Thirty One Million Unemployed or Underemployed, Subpar Economic Growth at 1.7 to 1.9 Percent, Collapse of United States Dynamism of Income Growth and Employment Creation, Stagnation of Per Capita Real Disposable Personal Income with Temporary Surge in Realization of Income Anticipating Tax Increases in 2013, Peaking Valuations of Risk Financial Assets and Uncertain World Economic Growth and International Finance: Part III

 

Thirty One Million Unemployed or Underemployed, Subpar Economic Growth at 1.7 to 1.9 Percent, Collapse of United States Dynamism of Income Growth and Employment Creation, Stagnation of Per Capita Real Disposable Personal Income with Temporary Surge in Realization of Income Anticipating Tax Increases in 2013, Peaking Valuations of Risk Financial Assets and Uncertain World Economic Growth and International Finance

Carlos M. Pelaez

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

Executive Summary

IA Thirty One Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IA5 Stagnating Real Wages

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

II Mediocre and Decelerating United States Economic Growth

IA Mediocre and Decelerating United States Economic Growth

IA1 Contracting Real Private Fixed Investment

IIB Stagnating Real Disposable Income and Consumption Expenditures

IIB1 Stagnating Real Disposable Income and Consumption Expenditures

IIB2 Financial Repression

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

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

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

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

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

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

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

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

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog for IQ2012, IIQ2012 and IIIQ2012 available now for all countries. Growth is weak throughout most of the world. Japan’s GDP increased 1.4 percent in IQ2012 and 3.4 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP grew 0.0 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 0.1 percent, which is much lower than 5.7 percent in IQ2012. Growth of 3.9 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.9 percent in IIIQ2012 at the SAAR of minus 3.5 percent and increased 0.5 percent relative to a year earlier. China grew at 1.8 percent in IIQ2012, which annualizes to 7.4 percent. China grew at 2.2 percent in IIIQ2012, which annualizes at 7.4 percent. 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 7.6 percent in IIQ2012 relative to IIQ2011. Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2012. China’s GDP grew 8.1 percent in IQ2012 relative to a year earlier but only 7.6 percent in IIQ2012 relative to a year earlier and 7.4 percent in IIIQ2012 relative to IIIQ2011. GDP was flat in the euro area in IQ2012 and fell 0.1 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.5 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.6 percent relative to a year earlier. Germany’s GDP increased 0.5 percent in IQ2012 and 1.7 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.3 percent and 0.5 percent relative to a year earlier but 1.0 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.2 percent and 0.4 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.3 percent at SAAR and 2.1 percent relative to a year earlier. In IIIQ2012, GDP grew 0.8 percent, 3.1 percent at SAAR and 2.6 percent relative to IIIQ2011. In IVQ2012, GDP grew 0.0 percent, -0.1 percent at SAAR and 1.5 percent relative to IVQ2011 (Section II and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) but with substantial unemployment and underemployment (Section I and earlier at http://cmpassocregulationblog.blogspot.com/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 five consecutive quarters from IIIQ2011 to IIIQ2012. Italy’s GDP fell 0.8 percent in IQ2012 and declined 1.4 percent relative to IQ2011. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.2 percent and declined 2.4 percent relative to a year earlier. France’s GDP stagnated in IQ2012 and increased 0.2 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.1 percent and increased 0.0 percent relative to a year earlier.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.5        SAAR: 2.0	2.4
Japan	QOQ: 1.4 SAAR: 5.7	3.4
China	1.8	8.1
Euro Area	0.0	-0.1
Germany	0.5	1.7
France	0.0	0.2
Italy	-0.8	-1.4
United Kingdom	-0.2	0.2
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3         SAAR: 1.3	2.1
Japan	QOQ: 0.0 SAAR: -0.1	3.9
China	1.8	7.6
Euro Area	-0.2	-0.5
Germany	0.3	0.5 1.0 CA
France	-0.1	0.1
Italy	-0.7	-2.4
United Kingdom	-0.4	-0.3
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.8  SAAR: 3.1	2.6
Japan	QOQ: –0.9 SAAR: –3.5	0.5
China	2.2	7.4
Euro Area	-0.1	-0.6
Germany	0.2	0.4
France	0.1	0.0
Italy	-0.2	-2.4
United Kingdom	0.9	0.0
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: –0.1	1.5
China	2.0	7.9
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 (Section VB 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 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 0.3 percentage points from Japan’s growth of GDP in IIQ2012 and deducted 2.9 percentage points from GDP growth in IIIQ2012. China’s exports fell 1.8 percent in the month of Jul and increased 1.0 percent in 12 months. In Aug 2012, China’s exports increased 0.6 percent and increased 2.7 percent in 12 months. Trade rebounded in China in Sep with growth of exports of 9.9 percent in the 12 months ending in Sep and 2.4 percent for imports. There was further growth in China’s exports of 11.6 percent in the 12 months ending in Oct while imports increased 2.4 percent. In Nov 2012, China’s exports increased 2.9 percent in 12 months and 7.3 percent in Jan-Nov 2012 while imports were unchanged in Nov 2012 and increased 4.1 percent in Jan-Nov 2012. In the 12 months ending in 2012, China’s exports increased 14.1 percent and imports 6.0 while in Jan-Dec 2012 exports increased 7.9 percent and imports increased 4.3 percent. Germany’s exports decreased 3.4 percent in the month of Nov 2012 and increased 0.0 percent in the 12 months ending in Nov 2012 while imports decreased 1.2 percent in the month of Nov and decreased 1.2 percent in the 12 months ending in Nov. Net trade contributed 1.4 percentage points to growth of Germany’s GDP in IIQ2012 and contributed 1.4 percentage points in IIIQ2012. The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing output, fell from 47.4 in Sep to 46.0 in Oct for the eighth consecutive month in contraction territory below 50.0 and much lower than the long-term average of the index of 52.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10278). New export orders fell for sixteen consecutive months at the fastest rate of decline since Apr 2009. UK’s exports increased 1.7 percent in Nov 2012 and decreased 1.0 percent in Sep-Nov 2012 relative to a year earlier while imports increased 1.0 percent in Nov and decreased 0.9 percent in Sep-Nov 2012 relative to a year earlier. Net trade deducted 0.9 percentage points from UK GDP growth in IIQ2012 and added 0.5 percentage points in IIIQ2012. France’s exports decreased 2.8 percent in Nov while imports decreased 2.5 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012, adding 0.3 percentage points in IIIQ2012. US exports increased 1.0 percent in Nov 2012 and goods exports increased 4.6 percent in Jan-Nov relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012. US imports increased 3.8 percent in Nov 2012 and goods imports increased 3.7 percent in Jan-Nov 2012 relative to a year earlier. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 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).

In the six months ending in Dec 2012, United States national industrial production accumulated increase of 0.9 percent at the annual equivalent rate of 1.8 percent, which is lower than 2.2 percent growth in 12 months. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/current/): “Capacity utilization for total industry moved up 0.1 percentage point to 78.8 percent, a rate 1.5 percentage points below its long-run (1972-2011) average.” United States industry is decelerating but the effects of hurricane Sandy prevent accurate evaluation. Manufacturing increased 0.8 percent in Dec 2012 seasonally adjusted, increasing 1.8 percent not seasonally adjusted in 12 months, and increased 0.7 percent in the six months ending in Dec or at the annual equivalent rate of 1.4 percent (http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html). Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.

Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	1.0 Nov	4.6 Jan-Nov	3.8 Nov	3.7 Jan-Nov
Japan		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	1.0 Jul 7.8 Jan-Jul 2.7 Aug 7.1 Jan-Aug 9.9 Sep Jan-Sep 7.4 11.6 Oct 7.8 Jan-Oct 2.9 Nov 7.3 Jan-Nov 14.1 Dec 7.9 Jan-Dec	2.2 Jul -0.3 Aug 4.9 Sep -9.4 Oct 11.3 Oct 4.9 Dec	4.7 Jul 6.5 Jan-Jul -2.6 Aug 5.2 Jan-Aug 2.4 Sep 4.8 Jan-Sep 2.4 Oct 4.6 Jan-Oct 0.0 Nov 4.1 Jan-Nov 6.0 Dec 4.3 Jan-Dec
Euro Area	5.4 12-M Nov	8.3 Jan-Nov	-0.3 12-M Nov	2.0 Jan-Nov
Germany	-3.4 Nov CSA	0.0 Nov	-3.7 Nov CSA	-1.2 Nov
France Nov	-2.8	-3.4	-2.5	-3.4
Italy Nov	0.4	3.6	-2.2	-8.2
UK	1.7 Nov	-1.0 Sep-Nov 12/Sep-Nov 11	1.0 Nov	-0.9 Sep-Nov 12/Sep-Nov 11
Net Trade % Points GDP Growth	% Points
USA	IVQ2012 -0.25 IIIQ2012 +0.38
Japan	-0.3 IIQ2012 -2.9 IIIQ2012
Germany	1.4 IIQ2012 1.4 IIIQ2012
France	-0.4 IIQ2012   0.3 IIIQ2012
UK	-0.9 IIQ2012 0.5 IIIQ2012

Sources: http://www.census.gov/foreign-trade/ http://www.bea.gov/iTable/index_nipa.cfm

http://www.customs.go.jp/toukei/latest/index_e.htm http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

http://english.customs.gov.cn/publish/portal191/ http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home

https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1 http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

http://www.insee.fr/en/

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

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for Nov 2012. The share of Asia in Japan’s trade is more than one half, 54.7 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 Millions Yens	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, increased to 53.7 in Dec from 53.6 in Nov, indicating expansion at a moderate rate but at the fastest pace since IQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). This index has remained above the contraction territory of 50.0 during 41 consecutive months. The index was driven by services with weaker expansion by manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). The employment index increased from 50.0 in Nov to 52.3 in Dec with continuing increases in input prices but at a marginally faster pace. David Hensley, Director of Global Economic Coordination at JP Morgan, finds encouraging signs in services while manufacturing vacillates but with sufficient overall strength that can continue in the first part of 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10564). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased to 50.2 in Dec from 48.6 in Nov, which is the first reading above 50 since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10543). New export business declined for the ninth consecutive month in Dec, but at the lowest rate of contraction since May 2012. David Hensley, Director of Global Economics Coordination at JP Morgan, finds improving global manufacturing at the end of the year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10543). The HSBC Brazil Composite Output Index, compiled by Markit, increased to 53.2 in Dec from 53.0 in Nov, indicating solid expansion at the fastest rate in nine months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 52.5 in Nov to 53.5 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). Andre Loes, Chief Economist, Brazil, at HSBC, finds improving expectations of economic activity in Brazil (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10510). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased from 52.2 in Nov to 51.1 in Dec, indicating slower improvement of business conditions in Brazilian manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10508). Andre Loes, Chief Economist, Brazil at HSBC, finds continuing expansion in Brazil’s manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10508).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 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 52.4 in Dec from 52.8 in Nov, which is the fastest growth rate since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10541). The index of new exports orders increased from 47.2 in Oct to 50.3 in Nov while total new orders increased from 51.1 in Oct to 53.6 in Nov. The index of new export orders increased from 50.3 in Nov to 52.6 in Dec, indicating expansion at a higher rate. Chris Williamson, Chief Economist at Markit, finds that manufacturing in the US is stronger at the end of the year and with expansion in countries such as Brazil and moderating sovereign debt crisis in Europe, US companies could benefit from stronger foreign demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10541). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 1.2 percentage points from 49.5 in Nov to 50.7 Dec Nov, which is the third reading above 50.0 in seven months (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders was unchanged at 50.3 in Dec from 50.3 in Nov. The index of exports increased 4.5 percentage points from 47.0 in Nov to 51.5 in Dec, moving into expansion territory. The Non-Manufacturing ISM Report on Business^® PMI increased 1.4 percentage points from 54.7 in Nov to 56.1 in Dec, indicating growth during 41 consecutive months, while the index of new orders increased 1.2 percentage points from 58.1 in Nov to 59.3 in Dec (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Dec 12 months NSA ∆%: 1.7; ex food and energy ∆%: 2.22 Dec month ∆%: 0.0; ex food and energy ∆%: 0.1 Blog 1/20/13
Producer Price Index	Dec 12-month NSA ∆%: 1.3; ex food and energy ∆% 2.0 Dec month SA ∆% = -0.2; ex food and energy ∆%: 0.1 Blog 1/20/13
PCE Inflation	Dec 12-month NSA ∆%: headline 1.3; ex food and energy ∆% 1.4 Blog 2/3/13
Employment Situation	Household Survey: Nov Unemployment Rate SA 7.9% Blog calculation People in Job Stress Jan: 31.4 million NSA, 19.4% of Labor Force Establishment Survey: Nov Nonfarm Jobs +157,000; Private +166,000 jobs created  Dec 12-month Average Hourly Earnings Inflation Adjusted ∆%: 1.0 Blog 2/3/13
Nonfarm Hiring	Nonfarm Hiring fell from 63.8 million in 2006 to 50.1 million in 2011 or by 13.7 million Private-Sector Hiring Nov 2012 3.248 million lower by 0.914 million than 4.162 million in Nov 2006 Blog 1/20/13
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 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 Blog 2/3/12
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 Real Personal Consumption Expenditures (RPCE): 0.2 12-month Dec NSA ∆%: RDPI: 5.6; RPCE ∆%: 1.3 Blog 2/3/2013
Quarterly Services Report	IIIQ12/IIIQ11 SA ∆%: Information 2.1 Professional 6.0 Administrative 3.9 Hospitals 7.4 Financial & Insurance 6.5 Blog 12/9/12
Employment Cost Index	Compensation Private IIIQ2012 SA ∆%: 0.5 Sep 12 months ∆%: 2.0 Blog 11/4/12
Industrial Production	Dec month SA ∆%: 0.3 Dec 12 months SA ∆%: 2.2 Manufacturing Nov SA ∆% 0.8 Dec 12 months SA ∆% 2.4, NSA 1.8 Capacity Utilization: 78.8 Blog 1/20/13
Productivity and Costs	Nonfarm Business Productivity IIIQ2012∆% SAAE 2.9; IIIQ2012/IIIQ2011 ∆% 1.7; Unit Labor Costs SAAE IIIQ2012 ∆% -1.9; IIIQ2012/IIIQ2011 ∆%: 0.1 Blog 12/9/2012
New York Fed Manufacturing Index	General Business Conditions From Dec -7.30 to Jan -7.78 New Orders: From Dec -3.44 to Jan -7.18 Blog 1/20/13
Philadelphia Fed Business Outlook Index	General Index from Dec 4.6 to Jan -5.8 New Orders from Dec 4.9 to Jan -4.3 Blog 1/20/13
Manufacturing Shipments and Orders	New Orders SA Nov ∆% 0.0 Ex Transport 0.2 Jan-Nov NSA New Orders 3.2 Ex transport 2.4 Blog 1/6/13
Durable Goods	Dec New Orders SA ∆%: 4.6; ex transport ∆%: 1.3 Jan-Dec New Orders NSA ∆%: 4.1; ex transport ∆% 2.2 Blog 2/3/13
Sales of New Motor Vehicles	Jan-Dec 2012 14,491,873; Jan-Dec 2011 12,777,939. Dec SAAR 15.37 million, Nov SAAR 15.54 million, Dec 2011 SAAR 13.61 million Blog 1/6/13
Sales of Merchant Wholesalers	Jan-Nov 2012/Jan-Nov 2011 NSA ∆%: Total 5.5; Durable Goods: 6.3; Nondurable Goods: 4.9 Blog 1/13/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Nov 12/Nov 11 NSA ∆%: Sales Total Business 4.5; Manufacturers 3.3 Retailers 4.8; Merchant Wholesalers 5.7 Blog 1/20/13
Sales for Retail and Food Services	Jan-Dec 2012/Jan-Dec 2011 ∆%: Retail and Food Services 5.2; Retail ∆% 4.9 Blog 1/20/13
Value of Construction Put in Place	Nov SAAR month SA ∆%: -0.3 Nov 12-month NSA: 7.9 Jan-Nov 2012 ∆% 9.2 Blog 1/6/13
Case-Shiller Home Prices	Nov 2012/Nov 2011 ∆% NSA: 10 Cities 4.5; 20 Cities: 5.5 ∆% Nov SA: 10 Cities 0.5 ; 20 Cities: 0.6 Blog 2/3/13
FHFA House Price Index Purchases Only	Nov SA ∆% 0.6; 12 month NSA ∆%: 5.7 Blog 1/27/13
New House Sales	Dec 2012 month SAAR ∆%: minus 7.3 Jan-Dec 2012/Jan-Dec 2011 NSA ∆%: 19.9 Blog 1/27/13
Housing Starts and Permits	Dec Starts month SA ∆%: 12.1 ; Permits ∆%: 0.3 Jan-Dec 2012/Jan-Dec 2011 NSA ∆% Starts 28.1; Permits  ∆% 30.3 Blog 1/20/13
Trade Balance	Balance Nov SA -$48731 million versus Oct -$42064 million Exports Nov SA ∆%: 1.0 Imports Nov SA ∆%: 3.8 Goods Exports Jan-Nov 2012/2011 NSA ∆%: 4.6 Goods Imports Jan-Nov 2012/2011 NSA ∆%: 3.7 Blog 1/13/13
Export and Import Prices	Dec 12-month NSA ∆%: Imports -1.5; Exports 1.1 Blog 1/13/13
Consumer Credit	Nov ∆% annual rate: 7.0 Blog 1/13/13
Net Foreign Purchases of Long-term Treasury Securities	Nov Net Foreign Purchases of Long-term Treasury Securities: $52.3 billion Major Holders of Treasury Securities: China $1170 billion; Japan $1133 billion; Total Foreign US Treasury Holdings Oct $5557 billion Blog 1/20/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Dec: Receipts 10.8; Outlays 15.5; Individual Income Taxes 15.5 Deficit Fiscal Year 2011 $1,297 billion Deficit Fiscal Year 2012 $1,089,353 million Blog 1/13/2013
CBO Budget and Economic Outlook	2012 Deficit $1128 B 7.3% GDP Debt 11,318 B 72.8% GDP 2013 Deficit $614 B, Debt 12,064 B 76.1% GDP Blog 8/26/12 11/18/12
Commercial Banks Assets and Liabilities	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:

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

1/13/13 http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.html

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

12/23-24/12 http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html

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

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

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

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

Manufacturers’ shipments of durable goods increased 1.3 percent in Dec 2012 after increasing 1.8 percent in Nov and 0.0 percent in Oct. New orders increased 4.6 percent in Dec 2012 after increasing 0.7 percent in Nov and 1.1 percent in Oct, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov after increase of orders for nondefense aircraft of 2642.2 percent in Sep after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul and 32.5 percent in Jun. New orders excluding transportation equipment increased 1.3 percent in Dec, 1.2 percent in Nov and 1.8 percent in Oct. Capital goods new orders, indicating investment, increased 14.4 percent in Dec and decreased 1.8 percent in Nov after increase of 1.4 percent in Oct. New orders of nondefense capital goods increased 3.8 percent in Dec and decreased 2.4 percent in Nov after increasing 2.6 percent in Oct. Excluding more volatile aircraft, capital goods orders increased 0.2 percent in Dec, 3.0 percent in Nov and 3.0 percent in Oct.

Table VA-1, US, Durable Goods Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Dec 2012 ∆%	Nov 2012  ∆%	Oct 2012  ∆%
Total
S	1.3	1.8	0.0
NO	4.6	0.7	1.1
Excluding Transport
S	1.1	1.6	0.1
NO	1.3	1.2	1.8
Excluding Defense
S	1.2	1.9	0.0
NO	1.2	0.6	1.2
Machinery
S	-0.5	3.2	1.2
NO	0.4	1.8	3.5
Computers & Electronic Products
S	2.7	-0.7	-0.4
NO	3.3	0.9	1.8
Computers
S	6.7	0.8	-12.0
NO	-0.5	4.1	-10.9
Transport Equipment
S	1.7	2.4	-0.3
NO	11.9	-0.5	-0.6
Motor Vehicles
S	1.1	3.5	-0.6
NO	0.4	3.4	-0.1
Nondefense Aircraft
S	2.5	0.4	0.5
NO	10.1	-12.9	0.2
Capital Goods
S	1.3	1.7	-0.1
NO	14.4	-1.8	1.4
Nondefense Capital Goods
S	0.7	1.6	0.2
NO	3.8	-2.4	2.6
Capital Goods ex Aircraft
S	0.3	2.2	0.4
NO	0.2	3.0	3.0

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

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

Chart VA-1 of the US Census Bureau shows monthly changes in manufacturers’ new orders in the past 12 months. Trends are difficult to discern for these data because of the significant volatility. Twelve-month percentage rates have fallen from the highs in 2010.

Chart VA-1, US, Manufacturers’ Durable Goods New Orders 2010-2011

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr021.html

Additional perspective on manufacturers’ shipments and new orders of durable goods is provided by Table VA-2. Values are cumulative millions of dollars in Jan-Dec 2012 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Dec 2012 total $2691.4 billion and new orders total $2628.7 billion, growing respectively by 7.0 percent and 4.1 percent relative to the same period in 2011. Excluding transportation equipment, shipments grew 5.4 percent and new orders increased 2.2 percent. Excluding defense, shipments grew 7.5 percent and new orders grew 4.4 percent. Important information not in Table VA-2 is the large share of nondurable goods: with shipments of $3 trillion in 2011, growing by 14.0 percent, and new orders of $3 trillion, growing by 14.0 percent, in part driven by higher prices for food and energy. Durable goods were lower in value in 2011, with shipments of $2.4 trillion, growing by 7.9 percent, and new orders of $2.4 trillion, growing by 10.0 percent. Capital goods have relatively high value of $944.1 billion for shipments, growing 5.7 percent, and new orders $971.9 billion, growing 0.4 percent. Excluding aircraft, capital goods shipments reached $764.5 billion, growing by 4.8 percent, and new orders $759.2 billion, growing -0.3 percent. There is no suggestion in these data that the US economy is close to recession but performance at the margin appears somewhat weaker without enough data to discern trends.

Table VA-2, US, Value of Manufacturers’ Shipments and New Orders of Durable Goods, NSA, Millions of Dollars 

Jan-Dec 2012	Shipments	∆% 2012/ 2011	New Orders	∆% 2012/  2011
Total	2,691,437	7.0	2,628,747	4.1
Excluding Transport	1,919,788	5.4	1,824,130	2.2
Excluding Defense	2,560,813	7.5	2,491,380	4.4
Machinery	389,395	9.1	374,308	-3.6
Computers & Electronic Products	338,592	-0.7	259,889	-0.2
Computers & Related Products	32,847	-12.2	33,025	-11.4
Transport Equipment	771,649	11.2	804,617	8.7
Motor Vehicles	521,918	12.0	520,699	11.6
Nondefense Aircraft	117,735	22.7	150,407	7.3
Capital Goods	944,069	5.7	971,879	0.4
Nondefense Capital Goods	842,895	7.2	865,281	0.8
Capital Goods ex Aircraft	764,522	4.8	759,229	-0.3

Note: Transport: transportation

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

Chart VA-2 of the Board of Governors of the Federal Reserve System shows that output accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.

Chart VA-2, US, Output of Durable Manufacturing, 1972-2012

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/default.htm

Manufacturing jobs increased 4,000 in Jan 2013 relative to Dec 2012, seasonally adjusted but decreased 90,000 in Jan 2013 relative to Dec 2012, not seasonally adjusted, as shown in Table I-10, because of the weaker economy and international trade together with the yearly adjustment of labor statistics. In the six months ending in Dec 2012, United States national industrial production accumulated increase of 0.9 percent at the annual equivalent rate of 1.8 percent, which is lower than 2.2 percent growth in 12 months. Capacity utilization for total industry in the United States increased 0.1 percentage points in Dec to 78.8 percent from 78.7 percent in Nov, which is 1.5 percentage points lower than the long-run average from 1972 to 2011. Manufacturing increased 0.8 percent in Dec seasonally adjusted, increasing 1.8 percent not seasonally adjusted in 12 months, and increased 0.7 percent in the six months ending in Dec or at the annual equivalent rate of 1.4 percent (Section VA at http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/united-states-commercial-banks-assets.html). Table VA-3 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.3 percent in US national income in IIQ2012 and 86.4 percent in IIIQ2012. Most of US national income is in the form of services. In Jan 2013, there were 132.705 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 110.965 million NSA in Jan 2013 accounted for 82.6 percent of total nonfarm jobs of 132.705 million, of which 11.846 million, or 10.7 percent of total private jobs and 8.9 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 92.929 million NSA in Jan 2013, or 70.0 percent of total nonfarm jobs and 83.8 percent of total private-sector jobs. Manufacturing has share of 11.2 percent in US national income in IIQ2011 and 11.1 percent in IIIQ2012, as shown in Table VA-3. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table VA-3, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IIQ2012	% Total	SAAR IIIQ2012	% Total
National Income WCCA	13,833.6	100.0	13,969.4	100.0
Domestic Industries	13,586.3	98.2	13,726.2	98.3
Private Industries	11,933.2	86.3	12,067.6	86.4
Agriculture	131.7	0.9	138.7	1.0
Mining	208.3	1.5	203.2	1.5%
Utilities	214.6	1.6	216.8	1.6
Construction	583.7	4.2	592.7	4.2
Manufacturing	1548.1	11.2	1552.5	11.1
Durable Goods	894.3	6.5	895.6	6.4
Nondurable Goods	653.8	4.7	656.9	4.7
Wholesale Trade	853.5	6.2	837.9	6.0
Retail Trade	951.9	6.9	959.8	6.9
Transportation & WH	414.5	3.0	414.9	3.0
Information	499.1	3.6	499.6	3.6
Finance, Insurance, RE	2237.5	16.2	2324.6	16.6
Professional, BS	1971.7	14.3	1997.2	14.3
Education, Health Care	1378.1	10.0	1385.7	9.9
Arts, Entertainment	540.4	3.9	540.5	3.9
Other Services	400.0	2.9	403.6	2.9
Government	1653.0	11.9	1658.6	11.9
Rest of the World	247.3	1.8	243.1	1.7

Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

Table VA-4 shows the euphoria of prices during the housing boom and the subsequent decline. House prices rose 96.1 percent in the 10-city composite of the Case-Shiller home price index and 81.4 percent in the 20-city composite between Nov 2000 and Nov 2005. Prices rose around 100 percent from Nov 2000 to Nov 2006, increasing 98.9 percent for the 10-city composite and 84.7 percent for the 20-city composite. House prices rose 38.4 percent between Nov 2003 and Nov 2005 for the 10-city composite and 34.7 percent for the 20-city composite propelled by low fed funds rates of 1.0 percent between Jun 2003 and Jun 2004 and then only increasing by 0.25 basis points at every meeting of the Federal Open Market Committee (FOMC) until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decline of yields of mortgage-backed securities with intended decrease in mortgage rates. Similarly, between Nov 2003 and Nov 2006 the 10-city index gained 40.5 percent and the 20-city index increased 37.1 percent. House prices have fallen from Nov 2006 to Nov 2012 by 29.3 percent for the 10-city composite and 28.7 percent for the 20-city composite. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Nov 2012, house prices increased 4.5 percent in the 10-city composite and increased 5.5 percent in the 20-city composite. Table VA-4 also shows that house prices increased 40.6 percent between Nov 2000 and Nov 2012 for the 10-city composite and increased 31.6 percent for the 20-city composite. House prices are close to the lowest level since peaks during the boom before the financial crisis and global recession. The 10-city composite fell 30.1 percent from the peak in Jun 2006 to Nov 2012 and the 20-city composite fell 29.4 percent from the peak in Jul 2006 to Nov 2012. The final part of Table VA-4 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average annual growth rate between Dec 1987 and Dec 2011 for the 10-city composite was 3.8 percent. Data for the 20-city composite are available only beginning in Jan 2000. House prices accelerated in the 1990s with the average rate of the 10-city composite of 5.0 percent between Dec 1992 and Dec 2000 while the average rate for the period Dec 1987 to Dec 2000 was 3.8 percent. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate of the 10-city composite between Dec 2000 and Dec 2011 was 2.3 percent while the rate of the 20-city composite was 1.9 percent.

Table VA-4, US, Percentage Changes of Standard & Poor’s Case-Shiller Home Price Indices, Not Seasonally Adjusted, ∆%

	10-City Composite	20-City Composite
∆% Nov 2000 to Nov 2003	41.7	34.7
∆% Nov 2000 to Nov 2005	96.1	81.4
∆% Nov 2003 to Nov 2005	38.4	34.7
∆% Nov 2000 to Nov 2006	98.9	84.7
∆% Nov 2003 to Nov 2006	40.4	37.1
∆% Nov 2005 to Nov 2012	-28.3	-27.4
∆% Nov 2006 to Nov 2012	-29.3	-28.7
∆% Nov 2009 to Nov 2012	0.0	-0.2
∆% Nov 2010 to Nov 2012	0.5	1.4
∆% Nov 2011 to Nov 2012	4.5	5.5
∆% Nov 2000 to Nov 2012	40.6	31.6
∆% Peak Jun 2006 Nov 2012	-30.1
∆% Peak Jul 2006 Nov 2012		-29.4
Average ∆% Dec 1987-Dec 2011	3.1	NA
Average ∆% Dec 1987-Dec 2000	3.8	NA
Average ∆% Dec 1992-Dec 2000	5.0	NA
Average ∆% Dec 2000-Dec 2011	2.3	1.9

Source: http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

With the exception of Apr 2011, house prices seasonally-adjusted declined in every month for both the 10-city and 20-city Case-Shiller composites from Dec 2010 to Jan 2012, as shown in Table VA-5. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. Without seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Aug 2011 but fell in every month from Sep 2011 to Feb 2012. The not seasonally adjusted index increases from Apr 2012 to Sep 2012 for both the 10- and 20-city composites while the seasonally adjusted index also increases in every month from Apr 2012 to Sep 2012. The index without seasonal adjustment fell 0.2 percent in Nov 2012 for the 10-city composite and fell 0.1 percent for the 20-city composite while the seasonally-adjusted index increased 0.5 percent for the 10-city composite and 0.6 percent for the 20-city composite. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

Table VA-5, US, Monthly Percentage Change of S&P Case-Shiller Home Price Indices, Seasonally Adjusted and Not Seasonally Adjusted, ∆%

	10-City Composite SA	10-City Composite NSA	20-City Composite SA	20-City Composite NSA
Nov 2012	0.5	-0.2	0.6	-0.1
Oct	0.5	-0.2	0.6	-0.2
Sep	0.3	0.2	0.4	0.2
Aug	0.4	0.8	0.5	0.8
Jul	0.2	1.5	0.3	1.6
Jun	1.0	2.1	1.0	2.3
May	0.9	2.2	1.0	2.4
Apr	0.8	1.4	1.1	1.4
Mar	0.5	-0.1	0.3	0.0
Feb	0.1	-0.9	0.2	-0.8
Jan	-0.2	-1.1	-0.1	-1.0
Dec 2011	-0.5	-1.2	-0.4	-1.2
Nov	-0.7	-1.4	-0.6	-1.3
Oct	-0.6	-1.3	-0.6	-1.3
Sep	-0.5	-0.6	-0.6	-0.7
Aug	-0.3	0.1	-0.3	0.1
Jul	-0.3	0.9	-0.2	1.0
Jun	-0.1	1.0	-0.1	1.2
May	-0.2	1.0	-0.3	1.0
Apr	0.0	0.6	0.2	0.6
Mar	-0.3	-1.0	-0.7	-1.0
Feb	-0.3	-1.3	-0.3	-1.2
Jan	-0.2	-1.1	-0.2	-1.1
Dec 2010	-0.2	-0.9	-0.2	-0.9

Source: http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----

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

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

Source: Policy Board, Bank of Japan

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

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

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Dec ∆% 0.3 12 months ∆% minus 0.6 Blog 1/13/13
Consumer Price Index	Dec NSA ∆% 0.1; Dec 12 months NSA ∆% -0.1 Blog 1/27/13
Real GDP Growth	IIIQ2012 ∆%: minus 0.9 on IIQ2012;  IIIQ2012 SAAR minus 3.5; ∆% from quarter a year earlier: 0.5 % Blog 12/16/12
Employment Report	Dec Unemployed 2.59 million Change in unemployed since last year: minus 170 thousand Unemployment rate: 4.2% Blog 2/3/13
All Industry Indices	Nov month SA ∆% -0.3 12-month NSA ∆% 0.1 Blog 1/27/13
Industrial Production	Dec SA month ∆%: 2.5 12-month NSA ∆% -7.8 Blog 2/3/13
Machine Orders	Total Nov ∆% 5.3 Private ∆%: 15.2 Novt ∆% Excluding Volatile Orders 3.9 Blog 1/20/13
Tertiary Index	Nov month SA ∆% minus 0.3 Nov 12 months NSA ∆% 1.1 Blog 1/20/13
Wholesale and Retail Sales	Dec 12 months: Total ∆%: -1.7 Wholesale ∆%: -2.5 Retail ∆%: 0.4 Blog 2/3/13
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:

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

12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html

8/9/11 http://cmpassocregulationblog.blogspot.com/2011/08/turbulence-in-world-financial-markets.html

In Dec 2012, industrial production in Japan increased 2.5 percent and decreased 7.8 percent in the 12 months ending in Dec 2012, as shown in Table VB-1. In the eight months Apr-Dec 2012, industrial production fell cumulative 7.2 or at the annual equivalent rate of 9.4 percent. As a result, growth of industrial production in 12 months fell from 14.2 percent in Mar 2012 to minus 7.8 percent in Dec 2012. Japan’s industrial production increased during two consecutive months by revised 2.3 percent in Dec 2011 and revised 0.9 percent in Jan 2012, reducing the percentage decline in 12 months from minus 3.0 percent in Dec to minus 1.6 percent in Jan 2012 and positive 1.5 percent in Feb. Monthly industrial production had climbed in every month since the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, with exception of Sep 2011 but fell again in Nov by 1.7 percent. Industrial production was higher in 12 months for the first month in Aug 2011 by 1.6 percent and again in Oct by 0.9 percent but fell 2.9 percent in Nov and 3.0 percent in Dec 2011 relative to a year earlier. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 16.4 percent in 2010. The annual average in calendar year 2011 fell 2.3 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011.

Table VB-1, Japan, Industrial Production ∆%

	∆% Month SA	∆% 12 Months NSA
Dec 2012	2.5	-7.8
Nov	-1.4	-5.5
Oct	1.6	-4.5
Sep	-4.1	-8.1
Aug	-1.6	-4.6
Jul	-1.0	-0.8
Jun	0.4	-1.5
May	-3.4	6.0
Apr	-0.2	12.9
Mar	1.3	14.2
Feb	-1.6	1.5
Jan	0.9	-1.6
Dec 2011	2.3	-3.0
Nov	-1.7	-2.9
Oct	1.8	0.9
Sep	-1.9	-2.4
Aug	0.9	1.6
Jul	1.1	-1.7
Jun	3.8	-0.6
May	5.8	-4.6
Apr	2.4	-12.7
Mar	-16.2	-12.4
Feb	1.1	4.5
Jan	1.2	6.1
Dec 2010	2.4	5.9
Calendar Year
2011		-2.3
2010		16.4
2009		-21.9
2008		-3.4

Source: http://www.meti.go.jp/english/statistics/index.html

The employment report for Japan in Nov 2012 is in Table VB-2. The rate of unemployment seasonally adjusted decreased to 4.2 percent in Sep 2012 from 4.3 percent in Jul 2012 and remained at 4.2 percent in Oct 2012, declining to 4.1 percent in Nov 2012 and increasing to 4.2 percent in Dec 2012. The rate of unemployment not seasonally adjusted remained at 4.0 in Dec 2012 and 0.2 percentage points lower from a year earlier. The employment rate stood at 56.1 percent in Dec 2012 and fell 0.3 percentage points from a year earlier.

Table VB-2, Japan, Employment Report Dec 2012 

Unemployed	2.59 million
Change since last year	-170 thousand; ∆% –6.2
Unemployment rate	4.2% SA 0.0; NSA 4.0%, -0.2 from earlier year
Population ≥ 15 years	110.93 million
Change since last year	∆% -0.1
Labor Force	65.86 million
Change since last year	∆% –0.9
Employed	62.28 million
Change since last year	∆% -0.6
Labor force participation rate	58.5
Change since last year	-0.4
Employment rate	56.1%
Change since last year	-0.3

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications http://www.stat.go.jp/english/data/roudou/154.htm

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications http://www.stat.go.jp/english/data/roudou/154.htm

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2010 to 2012. The sharp decline in Sep 2011 was the best reading in 2011 but the rate increased in the final quarter of the year, declining in Feb 2012 and stabilizing in Mar 2012 but increasing to 4.6 percent in Apr 2012 and declining again to 4.4 percent in May 2012 and 4.3 percent in both Jun and Jul 2012 with further decline to 4.2 percent in Aug, Sep and Oct 2012, 4.1 percent in Nov 2012 and 4.2 percent in Dec 2012.

Chart VB-1, Japan, Unemployment Rate

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/154.htm

During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid 1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for 1968, 1975, 1980 and 1985 and yearly from 1990 to 2012. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.4 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011 and 4.3 percent in 2012, while the participation rate fell from 60.4 percent to 59.6 percent, falling to 59.3 percent in 2011 and 59.1 in 2012, and the employment rate fell from 58.1 percent to 56.6 percent in 2010 and 56.5 percent in 2011 and 2012. The global recession adversely affected labor markets in advanced economies.

Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %

	Unemployment Rate	Participation Rate	Employment Rate
1968	1.2	65.9	65.1
1975	1.9	63.0	61.9
1980	2.0	63.3	62.0
1985	2.6	63.0	61.4
1990	2.1	63.3	61.9
1991	2.1	63.8	62.4
1992	2.2	64.0	62.6
1993	2.5	63.8	62.2
1994	2.9	63.6	61.8
1995	3.2	63.4	61.4
1996	3.4	63.5	61.4
1997	3.4	63.7	61.5
1998	4.1	63.3	60.7
1999	4.7	62.9	59.9
2000	4.7	62.4	59.5
2001	5.0	62.0	58.9
2002	5.4	61.2	57.9
2003	5.3	60.8	57.6
2004	4.7	60.4	57.6
2005	4.4	60.4	57.7
2006	4.1	60.4	57.9
2007	3.9	60.4	58.1
2008	4.0	60.2	57.8
2009	5.1	59.9	56.9
2010	5.1	59.6	56.6
2011	4.6	59.3	56.5
2012	4.3	59.1	56.5

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/154.htm

The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months, which can be appreciated in the chart in the link in parentheses but followed by decline in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012 with recovery in Jul and Aug 2012, interrupted in Sep-Oct 2012 and new increases in Nov 2012 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption decreased 0.7 percent in real terms in Dec 2012 and decreased 0.8 percent in nominal terms relative to a year earlier. There are several segments of decreasing real consumption: housing declining 12.3 percent in real terms and 12.6 percent in nominal terms, furniture and household utensils declining 0.3 percent in real terms and 2.2 percent in nominal terms and education declining 11.7 percent in real terms and 11.3 percent in nominal terms. Real household income increased 1.1 percent; real disposable income increased 0.8 percent; and real consumption expenditures increased 2.2 percent.

Table VB-4, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

Dec 2012	Nominal	Real
Households of Two or More Persons
Total Consumption	-0.8	-0.7
Excluding Housing, Vehicles & Remittance		0.1*
Food	0.6	0.9
Housing	-12.6	-12.3
Fuel, Light & Water Charges	6.8	3.8
Furniture & Household Utensils	-2.2	-0.3
Clothing & Footwear	0.2	0.5
Medical Care	0.5	1.2
Transport and Communications	9.2	9.0
Education	-11.3	-11.7
Culture & Recreation	-1.6	-0.4
Other Consumption Expenditures	-4.5	-4.4*
Workers’ Households
Income	1.0	1.1
Disposable Income	0.7	0.8
Consumption Expenditures	2.1	2.2

*Real: nominal deflated by CPI excluding imputed rent

Source: http://www.stat.go.jp/english/data/kakei/156.htm

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Real consumption fell 0.7 percent in the 12 months ending in Dec 2012 and nominal consumption fell 0.8 percent. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 5.7 percent in IQ2012 with private consumption contributing 2.8 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth_16.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 0.1 percent and contribution of 0.2 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.5 percent and personal consumption contracted at 1.0 percent. Nominal consumption increased 4.3 percent in May 2012 but at a lower 1.5 percent in Jun 2012, 1.2 percent in Jul 2012 and 1.4 percent in Aug 2012, decreasing 1.2 percent in Sep 2012 and 0.5 percent in Oct 2012, increasing 0.1 percent in Nov 2012 and decreasing 0.8 percent in Dec 2012. Real consumption expenditures increased 4.0 percent in May 2012 but at a lower 1.6 percent in Jun 2012, 1.7 percent in Jul 2012 and 1.8 percent in Aug 2012, declining 0.9 percent in Sep 2012 and 0.1 percent in Oct 2012, increasing 0.2 percent in Nov 2012 but declining 0.7 percent in Dec 2012. Both nominal and real consumption expenditures increased in 2009, 0.3 percent and 2.1 percent, respectively.

Table VB-5, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

	Nominal Consumption Expenditures ∆% Relative to a Year Earlier	Real Consumption Expenditures ∆% Relative to a Year Earlier
Dec 2012	-0.8	-0.7
Nov	0.1	0.2
Oct	-0.5	-0.1
Sep	-1.2	-0.9
Aug	1.4	1.8
Jul	1.2	1.7
Jun	1.5	1.6
May	4.3	4.0
Apr	3.2	2.6
Mar	4.1	3.4
Feb	2.7	2.3
Jan	-2.1	-2.3
Dec 2011	0.3	0.5
Nov	-3.8	-3.2
Oct	-0.6	-0.4
Sep	-1.9	-1.9
Aug	-3.9	-4.1
Jul	-1.8	-2.1
Jun	-3.9	-3.5
May	-1.6	-1.2
Apr	-2.5	-2.0
Mar	-8.8	-8.2
Feb	-0.1	0.5
Jan	-0.9	-0.3
Dec 2010	-3.2	-3.3
Dec 2009	0.3	2.1

Source: http://www.stat.go.jp/english/data/kakei/156.htm

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 5.7 percent in IQ2012 with private consumption contributing 2.8 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth_16.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 0.1 percent and contribution of 0.2 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.5 percent and personal consumption contracted at 1.0 percent. Nominal consumption increased 4.3 percent in May 2012 but at a lower 1.5 percent in Jun 2012, 1.2 percent in Jul 2012 and 1.4 percent in Aug 2012, decreasing 1.2 percent in Sep 2012 and 0.5 percent in Oct 2012 and increasing 0.1 percent in Nov 2012. Real consumption expenditures increased 4.0 percent in May 2012 but at a lower 1.6 percent in Jun 2012, 1.7 percent in Jul 2012 and 1.8 percent in Aug 2012, declining 0.9 percent in Sep 2012 and 0.1 percent in Oct 2012 but increasing 0.2 percent in Nov 2012. Both nominal and real consumption expenditures increased in 2009, 0.3 percent and 2.1 percent, respectively.

Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012 and beginning of IIIQ2012. Table VB-6 provides Japan’s wholesale and retail sales. Retail sales increased 1.2 percent in the 12 months ending in Nov 2012 but only 0.4 percent in the 12 months ending in Dec 2012. Total sales decreased 1.7 percent in the 12 months ending in Dec 2012. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through Jun 2012 but fell again by 0.7 percent in Jul 2012, increasing 1.7 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 1.3 percent in Nov 2012 and only 0.4 percent in Dec 2012.

Table VB-6, Japan, Wholesale and Retail Sales 12 Month ∆%

	Total	Wholesale	Retail
Dec 2012	-1.7	-2.5	0.4
Nov	-0.8	-1.5	1.2
Oct	-1.4	-1.4	-1.2
Sep	-3.6	-4.9	0.4
Aug	-2.6	-4.2	1.7
Jul	-3.1	-4.0	-0.7
Jun	-2.8	-3.8	0.2
May	2.5	2.1	3.6
Apr	1.7	0.3	5.7
Mar	2.9	0.5	10.3
Feb	-0.1	-1.3	3.4
Jan	-2.0	-3.5	1.8
Dec 2011	-0.8	-2.0	2.5
Nov	-2.3	-2.4	-2.2
Oct	1.1	0.8	1.9
Sep	0.3	0.8	-1.1
Aug	3.1	5.2	-2.6
Jul	2.3	3.0	0.6
Jun	3.1	3.8	1.2
May	1.3	2.3	-1.3
Apr	-2.6	-1.7	-4.8
Mar	-1.3	1.2	-8.3
Feb	5.3	7.2	0.1
Jan	3.3	4.6	0.1
Dec 2010	3.5	5.7	-2.1
Calendar Year
2012	-0.9	-2.0	2.2
2011	1.0	1.8	-1.2
2010	1.5	1.1	2.5
2009	-20.5	-25.6	-2.3
2008	1.2	1.5	0.3

Source:

http://www.meti.go.jp/english/statistics/index.html

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

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

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

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index from Nov 2011 to Nov 2012. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012 and sharper drop to 53.7 in Sep 2012, rebounding to 55.5 in Oct 2012 and 55.6 in Nov 2012.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct, 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 Dec 2012 above the neutral zone of 50.0.

Chart CIPMMFG, China, Manufacturing Index of Purchasing Managers, Seasonally Adjusted

Source: National Bureau of Statistics of China

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

Cumulative growth 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 marginally improving business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 51.6 in Nov to 51.8 in Dec for the fourth consecutive month of increasing output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest growth of 8 percent in IVQ2012 GDP relative to a year earlier (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). The HSBC Business Activity index decreased from 52.1 in Nov to 51.7 in Dec with continuing growth in services at a slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds strength in services from new orders and growth of employment (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10556). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 51.5 in Dec from 50.5 in Nov, indicating moderate activity, which is the highest reading since May 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10489). Weak export orders were attributed to weakness in Europe, Japan and the US. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds gradual improvement of the economy of China with reduction of stocks and continuing government stimulus that is consistent with probable growth of GDP at 8.6 percent in 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10489).

Wang Xiaotian, writing on China Daily, on “China cuts its reserve ratio again,” published by Xinhuanet on May 13, 2012 (http://news.xinhuanet.com/english/china/2012-05/13/c_131584252.htm), informs that the People’s Bank of China (PBC) (http://www.pbc.gov.cn/publish/english/963/index.html) reduced the reserve requirement imposed on Chinese lenders by 50 basis points with the objective of injecting liquidity to strengthen the economy. This is the second such reduction of reserve requirements in 2012. The reduction is estimated to release CNY 400 in China’s money market. The reserve requirement will be 20 percent for larger banks and 16.5 percent for smaller banks. The measures are intended to strengthen the economy. Xinhuanet, writing on “China announces surprise rate cuts amid economic downshift,” on Jun 5, 2012 (http://news.xinhuanet.com/english/china/2012-07/05/c_131697843.htm), informs that the central bank of China People’s Bank of China reduced the one year deposit rate by 25 basis points and the one year lending rate by 31 basis points effective Jun 6, 2012. The People’s Bank of China posts the new rates (http://www.pbc.gov.cn/publish/english/955/2012/20120608171005950734495/20120608171005950734495_.html). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Dec 12-month ∆%: minus 1.9 Dec month ∆%: minus 0.1 Blog 1/13/13
Consumer Price Index	Dec month ∆%: 0.8 Dec 12 months ∆%: 2.5 Blog 1/13/13
Value Added of Industry	Dec month ∆%: 0.87 Jan-Dec 2012/Jan-Dec 2011 ∆%: 10.0 Blog 1/20/13
GDP Growth Rate	Year IVQ2012 ∆%: 7.9 Quarter IIQ2012 ∆%: 2.0 Blog 1/20/13
Investment in Fixed Assets	Dec month ∆%: 1.24 Total Jan-Dec 2012 ∆%: 20.6 Real estate development: 16.2 Blog 1/20/13
Retail Sales	Dec month ∆%: 1.53 Dec 12 month ∆%: 15.2 Jan-Dec ∆%: 14.3 Blog 1/20/13
Trade Balance	Dec balance $31.67 billion Exports 12M ∆% 14.1 Imports 12M ∆% 6.0 Cumulative Dec: $231.1 billion Blog 1/13/13

Links to blog comments in Table CNY:

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	10.2	1.4
2012*	2.5		-0.4
2013*			0.1
2014*			1.4

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

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

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2012 ∆% 0.1; IIIQ2012/IIIQ2011 ∆% 0.0 Blog 12/30/12
Unemployment	Nov 2012: 11.8% unemployment rate Nov 2012: 18.820 million unemployed Blog 1/13/13
HICP	Dec month ∆%: 0.4 12 months Dec ∆%: 2.2 Blog 1/20/13
Producer Prices	Euro Zone industrial producer prices Nov ∆%: -0.2 Nov 12-month ∆%: 2.1 Blog 1/13/13
Industrial Production	Nov month ∆%: -0.3; Nov 12 months ∆%: -3.7 Blog 1/20/13
Retail Sales	Nov month ∆%: 0.1 Nov 12 months ∆%: minus 2.6 Blog 1/13/13
Confidence and Economic Sentiment Indicator	Sentiment 87.8 Jan 2013 Consumer minus 23.9 Jan 2013 Blog 2/3/13
Trade	Jan-Nov 2012/Jan-Nov 2011 Exports ∆%: 8.3 Imports ∆%: 2.0 Nov 2012 12-month Exports ∆% 5.4 Imports ∆% -0.3 Blog 1/20/13

Links to blog comments in Table EUR:

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

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

The Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). This deterioration is shown in Table VD-1 with the index falling from 95.3 in Feb 2012 to 89.2 in Jan 2013 with improvement at the margin from 87.8 in Dec 2012. There is downward trend in 2012 with the index still above the minimum value of 69.9 reached in Mar 2009 but still below the average of 100.

Table VD-1, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-6.8	10.0	-13.1	-9.2	-17.8
Maximum	118.2 05-00	7.8 04-07	35.3     08-98	2.4 05-00	5.3 06-90	6.1 02-90
Minimum	69.8 03-09	-38.2 03-09	-27.3 03-09	-34.3 03-09	-24.9 01-93	-46.1 09-93
Jan 2013	89.2	-13.9	-8.8	-23.9	-15.6	-28.7
Dec 2012	87.8	-14.2	-9.8	-26.3	-15.9	-33.3
Nov	86.6	-14.9	-12.0	-26.7	-14.8	-34.1
Oct	85.2	-18.2	-12.2	-25.5	-17.3	-31.6
Sep	86.0	-15.9	-12.0	-25.7	-18.4	-30.3
Aug	86.9	-15.3	-10.9	-24.4	-17.1	-31.5
Jul	88.7	-15.0	-8.6	-21.3	-14.9	-27.3
Jun	90.7	-12.7	-7.5	-19.6	-14.3	-26.7
May	91.4	-11.2	-5.3	-19.1	-18.0	-28.7
Apr	93.7	-8.8	-2.5	-19.7	-10.9	-26.1
Mar	95.2	-7.0	-0.4	-18.9	-11.9	-25.1
Feb	95.3	-5.5	-1.0	-20.1	-13.9	-23.3

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

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

Source: European Commission Services

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

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

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

Table VE-DE, Germany, GDP Annual ∆%

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2011	3.0	3.1
2010	4.2	4.0
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.8
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2012/08/PE12_287_811.html;jsessionid=A761BC574543A771416A9CF81034F7BA.cae1

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 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=10588). 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 49.2 in Nov to 50.3 in Dec, indicating a level above the neutral zone of 50.0 after seven consecutive months below 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). Tim Moore, Senior Economist at Markit and author of the report, finds that the composite index of manufacturing and services indicates four months of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10383). The Germany Services Business Activity Index increased from 49.7 in Nov to 52.0 in Dec (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10560). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 46.8 in Nov to 46.0 in Dec for the tenth consecutive month in contraction territory below 50.0 and lower than the average of 46.7 for 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10538). New export orders fell for eighteen consecutive months with weak demand from internal and external clients. Tim Moore, Senior Economist at Markit and author of the report, finds continuing weakness in Germany’s manufacturing that cannot maintain strong performance in the beginning of the cyclical expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10538).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIIQ2012 0.2 ∆%; III/Q2012/IIIQ2011 ∆% 0.4 2011/2010: 3.0% GDP ∆% 1992-2011 Blog 8/26/12 5/27/12 11/25/12
Consumer Price Index	Dec month NSA ∆%: 0.9 Dec 12-month NSA ∆%: 2.1 Blog 1/20/13
Producer Price Index	Dec month ∆%: -0.3 CSA, 0.1 NSA 12-month NSA ∆%: 1.5 Blog 1/27/13
Industrial Production	Mfg Oct month CSA ∆%: 0.4 12-month NSA: minus 3.2 Blog 1/13/13
Machine Orders	MFG Nov month ∆%: -1.8 Nov 12-month ∆%: -1.0 Blog 1/13/13
Retail Sales	Dec Month ∆% -1.7 12-Month ∆% -4.7 Blog 2/3/13
Employment Report	Unemployment Rate Dec 5.3% Blog 2/3/13
Trade Balance	Exports Nov 12-month NSA ∆%: 0.0 Imports Nov 12 months NSA ∆%: -1.2 Exports Nov month CSA ∆%: -3.4; Imports Nov month SA -3.7 Blog 1/13/13

Links to blog comments in Table DE:

1/27/13 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

1/13/13 http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1. The number unemployed, not seasonally adjusted, decreased from 2.33 million in Dec 2011 to 2.25 million in Dec 2012, or 3.4 percent, while the unemployment rate decreased from 5.5 percent in Dec 2011 to 5.3 percent in Dec 2012. The number of persons in employment, not seasonally adjusted, increased from 40.06 million in Dec 2011 to 40.42 million in Dec 2012, or 0.9 percent, while the employment rate increased from 63.5 percent in Dec 2011 to 64.1 percent in Dec 2012. The number unemployed, seasonally adjusted, fell from 2.26 million in Nov 2012 to 2.24 million in Dec 2012, while the unemployment rate was unchanged from 5.3 percent in Nov 2012 to 5.3 percent in Dec 2012. The number of persons in employment, seasonally adjusted, increased from 40.25 million in Nov 2012 to 40.30 million in Dec 2012, or 0.1 percent.

Table VE-1, Germany, Unemployment Labor Force Survey

	Dec 2012	Nov 2012	Dec 2011
NSA
Number Unemployed Millions	2.25 ∆% Dec 2012/Nov 2012: 0.9 ∆% Dec 2012/Dec 2011: -3.4	2.23	2.33
% Rate Unemployed	5.3	5.2	5.5
Persons in Employment Millions	40.42 ∆% Dec 2012/Nov 2012: -0.4 ∆% Dec 2012/Dec 2011: 0.9	40.57	40.06
Employment Rate	64.1	64.5	63.5
SA
Number Unemployed Millions	2.24 ∆% Dec 2012/Nov  2012: -0.9 ∆% Dec 2012/Dec 2011: –5.5	2.26	2.37
% Rate Unemployed	5.3	5.3	5.6
Persons in Employment Millions	40.30 ∆% Dec 2012/Nov 2012: 0.1 ∆% Dec  2012/Dec 2011: 1.2	40.25	39.82

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2013/01/PE13_039_132.html;jsessionid=20228160F5B2071BE51E4F99DED6D7A1.cae1

The unemployment rate in Germany as percent of the labor force in Table VE-2 stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012 and 7.4 percent in Jan 2013. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

Table VE-2, Germany, Unemployment Rate in Percent of Labor Force

	Percent of Labor Force
Jan 2013	7.4
Dec 2012	6.7
Nov	6.5
Oct	6.5
Sep	6.5
Aug	6.8
Jul	6.8
Jun	6.6
May	6.7
Apr	7.0
Mar	7.2
Feb	7.4
Jan	7.3
Dec 2011	6.6
Nov	6.4
Oct	6.5
Sep	6.6
Aug	7.0
Jul	7.0
Jun	6.9
May	7.0
Apr	7.3
Mar	7.6
Feb	7.9
Jan	7.9
Dec 2010	7.1
Dec 2009	7.8
Dec 2008	7.4
Dec 2007	8.1
Dec 2006	9.6
Dec 2005	11.1

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

Chart VE-1 of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, 6.6 percent in Jun 2012, 6.8 percent in Jul and Aug 2012 and 6.5 percent from Sep to Nov 2012, increasing to 6.7 percent in Dec 2012 and 7.4 percent in Jan 2013.

Chart VE-1, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland

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

Retail sales in Germany adjusted for inflation are provided in Table VE-3. There have been sharp fluctuations in monthly and 12 months percentage changes. Retail sales decreased 1.7 percent in Dec 2012 and fell 4.7 percent in the 12 months ending in Dec 2012. Retail sales decreased in every month in 2012 with exception of 0.6 percent in Nov, 0.1 percent in Nov, 0.6 percent in Jun and 0.9 percent in Mar.

Table VE-3, Retail Sales in Germany Adjusted for Inflation

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Dec 2012	-4.7	-1.7
Nov	-0.6	0.6
Oct	0.9	-0.9
Sep	-3.7	0.1
Aug	-0.8	-0.2
Jul	-1.2	-1.1
Jun	4.5	0.6
May	-0.8	-0.2
Apr	-4.5	-0.4
Mar	4.2	0.9
Feb	2.3	-0.1
Jan	1.9	-1.6
Dec 2011	0.9	1.5
Nov	1.0	-0.7
Oct	-0.4	0.3
Sep	1.3	0.1
Aug	3.6	-0.5
Jul	-2.1	0.6
Jun	-2.2	2.8
May	4.6	-2.2
Apr	4.7	0.8
Mar	-2.9	-2.8
Feb	2.8	0.9
Jan	3.0	0.7
Dec 2010	0.6	1.0
Dec 2009	-2.2
Dec 2008	3.3
Dec 2007	-6.2
Dec 2006	1.3

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

Chart VE-2 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at constant prices from 2007 to 2012. There appear to be fluctuations without trend but probably the beginning of declining trend in the final segment.

Chart VE-2, Germany, Turnover in Retail Trade at Constant Prices 2005=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at current prices from 2007 to 2011. There are also sharp fluctuations but without trend.

Chart VE-3, Germany, Turnover in Retail Sales at Current Prices, Original Values, 2005=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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 IIIQ1949 to IIIQ2012 is quite high at 3.2 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.1 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using third quarter data, is 1.1 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

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

Period	Average ∆%
1949-2012*	3.2
2000-2012*	1.1
2000-2011	1.1
2000-2007	1.7
1990-1999	1.9
1980-1989	2.6
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

*Third Quarter on Third Quarter

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20121228

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

Table FR, France, Economic Indicators

CPI	Dec month ∆% 0.3 12 months ∆%: 1.3 1/13/13
PPI	Dec month ∆%: -0.3 Dec 12 months ∆%: 1.7 Blog 2/3/13
GDP Growth	IIIQ2012/IIQ2012 ∆%: 0.1 IIIQ2012/IIIQ2011 ∆%: 0.0 Blog 12/30/12
Industrial Production	Nov ∆%: Manufacturing 0.2 12-Month ∆%: Manufacturing minus 4.6 Blog 1/13/13
Consumer Spending	Manufactured Goods Dec ∆%: 0.3 Dec 12-Month Manufactured Goods ∆%: -0.6 Blog 2/3/13
Employment	IIIQ2012 Unemployed 2.826 million Unemployment Rate: 9.9% Employment Rate: 63.9% Blog 12/16/12
Trade Balance	Nov Exports ∆%: month -2.8, 12 months -3.4 Nov Imports ∆%: month -2.5, 12 months -3.4 Blog 1/13/13
Confidence Indicators	Historical averages 100 Jan Mfg Business Climate 86 Blog 1/27/13

Links to blog comments in Table FR:

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

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

12/16/12 http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html

The Aug monthly report of household expenditures in consumption goods for France is in Table VF-1. Total consumption increased 0.0 percent in Dec 2012 after increasing 0.2 percent in Nov. Consumption of manufactured products increased 0.3 percent in Dec 2012 after decreasing 0.1 percent in Nov. Total consumption decreased 0.1 percent in Dec 2012 relative to Dec 2011 and consumption of manufactured goods decreased 0.6 percent in Dec 2012 relative to Dec 2011. Internal demand is weak throughout most advanced economies.

Table VF-1, France, Household Expenditures in Consumption Goods, Month ∆% Chained Billion Euros Trading-Days SA

	Total	Food	Eng. Goods	Energy	Mfg Goods
Dec 2012	0.0	0.1	1.0	-2.8	0.3
Dec 2012/Dec 2011	-0.1	-0.5	-1.2	4.0	-0.6
Nov	0.2	-0.5	-0.1	2.2	-0.1
Oct	0.0	-0.5	0.3	0.1	0.1
Sep	0.1	-0.1	0.3	0.0	0.1
Aug	-0.6	-0.2	-0.5	-1.8	-0.7
Jul	0.2	0.0	0.5	0.0	0.3
Jun	0.3	1.1	-0.1	-0.2	0.4
May	0.3	0.0	1.9	-3.0	1.3
Apr	0.4	-0.6	-2.4	10.0	-1.4
Mar	-2.5	-2.0	1.0	-11.5	-0.4
Feb	2.1	1.2	-0.8	11.4	0.5
Jan	-0.6	1.0	-2.4	1.3	-0.9
Dec 2011	0.0	-0.7	0.9	-0.8	0.1
Nov	0.0	0.2	0.5	-2.0	0.1
Oct	0.0	-0.6	0.8	-0.9	0.1
Sep	-0.2	0.3	0.3	-2.9	-0.1
Aug	0.9	0.3	0.5	3.1	1.0
Jul	-0.4	0.2	-0.9	-0.3	-0.4
Jun	0.6	-1.0	0.9	3.1	0.5
May	0.0	-0.6	-0.5	3.1	-0.7
Apr	-1.6	1.0	-2.0	-6.2	-1.0
Mar	-0.6	-0.2	-1.0	-0.3	-0.8
Feb	0.3	0.5	1.2	-2.3	0.8
Jan	-1.3	-0.6	-0.5	-5.1	-0.6
Dec 2010	0.8	0.5	0.1	3.6	0.3

Eng. Goods: Engineered Goods

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20130131

Chart VF-2 of Institut National de la Statistique et des Études Économiques of France provides growth of total consumption in France. Internal demand is not supporting overall economic growth. Two-thirds of the increase of consumption in Feb 2012 is attributed to higher consumption of energy during bitter cold weather and the drop in Mar reversed expenditures in energy under milder weather. There is downward trend of monthly consumption with fluctuations and stability in the final segment.

Chart VF-1, France, Total Consumption of Goods, Billions of Euros Trading and Seasonally Adjusted and Quarterly ∆%

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20130131

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.5 percent in IQ2012 to minus 2.4 percent in IIIQ2012. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates.

Table VG-IT, Italy, GDP and Expenditure Components, Chained Volume Measures, Quarter ∆% on Same Quarter Year Earlier

	GDP	Imports	Consumption	GFCF	Exports
2012
IIIQ	-2.4	-7.8	-3.7	-9.8	1.6
IIQ	-2.3	-7.6	-3.5	-9.6	2.5
IQ	-1.3	-9.0	-2.8	-7.9	1.9
2011
IVQ	-0.5	-6.8	-1.6	-3.7	3.3
IIIQ	0.4	0.3	-0.5	-2.2	5.9
IIQ	1.0	3.4	0.6	-0.2	7.1
IQ	1.3	8.9	0.9	0.7	10.9
2010
IVQ	2.2	15.4	0.8	2.3	13.3
IIIQ	1.9	13.0	1.0	4.3	12.2
IIQ	1.9	13.2	0.5	2.3	12.0
IQ	1.1	7.3	0.5	-0.8	7.3
2009
IVQ	-3.5	-6.4	-0.1	-7.5	-9.3
IIIQ	-5.0	-12.1	-0.9	-12.6	-16.3
IIQ	-6.6	-17.8	-1.3	-13.7	-21.4
IQ	-6.9	-17.2	-1.6	-12.7	-22.9
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/77009

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

Table IT, Italy, Economic Indicators

Consumer Price Index	Dec month ∆%: 0.2 Dec 12-month ∆%: 2.3 Blog 1/20/13
Producer Price Index	Dec month ∆%: -0.2 Dec 12-month ∆%: 2.0 Blog 2/3/13
GDP Growth	IIIQ2012/IIQ2012 SA ∆%: minus 0.2 IIIQ2012/IIIQ2011 NSA ∆%: minus 2.4 Blog 12/16/12
Labor Report	Nov 2012 Participation rate 63.9% Employment ratio 56.8% Unemployment rate 11.1% Blog 1/13/13
Industrial Production	Nov month ∆%: minus 1.0 12 months ∆%: minus 7.6 Blog 1/20/13
Retail Sales	Nov month ∆%: -0.4 Nov 12-month ∆%: -3.1 Blog 1/27/13
Business Confidence	Mfg Jan 88.2, Sep 88.4 Construction Jan 80.3, Sep 85.8 Blog 2/3/13
Trade Balance	Balance Nov SA €2261 million versus Oct €1442 Exports Nov month SA ∆%: 0.4; Imports Nov month ∆%: minus 2.2 Exports 12 months Nov NSA ∆%: 3.6 Imports 12 months NSA ∆%: -8.2 Blog 1/20/13

Links to blog comments in Table IT:

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

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

Italy’s index of business confidence in manufacturing and construction is provided in Table VG-1. There has been improvement of manufacturing confidence below the historical average of 100 from 87.5 in Aug with reading of 88.4 in Sep, declining marginally to 87.8 in Oct 2012 and improving to 88.4 in Nov 2012, 88.9 in Dec 2012 and 88.2 in Jan 2013. Order books improved from minus 42 in May to minus 40 in Aug-Sep with marginal decline to minus 42 in Oct 2012, minus 43 in Nov 2012, minus 42 in Dec 2012 and minus 43 in Jan 2013. There is mild improvement in construction with an increase of the index from 81.6 in Aug 2012 to 85.8 in Sep followed by decline to 81.1 in Oct, 79.6 in Nov 2012, 79.5 in Dec 2012 and 80.3 in Jan 2013.

Table VG-1, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100

	Jan 2013	Dec 2012	Nov	Oct	Sep
Mfg Confidence	88.2	88.9	88.4	87.7	88.4
Order Books	-43	-42	-43	-42	-40
Stocks Finished Products	0	-2	1	1	1
Production Expectation	-5	-5	-4	-5	-6
Construction Confidence	80.3	79.5	79.6	81.0	85.8
Order Books	-50	-51	-50	-48	-47
Employment	-15	-18	-17	-18	-5

Mfg: manufacturing

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/80943

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.0 percent in 2009 after dropping 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 0.9 percent in 2011 and 0.0 percent in 2012. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent on average between 1948 and 2012, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 0.9 percent as advanced economies struggle with weak internal demand and world trade.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	4.2
2001	2.9
2002	2.4
2003	3.8
2004	2.9
2005	2.8
2006	2.6
2007	3.6
2008	-1.0
2009	-4.0
2010	1.8
2011	0.9
2012	0.0
Average ∆% per Year
1948-2012	2.6
1948-1959	2.9
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.6
2000-2012	1.5
2000-2007	3.0
2009-2012	0.9

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q4-2012/index.html

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

Table UK, UK Economic Indicators

CPI	Dec month ∆%: 0.5 Dec 12-month ∆%: 2.7 Blog 1/20/13
Output/Input Prices	Output Prices: Dec 12-month NSA ∆%: 2.2; excluding food, petroleum ∆%: 1.5 Input Prices: Dec 12-month NSA ∆%: 0.3 Excluding ∆%: 0.0 Blog 1/20/13
GDP Growth	IVQ2012 prior quarter ∆% -0.3; year earlier same quarter ∆%: 0.0 Blog 1/27/13
Industrial Production	Nov 2012/Nov 2011 ∆%: Production Industries minus 2.4; Manufacturing minus 2.1 Blog 1/13/13
Retail Sales	Dec month ∆%: -0.1 Nov 12-month ∆%: 0.3 Blog 1/20/13
Labor Market	Sep-Nov Unemployment Rate: 7.7%; Claimant Count 4.8%; Earnings Growth 1.5% Blog 1/27/13
Trade Balance	Balance Oct minus ₤3466 million Exports Nov ∆%: 1.7; Sep-Nov ∆%: -1.0 Imports Nov ∆%: 1.0 Sep-Nov ∆%: -0.9 Blog 1/13/13

Links to blog comments in Table UK:

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

1/13/13 http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.html

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