43.8 percent of GDP in the first three quarters of 2012 and primary industry for 9.4 percent in the first three quarters of 2012. 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, 9.1 percent in IIIQ2012 and 8.2 percent in IVQ2012.
Table VC-GDP, China, Cumulative and Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%
| Cumulative GDP 2012 | Value Current CNY Billion | 2012 Year-on-Year ∆% |
| GDP | 51,932.2 | 7.8 |
| Primary Industry | 5,237.7 | 4.5 |
| Farming IIIQ | 33,088.0 | 4.2 |
| Secondary Industry | 23,531.9 | 8.1 |
| Industry IIIQ | 141,641.5 | 7.9 |
| Construction IIIQ | 23,787.0 | 9.2 |
| Tertiary Industry | 23,162.6 | 8.1 |
| Transport, Storage, Post IIIQ | 18,941.0 | 6.7 |
| Wholesale, Retail Trades IIIQ | 31,651.2 | 11.8 |
| Hotel & Catering Services IIIQ | 7,015.6 | 7.6 |
| Financial Intermediation IIIQ | 22,465.2 | 9.5 |
| Real Estate IIIQ | 20,789.6 | 2.7 |
| Other IIIQ | 54,101.0 | 7.7 |
| Growth in Quarter Relative to Prior Quarter | ∆% on Prior Quarter | ∆% Annual Equivalent |
| 2012 | ||
| IVQ2012 | 2.0 | 8.2 |
| 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 VC-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 and 7.9 percent in IVQ2012. Growth of secondary industry decelerated from 14.5 percent in IQ2010 to 7.4 percent in IIIQ2012 and 7.9 percent in IVQ2012.
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 | IVQ 2012 | |
| GDP | 9.7 | 9.5 | 9.1 | 8.9 | 8.1 | 7.6 | 7.4 | 7.9 |
| Primary Industry | 3.5 | 3.2 | 3.8 | 4.5 | 3.8 | 4.3 | 4.2 | 4.5 |
| Secondary Industry | 11.1 | 11.0 | 10.8 | 10.6 | 9.1 | 8.3 | 8.1 | 8.1 |
| Tertiary Industry | 9.1 | 9.2 | 9.0 | 8.9 | 7.5 | 7.7 | 7.9 | 8.1 |
| GDP ∆% Relative to a Prior Quarter | 2.2 | 2.3 | 2.4 | 1.9 | 1.8 | 1.8 | 2.2 | 2.0 |
| 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=10587) is improving. The overall Flash China Manufacturing PMI™ increased marginally from 51.5 in Dec to 51.9 in Jan for a high in 24 months while the Flash China Manufacturing Output Index increased from 51.9 in Dec to 52.2 in Jan, 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 even with weak foreign demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10587).The HSBC China Services PMI™, compiled by Markit, shows improving business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 51.8 in Dec to 53.5 in Jan for the highest rate in two years (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10685). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10685). The HSBC Business Activity index increased from 51.7 in Dec to 54.0 in Jan with continuing growth in services at a faster rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10685). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds strength in services and recovery in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10685). The HSBC Purchasing Managers’ Index™ (PMI™), compiled by Markit, increased to 52.3 in Jan from 51.5 in Dec, indicating moderate activity, which is the highest reading in two years (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10652). New orders increased with respondents of the survey finding strengthening demand in Europe and the US. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds manufacturing is gaining traction following improving domestic demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10652).
Table CNY, China, Economic Indicators
| Price Indexes for Industry | Dec 12-month ∆%: minus 1.9 Dec month ∆%: minus 0.1 |
| Consumer Price Index | Dec month ∆%: 0.8 Dec 12 months ∆%: 2.5 |
| Value Added of Industry | Dec month ∆%: 0.87 Jan-Dec 2012/Jan-Dec 2011 ∆%: 10.0 |
| GDP Growth Rate | Year IVQ2012 ∆%: 7.9 |
| Investment in Fixed Assets | Dec month ∆%: 1.24 Total Jan-Dec 2012 ∆%: 20.6 Real estate development: 16.2 |
| Retail Sales | Dec month ∆%: 1.53 Jan-Dec ∆%: 14.3 |
| Trade Balance | Jan balance $29.15 billion Cumulative Jan: $29.15 billion |
Links to blog comments in Table CNY:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
1/20/13 http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html
1/13/13 http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.html
VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.4 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.4 percent in 2012 and 0.1 percent in 2013 but 1.4 percent in 2014.
Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, 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 | 10.1 | 1.4 |
| 2012* | 2.5 | 11.4 | -0.4 |
| 2013* | 0.1 | ||
| 2014* | 1.4 |
*EUROSTAT forecast Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
The GDP of the euro area in 2011 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $13,114.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France is $2778.1 billion with the GDP of Germany of $3607.4 billion, Italy of $2198.7 billion and Spain $1479.6 billion is $10,063.8 billion or 76.7 percent of total euro area GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013 and 2014 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.
Table VD-EUR1, Euro Area, Real GDP Growth Rate, ∆%
| Euro Area | Germany | France | Italy | Spain | |
| 2014* | 1.4 | 2.0 | 1.2 | 0.8 | 0.8 |
| 2013* | 0.1 | 0.8 | 0.4 | -0.5 | -1.4 |
| 2012 | -0.4* | 0.7 | 0.2* | -2.3* | -1.4* |
| 2011 | 1.4 | 3.0 | 1.7 | 0.4 | 0.4 |
| 2010 | 2.0 | 4.2 | 1.7 | 1.8 | -0.3 |
| 2009 | -4.4 | -5.1 | -3.1 | -5.5 | -3.7 |
| 2008 | 0.4 | 1.1 | -0.1 | -1.2 | 0.9 |
| 2007 | 3.0 | 3.3 | 2.3 | 1.7 | 3.5 |
| 2006 | 3.2 | 3.7 | 2.5 | 2.2 | 4.1 |
| 2005 | 1.7 | 0.7 | 1.8 | 0.9 | 3.6 |
| 2004 | 2.2 | 1.2 | 2.5 | 1.7 | 3.3 |
| 2003 | 0.7 | -0.4 | 0.9 | 0.0 | 3.1 |
| 2002 | 0.9 | 0.0 | 0.9 | 0.5 | 2.7 |
| 2001 | 2.0 | 1.5 | 1.8 | 1.9 | 3.7 |
| 2000 | 3.8 | 3.1 | 3.7 | 3.7 | 5.0 |
| 1999 | 2.9 | 1.9 | 3.3 | 1.5 | 4.7 |
| 1998 | 2.8 | 1.9 | 3.4 | 1.4 | 4.5 |
| 1997 | 2.6 | 1.7 | 2.2 | 1.9 | 3.9 |
| 1996 | 1.5 | 0.8 | 1.1 | 1.1 | 2.5 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI®, combining activity in manufacturing and services, increased from 47.2 in Dec to 48.2 in Jan, for twelve consecutive declines and fifteen drops in sixteen months but with Oct registering the highest reading in ten months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10586). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with GDP declining but improving outlook for return to growth in the first half of 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10586). The Markit Eurozone PMI® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 47.2 in Dec to 48.6 in Jan, which is the twelfth consecutive contraction; contraction but at a slower rate in three consecutive months spread in manufacturing and services throughout France, Italy and Spain but with growth in Germany (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10671). Chris Williamson, Chief Economist at Markit, finds that the data are consistent with sharp reduction in contraction and likely stabilization in IQ2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10671). The Markit Eurozone Services Business Activity Index increased from 47.8 in Dec to 48.6 in Jan (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10671). The Markit Eurozone Manufacturing PMI® increased to 47.9 in Jan from 46.1 in Dec, which indicates contraction in eighteen consecutive months of deterioration of manufacturing business in the euro zone but with the index at a high in eleven months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10641). New export orders declined in Jan for the nineteenth consecutive month but only at a marginal pace with increases in Italy, Spain, Ireland and the Netherlands. Chris Williamson, Chief Economist at Markit, finds that the survey data are consistent with likely stabilization following contraction throughout most of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10641). Table EUR provides the regional data table for the euro area.
Table EUR, Euro Area Economic Indicators
| GDP | IVQ2012 ∆% -0.6; IVQ2012/IVQ2011 ∆% -0.9 Blog 2/17/13 |
| Unemployment | Dec 2012: 11.7% unemployment rate Dec 2012: 18.715 million unemployed Blog 2/10/13 |
| HICP | Dec month ∆%: 0.4 12 months Dec ∆%: 2.2 |
| Producer Prices | Euro Zone industrial producer prices Dec ∆%: -0.2 |
| Industrial Production | Dec month ∆%: 0.7; Dec 12 months ∆%: -2.4 |
| Retail Sales | Dec month ∆%: -0.8 |
| Confidence and Economic Sentiment Indicator | Sentiment 87.8 Jan 2013 Consumer minus 23.9 Jan 2013 Blog 2/3/13 |
| Trade | Jan-Dec 2012/Jan-Dec 2011 Exports ∆%: 7.4 Dec 2012 12-month Exports ∆% -3.1 Imports ∆% -5.9 |
Links to blog comments in Table EUR:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
2/3/13 http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html
1/20/13 http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html
The GDP of the euro area in 2011 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $13,114.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France is $2778.1 billion with the GDP of Germany of $3607.4 billion, Italy of $2198.7 billion and Spain $1479.6 billion is $10,063.8 billion or 76.7 percent of total euro area GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013 and 2014 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.
Table VD 1, Euro Area, Real GDP Growth Rate, ∆%
| Euro Area | Germany | France | Italy | Spain | |
| 2014* | 1.4 | 2.0 | 1.2 | 0.8 | 0.8 |
| 2013* | 0.1 | 0.8 | 0.4 | -0.5 | -1.4 |
| 2012 | -0.4* | 0.7 | 0.2* | -2.3* | -1.4* |
| 2011 | 1.4 | 3.0 | 1.7 | 0.4 | 0.4 |
| 2010 | 2.0 | 4.2 | 1.7 | 1.8 | -0.3 |
| 2009 | -4.4 | -5.1 | -3.1 | -5.5 | -3.7 |
| 2008 | 0.4 | 1.1 | -0.1 | -1.2 | 0.9 |
| 2007 | 3.0 | 3.3 | 2.3 | 1.7 | 3.5 |
| 2006 | 3.2 | 3.7 | 2.5 | 2.2 | 4.1 |
| 2005 | 1.7 | 0.7 | 1.8 | 0.9 | 3.6 |
| 2004 | 2.2 | 1.2 | 2.5 | 1.7 | 3.3 |
| 2003 | 0.7 | -0.4 | 0.9 | 0.0 | 3.1 |
| 2002 | 0.9 | 0.0 | 0.9 | 0.5 | 2.7 |
| 2001 | 2.0 | 1.5 | 1.8 | 1.9 | 3.7 |
| 2000 | 3.8 | 3.1 | 3.7 | 3.7 | 5.0 |
| 1999 | 2.9 | 1.9 | 3.3 | 1.5 | 4.7 |
| 1998 | 2.8 | 1.9 | 3.4 | 1.4 | 4.5 |
| 1997 | 2.6 | 1.7 | 2.2 | 1.9 | 3.9 |
| 1996 | 1.5 | 0.8 | 1.1 | 1.1 | 2.5 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
Table VD-2 provides percentage changes of euro area real GDP in a quarter relative to the prior quarter. Real GDP fell 0.3 percent in IVQ2011, remained unchanged in IQ2012 and fell in the final three quarters of 2012: 0.2 percent in IIQ2012, 0.1 percent in IIIQ2012 and 0.6 percent in IVQ2012. The global recession manifested in the euro area in five consecutive quarterly declines from IIQ2008 to IIQ2009. The strongest impact was contraction of 2.8 percent in IQ2009. Recovery began in IIIQ2009 with cumulative growth of 3.7 percent to IQ2011 or at the annual equivalent rate of 2.1 percent. Growth was much more vigorous from IVQ2003 to IQ2008.
Table VD-2, Euro Area, Real GDP, Percentage Change from Prior Quarter, Calendar and Seasonally Adjusted ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 0.0 | -0.2 | -0.1 | -0.6 |
| 2011 | 0.6 | 0.2 | 0.1 | -0.3 |
| 2010 | 0.5 | 1.0 | 0.4 | 0.3 |
| 2009 | -2.8 | -0.3 | 0.4 | 0.4 |
| 2008 | 0.5 | -0.4 | -0.6 | -1.7 |
| 2007 | 0.8 | 0.4 | 0.6 | 0.4 |
| 2006 | 0.9 | 1.1 | 0.7 | 1.0 |
| 2005 | 0.2 | 0.7 | 0.6 | 0.6 |
| 2004 | 0.5 | 0.5 | 0.4 | 0.3 |
| 2003 | 0.0 | 0.1 | 0.5 | 0.7 |
| 2002 | 0.2 | 0.6 | 0.3 | 0.0 |
| 2001 | 0.9 | 0.1 | 0.1 | 0.2 |
| 2000 | 1.3 | 0.8 | 0.4 | 0.7 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
Table VD-3 provides percentage change in real GDP in the euro area in a quarter relative to the same quarter a year earlier. Growth rates were quite strong from 2004 to 2007. There were five consecutive quarters of sharp declines in GDP in a quarter relative to the same quarter a year earlier from IVQ2008 to IVQ2009 with sharp contractions of 5.4 percent in IQ2009, 5.3 percent in IIQ2009 and 4.4 percent in IIIQ2009. Growth rates decline in magnitude with 1.3 percent in IIIQ2011 and 0.6 percent in IVQ211 with contractions of 0.1 percent in IQ2012, 0.5 percent in IIQ2012, 0.6 percent in IIIQ2012 and 0.9 percent in IVQ2012.
Table VD-3, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a Year Earlier, Calendar and Seasonally Adjusted ∆%
| IQ | IIQ | IIIQ | IV | |
| 2012 | -0.1 | -0.5 | -0.6 | -0.9 |
| 2011 | 2.4 | 1.6 | 1.3 | 0.6 |
| 2010 | 1.0 | 2.3 | 2.3 | 2.2 |
| 2009 | -5.4 | -5.3 | -4.4 | -2.3 |
| 2008 | 2.0 | 1.2 | 0.0 | -2.1 |
| 2007 | 3.7 | 3.0 | 3.0 | 2.4 |
| 2006 | 3.0 | 3.3 | 3.4 | 3.8 |
| 2005 | 1.5 | 1.7 | 1.9 | 2.2 |
| 2004 | 1.8 | 2.2 | 2.2 | 1.8 |
| 2003 | 0.9 | 0.4 | 0.5 | 1.2 |
| 2002 | 0.5 | 1.0 | 1.2 | 1.1 |
| 2001 | 2.9 | 2.1 | 1.8 | 1.2 |
| 2000 | 4.3 | 4.4 | 3.7 | 3.3 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
Table VD-4 provides GDP growth in IVQ2012 and relative to the same quarter a year earlier for the euro zone, European Union, Japan and the US. The GDP of the euro zone fell 0.6 percent in IVQ2012 and declined 0.9 percent relative to a year earlier while the GDP of the European Union decreased 0.5 percent in IVQ2012 and decreased 0.6 percent relative to a year earlier. Growth in IVQ2012 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html) and motivate hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html)
Table VD-4, Euro Zone, European Union, Japan and USA, Real GDP Growth
| ∆% IVQ2012/ IIIQ2012 | ∆% IVQ2012/ IVQ2011 | |
| Euro Zone | -0.6 | -0.9 |
| European Union | -0.5 | -0.6 |
| Germany | -0.6 | 0.4 |
| France | -0.3 | -0.3 |
| Netherlands | -0.2 | -0.9 |
| Finland | -0.5 | -1.6 |
| Belgium | -0.1 | -0.4 |
| Portugal | -1.8 | -3.8 |
| Ireland* | 0.2 | 0.8 |
| Italy | -0.9 | -2.7 |
| Greece | NA | -6.0 |
| Spain | -0.7 | -1.8 |
| United Kingdom | -0.3 | 0.0 |
| Japan** | -0.9 | 0.5 |
| USA | 0.0 | 1.5 |
*Calendar adjusted IIIQ2012; **IIIQ2012
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
Chart VD-1 of EUROSTAT provides projected growth in 2014 relative to 2013 for a large variety of countries. There have been diverging experiences in growth in the world economy.
Chart VD-1, Euro Zone, European Union, Real GDP Growth 2014 EUROSTAT Forecast ∆% on Previous Year
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
Industrial production in the euro area increased 0.7 percent in Dec 2012, declining in four of seven months from Jun to Dec 2012 for cumulative growth of minus 2.4 percent that is equivalent to minus 4.1 percent in a year, as shown in Table VD-5 with revised estimates by EUROSTAT. The global recession caused sharp contraction of euro area industrial production with declines of 12.7 percent in the 12 months ending in Dec 2008, 3.7 percent in the 12 months ending in Dec 2009, 8.8 percent in the 12 months ending in Dec 2010, 1.8 percent in the 12 months ending in Dec 2011 and 2.4 percent in the 12 months ending in Dec 2012.
Table VD-5, Euro Zone, Industrial Production, ∆%
| Month ∆% | 12-Month ∆% | |
| Dec 2012 | 0.7 | -2.4 |
| Nov | -0.7 | -4.0 |
| Oct | -1.0 | -3.4 |
| Sep | -2.3 | -2.8 |
| Aug | 0.8 | -1.3 |
| Jul | 0.4 | -2.6 |
| Jun | -0.3 | -1.8 |
| May | 0.8 | -2.6 |
| Apr | -1.1 | -2.5 |
| Mar | 0.0 | -1.6 |
| Feb | 0.7 | -1.8 |
| Jan | 0.1 | -1.9 |
| Dec 2011 | -1.8 | |
| Dec 2010 | -8.8 | |
| Dec 2009 | -3.7 | |
| Dec 2008 | -12.7 | |
| Dec 2007 | 1.8 | |
| Dec 2006 | 5.2 | |
| Dec 2005 | 2.9 | |
| Dec 2004 | 1.0 | |
| Dec 2003 | 2.3 | |
| Dec 2002 | -0.1 | |
| Dec 2001 | -4.1 | |
| Dec 2000 | 6.2 | |
| Dec 1999 | 4.8 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
Table VD-6 provides monthly industrial production percentage changes for total production and major segments. There was recovery in Dec 2012 with growth of capital goods of 1.3 percent, durables goods of 2.0 percent and nondurable goods of 2.0 percent. Total production and all segments fell in Oct-Sep 2012 and in all segments in Nov 2012 with exception of capital goods.
Table VD-6, Euro Zone, Industrial Production Month ∆%
| Total | INT | ENE | CG | DUR | NDUR | |
| Dec 2012 | 0.7 | -0.2 | -1.2 | 1.3 | 2.0 | 2.0 |
| Nov | -0.7 | -1.0 | -1.3 | 0.4 | -0.7 | -1.1 |
| Oct | -1.0 | -0.6 | -0.3 | -2.8 | -3.6 | 1.3 |
| Sep | -2.3 | -2.1 | -0.2 | -3.1 | -3.3 | -2.8 |
| Aug | 0.8 | 0.2 | 0.8 | 1.2 | 2.6 | 1.4 |
| Jul | 0.4 | 0.1 | -1.6 | 2.2 | -0.2 | -0.6 |
Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods Source: Eurostat http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
Table VD-2 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. All 12-month percentage changes in Table VD-2 are negative with exception of increase of 1.2 percent in output of energy in the 12 months ending. Industrial production increased 0.7 percent in the month of Dec 2012 and fell 2.4 percent in the 12 months ending in Dec 2012. Industrial production deteriorated at unusually high rates in the earlier months of Oct and Sep 2012.
Table VD-7, Euro Zone, Industrial Production 12-Month ∆%
| 2012 | Dec Month ∆% | Dec 12-Month ∆% |
| Total | 0.7 | -2.4 |
| Intermediate Goods | -0.2 | -4.6 |
| Energy | -1.2 | 1.2 |
| Capital Goods | 1.3 | -2.9 |
| Durable Consumer Goods | 2.0 | -3.9 |
| Nondurable Consumer Goods | 2.0 | -1.3 |
Source: Eurostat http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
There has been significant decline in percentage changes of industrial production and major categories in 12-month rates into 2012 as shown in Table VD-8. The 12-month rate of growth in Mar 2011 of minus 1.6 percent has fallen to minus 4.0 percent in Nov 2012 and minus 2.4 percent in Dec 2012. Trend is difficult to identify because of significant volatility but is evidently negative. Capital goods were growing at 2.4 percent in the 12 months ending in Mar 2011 and at minus 4.4 percent in the 12 months ending in Nov 2012 and minus 2.9 percent in the 12 months ending in Dec 2012.
Table VD-8, Euro Zone, Industrial Production 12-Month ∆%
| Total | INT | ENE | CG | DUR | NDUR | |
| Dec 2012 | -2.4 | -4.6 | 1.2 | -2.9 | -3.9 | -1.3 |
| Nov | -4.0 | -5.4 | -0.3 | -4.4 | -6.9 | -2.6 |
| Oct | -3.4 | -4.2 | 1.4 | -4.3 | -6.4 | -2.4 |
| Sep | -2.8 | -4.4 | 0.2 | -1.2 | -3.0 | -3.2 |
| Aug | -1.3 | -3.5 | 0.3 | 0.3 | -2.5 | -0.2 |
| Jul | -2.6 | -3.9 | 0.6 | -1.2 | -9.3 | -2.4 |
Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods
Source: http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
Table VD-9 provides industrial production of member countries of the euro zone, the UK and the European Union. Twelve-month percentage changes in Dec 2012 are negative for all countries in Table VD-9 with exception of 2.0 percent for the Netherlands and 1.9 percent for Ireland.
Table VD-9, Euro Zone, Industrial Production by Member Countries, ∆%
| Dec 2012 | Month ∆% | 12-Month ∆% |
| Euro Zone | 0.7 | -2.4 |
| Germany | 0.8 | -0.7 |
| France | 0.0 | -2.1 |
| Netherlands | 0.2 | 2.0 |
| Finland | 1.9 | -0.8 |
| Belgium | NA | NA |
| Portugal | -1.3 | -4.0 |
| Ireland | 8.5 | 1.9 |
| Italy | 0.4 | -6.6 |
| Greece | 0.2 | -0.5 |
| Spain | 0.0 | -6.9 |
| UK | 1.1 | -2.2 |
| European Union | 0.5 | -2.3 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home
Euro zone trade growth continues to be relatively strong as shown in Table VD-10. Exports grew at 7.4 percent and imports at 1.7 percent in Jan-Dec 2012 relative to Jan-Dec 2011. The 12-month rate of growth of exports was -3.1 percent in Dec 2012 while imports decreased 5.9 percent. In Nov 2012, exports increased 5.3 percent in 12 months and imports increased 0.0 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.
Table VD-10, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA
| Exports | Imports | |
| Jan-Dec 2012 | 1,868.6 | 1,786.8 |
| Jan-Dec 2011 | 1,740.4 | 1,756.1 |
| ∆% | 7.4 | 1.7 |
| Dec 2012 | 143.4 | 131.7 |
| Dec 2011 | 148.0 | 140.0 |
| ∆% | -3.1 | -5.9 |
| Nov 2012 | 164.0 | 159.9 |
| Nov 2011 | 155.8 | 150.9 |
| ∆% | 5.3 | 0.0 |
| Trade Balance | Jan-Dec 2012 | Jan-Dec 2011 |
| € Billions | 81.8 | -15.7 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-15022013-AP/EN/6-15022013-AP-EN.PDF
The structure of trade of the euro zone in Jan-Nov 2012 is provided in Table VD-11. Data are still not available for trade structure for Dec 2012. Manufactured exports increased 7.5 percent in Jan-Nov 2012 relative to Jan-Nov 2011 while imports fell 1.0 percent. The trade surplus in manufactured products was marginally higher than the trade deficit in primary products in Jan-Nov 2012 but lower in Jan-Nov 2011 largely because of the commodity shock caused by carry trades.
Table VD-11, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%
| Primary | Manufactured | Other | Total | |
| Exports | ||||
| Jan-Nov 2012 € B | 272.0 | 1,404.6 | 48.6 | 1,725.2 |
| Jan-Nov 2011 € B | 240.5 | 1,307.1 | 44.9 | 1,592.5 |
| ∆% | 13.1 | 7.5 | 8.2 | 8.3 |
| Imports | ||||
| Jan-Nov 2012 € B | 615.0 | 1,010.5 | 29.6 | 1,655.2 |
| Jan-Nov 2011 € B | 568.2 | 1,020.9 | 27.0 | 1,616.1 |
| ∆% | 8.2 | -1.0 | 9.6 | 2.4 |
| Trade Balance € B | ||||
| Jan-Nov 2012 | -343.0 | 394.0 | 19.0 | 70.0 |
| Jan-Nov 2011 | -327.7 | 286.1 | 17.9 | -23.7 |
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-15022013-AP/EN/6-15022013-AP-EN.PDF
VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, 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, 3.0 percent in 2011 and 0.7 percent in 2012. Growth slowed in 2011 from 1.2 percent in IQ2011, 0.5 percent in IIQ2011 and 0.4 percent in IIIQ2011 to decline of 0.1 percent in IVQ2011 and growth of 0.5 percent in IQ2012, 0.3 percent in IIQ2012, 0.2 percent in IIIQ2012 and decline of 0.6 percent in IVQ2012.
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 | |
| 2012 | 0.7 | 0.9 |
| 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/2013/02/PE13_057_811.html
The Flash Germany Composite Output Index of the Markit Flash Germany PMI®, combining manufacturing and services, increased from 50.3 in Dec to 53.6 in Jan, which is the highest reading in twelve months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10688). The pace of decline of new export orders for manufacturing was at significantly lower rate than in Dec, with some respondents finding enhanced demand in Asia but continuing weakness in Southern Europe. Tim Moore, Senior Economist at Markit and author of the report, finds strength in Germany’s private sector with potential to provide impulse to GDP growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10588). 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 50.3 in Dec to 54.4 in Jan, which is the fastest rate of since Jun 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). Tim Moore, Senior Economist at Markit and author of the report, finds that the economy of Germany has moved away from contraction to expansion with growth in both manufacturing and services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10688). The Germany Services Business Activity Index increased from 52.0 in Dec to 55.7 in Jan (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10688). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing conditions, increased from 46.0 in Dec to 49.8 in Jan for the eleventh consecutive month in contraction territory below 50.0 but at the slowest rate of deterioration and with modest increase in output after nine consecutive months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10655). New export orders fell in Jan for nineteen consecutive months but at rate well below that in Dec with some respondents indicating improving demand for Asia that compensates declines in southern Europe. Tim Moore, Senior Economist at Markit and author of the report, finds strength in Germany’s return to manufacturing growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10655).Table DE provides the country data table for Germany.
Table DE, Germany, Economic Indicators
| GDP | IVQ2012 -0.6 ∆%; IV/Q2012/IVQ2011 ∆% 0.1 2011/2010: 3.0% GDP ∆% 1992-2012 Blog 8/26/12 5/27/12 11/25/12 2/17/13 |
| Consumer Price Index | Dec month NSA ∆%: 0.9 |
| Producer Price Index | Dec month ∆%: -0.3 CSA, 0.1 NSA |
| Industrial Production | Mfg Dec month CSA ∆%: 1.2 |
| Machine Orders | MFG Dec month ∆%: 0.8 |
| Retail Sales | Dec Month ∆% -1.7 12-Month ∆% -4.7 Blog 2/3/13 |
| Employment Report | Unemployment Rate Dec 5.3% |
| Trade Balance | Exports Dec 12-month NSA ∆%: -6.9 Blog 2/10/13 |
Links to blog comments in Table DE:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
2/3/13 http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html
1/27/13 http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets.html
1/20/13 http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.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
Table VE-1 provides percentage change of Germany’s GDP in one quarter relative to the prior quarter from 2003 to 2012. Germany’s GDP contracted during four consecutive quarters from IIQ2008 to IQ2009. The deepest contraction was 4.1 percent in IQ2009. Growth was quite strong from IIIQ2009 to IQ2011 for cumulative growth of 7.3 percent in seven quarters or at the average rate of 1.0 percent per quarter, which is equivalent to 4.1 percent per year. Economic growth decelerated in IIQ2011 to 0.5 percent and 0.4 percent in IIIQ2011. The economy contracted mildly by 0.1 percent in IVQ2011 and grew 0.5 percent in IQ2012 and 0.3 percent in IIQ2012. GDP growth in IIIQ2012 was 0.2 percent relative to IIQ2012. GDP contracted 0.6 percent in IVQ2012 relative to IIIQ2012.
Table VE-1, Germany Quarter GDP ∆% Relative to Prior Quarter, Seasonally and Calendar Adjusted
| IQ | IIQ | IIIQ | IV | |
| 2012 | 0.5 | 0.3 | 0.2 | -0.6 |
| 2011 | 1.2 | 0.5 | 0.4 | -0.1 |
| 2010 | 0.7 | 2.2 | 0.7 | 0.6 |
| 2009 | -4.1 | 0.2 | 0.8 | 0.9 |
| 2008 | 1.0 | -0.4 | -0.4 | -2.0 |
| 2007 | 0.6 | 0.5 | 0.9 | 0.4 |
| 2006 | 1.1 | 1.5 | 1.0 | 1.3 |
| 2005 | -0.1 | 0.6 | 0.8 | 0.3 |
| 2004 | 0.0 | 0.3 | -0.2 | 0.0 |
| 2003 | -0.8 | -0.1 | 0.5 | 0.4 |
Seasonal and calendar adjusted
Source: Statistisches Bundesamt Deutschland (Destatis)
https://www.destatis.de/EN/PressServices/Press/pr/2013/02/PE13_057_811.html
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Table VE-2 provides percentage changes of Germany’s GDP in a quarter relative to the same quarter a year earlier. Growth was weak in the recovery from the recession of 2001 through 2005, as in most of the euro area (see Pelaez and Pelaez, The Global Recession Risk (2007), 116-46). Germany’s economy then grew robustly in 2006 and 2007 until the global recession after 2007. Germany recovered with strong growth in 2010 and vigorous 5.2 percent in IQ2011. The economy decelerated in the final three quarters of 2011, growing 1.7 percent in IQ2012 relative to IQ2011. Growth decelerated further to 0.5 percent in IIQ2012 without calendar adjustment and 1.0 percent with calendar adjustment and to 0.4 percent in IIIQ2012 and 0.1 percent in IVQ2012.
Table VE-2, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Price Adjusted NCSA
| IQ | IIQ | IIIQ | IV | |
| 2012 | 1.7 | 0.5 | 0.4 | 0.1 |
| 2011 | 5.2 | 3.1 | 2.6 | 1.4 |
| 2010 | 2.8 | 5.0 | 4.5 | 4.2 |
| 2009 | -6.5 | -7.4 | -5.0 | -1.6 |
| 2008 | 2.1 | 3.1 | 1.1 | -1.9 |
| 2007 | 4.3 | 3.4 | 3.3 | 2.2 |
| 2006 | 4.3 | 2.4 | 3.5 | 4.6 |
| 2005 | -0.8 | 1.2 | 1.2 | 1.0 |
| 2004 | 1.5 | 1.6 | 0.6 | 0.9 |
| 2003 | 0.0 | -1.1 | -0.5 | 0.1 |
Price adjusted NSA Source: Statistisches Bundesamt Deutschland (Destatis)
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-1 of the Statistisches Bundesamt Deutschland (Destatis) (Federal Statistics Agency of Germany) provides GDP at current prices from 2003 to 2012. The German economy is productive with significant dynamism over the long term. There are fluctuations in an increasing trend since 2009.
Chart VE-1, Germany, GDP, Current Prices, Billion Euro
Source: Statistisches Bundesamt Deutschland (Destatis)
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-2 of the Statistisches Bundesamt Deutschland (Destatis) (Federal Statistics Agency of Germany) provides the index of price-adjusted chain-linked GDP of Germany from 2008 to 2012. Germany was growing rapidly before the global contraction and rebounded with significant strength along a strong upward trend that is moderating.
Chart VE-2, Germany, Index of Price-Adjusted Chain-Linked GDP, 2000=100
Source: Statistisches Bundesamt Deutschland (Destatis)
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.3 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.1 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.
Table VF-1, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012
| Period | Average ∆% |
| 1949-2012 | 3.3 |
| 2000-2012 | 1.0 |
| 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 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130214
The Markit Flash France Composite Output Index fell from 44.6 in Dec to 42.7 in Jan for the lowest reading in 46 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10584). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest the sharpest decline of overall output in about four years with increasing reduction of employment (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10584).
The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, fell from 44.6 in Dec to 42.7 in Jan, which is at a low in 46 months since Mar 2009, indicating significant contraction of private sector activity for an eleventh consecutive month at faster rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10682). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI®, finds generalized deteriorating conditions in the French private sector (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10682). The Markit France Services Activity index decreased from 45.2 in Dec to 43.6 in Jan, which is the weakest reading in 46 months since Mar 2009 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10682). The Markit France Manufacturing Purchasing Managers’ Index® decreased to 42.9 in Jan from 44.6 in Dec, remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10631). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds continuing weakness in manufacturing with new orders declining at the sharpest pace in about four years that suggest further sharp declines in output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10631). Table FR provides the country data table for France.
Table FR, France, Economic Indicators
| CPI | Dec month ∆% 0.3 |
| PPI | Dec month ∆%: -0.3 Blog 2/3/13 |
| GDP Growth | IVQ2012/IIIQ2012 ∆%: -0.3 |
| Industrial Production | Dec ∆%: |
| Consumer Spending | Manufactured Goods |
| Employment | IIIQ2012 Unemployed 2.826 million |
| Trade Balance | Dec Exports ∆%: month 3.1, 12 months 4.7 Dec Imports ∆%: month 5.4, 12 months 3.8 Blog 2/10/13 |
| Confidence Indicators | Historical averages 100 Jan Mfg Business Climate 86 Blog 1/27/13 |
Links to blog comments in Table FR:
2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html
2/3/13 http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html
1/27/13 http://cmpassocregulationblog.blogspot.com/2013/01/united-states-commercial-banks-assets.html
1/13/13 http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.html
12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html
Growth of GDP in a quarter relative to the prior quarter is provided for France in Table VF-1. GDP fell 0.3 percent in IVQ2012. The French economy grew 0.1 percent in IVQ2011 and IQ2012, declining 0.1 percent in IIQ2011. In the four quarters of 2012, France’s GDP contracted 0.3 percent. Growth in the nine quarters of expansion from IIIQ2009 to IIIQ2011 accumulated 3.6 percent at the annual equivalent rate of 1.6 percent. Growth from IVQ2011 to IVQ2012 was minus 0.2 percent. Recovery has been much weaker than the cumulative 2.7 percent in the four quarters of 2006. Weak recoveries in advanced economies have prevented full utilization of labor, capital and productive resources.
Table VF-1, France, Quarterly Real GDP Growth, Quarter on Prior Quarter ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 0.0 | -0.1 | 0.1 | -0.3 |
| 2011 | 0.8 | 0.0 | 0.2 | 0.1 |
| 2010 | 0.3 | 0.7 | 0.4 | 0.4 |
| 2009 | -1.7 | 0.0 | 0.1 | 0.6 |
| 2008 | 0.3 | -0.6 | -0.5 | -1.5 |
| 2007 | 0.6 | 0.5 | 0.4 | 0.3 |
| 2006 | 0.7 | 1.0 | 0.1 | 0.9 |
| 2005 | 0.1 | 0.3 | 0.5 | 0.7 |
| 2004 | 0.5 | 0.8 | 0.4 | 0.9 |
| 2003 | 0.3 | 0.0 | 0.7 | 0.7 |
| 2002 | 0.7 | 0.5 | 0.2 | -0.1 |
| 2001 | 0.5 | 0.3 | 0.2 | -0.4 |
| 2000 | 1.1 | 0.7 | 0.5 | 1.0 |
| 1999 | 0.6 | 0.9 | 1.0 | 1.2 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130214
Growth rates of France’s real GDP in a quarter relative to the same quarter a year earlier are shown in Table VF-2. France has not recovered the rates of growth in excess of 2 percent prior to the global recession. GDP fell 4.3 percent in IQ2009, 3.7 percent in IIQ2009, 3.1 percent in IIIQ2009 and 1.0 percent in IVQ2009. Growth in IVQ2011 relative to IVQ2010 was 1.1 percent and GDP growth declined to 0.2 percent in IQ2012, 0.1 percent in IIQ2012 relative to the same quarter a year earlier, 0.0 percent in IIIQ2012 relative to a year earlier and minus 0.3 percent in IVQ2012 relative to a year earlier.
Table VF-2, France, Real GDP Growth Current Quarter Relative to Same Quarter Year Earlier ∆%
| IQ | IIQ | IIIQ | IVQ | |
| 2012 | 0.2 | 0.1 | 0.0 | -0.3 |
| 2011 | 2.4 | 1.8 | 1.5 | 1.1 |
| 2010 | 0.9 | 1.6 | 1.9 | 1.8 |
| 2009 | -4.3 | -3.7 | -3.1 | -1.0 |
| 2008 | 1.6 | 0.5 | -0.5 | -2.3 |
| 2007 | 2.6 | 2.1 | 2.5 | 1.9 |
| 2006 | 2.3 | 3.0 | 2.5 | 2.7 |
| 2005 | 2.1 | 1.7 | 1.9 | 1.7 |
| 2004 | 1.8 | 2.6 | 2.3 | 2.5 |
| 2003 | 0.9 | 0.4 | 0.8 | 1.6 |
| 2002 | 0.6 | 0.9 | 0.9 | 1.3 |
| 2001 | 2.7 | 2.2 | 1.9 | 0.5 |
| 2000 | 4.3 | 4.1 | 3.6 | 3.3 |
| 1999 | 2.9 | 2.8 | 3.2 | 3.7 |
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130214
Percentage changes and contributions of segments of GDP in France are provided in Table VF-3. Internal demand contributed 0.0 percentage points in IVQ2012, 0.1 percentage points to GDP growth in IIIQ2012, 0.1 percentage points to GDP growth in IIQ2012, 0.0 percentage points in IQ2011 and 0.3 percentage points in IVQ2011. Net foreign trade added 0.1 percentage points in IVQ2012 and 0.3 percentage points in IIIQ2012 after deducting 0.3 percentage points in IIQ2012 and 0.0 percentage points in IQ2012, adding 0.8 percentage points in IVQ2011.
Table VF-3, France, Contributions to GDP Growth, Calendar and Seasonally Adjusted, %
| ∆% from Prior Period | IQ 2012 | IIQ | IIIQ | IVQ 2012 | 2011 | 2012 |
| GDP | -0.1 | -0.1 | 0.1 | -0.3 | 1.7 | 0.0 |
| Imports | 0.2 | 1.4 | -0.5 | -0.8 | 5.2 | -0.3 |
| Household Consump. | 0.1 | -0.2 | 0.3 | 0.2 | 0.2 | 0.0 |
| Govt. | 0.5 | 0.4 | 0.4 | 0.4 | 0.2 | 1.4 |
| GFCF | -1.0 | 0.3 | -0.5 | -1.0 | 3.5 | 0.0 |
| Exports | 0.1 | 0.3 | 0.7 | -0.6 | 5.5 | 2.3 |
| % Point | ||||||
| Internal Demand ex Inventory Changes | 0.0 | 0.1 | 0.1 | 0.0 | 0.9 | 0.3 |
| Inventory Changes | -0.1 | 0.2 | -0.3 | -0.4 | 0.8 | -1.1 |
| Net Foreign Trade | 0.0 | -0.3 | 0.3 | 0.1 | 0.0 | 0.7 |
Notes: Consump.: Consumption; Gvt.: Government; GFCF: Gross Fixed Capital Formation; Contribus.: Contributions
Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130214
Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques provides percentage point contributions to GDP growth. GDP grew sharply into IQ2011 and then stalled in IIQ2011, declining in IQ2012 and IVQ2012. Final consumption was the key negative contributor to GDP growth in IIQ2011. GDP growth strengthened in IIIQ2011 with the impulse originating in final consumption. Net trade and gross fixed capital formation (GFCF) drove GDP growth in IVQ2011. Final consumption and inventory change were positive contributors to GDP growth in IQ2012 with subtractions by GFCF (Gross Fixed Capital Formation) and net trade. Net trade subtracted from growth in IIQ2012. Net trade and final consumption drove growth of GDP in IIIQ2012. Final consumption and net trade contributed to growth in IVQ2012 with deductions by GFCF and inventory changes.
Chart VF-1, France, Percentage Point Contributions to GDP Growth
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130214
Table VF-4 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, 0.8 percent in Jul 2012 and 2.1 percent in Aug 2012 for cumulative quarterly increase of 3.2 percent at annual equivalent 13.5 percent. Improvement was interrupted by declines of manufacturing of 3.6 in Sep 2012 and 0.9 percent in Oct 2012 such that the cumulative from Jun 2012 to Oct 2012 is minus 1.4 percent and minus 3.3 percent in 12 months. Decline of manufacturing in four of the six months from Dec 2011 to May 2012 with cumulative decline of 3.8 percent from Dec 2011 to May 2012, or 7.4 percent annual equivalent, pulled down the 12-month percentage change to minus 4.6 percent in May 2012. In contrast, the cumulative increase of 3.2 percent in Jun-Aug 2012 pulled up the 12-month rate to only minus 0.1 percent in Aug 2012. In the quarter Dec 2011 to Feb 2012, manufacturing fell 3.0 at the annual equivalent rate of minus 11.4 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 12.8 percent in 2008 during the global contraction and an additional 2.9 percent in 2009.
Table VF-4, France, Manufacturing, Month and 12-Month ∆%
| Month ∆% | 12-Month ∆% | |
| Dec 2012 | 0.1 | -2.9 |
| Nov | 0.1 | -4.9 |
| Oct | -0.9 | -3.8 |
| Sep | -3.6 | -2.5 |
| Aug | 2.1 | -0.1 |
| Jul | 0.8 | -2.4 |
| Jun | 0.3 | -2.5 |
| May | -1.2 | -4.6 |
| Apr | -0.7 | -2.0 |
| Mar | 1.1 | -1.2 |
| Feb | -1.3 | -3.9 |
| Jan | 0.3 | -1.8 |
| Dec 2011 | -2.0 | -0.3 |
| Nov | 1.2 | 1.5 |
| Oct | 0.4 | 2.1 |
| Sep | -1.2 | 1.1 |
| Aug | -0.2 | 3.7 |
| Jul | 0.7 | 2.9 |
| Jun | -1.8 | 2.7 |
| May | 1.5 | 3.2 |
| Apr | 0.1 | 2.6 |
| Mar | -1.6 | 3.4 |
| Feb | 0.8 | 6.6 |
| Jan | 1.9 | 6.1 |
| Dec 2010 | -0.1 | 4.9 |
| Dec 2009 | -2.9 | |
| Dec 2008 | -12.8 | |
| Dec 2007 | -0.2 | |
| Dec 2006 | 2.4 | |
| Dec 2005 | 0.0 | |
| Dec 2004 | 1.3 | |
| Dec 2003 | 0.5 | |
| Dec 2002 | -0.5 | |
| Dec 2001 | -5.0 | |
| Dec 2000 | 5.2 | |
| Annual | ||
| Average ∆% Dec 1990-Dec 2000 | 1.7 | |
| Average ∆% Dec 2003-Jan 2008 | 1.2 |
Source:
Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130211
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-2, 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=20130211
© Carlos M. Pelaez, 2010, 2011, 2012, 2013
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