Tuesday, April 16, 2013

Recovery without Hiring, Ten Million Fewer Full-time Jobs, Youth and Middle-age Unemployment, United States International Trade, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk: Part II

 

Recovery without Hiring, Ten Million Fewer Full-time Jobs, Youth and Middle-age Unemployment, United States International Trade, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

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

Executive Summary

I Recovery without Hiring

IA1 Hiring Collapse

IA2 Labor Underutilization

IA3 Ten Million Fewer Full-time Job

IA4 Youth and Middle-Aged Unemployment

II United States International Trade

IIA1 United States International Trade

IIA2 United States Import and Export Prices

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

IV Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table IV-1, updated with every blog comment, provides the latest annual data for GDP, consumer price index (CPI) inflation, producer price index (PPI) inflation and unemployment (UNE) for the advanced economies, China and the highly-indebted European countries with sovereign risk issues. The table now includes the Netherlands and Finland that with Germany make up the set of northern countries in the euro zone that hold key votes in the enhancement of the mechanism for solution of sovereign risk issues (Peter Spiegel and Quentin Peel, “Europe: Northern Exposures,” Financial Times, Mar 9, 2011 http://www.ft.com/intl/cms/s/0/55eaf350-4a8b-11e0-82ab-00144feab49a.html#axzz1gAlaswcW). Newly available data on inflation is considered below in this section. Data in Table IV-1 for the euro zone and its members are updated from information provided by Eurostat but individual country information is provided in this section  as soon as available, following Table IV-1. Data for other countries in Table IV-1 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section V World Economic Slowdown following with individual country and regional data tables.

Table IV-1, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates

 

GDP

CPI

PPI

UNE

US

1.7

2.0

1.1

7.6

Japan

0.5

-0.7

-0.5

4.3

China

7.9

2.1

-1.9

 

UK

0.2

2.8* CPIH 2.6

2.3 output
1.3**
input
2.5

7.8

Euro Zone

-0.9

1.8

1.3

12.0

Germany

0.4

1.8

1.2

5.4

France

-0.3

1.2

1.9

10.8

Nether-lands

-0.9

3.2

0.4

6.2

Finland

-1.4

2.5

1.1

8.1

Belgium

-0.4

1.3

4.2

8.1

Portugal

-3.8

0.2

1.9

17.5

Ireland

0.8

1.2

1.5

14.2

Italy

-2.7

2.0

0.5

11.6

Greece

-6.0

0.1

1.0

NA

Spain

-1.9

2.9

2.1

26.3

Notes: GDP: rate of growth of GDP; CPI: change in consumer price inflation; PPI: producer price inflation; UNE: rate of unemployment; all rates relative to year earlier

*Office for National Statistics http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/february-2013/index.html **Core

PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/february-2013/index.html

Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/; country statistical sources http://www.census.gov/aboutus/stat_int.html

Table IV-1 shows the simultaneous occurrence of low growth, inflation and unemployment in advanced economies. The US grew at 1.7 percent in IVQ2012 relative to IVQ2011 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp4q12_3rd.pdf http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html). Japan’s GDP grew 0.3 percent in IVQ2011 relative to IVQ2010 and contracted 1.6 percent in IIQ2011 relative to IIQ2010 because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 but grew at the seasonally-adjusted annual rate (SAAR) of 10.6 percent in IIIQ2011, increasing at the SAAR of 0.4 percent in IVQ 2011, increasing at the SAAR of 6.1 percent in IQ2012 and decreasing at 0.9 percent in IIQ2012 but contracting at the SAAR of 3.7 percent in IIIQ2012 and increasing at the SAAR of 0.2 percent in IVQ2012 (see Section VB http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm and earlier at

http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html); the UK grew at minus 0.3 percent in IVQ2012 relative to IIIQ2012 and GDP increased 0.2 percent in IVQ2012 relative to IVQ2011 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html); and the Euro Zone grew at minus 0.6 percent in IVQ2012 and minus 0.9 percent in IVQ2012 relative to IVQ2011 (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or_8.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm). These are stagnating or “growth recession” rates, which are positive or about nil growth rates with some contractions that are insufficient to recover employment. The rates of unemployment are quite high: 7.6 percent in the US but 18.2 percent for unemployment/underemployment or job stress of 29.6 million (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm), 4.3 percent for Japan (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html), 7.8 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 2.0 percent in the US, -0.7 percent for Japan, 2.1 percent for China, 1.8 percent for the Euro Zone and 2.8 percent for the UK. Stagflation is still an unknown event but the risk is sufficiently high to be worthy of consideration (see http://cmpassocregulationblog.blogspot.com/2011/06/risk-aversion-and-stagflation.html). The analysis of stagflation also permits the identification of important policy issues in solving vulnerabilities that have high impact on global financial risks. There are six key interrelated vulnerabilities in the world economy that have been causing global financial turbulence: (1) sovereign risk issues in Europe resulting from countries in need of fiscal consolidation and enhancement of their sovereign risk ratings (see Section III and earlier http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html); (2) the tradeoff of growth and inflation in China now with change in growth strategy to domestic consumption instead of investment and political developments in a decennial transition; (3) slow growth by repression of savings with de facto interest rate controls (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html), weak hiring with the loss of 10 million full-time jobs (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html) and continuing job stress of 24 to 30 million people in the US and stagnant wages in a fractured job market (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm); (4) the timing, dose, impact and instruments of normalizing monetary and fiscal policies (see http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html http://cmpassocregulationblog.blogspot.com/2012/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2011/08/united-states-gdp-growth-standstill.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html http://cmpassocregulationblog.blogspot.com/2011/03/global-financial-risks-and-fed.html http://cmpassocregulationblog.blogspot.com/2011/02/policy-inflation-growth-unemployment.html) in advanced and emerging economies; (5) the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 that had repercussions throughout the world economy because of Japan’s share of about 9 percent in world output, role as entry point for business in Asia, key supplier of advanced components and other inputs as well as major role in finance and multiple economic activities (http://professional.wsj.com/article/SB10001424052748704461304576216950927404360.html?mod=WSJ_business_AsiaNewsBucket&mg=reno-wsj); and (6) geopolitical events in the Middle East.

In the effort to increase transparency, the Federal Open Market Committee (FOMC) provides both economic projections of its participants and views on future paths of the policy rate that in the US is the federal funds rate or interest on interbank lending of reserves deposited at Federal Reserve Banks. These projections and views are discussed initially followed with appropriate analysis.

Charles Evans, President of the Federal Reserve Bank of Chicago, proposed an “economic state-contingent policy” or “7/3” approach (Evans 2012 Aug 27):

“I think the best way to provide forward guidance is by tying our policy actions to explicit measures of economic performance. There are many ways of doing this, including setting a target for the level of nominal GDP. But recognizing the difficult nature of that policy approach, I have a more modest proposal: I think the Fed should make it clear that the federal funds rate will not be increased until the unemployment rate falls below 7 percent. Knowing that rates would stay low until significant progress is made in reducing unemployment would reassure markets and the public that the Fed would not prematurely reduce its accommodation.

Based on the work I have seen, I do not expect that such policy would lead to a major problem with inflation. But I recognize that there is a chance that the models and other analysis supporting this approach could be wrong. Accordingly, I believe that the commitment to low rates should be dropped if the outlook for inflation over the medium term rises above 3 percent.

The economic conditionality in this 7/3 threshold policy would clarify our forward policy intentions greatly and provide a more meaningful guide on how long the federal funds rate will remain low. In addition, I would indicate that clear and steady progress toward stronger growth is essential.”

Evans (2012Nov27) modified the “7/3” approach to a “6.5/2.5” approach:

“I have reassessed my previous 7/3 proposal. I now think a threshold of 6-1/2 percent for the unemployment rate and an inflation safeguard of 2-1/2 percent, measured in terms of the outlook for total PCE (Personal Consumption Expenditures Price Index) inflation over the next two to three years, would be appropriate.”

The Federal Open Market Committee (FOMC) decided at its meeting on Dec 12, 2012 to implement the “6.5/2.5” approach (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm):

“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”

Another rising risk is division within the Federal Open Market Committee (FOMC) on risks and benefits of current policies as expressed in the minutes of the meeting held on Jan 29-30, 2013 (http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20130130.pdf 13):

“However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases. Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behavior that could undermine financial stability. Several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound, but others pointed to offsetting factors and one noted that losses would not impede the effective operation of monetary policy.

Jon Hilsenrath and Victoria McGrane, writing on “Fed slip over how long to keep cash spigot open,” published on Feb 20, 2013 in the Wall street Journal (http://professional.wsj.com/article/SB10001424127887323511804578298121033876536.html), analyze the minutes of the Fed, comments by members of the FOMC and data showing increase in holdings of riskier debt by investors, record issuance of junk bonds, mortgage securities and corporate loans. Jon Hilsenrath, writing on “Jobs upturn isn’t enough to satisfy Fed,” on Mar 8, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324582804578348293647760204.html), finds that much stronger labor market conditions are required for the Fed to end quantitative easing. Unconventional monetary policy with zero interest rates and quantitative easing is quite difficult to unwind because of the adverse effects of raising interest rates on valuations of risk financial assets and home prices, including the very own valuation of the securities held outright in the Fed balance sheet. Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash.

Unconventional monetary policy will remain in perpetuity, or QE→∞, changing to a “growth mandate.” There are two reasons explaining unconventional monetary policy of QE→∞: insufficiency of job creation to reduce unemployment/underemployment at current rates of job creation; and growth of GDP at 1.5 percent, which is well below 3.0 percent estimated by Lucas (2011May) from 1870 to 2010. Unconventional monetary policy interprets the dual mandate of low inflation and maximum employment as mainly a “growth mandate” of forcing economic growth in the US at a rate that generates full employment. A hurdle to this “growth mandate” is that the US economy grew at 6.2 percent on average during cyclical expansions in the postwar period while growth has been at only 2.1 percent on average in the cyclical expansion in the 14 quarters from IIIQ2009 to IVQ2012. Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.

First, the number of nonfarm jobs and private jobs created has been declining in 2012 from 311,000 in Jan 2012 to 87,000 in Jun, 138,000 in Sep, 160,000 in Oct, 247,000 in Nov and 219,000 in Dec 2012 for total nonfarm jobs and from 323,000 in Jan 2012 to 78,000 in Jun, 118,000 in Sep, 217,000 in Oct, 256,000 in Nov and 224,000 in Dec 2012 for private jobs. Average new nonfarm jobs in the quarter Dec 2011 to Feb 2012 were 270,667 per month, declining to average 159,909 per month in the eleven months from Mar 2012 to Jan 2013. Average new private jobs in the quarter Dec 2011 to Feb 2012 were 279,000 per month, declining to average 167,727 per month in the eleven months from Mar 2012 to Jan 2013. The number of 164,000 new private new jobs created in Jan 2013 is lower than the average 167,727 per month created from Mar 2012 to Jan 2013. New farm jobs created in Feb 2013 were 268,000 and 254,000 in private jobs, which exceeds the average for the prior eleven months. In Mar 2013 the US economy created 88,000 new farm jobs, which is 52 percent of the average of 169,000 jobs per month created in the past 12 months (page 2 http://www.bls.gov/news.release/pdf/empsit.pdf). The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the six months from Oct 2012 to Mar 2013 was 188,333, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 29.6 million unemployed or underemployed. The difference between the average increase of 188,333 new private nonfarm jobs per month in the US from Oct 2012 to Mar 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 75,166 monthly new jobs net of absorption of new entrants in the labor force. There are 29.6 million in job stress in the US currently. The provision of 75,166 new jobs per month net of absorption of new entrants in the labor force would require 393 months to provide jobs for the unemployed and underemployed (29.550 million divided by 75,166) or 32.8 years (393 divided by 12). The civilian labor force of the US in Mar 2013 not seasonally adjusted stood at 154.512 million with 11.815 million unemployed or effectively 19.490 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them for effective labor force of 162.187 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 1.1 years (1 million divided by product of 75,166 by 12, which is 901,992). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.726 million (0.05 times labor force of 154.512 million) for new net job creation of 4.089 million (11.815 million unemployed minus 7.726 million unemployed at rate of 5 percent) that at the current rate would take 4.5 years (4.089 million divided by 901.992). Under the calculation in this blog there are 19.490 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.187 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.381 million jobs net of labor force growth that at the current rate would take 12.6 years (19.490 million minus 0.05(162.187 million) or 11.381 million divided by 901,992, using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in the US fell from 147.118 million in Nov 2007 to 142.698 million in Mar 2013, by 4.420 million, or decline of 3.0 percent, while the noninstitutional population increased from 232.939 million in Nov 2007 to 244.995 million in Mar 2013, by 12.056 million or increase of 5.2 percent, using not seasonally adjusted data. There is actually not sufficient job creation to merely absorb new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Second, calculations show that actual growth is around 1.6 to 2.1 percent per year. This rate is well below 3 percent per year in trend from 1870 to 2010, which has been always recovered after events such as wars and recessions (Lucas 2011May). Growth is not only mediocre but sharply decelerating to a rhythm that is not consistent with reduction of unemployment and underemployment of 30.8 million people corresponding to 19.0 percent of the effective labor force of the United States (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html). In the four quarters of 2011 and the four quarters of 2012, US real GDP grew at the seasonally-adjusted annual equivalent rates of 0.1 percent in the first quarter of 2011 (IQ2011), 2.5 percent in IIQ2011, 1.3 percent in IIIQ2011, 4.1 percent in IVQ2011, 2.0 percent in IQ2012, 1.3 percent in IIQ2012, revised 3.1 percent in IIIQ2012 and 0.4 percent in IVQ2012. GDP growth in IIIQ2012 was revised from 2.7 percent seasonally adjusted annual rate (SAAR) to 3.1 percent but mostly because of contribution of 0.73 percentage points of inventory accumulation and one-time contribution of 0.64 percentage points of expenditures in national defense that without them would have reduced growth from 3.1 percent to 1.73 percent. Equally, GDP growth in IVQ2012 is measured in the third estimate as 0.4 percent but mostly because of deduction of divestment of inventories of 1.52 percentage points and deduction of one-time national defense expenditures of 1.28 percentage points. The annual equivalent rate of growth of GDP for the four quarters of 2011 and the four quarters of 2012 is 1.8 percent, obtained as follows. Discounting 0.1 percent to one quarter is 0.025 percent {[(1.001)1/4 -1]100 = 0.025}; discounting 2.5 percent to one quarter is 0.62 percent {[(1.025)1/4 – 1]100}; discounting 1.3 percent to one quarter is 0.32 percent {[(1.013)1/4 – 1]100}; discounting 4.1 percent to one quarter is 1.0 {[(1.04)1/4 -1]100; discounting 2.0 percent to one quarter is 0.50 percent {[(1.020)1/4 -1]100); discounting 1.3 percent to one quarter is 0.32 percent {[(1.013)1/4 -1]100}; discounting 3.1 percent to one quarter is 0.77 {[(1.031)1/4 -1]100); and discounting 0.4 percent to one quarter is 0.1 percent {[(1.004)1/4 – 1]100}. Real GDP growth in the four quarters of 2011 and the four quarters of 2012 accumulated to 3.7 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001) - 1]100 = 3.7%}. This is equivalent to growth from IQ2011 to IVQ2012 obtained by dividing the seasonally-adjusted annual rate (SAAR) of IVQ2012 of $13,665.4 billion by the SAAR of IVQ2010 of $13,181.2 (http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1 and Table I-6 below) and expressing as percentage {[($13,665.4/$13,181.2) - 1]100 = 3.7%} with a minor rounding discrepancy. The growth rate in annual equivalent for the four quarters of 2011 and the four quarters of 2012 is 1.8 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001)4/8 -1]100 = 1.8%], or {[($13,665.4/$13,181.2)]4/8-1]100 = 1.8%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 in Table I-6 below, obtaining the average for eight quarters and the annual average for one year of four quarters. Growth in the four quarters of 2012 accumulates to 1.7 percent {[(1.02)1/4(1.013)1/4(1.031)1/4(1.004)1/4 -1]100 = 1.7%}. This is equivalent to dividing the SAAR of $13,665.4 billion for IVQ2012 in Table I-6 by the SAAR of $13,441.0 billion in IVQ2011 except for a rounding discrepancy to obtain 1.7 percent {[($13,665.4/$13,441.0) – 1]100 = 1.7%}. The US economy is still close to a standstill especially considering the GDP report in detail. Excluding growth at the SAAR of 2.5 percent in IIQ2011 and 4.1 percent in IVQ2011 while converting growth in IIIQ2012 to 1.73 percent by deducting from 3.1 percent one-time inventory accumulation of 0.73 percentage points and national defense expenditures of 0.64 percentage points and converting growth in IVQ2012 by adding 1.52 percentage points of inventory divestment and 1.28 percentage points of national defense expenditure reductions to obtain 3.2 percent, the US economy grew at 1.6 percent in the remaining six quarters {[(1.00025x1.0032x1.005x1.0032x1.0043x1.0079)4/6 – 1]100 = 1.6%} with declining growth trend in three consecutive quarters from 4.1 percent in IVQ2011, to 2.0 percent in IQ2012, 1.3 percent in IIQ2012, 3.1 percent in IIIQ2012 that is more like 1.73 percent without inventory accumulation and national defense expenditures and 0.4 percent in IVQ2012 that is more likely 3.2 percent by adding 1.52 percentage points of inventory divestment and 1.28 percentage points of national defense expenditures. Weakness of growth is more clearly shown by adjusting the exceptional one-time contributions to growth from items that are not aggregate demand: 2.53 percentage points contributed by inventory change to growth of 4.1 percent in IVQ2011; 0.64 percentage points contributed by expenditures in national defense together with 0.73 points of inventory accumulation to growth of 3.1 percent in IIIQ2012; and deduction of 1.52 percentage points of inventory divestment and 1.28 percentage points of national defense expenditure reductions. The Bureau of Economic Analysis (BEA) of the US Department of Commerce released on Wed Jan 30, 2012, the third estimate of GDP for IVQ2012 at 0.4 percent seasonally-adjusted annual rate (SAAR) (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp4q12_3rd.pdf). In the four quarters of 2012, the US economy is growing at the annual equivalent rate of 2.1 percent {([(1.021/4(1.013)1/4(1.0173)1/4(1.032)1/4]-1)100 = 2.1%} by excluding inventory accumulation of 0.73 percentage points and exceptional defense expenditures of 0.64 percentage points from growth 3.1 percent at SAAR in IIIQ2012 to obtain adjusted 1.73 percent SSAR and adding 1.52 percentage points of national defense expenditure reductions and 1.28 percentage points of inventory divestment to growth of 0.4 percent SAAR in IVQ2012 to obtain 3.2 percent.

In fact, it is evident to the public that this policy will be abandoned if inflation costs rise. There is concern of the production and employment costs of controlling future inflation. Even if there is no inflation, QE→∞ cannot be abandoned because of the fear of rising interest rates. The economy would operate in an inferior allocation of resources and suboptimal growth path, or interior point of the production possibilities frontier where the optimum of productive efficiency and wellbeing is attained, because of the distortion of risk/return decisions caused by perpetual financial repression. Not even a second-best allocation is feasible with the shocks to efficiency of financial repression in perpetuity.

The statement of the FOMC at the conclusion of its meeting on Dec 12, 2012, revealed policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm) practically unchanged in the statement at the conclusion of its meeting on Jan 30, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130130a.htm) and at its meeting on Mar 20, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130320a.htm):

Release Date: Mar 20, 2013

For immediate release

Information received since the Federal Open Market Committee met in January suggests a return to moderate economic growth following a pause late last year.  Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated.  Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy has become somewhat more restrictive.  Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices.  Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.  The Committee continues to see downside risks to the economic outlook.  The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.  The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.  Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months.  The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability.  In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.  In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.  In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. “

There are several important issues in this statement.

  1. Mandate. The FOMC pursues a policy of attaining its “dual mandate” of (http://www.federalreserve.gov/aboutthefed/mission.htm):

“Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates”

  1. Open-ended Quantitative Easing or QE. Earlier programs are continued with an additional open-ended $85 billion of bond purchases per month: “To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”
  1. Advance Guidance on “6 ¼ 2 ½ “Rule. Policy will be accommodative even after the economy recovers satisfactorily: “To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.  In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
  1. Monitoring and Policy Focus on Jobs. The FOMC reconsiders its policy continuously in accordance with available information: “In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”

Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval of (1.99, 2.0). Symmetric targets appear to have been abandoned in favor of a self-imposed single jobs mandate of easing monetary policy even with the economy growing at or close to potential output that is actually a target of growth forecast. The impact on the overall economy and the financial system of errors of policy are magnified by large-scale policy doses of trillions of dollars of quantitative easing and zero interest rates. The US economy has been experiencing financial repression as a result of negative real rates of interest during nearly a decade and programmed in monetary policy statements until 2015 or, for practical purposes, forever. The essential calculus of risk/return in capital budgeting and financial allocations has been distorted. If economic perspectives are doomed until 2015 such as to warrant zero interest rates and open-ended bond-buying by “printing” digital bank reserves (http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html; see Shultz et al 2012), rational investors and consumers will not invest and consume until just before interest rates are likely to increase. Monetary policy statements on intentions of zero interest rates for another three years or now virtually forever discourage investment and consumption or aggregate demand that can increase economic growth and generate more hiring and opportunities to increase wages and salaries. The doom scenario used to justify monetary policy accentuates adverse expectations on discounted future cash flows of potential economic projects that can revive the economy and create jobs. If it were possible to project the future with the central tendency of the monetary policy scenario and monetary policy tools do exist to reverse this adversity, why the tools have not worked before and even prevented the financial crisis? If there is such thing as “monetary policy science”, why it has such poor record and current inability to reverse production and employment adversity? There is no excuse of arguing that additional fiscal measures are needed because they were deployed simultaneously with similar ineffectiveness.

Table IV-2 provides economic projections of governors of the Board of Governors of the Federal Reserve and regional presidents of Federal Reserve Banks released at the meeting of Mar 20, 2013. The Fed releases the data with careful explanations (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf). Columns “∆% GDP,” “∆% PCE Inflation” and “∆% Core PCE Inflation” are changes “from the fourth quarter of the previous year to the fourth quarter of the year indicated.” The GDP report for IVQ2012 is analyzed in Section I (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) and the PCE inflation data from the report on personal income and outlays in Section IV (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html and earlier at (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html). The Bureau of Economic Analysis (BEA) provides the third estimate of IVQ2012 GDP and annual for 2012 with the first estimate for IQ2013 be released on Apr 26 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm See Section I and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html). PCE inflation is the index of personal consumption expenditures (PCE) of the report of the Bureau of Economic Analysis (BEA) on “Personal Income and Outlays” (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm), which is analyzed in Section IV http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and the report for Nov 2012 at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html. The next report on “Personal Income and Outlays” for Mar will be released at 8:30 AM on Apr 29, 2013 (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm). PCE core inflation consists of PCE inflation excluding food and energy. Column “UNEMP %” is the rate of unemployment measured as the average civilian unemployment rate in the fourth quarter of the year. The Bureau of Labor Statistics (BLS) provides the Employment Situation Report with the civilian unemployment rate in the first Friday of every month, which is analyzed in this blog. The report for Jan 2013 was released on Feb 1, 2013 and analyzed in this blog (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html). The report for Feb 2013 was released on Mar 8, 2013 (http://www.bls.gov/ces/) and analyzed in this blog on Mar 10, 2013 (http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm). The report for Mar 2013 was released on Apr 5, 2013 (http://www.bls.gov/ces/) and analyzed in this blog in the comment on Apr 7 (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html). “Longer term projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy” (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf).

It is instructive to focus on 2013 as 2014, 2015 and longer term are too far away, and there is not much information even on what will happen in 2013 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC but the second block of numbers provides the range of projections by FOMC participants. The first row for each year shows the projection introduced after the meeting of Mar 20, 2012 and the second row “PR” the projection of the Dec 12, 2012 meeting. There are three major changes in the view.

1. Growth “∆% GDP.” The FOMC has reduced the forecast of GDP growth in 2013 from 2.3 to 3.0 percent at the meeting in Dec 2012 to 2.3 to 2.8 percent at the meeting on Mar 20, 2013.

2. Rate of Unemployment “UNEM%.” The FOMC reduced the forecast of the rate of unemployment from 7.4 to 7.7 percent at the meeting on Dec 12, 2012 to 7.3 to 7.5 percent at the meeting on Mar 20, 2013.

3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 1.3 to 2.0 percent at the meeting on Dec 12, 2012 to 1.3 to 1.7 percent at the meeting on Mar 20, 2013.

4. Core Inflation “∆% Core PCE Inflation.” Core inflation is PCE inflation excluding food and energy. There is again not much of a difference of the projection that changed from 1.6 to 1.9 percent at the meeting on Dec 12, 2012 to 1.5 to 1.6 percent at the meeting on Mar 20, 2013.

Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, Dec 2012 and Mar 2012 

 

∆% GDP

UNEM %

∆% PCE Inflation

∆% Core PCE Inflation

Central
Tendency

       

2013 
Dec PR

2.3 to 2.8
2.3 to 3.0

7.3 to 7.5
7.4 to 7.7

1.3 to 1.7
1.3 to 2.0

1.5 to 1.6 1.6 to 1.9

2014 
Dec PR

2.9 to 3.4
3.0 to 3.5

6.7 to 7.0
6.8 to 7.3

1.5 to 2.0
1.5 to 2.0

1.7 to 2.0
1.6 to 2.0

2015
Dec

2.9 to 3.7

3.0 to 3.7

6.0 to 6.5

6.0 to 6.6

1.7 to 2.0

1.7 to 2.0

1.8 to 2.1

1.8 to 2.0

Longer Run

Sep PR

2.3 to 2.5

2.3 to 2.5

5.2 to 6.0

5.2 to 6.0

2.0

2.0

 

Range

       

2013
Dec PR

2.0 to 3.0
2.0 to 3.2

6.9 to 7.6
6.9 to 7.8

1.3 to 2.0
1.3 to 2.0

1.5 to 2.0
1.5 to 2.0

2014
Dec PR

2.6 to 3.8
2.8 to 4.0

6.1 to 7.1
6.1 to 7.4

1.4 to 2.1
1.4 to 2.2

1.5 to 2.1
1.5 to 2.0

2015

Dec PR

2.5 to 3.8

2.5 to 4.2

5.7 to 6.5

5.7 to 6.8

1.6 to 2.6

1.5 to 2.2

1.7 to 2.6

1.7 to 2.2

Longer Run

Dec PR

2.0 to 3.0

2.2 to 3.0

5.0 to 6.0

5.0 to 6.0

2.0

2.0

 

Notes: UEM: unemployment; PR: Projection

Source: Board of Governors of the Federal Reserve System, FOMC http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf

Another important decision at the FOMC meeting on Jan 25, 2012, is formal specification of the goal of inflation of 2 percent per year but without specific goal for unemployment (http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm):

“Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.

The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.

Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.

The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.

In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary.  However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. ”

The probable intention of this specific inflation goal is to “anchor” inflationary expectations. Massive doses of monetary policy of promoting growth to reduce unemployment could conflict with inflation control. Economic agents could incorporate inflationary expectations in their decisions. As a result, the rate of unemployment could remain the same but with much higher rate of inflation (see Kydland and Prescott 1977 and Barro and Gordon 1983; http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html See Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 99-116). Strong commitment to maintaining inflation at 2 percent could control expectations of inflation.

The FOMC continues its efforts of increasing transparency that can improve the credibility of its firmness in implementing its dual mandate. Table IV-3 provides the views by participants of the FOMC of the levels at which they expect the fed funds rate in 2012, 2013, 2014 and the in the longer term. Table IV-3 is inferred from a chart provided by the FOMC with the number of participants expecting the target of fed funds rate (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf). There are 18 participants expecting the rate to remain at 0 to ¼ percent in 2013 and one to be higher in the interval below 1.0 percent. The rate would still remain at 0 to ¼ percent in 2014 for 14 participants with three expecting the rate to be in the range of 1.0 to 2.0 percent, one participant expecting rates at 0.5 to 1.0 percent and one participant expecting rates from 2.0 to 3.0. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels until late in 2014. For 2015, nine participants expect rates to be below 1.0 percent while nine expect rates from 1.0 to 4.5 percent. In the long run, all 19 participants expect rates to be between 3.0 and 4.5 percent.

Table IV-3, US, Views of Target Federal Funds Rate at Year-End of Federal Reserve Board

Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012

 

0 to 0.25

0.5 to 1.0

1.0 to 1.5

1.0 to 2.0

2.0 to 3.0

3.0 to 4.5

2013

18

1

       

2014

14

1

 

3

1

 

2015

1

8

6

1

2

1

Longer Run

         

19

Source: Board of Governors of the Federal Reserve System, FOMC http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf

Additional information is provided in Table IV-4 with the number of participants expecting increasing interest rates in the years from 2013 to 2015. It is evident from Table IV-4 that the prevailing view of the FOMC is for interest rates to continue at low levels in future years. This view is consistent with the economic projections of low economic growth, relatively high unemployment and subdued inflation provided in Table IV-2.

Table IV-4, US, Views of Appropriate Year of Increasing Target Federal Funds Rate of Federal

Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 20, 2012

Appropriate Year of Increasing Target Fed Funds Rate

Number of Participants

2013

1

2014

4

2015

13

2016

1

Source: Board of Governors of the Federal Reserve System, FOMC http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf

Inflation in advanced economies has been fluctuating in waves at the production level with alternating surges and moderation of commodity price shocks. Table IV-6 provides month and 12-month percentage rates of inflation of Japan’s corporate goods price index (CGPI). Inflation measured by the CGPI increased 0.1 percent in Mar 2013 and fell 0.5 percent in 12 months. Measured by 12-month rates, CGPI inflation increased from minus 0.2 percent in Jul 2010 to a high of 2.2 percent in Jul-Aug 2011 and declined to minus 0.5 percent in Mar 2013. Calendar-year inflation for 2012 is minus 0.9 percent and 1.5 percent for 2011, which is the highest after declines in 2009 and 2010 but lower than 4.6 percent in the commodity shock driven by zero interest rates during the global recession in 2008. Inflation of the corporate goods prices follows waves similar to those in other indices around the world (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html). In the first wave, annual equivalent inflation reached 5.9 percent in Jan-Apr 2011, driven by commodity price shocks of the carry trade from zero interest rates to commodity futures. In the second wave, carry trades were unwound because of risk aversion caused by the European debt crisis, resulting in average annual equivalent inflation of minus 1.2 percent in May-Jun 2011. In the third wave, renewed risk aversion caused annual equivalent decline of the CGPI of minus 2.2 percent in Jul-Nov 2011. In the fourth wave, continuing risk aversion resulted in annual equivalent inflation of minus 0.6 percent in Dec 2011 to Jan 2012. In the fifth wave, renewed risk appetite resulted in annual equivalent inflation of 2.0 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation dropped to minus 5.8 percent in May-Jul 2012. In the seventh wave, annual equivalent inflation jumped to 3.0 percent in Aug-Sep 2012. In the eighth wave, annual equivalent inflation was minus 3.0 percent in Oct-Nov 2012 in a new round of risk aversion. In the ninth wave, annual equivalent inflation returned at 3.7 percent in Dec 2012-Mar 2013. Unconventional monetary policies of zero interest rates and quantitative easing have created a difficult environment for economic and financial decisions with significant inflation volatility.

Table IV-5, Japan, Corporate Goods Price Index (CGPI) ∆%

 

Month

Year

Mar 2013

0.1

-0.5

Feb

0.5

-0.1

Jan

0.2

-0.4

Dec 2012

0.4

-0.7

AE ∆% Dec-Mar

3.7

 

Nov

-0.1

-1.1

Oct

-0.4

-1.1

AE ∆% Oct-Nov

-3.0

 

Sep

0.3

-1.5

Aug

0.2

-2.0

AE ∆% Aug-Sep

3.0

 

Jul

-0.5

-2.3

Jun

-0.6

-1.5

May

-0.4

-0.9

AE ∆% May-Jul

-5.8

 

Apr

-0.2

-0.7

Mar

0.5

0.3

Feb

0.2

0.4

AE ∆% Feb-Apr

2.0

 

Jan

-0.1

0.3

Dec 2011

0.0

0.8

AE ∆% Dec-Jan

-0.6

 

Nov

-0.1

1.3

Oct

-0.8

1.3

Sep

-0.2

2.0

Aug

-0.1

2.2

Jul

0.3

2.2

AE ∆% Jul-Nov

-2.2

 

Jun

0.0

1.9

May

-0.2

1.6

AE ∆% May-Jun

-1.2

 

Apr

0.8

1.8

Mar

0.6

1.3

Feb

0.1

0.7

Jan

0.4

0.6

AE ∆% Jan-Apr

5.9

 

Dec 2010

0.5

1.2

Nov

-0.1

0.9

Oct

-0.1

0.9

Sep

0.0

-0.1

Aug

-0.1

0.0

Jul

0.0

-0.2

Calendar Year

   

2012

 

-0.9

2011

 

1.5

2010

 

-0.1

2009

 

-5.3

2008

 

4.6

AE: annual equivalent

Source: Bank of Japan http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1303.pdf http://www.boj.or.jp/en/statistics/index.htm/

Chart IV-1 of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan from 1970 to 2013. Percentage changes of inflation of services are not as sharp as those of goods. Japan had the same sharp waves of inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). Behavior of the CGPI of Japan in the 1970s mirrors the Great Inflation episode in the United States with waves of inflation rising to two digits. Both political pressures and errors abounded in the unhappy stagflation of the 1970s also known as the US Great Inflation (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). Inflation also collapsed in the beginning of the 1980s because of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid-2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.

clip_image001

Chart IV-1, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1970-2013

Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

There is similar behavior of year-on-year percentage changes of the US producer price index from 1970 to 2013 in Chart IV-2 of the US Bureau of Labor Statistics as in Chart IV-1 with the domestic goods CGPI. The behavior of the CGPI of Japan in the 1970s is quite similar to that of the US PPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.

clip_image002

Chart IV-2, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1970-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Finer detail is provided by Chart IV-3 of the domestic CGPI from 2008 to 2013. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion.

clip_image003

Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

There is similar behavior of the US producer price index from 2008 to 2013 in Chart IV-4 as in the domestic CGPI in Chart IV-3. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-4 followed by increasing slope during periods of risk appetite. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.

clip_image004

Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index fell from 104.8 in Jun 2009 to 94 in Feb 2012 or minus 10.3 percent and increased to 105.9 in Feb 2013 for a gain of 12.7 percent relative to Feb 2012 and 1.0 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

clip_image005

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 102.3 in Feb 2012 or 4.5 percent but dropped to 101.5 in Feb 2013 or minus 0.8 percent relative to Feb 2012 and gained 3.7 percent relative to Jun 2009.

clip_image006

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after the rise during the global recession in 2008 driven by carry trades from fed funds rates collapsing to zero into commodity futures and decline during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan. The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 106.4 in Feb 2012 or 13.8 percent and to 120.4 in Feb 2013 or gain of 13.2 percent relative to Feb 2012 and 28.8 percent relative to Jun 2009. Recent depreciation of the yen relative to the dollar explains the increase in imports in domestic yen prices.

clip_image007

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 115.8 in Feb 2012 or 34.3 percent and to 114.9 in Feb 2013 or minus 0.8 percent relative to Feb 2012 and gain of 33.3 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 3.7 percent from Jun 2009 to Feb 2012 while the import corporate goods price index increased 33.3 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 3.7 percent from Jun 2009 to Feb 2012, while imports of corporate goods, mostly commodities and raw materials increased 33.3 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

clip_image008

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2013. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from interest rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

clip_image009

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2013

Source: Bank of Japan

http://www.stat-search.boj.or.jp/index_en.html

The producer price index of the US from 1970 to 2013 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

clip_image010

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-6. Petroleum and coal with weight of 5.7 percent increased 0.6 percent in Mar 2013 and increased 1.6 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, increased 0.4 percent in Mar 2013 and increased 0.2 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income.

Table IV-6, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Mar 2013

Weight

Month ∆%

12 Month ∆%

Total

1000.0

0.1

-0.5

Food, Beverages, Tobacco, Feedstuffs

137.5

-0.1

0.4

Petroleum & Coal

57.4

0.6

1.6

Production Machinery

30.8

0.4

0.2

Electronic Components

31.0

-0.3

-1.9

Electric Power, Gas & Water

52.7

0.4

4.2

Iron & Steel

56.6

0.3

-7.5

Chemicals

92.1

0.3

0.9

Transport
Equipment

136.4

0.0

-2.2

Source: Bank of Japan http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1303.pdf

Percentage point contributions to change of the corporate goods price index (CGPI) in Mar 2013 are provided in Table IV-7 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.1 percent in Mar 2013, the energy shock resulting from carry trades is evident in the contribution of 0.04 percentage points by petroleum and coal products in new carry trades of exposures in commodity futures. The exports CGPI decreased 0.2 percent on the basis of the contract currency with deduction of 0.08 percentage points by general purpose, production & business oriented machinery. The imports CGPI increased 0.3 percent on the contract currency basis. Petroleum, coal & natural gas added 0.45 percentage points because of new carry trades into energy commodity exposures. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table IV-7, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Mar 2013

Contribution to Change Percentage Points

A. Domestic Corporate Goods Price Index

Monthly Change: 
0.1%

Petroleum & Coal Products

0.04

Scrap & Waste

0.03

Chemicals & Related Products

0.02

Electric Power, Gas & Water

0.02

Iron & Steel

0.02

Nonferrous Metals

-0.02

B. Export Price Index

Monthly Change: 
-0.2% contract currency

General Purpose, Production & Business Oriented Machinery

-0.08

Textiles

-0.07

Metals & Related Products

-0.06

Chemicals & Related Products

0.07

C. Import Price Index

Monthly Change:

0.3 % contract currency basis

Petroleum, Coal & Natural Gas

0.45

Metals & Related Products

-0.09

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1303.pdf

China is experiencing similar inflation behavior as the advanced economies in prior months in the form of declining commodity prices but differs in decreasing inflation of producer prices relative to a year earlier. As shown in Table IV-8, inflation of the price indexes for industry in Mar 2013 is 0.0 percent; 12-month inflation is minus 1.9 percent in Mar; and cumulative inflation in Jan-Mar 2013 relative to Jan-Mar 2012 is minus 1.7 percent. Inflation of segments in Mar 2013 in China is provided in Table IV-8 in column “Month Mar 2013 ∆%.” There were increases of prices of mining & quarrying of 0.4 percent in Mar but decrease of 5.6 percent in 12 months. Prices of consumer goods decreased 0.1 percent in Mar and increased 0.5 percent in 12 months. Prices of inputs in the purchaser price index decreased 0.1 percent in Mar and declined 2.0 percent in 12 months. Fuel and power increased 0.5 percent in Mar and declined 3.2 percent in 12 months. An important category of inputs for exports is textile raw materials, increasing 0.1 percent in Feb and declining 0.9 percent in 12 months.

Table IV-8, China, Price Indexes for Industry ∆%

 

Month     Mar 2013 ∆%

12-Month Mar 2013 ∆%

Jan-Mar 2013/Jan-Mar 2012 ∆%

I Producer Price Indexes

0.0

-1.9

-1.7

Means of Production

0.0

-2.7

-2.5

Mining & Quarrying

0.4

-5.6

-5.3

Raw Materials

0.1

-3.2

-2.7

Processing

-0.1

-2.1

-2.1

Consumer Goods

-0.1

0.5

0.6

Food

-0.2

1.2

1.3

Clothing

-0.1

1.4

1.5

Daily Use Articles

-0.1

0.3

0.6

Durable Consumer Goods

-0.1

-0.8

-0.9

II Purchaser Price Indexes

-0.1

-2.0

-1.9

Fuel and Power

0.5

-3.2

-2.9

Ferrous Metals

0.1

-5.0

-5.6

Nonferrous Metals

-1.1

-3.7

-2.6

Raw Chemical Materials

-0.2

-3.1

-3.1

Wood & Pulp

0.4

-0.2

-0.4

Building Materials

-0.3

-2.0

-1.7

Other Industrial Raw Materials

0.1

-0.7

-0.8

Agricultural

-0.6

1.9

2.3

Textile Raw Materials

0.1

-0.9

-0.9

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

China’s producer price inflation follows waves similar to those around the world but with declining trend since May 2012, as shown in Table IV-9. In the first wave, annual equivalent inflation was 6.4 percent in Jan-Jun 2011, driven by carry trades from zero interest rates to commodity futures. In the second wave, risk aversion unwound carry trades, resulting in annual equivalent inflation of minus 3.1 percent in Jul-Nov 2011. In the third wave, renewed risk aversion resulted in annual equivalent inflation of minus 2.4 percent in Dec 2011-Jan 2012. In the fourth wave, new carry trades resulted in annual equivalent inflation of 2.4 percent in Feb-Apr 2012. In the fifth wave, annual equivalent is minus 5.8 percent in May-Sep 2012. There are declining producer prices in China in Aug-Sep 2012 in contrast with increases worldwide. In a sixth wave, producer prices increased 0.2 percent in Oct 2012, which is equivalent to 2.4 percent in a year. In an eighth wave, annual equivalent inflation was minus 1.2 percent in Nov-Dec 2012. In the ninth wave, annual equivalent inflation in Jan-Mar 2013 is 1.6 percent.

Table IV-9, China, Month and 12-Month Rate of Change of Producer Price Index, ∆%

 

12-Month ∆%

Month ∆%

Mar 2013

-1.9

0.0

Feb

-1.6

0.2

Jan

-1.6

0.2

AE ∆% Jan-Mar

 

1.6

Dec 2012

-1.9

-0.1

Nov

-2.2

-0.1

AE ∆% Nov-Dec

 

-1.2

Oct

-2.8

0.2

AE ∆% Oct

 

2.4

Sep

-3.6

-0.1

Aug

-3.5

-0.5

Jul

-2.9

-0.8

Jun

-2.1

-0.7

May

-1.4

-0.4

AE ∆% May-Sep

 

-5.8

Apr

-0.7

0.2

Mar

-0.3

0.3

Feb

0.0

0.1

AE ∆% Feb-Apr

 

2.4

Jan

0.7

-0.1

Dec 2011

1.7

-0.3

AE ∆% Dec-Jan

 

-2.4

Nov

2.7

-0.7

Oct

5.0

-0.7

Sep

6.5

0.0

Aug

7.3

0.1

Jul

7.5

0.0

AE ∆% Jul-Nov

 

-3.1

Jun

7.1

0.0

May

6.8

0.3

Apr

6.8

0.5

Mar

7.3

0.6

Feb

7.2

0.8

Jan

6.6

0.9

AE ∆% Jan-Jun

 

6.4

Dec 2010

5.9

0.7

AE: Annual Equivalent

Source: National Bureau of Statistics of China

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

Chart IV-9 of the National Bureau of Statistics of China provides monthly and 12-month rates of inflation of the price indexes for the industrial sector. Negative monthly rates in Oct, Nov, Dec 2011, Jan, Mar, Apr, May, Jun, Jul, Aug, Sep, Nov and Dec 2012 pulled down the 12-month rates to 5.0 percent in Oct 2011, 2.7 percent in Nov, 1.7 percent in Dec, 0.7 percent in Jan 2012, 0.0 percent in Feb, minus 0.3 percent in Mar, minus 0.7 percent in Apr, minus 1.4 percent in May, 2.1 in Jun, minus 2.9 percent in Jul, minus 3.5 percent in Aug, minus 3.6 percent in Sep. The increase of 0.2 percent in Oct 2012 pulled up the 12-month rate to minus 2.8 percent and the rate eased to minus 2.2 percent in Nov 2012 and minus 1.9 percent in Dec 2012. Increases of 0.2 percent in Jan and Feb 2013 pulled the 12-month rate to minus 1.6 percent while no change in Mar 2013 brought down the 12-month rate to minus 1.9 percent.

clip_image011

Chart IV-9, China, Producer Prices for the Industrial Sector Month and 12 months ∆%

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

Chart IV-10 of the National Bureau of Statistics of China provides monthly and 12-month inflation of the purchaser product indices for the industrial sector. Decreasing monthly inflation with four successive contractions from Oct 2011 to Jan 2012 and May-Aug 2012 pulled down the 12-month rate to minus 4.1 percent in Aug and Sep. Consecutive increases of 0.1 percent in Sep and Oct 2012 raised the 12-month rate to minus 3.3 percent in Oct 2012. The rate eased to minus 2.8 in Nov 2012 with decrease of 0.2 percent in Nov 2012 and minus 2.4 percent in Dec 2012 with monthly decrease of 0.1 percent. Increase of 0.3 percent in Jan 2013 and 0.2 in Feb 2013 pulled the 12-month rate to minus 1.9 percent. Decrease of prices of 0.1 percent in Mar 2013 brought down the 12-month rate to minus 2.0 percent.

clip_image012

Chart IV-10, China, Purchaser Product Indices for Industrial Sector

Source: National Bureau of Statistics of China

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

China is highly conscious of food price inflation because of its high weight in the basket of consumption of the population. Consumer price inflation in China in Mar 2013 was minus 0.9 percent and 2.1 percent in 12 months, as shown in Table IV-10. Food prices decreased 2.9 percent in Mar 2013, increasing 2.7 percent in 12 months because of inclement winter weather in prior months. Another area of concern is housing inflation, which was 0.3 in Feb but increased 2.8 percent in 12 months. Prices of services increased 0.5 percent in Mar and gained 2.9 percent in 12 months.

Table IV-10, China, Consumer Price Index

2013

Mar 2013 Month   ∆%

Mar 2013 12-Month  ∆%

Jan-Mar 2013   ∆% Jan-Mar 2012

Consumer Prices

-0.9

2.1

2.4

Urban

-0.9

2.0

2.4

Rural

-1.0

2.2

2.6

Food

-2.9

2.7

3.8

Non-food

0.1

1.8

1.7

Consumer Goods

-1.3

1.7

2.3

Services

0.0

3.1

2.8

Commodity Categories:

     

Food

-2.9

2.7

3.8

Tobacco, Liquor

-0.1

1.0

1.2

Clothing

0.6

2.3

2.3

Household

0.0

1.6

1.6

Healthcare & Personal Articles

0.0

1.7

1.7

Transportation & Communication

-0.3

-0.3

-0.1

Recreation, Education, Culture & Services

-0.4

1.7

1.4

Residence

0.5

2.9

2.9

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

Month and 12-month rates of change of consumer prices are provided in Table IV-11. There are waves of consumer price inflation in China similar to those around the world (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html). In the first wave, consumer prices increased at the annual equivalent rate of 8.3 percent in Jan-Mar 2011, driven by commodity price increases resulting from unconventional monetary policy of zero interest rates. In the second wave, risk aversion unwound carry trades with annual equivalent inflation falling to the rate of 2.0 percent in Apr-Jun 2011. In the third wave, inflation returned at 2.9 percent with renewed interest in commodity exposures in Jul-Nov 2011. In the fourth wave, inflation returned at a high 5.8 percent annual equivalent in Dec 2011 to Mar 2012. In the fifth wave, annual equivalent inflation was minus 3.9 percent in Apr to Jun 2012. In the sixth wave, annual equivalent inflation rose to 4.1 percent in Jul-Sep 2012. In the seventh wave, inflation was minus 1.2 percent annual equivalent in Oct 2012 and 0.0 percent in Oct-Nov 2012. In the eighth wave, annual equivalent inflation was 12.2 percent in Dec 2012-Feb 2013 primarily because of winter weather that caused increases in food prices. In the ninth wave, collapse of food prices resulted in annual equivalent inflation of minus 10.3 percent in Mar 2013. Inflation volatility originating in unconventional monetary policy clouds investment and consumption decisions by business and households.

Table IV-11, China, Month and 12-Month Rates of Change of Consumer Price Index ∆%

 

Month ∆%

12-Month ∆%

Mar 2013

-0.9

2.1

AE ∆% Mar

-10.3

 

Feb

1.1

3.2

Jan

1.0

2.0

Dec 2012

0.8

2.5

AE ∆% Dec-Feb

12.2

 

Nov

0.1

2.0

Oct

-0.1

1.7

AE ∆% Oct-Nov

0.0

 

Sep

0.3

1.9

Aug

0.6

2.0

Jul

0.1

1.8

AE ∆% Jul-Sep

4.1

 

Jun

-0.6

2.2

May

-0.3

3.0

Apr

-0.1

3.4

AE ∆% Apr to Jun

-3.9

 

Mar

0.2

3.6

Feb

-0.1

3.2

Jan

1.5

4.5

Dec 2011

0.3

4.1

AE ∆% Dec to Mar

5.8

 

Nov

-0.2

4.2

Oct

0.1

5.5

Sep

0.5

6.1

Aug

0.3

6.2

Jul

0.5

6.5

AE ∆% Jul to Nov

2.9

 

Jun

0.3

6.4

May

0.1

5.5

Apr

0.1

5.3

AE ∆% Apr to Jun

2.0

2.0

Mar

-0.2

5.4

Feb

1.2

4.9

Jan

1.0

4.9

AE ∆% Jan to Mar

8.3

 

Dec 2010

0.5

4.6

AE: Annual Equivalent

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

Chart IV-11 of the National Bureau of Statistics of China provides monthly and 12-month rates of consumer price inflation. In contrast with producer prices, consumer prices had not moderated at the monthly marginal rates. Consumer prices fell 0.2 percent in Nov 2011 after increasing only 0.1 percent in Oct but increased 0.3 percent in Dec and a high 1.5 percent in Jan 2012, declining 0.1 percent in Feb, rising 0.2 percent in Mar and declining 0.1 percent in Apr, 0.3 percent in May and 0.6 percent in Jun 2012 but increasing 0.1 percent in Jul, 0.6 percent in Aug 2012 and 0.3 percent in Sep 2012. Consumer prices fell 0.1 percent in Oct 2012. The decline of 0.1 percent in Feb 2012 pulled down the 12-month rate to 3.2 percent, which bounced back to 3.6 percent in Mar with the monthly increase of 0.2 percent and fell to 2.2 percent in Jun with increasing pace of monthly decline from Apr to Jun 2012. Even with increase of 0.1 percent in Jul 2012, consumer price inflation in 12 months fell to 1.8 percent in Jul 2012 but bounced back to 2.0 percent with increase of 0.6 percent in Aug. In Sep, increase of 0.3 percent still maintained 12-month inflation at 1.9 percent. The decline of 0.1 percent in Oct 2012 pulled down the 12-month rate to 1.7 percent, which is the lowest in Chart IV-3. Increase of 0.1 percent in Nov 2012 pulled up the 12-month rate to 2.0 percent. Abnormal increase of 0.8 percent in Dec 2012 because of winter weather pulled up the 12-month rate to 2.5 percent. Even with increase of 1.0 percent in Jan 2013 12-month inflation fell to 2.0 percent. Inflation of 1.1 percent in Feb 2013 pulled the 12-month rate to 3.2 percent. Collapse of food prices with decline of consumer prices by 0.9 percent in Mar 2013 brought down the 12-month rate to 2.1 percent.

clip_image013

Chart IV-11, China, Consumer Prices ∆% Month and 12 Months Oct 2011 to Oct 2012

Source: National Bureau of Statistics of China

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

The estimate of consumer price inflation in Germany in Table IV-12 is 1.4 percent in 12 months ending in Mar 2013, 0.5 percent NSA in Mar 2013 relative to Feb 2013 and 0.1 percent SA in Mar 2013 relative to Feb 2013. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html), as shown in Table IV-12. In the first wave, annual equivalent inflation was 3.0 percent in Feb-Apr 2011 NSA and 2.4 percent SA during risk appetite in carry trades from zero interest rates to commodity futures. In the second wave, annual equivalent consumer price inflation collapsed to 0.6 percent NSA and 3.0 percent SA in May-Jun 2011 because of risk aversion caused by European sovereign debt event. In the third wave, annual equivalent consumer price inflation was 1.7 percent NSA and 1.9 percent SA in Jul-Nov 2011 because of relaxed risk aversion. In the fourth wave, annual equivalent inflation was 0.6 percent NSA and 1.8 percent SA in Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation rose to 4.5 percent NSA and 2.0 percent SA in Feb-Apr 2012 during another energy-commodity carry trade shock. In the sixth wave, annual equivalent inflation in May-Jun 2012 is minus 1.2 percent NSA and 1.2 percent SA. In the seventh wave, annual equivalent inflation NSA is 4.9 percent in Jul-Aug 2012 and 3.7 percent SA. In the eighth wave in Sep-Dec 2012, annual equivalent inflation is 1.5 percent NSA and 1.5 percent SA. In the ninth wave, annual equivalent inflation fell to minus 5.8 percent NSA in Jan 2013 and minus 1.2 percent SA. In the eleventh wave, annual equivalent inflation rose to 6.8 percent NSA in Feb-Mar 2013 and 1.2 percent CSA. Under unconventional monetary policy of zero interest rates and quantitative easing inflation becomes highly volatile during alternative shocks of risk aversion and risk appetite, preventing sound investment and consumption decisions.

Table IV-12, Germany, Consumer Price Index ∆%

 

12-Month ∆%

Month ∆% NSA

Month ∆% CSA

Mar 2013

1.4

0.5

0.1

Feb

1.5

0.6

0.1

AE ∆% Feb-Mar

 

6.8

1.2

Jan

1.7

-0.5

-0.1

AE ∆% Jan

 

-5.8

-1.2

Dec 2012

2.0

0.3

0.2

Nov

1.9

0.1

0.1

Oct

2.0

0.0

0.1

Sep

2.0

0.1

0.1

AE ∆% Sep-Dec

 

1.5

1.5

Aug

2.2

0.4

0.3

Jul

1.9

0.4

0.3

AE ∆% Jul-Aug

 

4.9

3.7

Jun

1.7

-0.2

0.0

May

2.0

0.0

0.2

AE ∆% May-Jun

 

-1.2

1.2

Apr

2.0

-0.2

0.1

Mar

2.2

0.6

0.2

Feb

2.2

0.7

0.2

AE ∆% Feb-Apr

 

4.5

2.0

Jan

2.1

-0.1

0.3

Dec 2011

2.0

0.2

0.0

AE ∆% Dec-Jan

 

0.6

1.8

Nov

2.4

0.2

0.2

Oct

2.3

0.0

0.1

Sep

2.4

0.2

0.3

Aug

2.1

0.1

0.1

Jul

2.1

0.2

0.1

AE ∆% Jul-Nov

 

1.7

1.9

Jun

2.1

0.1

0.3

May

2.0

0.0

0.2

AE ∆% May-Jun

 

0.6

3.0

Apr

1.9

0.0

0.2

Mar

2.0

0.6

0.2

Feb

1.9

0.6

0.2

Jan

1.7

-0.2

0.2

AE ∆% Feb-Apr

 

3.0

2.4

Dec 2010

1.3

0.6

0.2

Nov

1.5

0.1

0.2

Oct

1.3

0.1

0.2

Sep

1.2

-0.1

0.1

Aug

1.0

0.1

0.1

Annual Average ∆%

     

2012

2.0

   

2011

2.1

   

2010

1.1

   

2009

0.4

   

2008

2.6

   

Dec 2009

0.8

   

Dec 2008

1.1

   

Dec 2007

3.2

   

Dec 2006

1.4

   

Dec 2005

1.4

   

Dec 2004

2.2

   

Dec 2003

1.1

   

Dec 2002

1.1

   

Dec 2001

1.6

   

AE: Annual Equivalent

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

Chart IV-12 of the Statistisches Bundesamt Deutschland, or federal statistical office of Germany, provides the unadjusted consumer price index of Germany from 2005 to 2013. There is evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in subsequent months with renewed strength in Dec, decline in Jan 2012 and another upward spike from Feb to Apr 2012, new drop in May-Jun 2012 and increases in Jul and Aug 2012 relaxed in Sep-Nov 2012. Inflation returned in Dec 2012 and fell in Jan 2013, rebounding in Feb-Mar 2013. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.

clip_image014

Chart IV-12, Germany, Consumer Price Index, Unadjusted, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-13, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2009 to 2013. Chart IV-13 captures inflation waves with alternation of periods of positive and negative slopes resulting from zero interest rates with shocks of risk appetite and risk aversion. For example, the negative slope of decline of inflation by 0.2 percent in Jun 2012 and 0.0 percent in May 2012 follows an upward slope of price increases in Feb-Apr 2012 after decline of inflation by 0.1 percent in Jan 2012. The final segment shows another positive slope caused by inflation of 0.4 percent in Jul 2012, which is followed by 0.4 percent in Aug 2012 and flattening segment as inflation remains almost unchanged with 0.1 percent in Sep 0.0 percent in Oct 2012, increasing 0.1 percent in Nov 2012 and increasing 0.3 percent in Dec 2012. Inflation fell 0.5 percent in Jan 2013 and jumped 0.6 percent in Feb 2013 and 0.5 percent in Mar 2013. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

clip_image016

Chart IV-13, Germany, Consumer Price Index, Unadjusted and Trend, 2005=100

Source: Statistisches Bundesamt Deutschland

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

Table IV-13 provides the monthly and 12-month rate of inflation for segments of the consumer price index of Germany in Mar 2013. Inflation excluding energy increased 0.7 percent in Mar 2013 and rose 1.6 percent in 12 months. Excluding household energy inflation was 0.5 percent in Mar 2013 and rose 1.2 percent in 12 months. Food prices increased 0.9 percent in Mar 2013 and increased 3.7 percent in 12 months. There were differences in inflation of energy-related prices. Heating oil fell 6.2 percent in 12 months and decreased 3.1 percent in Mar. Motor fuels decreased 3.4 percent in Mar and decreased 6.7 percent in 12 months.

Table IV-13, Germany, Consumer Price Index ∆%

Mar 2013

Weight

12- Month ∆%

Month   ∆%

Total

1,000.00

1.4

0.5

Excluding heating oil and motor fuels

950.52

1.9

0.7

Excluding household energy

931.81

1.2

0.5

Excluding Energy

893.44

1.6

0.7

Total Goods

479.77

1.4

0.4

Nondurable Consumer Goods

307.89

1.6

-0.3

Medium-Term Life Consumer Goods

91.05

2.1

2.9

Durable Consumer Goods

80.83

-0.2

0.2

Services

520.23

1.5

0.5

Energy Components

     

Motor Fuels

38.37

-6.7

-3.4

Household Energy

68.19

4.7

-0.3

Heating Oil

11.11

-6.2

-3.1

Food

90.52

3.7

0.9

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2013/04/PE13_135_611.html;jsessionid=EEAA55E4364EE2FA5E5FE3DC00BF56E7.cae2

Table IV-14 provides monthly and 12 months consumer price inflation in France. There are the same waves as in inflation worldwide (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html). In the first wave, annual equivalent inflation in Jan-Apr 2011 was 4.3 percent driven by the carry trade from zero interest rates to commodity futures positions in an environment of risk appetite. In the second wave, risk aversion caused the reversal of carry trades into commodity futures, resulting in the fall of the annual equivalent inflation rate to minus 1.2 percent in May-Jul 2011. In the third wave, annual equivalent inflation rose to 3.0 percent in Aug-Nov 2011 with alternations of risk aversion and risk appetite. In the fourth wave, risk aversion originating in the European debt crisis caused annual equivalent inflation of 0.0 percent from Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation increased to 5.3 percent in Feb-Apr 2012. In the sixth wave, annual equivalent inflation was minus 2.4 percent in May-Jul 2012 during another bout of risk aversion causing reversal of carry trades from zero interest rates to commodity price futures exposures. In the seventh wave, annual equivalent inflation jumped to 8.7 percent in Aug 2012, 3.0 percent in Aug-Sep 2012 and 2.8 percent in Aug-Oct 2012. In the eighth wave, annual equivalent inflation was minus 2.4 percent in Nov 2012 and minus 1.6 percent in Nov 2012 to Jan 2013. In the ninth wave, annual equivalent inflation was 6.8 percent in Feb-Mar 2013.

Table IV-14, France, Consumer Price Index, Month and 12-Month ∆%

 

Month ∆%

12-Month ∆%

Mar 2013

0.8

1.0

Feb

0.3

1.0

AE ∆% Feb-Mar

6.8

 

Jan

-0.5

1.2

Dec 2012

0.3

1.3

Nov

-0.2

1.4

AE ∆% Nov-Jan

-1.6

 

Oct

0.2

1.9

Sep

-0.2

1.9

Aug

0.7

2.1

AE ∆% Aug-Oct

2.8

 

Jul

-0.5

1.9

Jun

0.0

1.9

May

-0.1

2.0

AE ∆% May-Jul

-2.4

 

Apr

0.1

2.1

Mar

0.8

2.3

Feb

0.4

2.3

AE ∆% Feb-Apr

5.3

 

Jan

-0.4

2.4

Dec 2011

0.4

2.5

AE ∆% Dec-Jan

0.0

 

Nov

0.3

2.5

Oct

0.3

2.4

Sep

-0.1

2.2

Aug

0.5

2.2

AE ∆% Aug-Nov

3.0

 

Jul

-0.5

1.9

Jun

0.1

2.1

May

0.1

2.0

AE ∆% May-Jul

-1.2

 

Apr

0.3

2.1

Mar

0.8

2.0

Feb

0.5

1.6

Jan

-0.2

1.8

AE ∆% Jan-Apr

4.3

 

Dec 2010

0.4

1.8

Annual

   

2012

 

2.0

2011

 

2.1

2010

 

1.5

2009

 

0.1

2008

 

2.8

2007

 

1.5

2006

 

1.6

2005

 

1.8

2004

 

2.1

2003

 

2.1

2002

 

1.9

2001

 

1.7

2000

 

1.7

1999

 

0.5

1998

 

0.7

1997

 

1.2

1996

 

2.0

1995

 

1.8

1994

 

1.6

1993

 

2.1

1992

 

2.4

1991

 

3.2

AE: Annual Equivalent Metropolitan France

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130411

Table IV-15 provides consumer price inflation in France and of various items in Mar 2013 and in the 12 months ending in Mar 2013. Inflation of all items was 0.8 percent in Mar 2013 and 1.0 percent in 12 months. Energy prices decreased 0.2 percent in Mar 2013 and increased 1.0 percent in 12 months. Transport and communications increased 0.8 percent in Mar 2013 and fell 6.7 percent in 12 months. Food and rentals and dwellings show the higher 12-month increases of 1.4 percent and 2.0 percent, respectively.

Table IV-15, France, Consumer Price Index, Month and 12-Month Percentage Changes of Index and Components, ∆%

Mar 2013

Weights

Month ∆%

12-Month ∆%

All Items

10000

0.8

1.0

Food

1658

0.5

1.4

Manufactured Products

2378

2.0

0.0

Energy

822

-0.2

1.0

Petroleum Products

495

-0.2

-2.0

Services

4576

0.4

1.2

Rentals, Dwellings

748

0.2

2.0

Transport and Communications

506

0.8

-6.7

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130411

Chart IV-14 of the Institut National de la Statistique et des Études Économiques (INSEE) of France shows headline and core consumer price inflation of France. Inflation rose during the commodity price shock of unconventional monetary policy. Risk aversion in late 2008 and beginning of 2009 caused collapse of valuation of commodity futures with resulting decline in inflation. Unconventional monetary policy with alternations of risk aversion resulted in higher inflation in France that stabilized in recent months until the increase of 0.2 percent in Oct 2011, 0.3 percent in Nov and 0.4 percent in Dec that were followed by decline of 0.4 percent in Jan 2012 and increases of 0.4 percent in Feb and 0.8 percent in Mar followed by 0.1 percent in Apr minus 0.1 percent in May and no change in Jun 2012 with marginal decline of 0.4 percent in Jul. Inflation returned with 0.7 percent in Aug 2012 but decline of 0.3 percent in Sep 2012 followed with increase of 0.2 percent in Oct 2012 and decrease of 0.2 percent in Nov 2012. Inflation in Dec 2012 was 0.3 percent and minus 0.5 percent in Jan 2013. Inflation returned at 0.3 percent in Feb 2013. Both the headline and core indexes are showing negative slopes in the new environment of risk aversion that causes reversals of carry trades into commodity futures prices. The 12-month rate of inflation has declined from 2.5 percent in Dec 2011 to 1.3 percent in Dec 2012, 1.2 percent in Jan 2013 and 1.0 percent in Feb-Mar 2013.

clip_image017

Chart IV-14, France, Consumer Price Index (IPC) and Core Consumer Price Index (ISJ) 12 Months Rates of Change

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=29&date=20130411

The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-16. Annual equivalent inflation in the first four months of 2011 was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May 2011 at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov 2011 jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.7 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. In the ninth wave, inflation collapsed to zero in Sep-Oct 2012 and was minus 0.8 percent in annual equivalent in Sep-Nov 2012. In the tenth wave, annual equivalent inflation in Dec 2012 to Mar 2013 was 2.4 percent. Economies are shocked worldwide by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html).

Table IV-16, Italy, Consumer Price Index

 

Month

12 Months

Mar 2013

0.2

1.6

Feb

0.1

1.9

Jan

0.2

2.2

Dec 2012

0.2

2.3

AE ∆% Dec 2012-Mar 2013

2.4

 

Nov 2012

-0.2

2.5

Oct

0.0

2.6

Sep

0.0

3.2

AE ∆% Sep-Nov

-0.8

 

Aug

0.4

3.2

Jul

0.1

3.1

AE ∆% Jul-Aug

3.0

 

June

0.2

3.3

May

0.0

3.2

AE ∆% May-Jun

1.2

 

Apr

0.5

3.3

Mar

0.5

3.3

Feb

0.4

3.3

AE ∆% Feb-Apr

5.7

 

Jan

0.3

3.2

Dec 2011

0.4

3.3

AE ∆% Dec-Jan

4.3

 

Nov

-0.1

3.3

Oct

0.6

3.4

AE ∆% Oct-Nov

3.0

 

Sep

0.0

3.0

Aug

0.3

2.8

Jul

0.3

2.7

AE ∆% Jul-Sep

2.4

 

Jun

0.1

2.7

May

0.1

2.6

AE ∆% May-Jun

1.2

 

Apr

0.5

2.6

Mar

0.4

2.5

Feb

0.3

2.4

Jan

0.4

2.1

AE ∆% Jan-Apr

4.9

 

Dec 2010

0.4

1.9

Annual

   

2012

 

3.0

2011

 

2.8

2010

 

1.5

2009

 

0.8

2008

 

3.3

2007

 

1.8

2006

 

2.1

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/87441

Consumer price inflation in Italy by segments in the estimate by ISTAT for Feb 2013 is provided in Table IV-17. Total consumer price inflation in Mar 2013 was 0.2 percent and 1.6 percent in 12 months. Inflation of goods was 0.1 percent in Mar 2013 and 2.0 percent in 12 months. Prices of durable goods decreased 0.2 percent in Mar and decreased 0.3 percent in 12 months, as typical in most countries. Prices of energy increased 0.2 percent in Mar and increased 3.4 percent in 12 months. Food prices increased 0.1 percent in Feb and increased 2.5 percent in 12 months. Prices of services decreased 0.1 percent in Mar and rose 2.5 percent in 12 months. Transport prices, also influenced by commodity prices, increased 1.7 percent in Mar and increased 3.3 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html).

Table IV-17, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%

Mar 2013

Weights

Month ∆%

12-Month ∆%

General Index

1,000,000

0.2

1.6

I Goods

559,402

0.1

1.7

Food

168,499

0.1

2.5

Energy

94,758

0.2

3.4

Durable

89,934

-0.2

-0.3

Nondurable

71,031

0.0

1.2

II Services

440,598

0.5

1.7

Housing

71,158

0.1

2.0

Communications

20,227

-0.7

-5.0

Transport

81,266

1.7

3.3

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/87441

Chart IV-14 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy with marginal increase followed by decline to 2.5 percent in Nov 2012, 2.3 percent in Dec 2012, 2.2 percent in Jan 2013, 1.9 percent in Feb 2013 and 1.6 percent in Mar 2013.

clip_image018

Chart, IV-14, Italy, Consumer Price Index, 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

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

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 IVQ2012 available now for all countries. Growth is weak throughout most of the world. Japan’s GDP increased 1.5 percent in IQ2012 and 3.4 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.2 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 0.9 percent, which is much lower than 6.1 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 3.7 percent and increased 0.4 percent relative to a year earlier. Japan’s GDP grew 0.0 percent in IVQ2012 at the SAAR of 0.2 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 relative to a year earlier. China grew at 2.2 percent in IIIQ2012, which annualizes at 9.1 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 2.0 percent, which annualizes at 8.2 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. Xinhuanet informs that Premier Wen Jiabao considers the need for macroeconomic stimulus, arguing that “we should continue to implement proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). Premier Wen elaborates that “the country should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations” (http://news.xinhuanet.com/english/china/2012-05/20/c_131599662.htm). There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). China’s GDP grew 7.9 percent in IVQ2012 relative to IVQ2011. Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2012. China’s GDP grew 8.1 percent in IQ2012 relative to a year earlier but only 7.6 percent in IIQ2012 relative to a year earlier, 7.4 percent in IIIQ2012 relative to IIIQ2011 and 7.9 percent in IVQ2012 relative to year earlier. GDP fell 0.1 percent in the euro area in IQ2012 and increased 0.3 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.8 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.8 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.6 percent relative to the prior quarter and fell 0.9 percent relative to a year earlier. Germany’s GDP increased 0.5 percent in IQ2012 and 1.7 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.3 percent and 0.5 percent relative to a year earlier but 1.0 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.2 percent and 0.4 percent relative to a year earlier. Germany’s GDP contracted 0.6 percent in IVQ2012 and increased 0.1 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.5 percent in IQ2012 at the SAAR of 2.0 percent and grew 2.4 percent relative to a year earlier. US GDP increased 0.3 percent in IIQ2012, 1.3 percent at SAAR and 2.1 percent relative to a year earlier. In IIIQ2012, GDP grew 0.8 percent, 3.1 percent at SAAR and 2.6 percent relative to IIIQ2011. In IVQ2012, GDP grew 0.0 percent,

0.4 percent at SAAR and 1.7 percent relative to IVQ2011 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html) and weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html). In IQ2012, UK GDP fell 0.1 percent, increasing 0.3 percent relative to a year earlier. UK GDP fell 0.4 percent in IIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.9 percent in IIIQ2012 and increased 0.4 percent relative to a year earlier. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and increased 0.2 percent relative to a year earlier. Italy has experienced decline of GDP in six consecutive quarters from IIIQ2011 to IVQ2012. Italy’s GDP fell 0.9 percent in IQ2012 and declined 1.6 percent relative to IQ2011. Italy’s GDP fell 0.7 percent in IIQ2012 and declined 2.6 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.2 percent and declined 2.6 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.8 percent relative to a year earlier. France’s GDP fell 0.1 percent in IQ2012 and increased 0.5 percent relative to a year earlier. France’s GDP decreased 0.1 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and increased 0.1 percent relative to a year earlier. France’s GDP fell 0.3 percent in IVQ2012 and declined 0.3 percent relative to a year earlier.

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

 

IQ2012/IVQ2011

IQ2012/IQ2011

United States

QOQ: 0.5        SAAR: 2.0

2.4

Japan

QOQ: 1.5

SAAR: 6.1

3.4

China

1.8

8.1

Euro Area

-0.1

0.3

Germany

0.5

1.7

France

-0.1

0.5

Italy

-0.9

-1.6

United Kingdom

-0.1

0.3

 

IIQ2012/IQ2012

IIQ2012/IIQ2011

United States

QOQ: 0.3         SAAR: 1.3

2.1

Japan

QOQ: -0.2
SAAR: -0.9

3.9

China

1.8

7.6

Euro Area

-0.2

-0.8

Germany

0.3

0.5 1.0 CA

France

-0.1

0.1

Italy

-0.7

-2.6

United Kingdom

-0.4

0.0

 

IIIQ2012/ IIQ2012

IIIQ2012/ IIIQ2011

United States

QOQ: 0.8 
SAAR: 3.1

2.6

Japan

QOQ: –0.9
SAAR: –3.7

0.4

China

2.2

7.4

Euro Area

-0.1

-0.8

Germany

0.2

0.4

France

0.2

0.1

Italy

-0.2

-2.6

United Kingdom

0.9

0.4

 

IVQ2012/IIIQ2012

IVQ2012/IVQ2011

United States

QOQ: 0.1
SAAR: 0.4

1.7

Japan

QOQ: 0.0

SAAR: 0.2

0.5

China

2.0

7.9

Euro Area

-0.6

-0.9

Germany

-0.6

0.1

France

-0.3

-0.3

Italy

-0.9

-2.8

United Kingdom

-0.3

0.2

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 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP Section VB http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html). In Feb 2013, Japan’s exports increased 2.9 percent in 12 months and imports increased 11.9 percent. The second part of Table V-4 shows that net trade deducted 1.1 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.8 percentage points from GDP growth in IIIQ2012 and deducted 0.6 percentage points from GDP growth in IVQ2012. In Mar 2013, China exports increased 10.0 percent relative to a year earlier and imports 14.1 percent. Germany’s exports decreased 1.5 percent in the month of Feb 2013 and decreased 2.8 percent in the 12 months ending in Feb 2013 while imports decreased 3.8 percent in the month of Feb and decreased 5.9 percent in the 12 months ending in Feb. Net trade contributed 0.4 percentage points to growth of GDP in IQ2012, contributed 1.4 percentage points in IIQ2012, contributed 1.6 percentage points in IIIQ2012, contributed 0.8 percentage points in IVQ2012 and contributed 1.0 percentage points in 2012. Net trade deducted 0.7 percentage points from UK value added in IQ2012, deducted 0.8 percentage points in IIQ2012, added 0.4 percentage points in IIIQ2012 and subtracted 0.2 percentage points in IVQ2012. France’s exports decreased 1.9 percent in Feb 2013 while imports decreased 0.8 percent and net trade deducted 0.4 percentage points from GDP growth in IIQ2012, adding 0.3 percentage points in IIIQ2012 and 0.2 percentage points in IVQ2012. US exports increased 0.8 percent in Feb 2013 and goods exports increased 2.2 percent in Jan-Feb 2013 relative to a year earlier but net trade added 0.38 percentage points to GDP growth in IIIQ2012 and added 0.33 percentage points in IVQ2012. US imports increased 0.0 percent in Feb 2013 and goods imports decreased 0.1 percent in Jan-Feb 2013 relative to a year earlier. In the six months ending in Feb 2013, United States national industrial production accumulated increase of 2.5 percent at the annual equivalent rate of 5.1 percent, which is higher than 2.5 percent growth in 12 months. Business equipment decreased 0.4 percent in Sep, decreased 1.2 percent in Oct, increased 3.1 percent in Nov, increased 0.5 percent in Dec, fell 1.3 percent in Jan, and increased 2.5 percent in Feb 2013, growing 3.2 percent in the 12 months ending in Feb 2013 and at the annual equivalent rate of 6.4 percent in the six months ending in Feb 2013. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/current/): “The capacity utilization rate for total industry increased to 79.6 percent [in Feb 2013], a rate that is 0.6 percentage points below its long-run (1972--2012) average.” United States industry is apparently decelerating with some strength at the margin. Manufacturing increased 0.8 percent in Feb 2013 seasonally adjusted, increasing 2.2 percent not seasonally adjusted in 12 months, and increased 3.0 percent in the six months ending in Feb 2013 or at the annual equivalent rate of 6.1 percent. Trade values incorporate both price and quantity effects that are difficult to separate. Data do suggest that world trade slowdown is accompanying world economic slowdown.

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

 

Exports
M ∆%

Exports 12 M ∆%

Imports
M ∆%

Imports 12 M ∆%

USA

0.8 Feb

2.2

Jan-Feb

0.0 Jan

-0.1

Jan-Feb

Japan

 

Feb 2013

-2.9

Jan 2013 6.4

Dec -5.8

Nov -4.1

Oct -6.5

Sep -10.3

Aug -5.8

Jul -8.1

 

Feb 2013

11.9

Jan 2013 7.3

Dec 1.9

Nov 0.8

Oct -1.6

Sep 4.1

Aug -5.4

Jul 2.1

China

 

10.0 Mar 13

18.4 Jan-Mar 13

 

14.1 Mar 13

8.4 Jan-Mar 13

Euro Area

5.2 12-M Jan

7.4 Jan-Dec

1.4 12-M Jan

1.8 Jan-Dec

Germany

-1.5 Feb CSA

-2.8 Feb

-3.8 B CSA

-5.9 Feb

France

Feb

-1.9

-3.6

-0.8

-4.2

Italy Jan

1.4

8.7

0.4

-1.8

UK

1.9 Dec

-3.9 Oct-Dec 12/Oct-Dec 11

0.9 Dec

-0.4 Oct-Dec 12/Oct-Dec 11

Net Trade % Points GDP Growth

% Points

     

USA

IVQ2012 +0.33

IIIQ2012 +0.38

     

Japan

-1.1 IIQ2012

-2.8 IIIQ2012

-0.6 IVQ2012

     

Germany

0.4 IQ2012

1.4 IIQ2012 1.6 IIIQ2012 0.8 IVQ2012

1.0 2012

     

France

-0.4 IIQ2012   0.3 IIIQ2012

0.2 IVQ2012

     

UK

-0.7 IQ2012

-0.8 IIQ2012

+0.4

IIIQ2012

-0.2 IVQ2012

     

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for Feb 2013. The share of Asia in Japan’s trade is more than one half, 52.2 percent of exports and 42.1 percent of imports. Within Asia, exports to China are 15.9 percent of total exports and imports from China 18.5 percent of total imports. While exports to China fell 15.8 percent in the 12 months ending in Feb 2013, imports from China increased 22.0 percent. The second largest export market for Japan in Feb 2013 is the US with share of 19.1 percent of total exports and share of imports from the US of 7.9 percent in total imports. Western Europe has share of 10.6 percent in Japan’s exports and of 9.9 percent in imports. Rates of growth of exports of Japan in Feb 2013 are sharply negative for all countries and regions with the exception of growth of 5.7 percent for exports to the US and 1.3 percent for exports to Australia. 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 2.9 percent in Feb 2013 while imports increased 11.9 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Feb 2013 are positive for all trading partners. Imports from Asia increased 14.0 percent in the 12 months ending in Feb 2013 while imports from China increased 22.0 percent. Data are in millions of yen, which has effects of recent depreciation of the yen relative to the United States dollar (USD).

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

Feb 2013

Exports
Millions Yen

12 months ∆%

Imports Millions Yen

12 months ∆%

Total

5,284,067

-2.9

6,061,534

11.9

Asia

2,757,508

-5.2

2,551,827

14.0

China

842,260

-15.8

1,119,981

22.0

USA

1,007,389

5.7

479,214

0.6

Canada

72,975

-17.2

77,539

22.2

Brazil

39,131

-1.8

97,131

15.1

Mexico

71,309

4.7

29,109

32.3

Western Europe

558,641

-9.0

600,914

11.3

Germany

136,919

-2.5

160,801

7.8

France

44,677

-15.1

80,966

8.9

UK

88,406

-16.7

49,949

19.9

Middle East

194,606

-6.9

1,358,008

14.4

Australia

136,255

1.3

352,350

1.9

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 marginally to 53.1 in Mar from 52.9 in Feb, indicating expansion at a moderate rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10974).This index has remained above the contraction territory of 50.0 during 44 consecutive months and the average for IQ2013 at 53.0 is slightly higher than 52.9 in IVQ2012. The employment index decreased to 51.4 in Mar relative to 52.3 in Feb with input prices rising at slower rate (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10974) David Hensley, Director of Global Economic Coordination at JP Morgan, finds continuing growth with slowing new orders and slow employment growth raising doubts on the sustainability of growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10974). The JP Morgan Global Manufacturing PMI, produced by JP Morgan and Markit in association with ISM and IFPSM, increased marginally to 51.2 in Mar from 50.9 in Feb, which is the third consecutive reading above 50 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10951). New export business increased marginally for the first month after eleven consecutive monthly declines. The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 52.9 in Feb to 51.0 in Mar, indicating improvement but with business activity growing at lower rates in both manufacturing and services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10948). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 52.1 in Feb to 50.3 in Mar ((http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10948). Andre Loes, Chief Economist, Brazil, at HSBC, finds recovering economy but within a modest forecast for 2013 lowered from 3 percent to 2.6 percent ((http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10948). The HSBC Brazil Purchasing Managers’ IndexTM (PMI) decreased from a 22-month high in Jan 2012 at 53.2 to 52.5 in Feb 2013 and 51.2 in Mar 2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10871). The average of 52.5 in IQ2013 was higher than the average of 51.2 for IVQ2012. Andre Loes, Chief Economist, Brazil at HSBC, finds continuing expansion in Brazil’s manufacturing with greater strength in IQ2013 than in IVQ2012 and the highest reading in IQ2011, supporting the view that the economy of Brazil is experiencing moderate recovery (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10871).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index (PMI) seasonally adjusted increased to 54.9 in Mar from 54.3 in Feb, continuing to suggest strengthening US manufacturing activity (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10868).

New export orders registered 51.2 in Mar from 48.5 in Feb, indicating expansion at a moderate rate while output continued growth after a high of eleven months in Feb. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with growth at 2.0 percent in IQ2013 that can provide impulse to US economic growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10868). The Markit US Manufacturing Purchasing Managers’ Index (PMI) increased to 54.6 in Mar from 54.3 in Feb (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10933). The index of new exports orders increased from 48.5 in Feb 2013 to 51.8 in Mar 2013 while total new orders were unchanged from 54.4 in Feb to 55.4 in Mar. Chris Williamson, Chief Economist at Markit, finds that manufacturing in the US is moving to growth of 2 percent in IQ2013 and could support growth of the US economy (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10933). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® decreased 2.9 percentage points from 54.2 in Feb to 51.3 in Mar (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders decreased 6.4 percentage points from 57.8 in Feb to 51.4 in Mar. The index of exports increased 2.5 percentage points from 53.5 in Feb to 56.0 in Mar, remaining in expansion territory. The Non-Manufacturing ISM Report on Business® PMI decreased 1.6 percentage points from 56.0 in Feb to 54.4 in Mar, indicating production growth during 44 consecutive months, while the index of new orders decreased 3.6 percentage points from 58.2 in Feb to 54.6 in Mar (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

Feb 12 months NSA ∆%: 2.0; ex food and energy ∆%: 2.0 Feb month SA ∆%: 0.7; ex food and energy ∆%: 0.2
Blog 3/17/13

Producer Price Index

Feb 12-month NSA ∆%: 1.3; ex food and energy ∆% 1.3
Feb month SA ∆% = 0.4; ex food and energy ∆%: 0.1
Blog 3/31/13

PCE Inflation

Jan 12-month NSA ∆%: headline 1.2; ex food and energy ∆% 1.3
Blog 3/31/13

Employment Situation

Household Survey: Feb Unemployment Rate SA 7.6%
Blog calculation People in Job Stress Mar: 29.6 million NSA, 18.2% of Labor Force
Establishment Survey:
Nov Nonfarm Jobs +88,000; Private +95,000 jobs created 
Feb 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.1
Blog 4/5/13

Nonfarm Hiring

Nonfarm Hiring fell from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million
Private-Sector Hiring Jan 2013 4.078 million lower by 1.082 million than 5.160 million in Jan 2006
Blog 3/17/13

GDP Growth

BEA Revised National Income Accounts
IQ2012/IQ2011 ∆%: 2.4

IIQ2012/IIQ2011 2.1

IIIQ2012/IIIQ2011 2.6

IVQ2012/IVQ2011 1.7

IQ2012 SAAR 2.0

IIQ2012 SAAR 1.3

IIIQ2012 SAAR 3.1

IVQ2012 SAAR 0.4
Blog 3/31/13

Real Private Fixed Investment

SAAR IVQ2012 9.7 ∆% IVQ2007 to IIIQ2012: minus 11.2% Blog 3/3/13

Personal Income and Consumption

Feb month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.7
Real Personal Consumption Expenditures (RPCE): 0.3
12-month Feb NSA ∆%:
RDPI: 0.9; RPCE ∆%: 2.0
Blog 3/31/2013

Quarterly Services Report

IVQ12/IVQ11 SA ∆%:
Information 5.4

Financial & Insurance 6.2
Blog 3/10/13

Employment Cost Index

Compensation Private IVQ2012 SA ∆%: 0.5
Dec 12 months ∆%: 2.2
Blog 2/10/13

Industrial Production

Feb month SA ∆%: 0.7
Feb 12 months SA ∆%: 2.5

Manufacturing Feb SA ∆% 0.8 Feb 12 months SA ∆% 2.0, NSA 2.2
Capacity Utilization: 79.6
Blog 3/24/13

Productivity and Costs

Nonfarm Business Productivity IVQ2012∆% SAAE -1.9; IVQ2012/IVQ2011 ∆% 0.5; Unit Labor Costs SAAE IVQ2012 ∆% 4.6; IVQ2012/IVQ2011 ∆%: 2.1

Blog 3/10/2013

New York Fed Manufacturing Index

General Business Conditions From Feb 10.04 to Mar 9.24
New Orders: From Feb 13.31 to Mar +8.18
Blog 3/24/13

Philadelphia Fed Business Outlook Index

General Index from Feb -12.5 to Mar 2.0
New Orders from Feb -7.8 to Mar 0.5
Blog 3/24/13

Manufacturing Shipments and Orders

New Orders SA Feb ∆% 3.0 Ex Transport 0.3

Jan-Feb NSA New Orders 0.7 Ex transport 0.9
Blog 4/5/13

Durable Goods

Feb New Orders SA ∆%: 5.7; ex transport ∆%: -0.5
Jan-Feb 13/Jan-Feb 12 New Orders NSA ∆%: 0.6; ex transport ∆% 1.2
Blog 3/31/13

Sales of New Motor Vehicles

Jan-Mar 2013 3,688,662; Jan-Mar 2012 3,467,496. Mar 13 SAAR 15.27 million, Feb 13 SAAR 15.38 million, Mar 2012 SAAR 14.12 million

Blog 4/5/13

Sales of Merchant Wholesalers

Jan 2013/Jan 2012 NSA ∆%: Total 5.9; Durable Goods: 5.4; Nondurable
Goods: 6.2
Blog 3/10/13

Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers

Jan 13/Jan 12 NSA ∆%: Sales Total Business 4.9; Manufacturers 3.1
Retailers 6.1; Merchant Wholesalers 5.9
Blog 3/17/13

Sales for Retail and Food Services

Feb 2013/Feb 2012 ∆%: Retail and Food Services 3.6; Retail ∆% 3.6
Blog 3/17/13

Value of Construction Put in Place

Feb SAAR month SA ∆%: 1.2 Feb 12-month NSA: 6.9 Jan-Feb 2013 ∆% 6.6
Blog 4/5/13

Case-Shiller Home Prices

Jan 2013/Jan 2012 ∆% NSA: 10 Cities 7.3; 20 Cities: 8.1
∆% Jan SA: 10 Cities 1.0 ; 20 Cities: 1.0
Blog 3/31/13

FHFA House Price Index Purchases Only

Jan SA ∆% 0.6;
12 month NSA ∆%: 6.5
Blog 3/31/13

New House Sales

Feb 2013 month SAAR ∆%: minus 4.6
Jan-Feb 2013/Jan-Feb 2012 NSA ∆%: 19.0
Blog 3/31/13

Housing Starts and Permits

Feb Starts month SA ∆%: 0.8 ; Permits ∆%: 4.6
Jan-Feb 2013/Jan-Feb 2012 NSA ∆% Starts 26.0; Permits  ∆% 32.8
Blog 3/24/13

Trade Balance

Balance Jan SA -$44,448 million versus Dec -$18144 million
Exports Jan SA ∆%: -1.2 Imports Jan SA ∆%: 1.8
Goods Exports Jan 2013/2012 NSA ∆%: 4.3
Goods Imports Jan 2013/2012 NSA ∆%: 0.9
Blog 3/10/13

Export and Import Prices

Feb 12-month NSA ∆%: Imports -0.3; Exports 1.5
Blog 3/17/13

Consumer Credit

Feb ∆% annual rate: 7.8
Blog 4/5/13

Net Foreign Purchases of Long-term Treasury Securities

Jan Net Foreign Purchases of Long-term Treasury Securities: $25.7 billion
Major Holders of Treasury Securities: China $1264 billion; Japan $1115 billion; Total Foreign US Treasury Holdings Jan $5616 billion
Blog 3/17/13

Treasury Budget

Fiscal Year 2013/2012 ∆% Feb: Receipts 13.1; Outlays 2.1; Individual Income Taxes 17.7
Deficit Fiscal Year 2011 $1,297 billion

Deficit Fiscal Year 2012 $1,089,353 million

Blog 3/17/2013

CBO Budget and Economic Outlook

2012 Deficit $1089 B 7.0% GDP Debt 11,280 B 72.5% GDP

2013 Deficit $845 B, Debt 12,229 B 76.3% GDP Blog 8/26/12 11/18/12 2/10/13

Commercial Banks Assets and Liabilities

Feb 2013 SAAR ∆%: Securities -3.2 Loans 2.1 Cash Assets 66.6 Deposits 4.5

Blog 3/24/13

Flow of Funds

2012 ∆ since 2007

Assets -$868.9 MM

Real estate -$3562.7 MM

Financial +$2204.3 MM

Net Worth -$46.6 MM

Blog 3/17/13

Current Account Balance of Payments

IVQ2012 +$6793 MM

%GDP 2.8

Blog 3/17/13

Links to blog comments in Table USA:

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

3/24/13 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

3/10/13 http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html

3/3/13 http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html

2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html

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

Growth rates and levels of sales in millions of dollars of manufacturers, retailers and merchant wholesalers are provided in Table VA-1. Total business sales increased 1.2 percent in Feb after decreasing 0.1 percent in Jan and increased 0.1 percent in the 12 months ending in Feb 2013. Sales of manufacturers increased 0.9 percent in Feb after increasing 0.4 percent in Jan and increased 0.0 percent in the 12 months ending in Feb. Retailers’ sales increased 1.2 percent in Feb, increased 0.0 percent in Jan and increased 0.9 percent in 12 months ending in Feb. Sales of merchant wholesalers increased 1.7 percent in Feb, decreased 0.8 percent in Jan and decreased 0.3 percent in 12 months ending in Feb. These data are not adjusted for price changes such that they reflect increases in both quantities and prices.

Table VA-1, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers

 

Feb 13/   Jan 13
∆% SA

Feb 2013
Millions of Dollars NSA

Jan 13/ Dec 12  ∆% SA

Feb 13/ Feb 12
∆% NSA

Total Business

1.2

1,175,316

-0.1

0.1

Manufacturers

0.9

455,104

0.4

0.0

Retailers

1.2

338,329

0.0

0.9

Merchant Wholesalers

1.7

381,883

-0.8

-0.3

Source: US Census Bureau http://www.census.gov/mtis/

Chart VA-1 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and recovery in the final segment above the peak before the global recession. Data are not adjusted for price changes.

clip_image019

Chart VA-1, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Feb 2013

US Census Bureau

http://www.census.gov/mtis/

Chart VA-2 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment.

clip_image020

Chart VA-2, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Feb 2013

US Census Bureau

http://www.census.gov/mtis/

Businesses added cautiously to inventories to replenish stocks. Retailers added 0.3 percent to inventories in Feb 2013 and 1.4 percent in Jan with growth of 8.8 percent in 12 months, as shown in Table VA-2. Total business increased inventories by 0.1 percent in Feb, 0.9 percent in Jan and 5.0 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.28 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

Table VA-2, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios

Inventory Change

Feb 13
Millions of Dollars NSA

Feb 13/ Jan 13 ∆% SA

Jan 13/  Dec 12 ∆% SA

Feb 13/  Feb 12 ∆% NSA

Total Business

1,641,222

0.1

0.9

5.0

Manufacturers

622,106

0.2

0.6

2.4

Retailers

513,409

0.3

1.4

8.8

Merchant
Wholesalers

505,707

-0.3

0.8

4.6

Inventory/
Sales Ratio NSA

Feb 13
Billions of Dollars NSA

Feb 2013 SA

Jan 2013 SA

Feb 2012 SA

Total Business

1,641,222

1.28

1.29

1.26

Manufacturers

622,106

1.27

1.28

1.28

Retailers

513,409

1.39

1.40

1.33

Merchant Wholesalers

505,707

1.19

1.21

1.18

Source: US Census Bureau http://www.census.gov/mtis/

Chart VA-3 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Feb 2013. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.

clip_image021

Chart VA-3, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Feb 2013

US Census Bureau

http://www.census.gov/mtis/

Chart VA-4 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Feb 2013 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are significantly higher than in the peak before the global recession.

clip_image022

Chart VA-4, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Feb 2013

US Census Bureau

http://www.census.gov/mtis/

Inventories follow business cycles. When recession hits sales inventories pile up, declining with expansion of the economy. In a fascinating classic opus, Lloyd Meltzer (1941, 129) concludes:

“The dynamic sequences (I) through (6) were intended to show what types of behavior are possible for a system containing a sales output lag. The following conclusions seem to be the most important:

(i) An economy in which business men attempt to recoup inventory losses will always undergo cyclical fluctuations when equilibrium is disturbed, provided the economy is stable.

This is the pure inventory cycle.

(2) The assumption of stability imposes severe limitations upon the possible size of the marginal propensity to consume, particularly if the coefficient of expectation is positive.

(3) The inventory accelerator is a more powerful de-stabilizer than the ordinary acceleration principle. The difference in stability conditions is due to the fact that the former allows for replacement demand whereas the usual analytical formulation of the latter does not. Thus, for inventories, replacement demand acts as a de-stabilizer. Whether it does so for all types of capital goods is a moot question, but I believe cases may occur in which it does not.

(4) Investment for inventory purposes cannot alter the equilibrium of income, which depends only upon the propensity to consume and the amount of non-induced investment.

(5) The apparent instability of a system containing both an accelerator and a coefficient of expectation makes further investigation of possible stabilizers highly desirable.”

Chart VA-5 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012 and beginning of 2013.

clip_image024

Chart VA-5, Total Business Inventories/Sales Ratios 2002 to 2013

Source: US Census Bureau

http://www.census.gov/mtis/

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-3 for Feb 2013 and percentage changes from the prior month and for Feb 2013 relative to Feb 2012. These data are volatile aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 2.8 percent in Feb 2013 relative to Feb 2012 and increased 1.7 percent in Feb 2013 relative to Jan 2013. The value of total sales is quite high at $786.1 billion, approaching five trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Feb 2013 reached $346.9 billion, over two trillion dollars for a year, increasing 0.4 percent in Feb 2013 relative to Jan 2013 and increasing 1.8 percent in Feb 2013 relative to Feb 2012. Sales of automotive products reached $62.7 billion in Feb 2013, decreasing 0.6 percent in the month and increasing 1.9 percent relative to a year earlier. There is strong performance of 6.0 percent in machinery but lower of 0.8 percent in electrical products. Sales of nondurable goods rose 3.6 percent over a year earlier. The influence of commodity prices returned as suggested by increase of 2.1 percent in Feb 2013 and increase of 9.2 percent in Feb 2013 relative to a year earlier in farm products with increase of 10.6 percent in petroleum products in Feb 2013 and increase of 2.9 percent relative to a year earlier. The final three columns in Table VA-13 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers decreased 0.3 percent in Feb 2013 and increased 4.6 percent relative to a year earlier. Inventories of durable goods of $298.9 billion are 59.1 percent of total inventories of $505.7 billion and rose 7.5 percent relative to a year earlier. Automotive inventories decreased 2.3 percent relative to a year earlier. Machinery inventories of $83.9 billion rose 15.6 percent relative to a year earlier. Inventories of nondurable goods of $206.7 billion are 40.9 percent of the total and increased 0.6 percent relative to a year earlier. Inventories of farm products decreased 5.7 percent in Feb relative to Jan and decreased 4.1 percent relative to a year earlier. Inventories of petroleum products decreased 1.7 percent in Feb and decreased 8.9 percent relative to a year earlier.

Table VA-3, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%

2013

Sales $ Billions Jan-Feb 2013
NSA

Sales Feb ∆% SA

Sales∆% Feb 2013 from Feb 2012  NSA

INV $ Billions Feb 2013 NSA

INV  Jan ∆% SA

INV  ∆% Feb 2013 from Feb 2012 NSA

US Total

786.1

1.7

2.8

505.7

-0.3

4.6

Durable

346.9

0.4

1.8

298.9

0.2

7.5

Automotive

62.7

-0.6

1.9

45.1

0.0

-2.3

Prof. Equip.

58.6

2.2

2.2

34.2

0.5

9.5

Computer Equipment

28.7

2.3

-0.7

13.0

2.2

16.2

Electrical

58.7

-2.3

0.8

42.3

0.4

5.1

Machinery

62.1

0.2

6.0

83.8

0.1

15.6

Not Durable

439.1

2.7

3.6

206.7

-0.9

0.6

Drugs

70.6

-2.4

-0.1

33.9

-3.0

3.1

Apparel

23.4

2.4

6.5

21.7

2.0

1.2

Groceries

93.6

-1.1

1.8

36.0

-0.1

5.7

Farm Products

39.1

2.1

9.2

24.4

-5.7

-4.1

Petroleum

124.4

10.6

2.9

27.4

-1.7

-8.9

Note: INV: inventories

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

Chart VA-5 of the US Census Bureau provides wholesale trade sales without adjustment for seasonality or price changes from Jan 1992 to Feb 2013. The jagged curve of wholesale trade sales without adjustment shows strong seasonal variations. There is a strong long-term trend interrupted by sharp drop during the global recession. Growth resumed along a stronger upward trend and the level in Dec 2012 surpasses the peak before the global recession.

clip_image025

Chart VA-5, US, Wholesale Trade Sales, Monthly, NSA, Jan 1992-Feb 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-6 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Feb 2013. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop followed by increase to a higher level.

clip_image026

Chart VA-6, US, Wholesale Trade Sales, Monthly, SA, Jan 1992-Feb 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-4. The total for the US has remained almost without change at 1.19 in Feb 2013, 1.21 in Jan 2013 and 1.18 in Feb 2012. Inventory/sales ratios are higher in durable goods industries but still remain relatively stable with 1.59 in Feb 2013, 1.59 in Jan 2013 and 1.50 in Feb 2012. Computer equipment operates with low inventory/sales ratios of 0.82 in Feb 2013, 0.82 in Jan 2013 and 0.71 in Feb 2012 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.86 in Feb 2013 and 0.90 in Jan 2013, which are almost equal to 0.90 in Feb 2012. There are exceptions such as 1.76 in Feb 2013 in apparel that is equal to 1.76 in Jan 2013 and lower than 1.89 in Feb 2012.

Table VA-4, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA

 

Feb 2013

Jan 2013

Feb 2012

US Total

1.19

1.21

1.18

Durable

1.59

1.59

1.50

Automotive

1.31

1.30

1.37

Prof. Equip.

1.05

1.07

0.99

Comp. Equip.

0.82

0.82

0.71

Electrical

1.37

1.33

1.30

Machinery

2.49

2.49

2.30

Not Durable

0.86

0.90

0.90

Drugs

1.00

1.00

0.95

Apparel

1.76

1.76

1.89

Groceries

0.74

0.74

0.71

Farm Products

1.08

1.17

1.24

Petroleum

0.39

0.44

0.46

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

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars NSA are provided in Chart VA-7 of the US Census Bureau. Inventories resumed growth at a sharper rate after the global recession and are substantially higher than the peak before the contraction.

clip_image027

Chart VA-7, US, Inventories of Merchant Wholesalers, Millions of Dollars, NSA, Jan 1992-Feb 2013

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars SA are provided in Chart VA-8 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a much sharper slope than before the global recession.

clip_image028

Chart VA-8, US, Inventories of Merchant Wholesalers, Millions of Dollars, SA, Jan 1992-Feb 2013

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-9 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2004 to 2013 seasonally adjusted. Inventory/sales ratios rise during contractions as merchants are caught with increasing inventories because of weak sales and fall during expansions as merchants attempt to fill sales with existing stocks. There is an increase in the inventory/sales ratio in 2012 but not yet significantly higher with declining trend in the final segment followed by an increase.

clip_image030

Chart VA-9, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2004-2013

Source: US Census Bureau

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

Sales of retail and food services decreased 0.4 percent in Mar 2013 after increasing 1.0 percent in Feb 2013 seasonally adjusted (SA), growing 2.8 percent in Jan-Mar 2013 relative to Jan-Mar 2012 not seasonally adjusted (NSA), as shown in Table VA-5. Excluding motor vehicles and parts, retail sales decreased 0.4 percent in Mar 2013, increasing 1.0 percent in Feb 2013 SA and increasing 2.2 percent NSA in Jan-Mar 2013 relative to a year earlier. Sales of motor vehicles and parts decreased 0.6 percent in Mar 2013 after increasing 1.3 percent in Feb 2013 SA and increasing 5.5 percent NSA in Jan-Mar 2013 relative to a year earlier. Gasoline station sales decreased 2.2 percent SA in Mar 2013 after increasing 5.4 percent in Feb 2013 in oscillating prices of gasoline that are moderating, decreasing 0.2 percent in Jan-Mar 2013 relative to a year earlier.

Table VA-5, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

 

Mar/ Feb ∆% SA

Feb/Jan ∆% SA

Jan-Mar 2013 Million Dollars NSA

Jan-Mar 2013 from Jan-Mar 2012 ∆% NSA

Retail and Food Services

-0.4

1.0

1,189,046

2.8

Excluding Motor Vehicles and Parts

-0.4

1.0

961,321

2.2

Motor Vehicles & Parts

-0.6

1.3

227,725

5.5

Retail

-0.6

1.2

1,057,055

2.7

Building Materials

0.1

0.7

64,147

1.4

Food and Beverage

-0.1

0.8

156,733

2.9

Grocery

0.0

0.8

141,418

2.5

Health & Personal Care Stores

-0.3

-0.1

69,011

-0.4

Clothing & Clothing Accessories Stores

0.1

-0.3

53,593

2.7

Gasoline Stations

-2.2

5.4

129,629

-0.2

General Merchandise Stores

-1.2

0.2

142,374

-4.0

Food Services & Drinking Places

0.7

-0.5

131,991

3.8

Source: US Census Bureau http://www.census.gov/retail/

Chart VA-10 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been increasing monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.

clip_image032

Chart VA-10, US, Percentage Change of Retail and Food Services Sales

Source: US Census Bureau

http://www2.census.gov/retail/releases/historical/marts/img/martsbrf.gif

Chart VA-11 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Mar 2013 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.

clip_image033

Chart VA-11, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Mar 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Chart VA-12 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Mar 2013. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.

clip_image034

Chart VA-12, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Mar 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/retail/

Table VA-7 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2013 fiscal year to Mar 2013; federal fiscal data for the years from 2009 to 2012; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2012. Receipts increased 12.4 percent in the cumulative fiscal year 2013 for Mar 2013 relative to the cumulative in fiscal year 2012. Individual income taxes increased 14.7 percent relative to the same period a year earlier. Outlays decreased 2.5 percent relative to a year earlier. Total revenues of the US from 2009 to 2012 accumulate to $9019 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,111 billion, or $14.1 trillion, with the deficit accumulating to $5092 billion, or $5.1 trillion. Revenues decreased 6.6 percent from $9653 billion in the four years from 2005 to 2008 to $9019 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and also by growth of only 2.1 percent on average in the cyclical expansion from IIIQ2009 to IVQ2012 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html). Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). Weakness of growth and employment creation is analyzed in IB Collapse of United States Dynamism of Income Growth and Employment Creation. There are 29.6 million people without jobs or underemployed that is equivalent to 18.2 percent of the US effective labor force (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html) and hiring is significantly below the earlier cyclical expansion before 2007 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,111 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.6 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5092 billion in 2009-2012. Federal revenue was 15.4 percent of GDP on average in the years from 2009 to 2012, which is well below 18.0 percent of GDP on average from 1970 to 2010. Federal outlays were 24.1 percent of GDP on average from 2009 to 2012, which is well above 21.9 percent of GDP on average from 1970 to 2010. The lower part of Table IIB-4 shows that debt held by the public swelled from $5803 billion in 2008 to $11,280 billion in 2012, by $5477 billion or 94.3 percent. Debt held by the public as percent of GDP or economic activity jumped from 40.5 percent in 2008 to 72.5 percent in 2012, which is well above the average of 37.0 percent from 1970 to 2010. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table VA-6, US, Treasury Budget in Fiscal Year to Date Million Dollars

Mar 2013

Fiscal Year 2013

Fiscal Year 2012

∆%

Receipts

1,196,611

1,064,384

12.4

Outlays

1,797,095

1,843,360

-2.5

Deficit

-600,484

-778,976

NA

Individual Income Taxes

555,218

484,143

14.7

Social Insurance

307,649

272,225

13.0

 

Receipts

Outlays

Deficit (-), Surplus (+)

$ Billions

     

2012

2,449

3,538

-1,089

Fiscal Year 2011

2,302

3,599

-1,297

Fiscal Year 2010

2,163

3,456

-1,293

Fiscal Year 2009

2,105

3,518

-1,413

Total 2009-2012

9,019

14,111

-5,092

Average % GDP 2009-2012

15.4

24.1

-8.7

Fiscal Year 2008

2,524

2,983

-459

Fiscal Year 2007

2,568

2,729

-161

Fiscal Year 2006

2,407

2,655

-248

Fiscal Year 2005

2,154

2,472

-318

Total 2005-2008

9,653

10,839

-1,186

Average % GDP 2005-2008

17.9

20.1

-2.2

Debt Held by the Public

Billions of Dollars

Percent of GDP

 

2005

4,592

36.9

 

2006

4,829

36.6

 

2007

5,035

36.3

 

2008

5,803

40.5

 

2009

7,545

54.1

 

2010

9,019

62.8

 

2011

10,128

67.7

 

2012

11,280

72.5

 

Sources: http://www.fms.treas.gov/mts/index.html CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5.

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/gor1210a.pdf). For fiscal 2013, the forecast is of growth of GDP between 1.3 and 1.8 percent, with domestic producer price inflation (Corporate Goods Price Index, CGPI) in the range of 0.1 to 0.7 percent and the all items CPI less fresh food of 0.2 to 0.6 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.

The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.

Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”

The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”

Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:

  1. Monetary Base Control. Most central banks in the world pursue interest rates instead of monetary aggregates, injecting bank reserves to lower interest rates to desired levels. The Bank of Japan (BOJ) has shifted back to monetary aggregates, conducting money market operations with the objective of increasing base money, or monetary liabilities of the government, at the annual rate of 60 to 70 trillion yen. The BOJ estimates base money outstanding at “138 trillion yen at end-2012) and plans to increase it to “200 trillion yen at end-2012 and 270 trillion yen at end 2014” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
  2. Maturity Extension of Purchases of Japanese Government Bonds. Purchases of bonds will be extended even up to bonds with maturity of 40 years with the guideline of extending the average maturity of BOJ bond purchases from three to seven years. The BOJ estimates the current average maturity of Japanese government bonds (JGB) at around seven years. The BOJ plans to purchase about 7.5 trillion yen per month (http://www.boj.or.jp/en/announcements/release_2013/rel130404d.pdf). Takashi Nakamichi, Tatsuo Ito and Phred Dvorak, wiring on “Bank of Japan mounts bid for revival,” on Apr 4, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323646604578401633067110420.html ), find that the limit of maturities of three years on purchases of JGBs was designed to avoid views that the BOJ would finance uncontrolled government deficits.
  3. Seigniorage. The BOJ is pursuing coordination with the government that will take measures to establish “sustainable fiscal structure with a view to ensuring the credibility of fiscal management” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
  4. Diversification of Asset Purchases. The BOJ will engage in transactions of exchange traded funds (ETF) and real estate investment trusts (REITS) and not solely on purchases of JGBs. Purchases of ETFs will be at an annual rate of increase of one trillion yen and purchases of REITS at 30 billion yen.

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 expanded strongly with the Markit Composite Output PMI Index increasing from 50.2 in Feb to 53.2 in Mar, which is the highest reading in a year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10950). Paul Smith, economist at Markit and author of the report, finds that the survey data suggest growth of the economy of Japan possibly even higher than 0,5 percent in IQ2013 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10824). The Markit Business Activity Index of Services increased from 51.1 in Feb to 54.0 in Mar, which is the highest level since Sep 2007 when the survey began (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10950). Paul Smith, Senior Economist at Markit and author of the report, finds signs of growth in the beginning of 2013 with confidence in demand for services (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10950). Markit/JMMA Purchasing Managers’ Index (PMI™), seasonally adjusted, increased from 48.5 in Feb to 50.4 in Mar for the first reading above 50.0 since May 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10885). Foreign business grew at the fastest rate in more than two years with respondents attributing growth to devaluation of the yen and strength in Asia. Andrew Harker, Senior Economist at Markit and author of the report, finds resumption of growth in manufacturing in Japan in Mar 2013 both in new orders and output (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10885).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

Feb ∆% +0.1
12 months ∆% minus 0.5
Blog 4/14/13

Consumer Price Index

Feb NSA ∆% -0.2; Feb 12 months NSA ∆% -0.7
Blog 3/31/13

Real GDP Growth

IVQ2012 ∆%: 0.0 on IIIQ2012;  IVQ2012 SAAR 0.2;
∆% from quarter a year earlier: 0.5 %
Blog 3/10/13

Employment Report

Feb Unemployed 2.77 million

Change in unemployed since last year: minus 120 thousand
Unemployment rate: 4.2%
Blog 3/31/13

All Industry Indices

Jan month SA ∆% -1.4
12-month NSA ∆% -0.5

Blog 3/24/13

Industrial Production

Feb SA month ∆%: -0.1
12-month NSA ∆% -11.0
Blog 3/31/13

Machine Orders

Total Feb ∆% 4.6

Private ∆%: 0.1 Feb ∆% Excluding Volatile Orders 7.5
Blog 4/14/13

Tertiary Index

Feb month SA ∆% 1.1
Feb 12 months NSA ∆% 0.2
Blog 4/14/13

Wholesale and Retail Sales

Feb 12 months:
Total ∆%: -1.6
Wholesale ∆%: -1.3
Retail ∆%: -2.3
Blog 3/31/13

Family Income and Expenditure Survey

Feb 12-month ∆% total nominal consumption 0.1, real 0.8 Blog 3/31/13

Trade Balance

Exports Feb 12 months ∆%: -2.9 Imports Feb 12 months ∆% 11.9 Blog 3/24/13

Links to blog comments in Table JPY:

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

3/24/13 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html

3/10/13 http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html

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

The tertiary activity index of Japan increased 1.1 percent SA in Feb 2013 and decreased 1.6 percent NSA in the 12 months ending in Feb 2013, as shown in Table VB-1. The tertiary activity index of Japan seasonally adjusted fell at the annual equivalent rate of minus 4.1 percent in Jan-Apr 2012 for cumulative decline of 1.4 percent but increased 2.6 percent not seasonally adjusted in the 12 months ending in Apr 2012, as shown in Table VB-1. The tertiary activity index fell 0.3 percent in the six months from Jun to Nov 2012 or at the annual equivalent rate of minus 0.6 percent. There was strong impact from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in the decline of the tertiary activity index by 5.4 percent in Mar 2011 and 3.4 percent in 12 months. The performance of the tertiary sector in the quarter Jul-Sep 2011 was weak: increase of 0.4 percent in Jul, increase of 0.1 percent in Aug and decline of 0.2 percent in Sep, after increasing 1.2 percent in Jun. The not seasonally adjusted index increased 4.2 percent in the 12 months ending in Mar 2012 but the 12-month percentage rate dropped to 0.1 percent in Sep 2012, increasing 1.4 percent in the 12 months ending in Oct 2012, 1.0 percent in the 12 months ending in Nov 2012, 0.0 percent in the 12 months ending in Dec 2012, 0.2 percent in the 12 months ending in Jan 2013 and minus 1.6 percent in the 12 months ending in Feb 2013. Most of the growth occurred in the quarter from Apr to Jun 2011 with gain of 4.3 percent or at annual equivalent rate of 18.1 percent.

Table VB-1, Japan, Tertiary Activity Index, ∆%

 

Month ∆% SA

12 Months ∆% NSA

Feb 2013

1.1

-1.6

Jan

-1.5

0.2

Dec 2012

1.3

0.0

Nov

-0.5

1.0

Oct

0.2

1.4

Sep

0.2

0.1

Aug

0.3

0.6

Jul

-0.6

0.9

Jun

0.1

0.8

May

0.9

3.2

Apr

-0.2

2.6

Mar

-0.6

4.2

Feb

0.0

2.4

Jan

-0.6

0.4

Dec 2011

1.6

1.2

Nov

-0.8

-0.3

Oct

0.6

0.9

Sep

-0.2

0.1

Aug

0.1

0.8

Jul

0.4

0.1

Jun

1.2

1.0

May

0.9

-0.2

Apr

2.1

-2.3

Mar

-5.4

-3.4

Feb

0.3

2.0

Jan

0.5

1.0

Dec 2010

-0.2

1.8

Nov

0.6

2.5

Oct

0.2

0.5

Sep

-0.4

1.3

Aug

0.1

2.3

Jul

0.7

1.6

Jun

0.1

1.0

May

-0.3

1.2

Dec 2009

 

-5.2

Dec 2008

 

-3.3

Dec 2007

 

-0.3

Dec 2006

 

0.6

Dec 2005

 

2.6

Dec 2004

 

1.6

Calendar Year

   

2012

 

1.4

2011

 

0.1

2010

 

1.3

2009

 

-5.2

2008

 

-1.0

2007

 

1.0

2006

 

1.8

2005

 

1.9

2004

 

1.8

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

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Feb 2013 are provided in Table VB-2. Electricity, gas, heat supply and water increased 1.2 percent in Feb 2013 and decreased 6.6 percent in the 12 months ending in Feb 2013. Wholesale and retail trade increased 0.9 percent in the month of Feb and decreased 3.5 percent in 12 months. Information and communications increased 0.9 percent in Feb and increased 1.1 percent in 12 months.

Table VB-2, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%

Feb 2013

Weight

Month ∆% SA

12 Months ∆% NSA

Tertiary Index

10,000.0

1.1

-1.6

Electricity, Gas, Heat Supply & Water

372.9

1.2

-6.6

Information & Communications

951.2

0.9

1.1

Wholesale & Retail Trade

2,641.2

0.9

-3.5

Finance & Insurance

971.1

1.9

3.9

Real Estate & Goods Rental & Leasing

903.4

0.3

-0.4

Scientific Research, Professional & Technical Services

551.3

2.0

-8.9

Accommodations, Eating, Drinking

496.0

0.7

-1.2

Living-Related, Personal, Amusement Services

552.7

0.9

-1.6

Learning Support

116.9

-0.5

0.4

Medical, Health Care, Welfare

921.1

0.5

0.5

Miscellaneous ex Government

626.7

0.4

-1.7

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

Japan’s total machinery orders seasonally adjusted in Table VB-1 increased 4.6 percent in Feb 2013 after decreasing 3.0 percent in Jan 2013, decreasing 1.6 percent in Dec 2012 and increasing 5.3 percent in Nov. Total private sector orders increased 0.1 percent in Feb 2013, decreased 7.2 percent in Jan 2013 after falling 9.8 percent in Dec 2012, increasing 15.2 percent in Nov. Private-sector orders excluding volatile orders, which are closely watched, increased 7.5 percent in Feb 2013, decreased 13.1 percent in Jan 2013 and increased 2.8 percent in Dec and 3.9 percent in Nov. Orders for manufacturing increased 8.6 percent in Feb 2012, falling 13.2 percent in Jan 2013 after increasing 3.0 percent in Dec and 3.9 percent in Nov. Overseas orders increased 8.0 in Feb 2013 and 4.8 percent in Jan but decreased 12.6 percent in Dec 2012 after increasing 17.0 percent in Nov. There is significant volatility in industrial orders in advanced economies.

Table VB-1, Japan, Machinery Orders, Month ∆%, SA 

2012-2013

Feb 13

Jan 13

Dec 12

Nov 12

Total

4.6

-3.0

-1.6

5.3

Private Sector

0.1

-7.2

-9.8

15.2

Excluding Volatile Orders

7.5

-13.1

2.8

3.9

Mfg

8.6

-13.2

3.0

3.9

Non Mfg ex Volatile

0.6

-6.3

-8.0

6.2

Government

21.5

-26.1

16.4

-2.6

From Overseas

8.0

4.8

-12.6

17.0

Through Agencies

-1.6

-0.7

3.4

6.4

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

Total orders for machinery and total private-sector orders excluding volatile orders for Japan are shown in Chart VB-1 of Japan’s Economic and Social Research Institute at the Cabinet Office. The trend of private-sector orders excluding volatile orders was showing recovery from the drop after Mar 2011 because of the earthquake/tsunami. There was reversal of the trend of increase in total orders with recent decreases and an upward movement in the final data point. Fluctuations still prevent detecting longer-term trends but recovery is still evident from the global recession. There was a major setback by the declines in May 2012 shown in the final segment of Chart VB-1 with partial recovery in Jun 2012, decline again in Jul and Aug 2012 and rebound in total orders in Nov reversed in Dec but decline in orders excluding volatile segments with increase in Nov-Dec 2012. The final segment shows growth in Feb 2013.

clip_image036

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

http://www.esri.cao.go.jp/index-e.html

Table VB-4 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,698,308 million in Feb 2013 are divided between JPY 672,839 million overseas orders, or 39.6 percent of the total, and domestic orders of JPY 936,776 million, or 55.2 percent of the total, with orders through agencies of JPY 88,693 million, or 5.2 percent of the total. Orders through agencies are not shown in the table because of the minor value. Twelve-month percentages changes in Feb 2013 continued to reverse increases in Jul 2012: minus 14.8 percent for total orders, minus 21.0 percent for overseas orders, minus 10.7 percent for domestic orders and minus 11.3 percent for private orders excluding volatile items. All 12-month percentage changes in the quarter Dec 2012 to Feb 2013 are sharply negative.

Table VB-2, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series  

 

Total

Overseas

Domestic

Private ex Volatile

Value Feb 2013

1,698,308

672,839

936,776

632,381

% Total

100.0

39.6

55.2

37.2

Value Feb 2012

1,992,950

851,704

1,048,746

712,679

% Total

100.0

42.7

52.6

35.8

12-month ∆%

-14.8

-21.0

-10.7

-11.3

Feb 2013

-14.8

-21.0

-10.7

-11.3

Jan 2013

-24.8

-36.7

-11.8

-9.7

Dec 2012

-12.5

-24.1

-3.3

-3.4

Nov 2012

-8.6

-9.6

-8.5

0.3

Oct 2012

-6.9

-12.8

-2.6

1.2

Sep 2012

-7.8

-18.4

-1.8

-7.8

Aug 2012

-18.6

-31.1

-10.2

-6.1

Jul 2012

2.6

-1.9

3.2

1.7

Jun 2012

-10.9

-11.3

-12.4

-9.9

May 2012

-6.8

-7.0

-8.6

1.0

Apr 2012

7.5

-9.6

23.0

6.6

Mar 2012

8.1

-10.0

19.0

-1.1

Feb 2012

-9.3

-8.9

-11.2

8.9

Jan 2012

9.8

18.3

0.5

5.7

Dec 2011

0.8

12.6

-8.5

6.3

Nov 2011

11.0

8.0

13.5

12.5

Oct 2011

-6.8

-15.6

-1.0

1.5

Dec 2010

9.4

3.5

14.1

-0.6

Dec 2009

1.8

0.4

3.6

-1.9

Dec 2008

-23.3

-29.4

-17.4

-24.7

Dec 2007

1.3

9.8

-4.3

-6.4

Dec 2006

0.8

0.9

-0.1

0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Feb 2013 were JPY 88,693 million or 5.2 percent of the total and 4.6 percent of the total in Feb 2012, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/index-e.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. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012. Improvement continued with 56.1 in Dec 2012 and 56.2 in Jan 2013, declining marginally to 54.5 in Feb 2013 and 55.6 in Mar 2013.

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

 

Total Index

New Orders

Interm.
Input Prices

Subs Prices

Exp

Mar 2013

55.6

52.0

55.3

50.0

62.4

Feb

54.5

51.8

56.2

51.1

62.7

Jan

56.2

53.7

58.2

50.9

61.4

Dec 2012

56.1

54.3

53.8

50.0

64.6

Nov

55.6

53.2

52.5

48.4

64.6

Oct

55.5

51.6

58.1

50.5

63.4

Sep

53.7

51.8

57.5

51.3

60.9

Aug

56.3

52.7

57.6

51.2

63.2

Jul

55.6

53.2

49.7

48.7

63.9

Jun

56.7

53.7

52.1

48.6

65.5

May

55.2

52.5

53.6

48.5

65.4

Apr

56.1

52.7

57.9

50.3

66.1

Mar

58.0

53.5

60.2

52.0

66.6

Feb

57.3

52.7

59.0

51.2

63.8

Jan

55.7

52.2

58.2

51.1

65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012 and sharper drop to 53.7 in Sep 2012, rebounding to 55.5 in Oct 2012, 55.6 in Nov 2012, 56.1 in Dec 2012 and 55.6 in Mar 2013.

clip_image037

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 50.9 in Mar 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 52.3 in Mar 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 49.8 in Mar 2013.

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

 

IPM

PI

NOI

INV

EMP

SDEL

Mar 2013

50.9

52.7

52.3

47.5

49.8

51.1

Feb

50.1

51.2

50.1

49.5

47.6

48.3

Jan

50.4

51.3

51.6

50.1

47.8

50.0

Dec 2012

50.6

52.0

51.2

47.3

49.0

48.8

Nov

50.6

52.5

51.2

47.9

48.7

49.9

Oct

50.2

52.1

50.4

47.3

49.2

50.1

Sep

49.8

51.3

49.8

47.0

48.9

49.5

Aug

49.2

50.9

48.7

45.1

49.1

50.0

Jul

50.1

51.8

49.0

48.5

49.5

49.0

Jun

50.2

52.0

49.2

48.2

49.7

49.1

May

50.4

52.9

49.8

45.1

50.5

49.0

Apr

53.3

57.2

54.5

48.5

51.0

49.6

Mar

53.1

55.2

55.1

49.5

51.0

48.9

Feb

51.0

53.8

51.0

48.8

49.5

50.3

Jan

50.5

53.6

50.4

49.7

47.1

49.7

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

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. 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 50.9 in Mar 2013 above the neutral zone of 50.0.

clip_image038

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/

Chart VC-GDP of the National Bureau of Statistics of China provides annual value and growth rates of GDP. China’s GDP growth in 2012 is still high at 7.8 percent but at the lowest rhythm in five years.

clip_image039

Chart VC-GDP, China, Gross Domestic Product, Million Yuan and ∆%, 2008-2012

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/

Table VC-IND provides values and growth rates of important segments of economic activity in China. Value added by industry decelerated from 12.1 percent in 2010 to 7.9 percent in 2012. Construction growth also decelerated from 18.6 percent in 2009 during high stimulus to 9.3 percent in 2012. There is also deceleration of investment in fixed assets from growth of 30.0 percent in 2009 and 23.8 percent in 2011 to 20.2 percent in 2012. Growth of retail sales of consumer goods fell from 18.3 percent in 2010 to 14.3 percent in 2012.

Table VC-IND, China, Value Added by Industry, Construction, Investment in Fixed Assets and Retail Sales of Consumer Goods, Billions of Yuan and ∆%, 2008-2012

 

IND VA BY

∆%

CON BY

∆%

IFA BY

∆%

RSCG BY

∆%

2012

1999

7.9

355

9.3

3747

20.3

2103

14.3

2011

1885

10.4

319

9.7

3115

23.8

1839

17.1

2010

1607

12.1

267

13.5

2781

23.8

1570

18.3

2009

1352

8.7

224

18.6

2246

30.0

1327

15.5

2008

1303

9.9

187

9.5

1788

25.9

1148

22.7

Notes: IND VA: Value Added by Industry; CON: Construction; IFA: Investment in Fixed Assets; RSCG: Retail Sales of Consumer Goods; BY: Billions of Yuan

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

Table VC-F provides China FX reserves, exports and imports from 2008 to 2012. Growth of exports and imports fell from high two-digit rates to 7.9 percent for exports and 4.3 percent for imports in 2012. Growth of China’s international reserves also fell from high two-digit rates to 4.1 percent in 2012 with the stock of reserves at a high level of $3.3 trillion.

Table VC-F, China, Foreign Exchange Reserves, Exports and Imports, USD Billions and ∆%

 

FX Reserves USD B

∆%

Exports USD B

∆%

Imports USD B

∆%

2012

3311.6

4.1

2048.9

7.9

1817.8

4.3

2011

3181.1

11.7

1898.4

20.3

1743.5

24.9

2010

2847.3

18.7

1577.8

31.3

1396.2

38.8

2009

2399.2

23.3

1201.6

19.5

1005.9

-6.8

2008

1946.0

27.3

1005.9

 

1132.6

 

Notes: USD B: US Dollar Billions

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=10856) is improving. The overall Flash China Manufacturing PMI increased marginally from 50.4 in Feb to 51.7 in Mar while the Flash China Manufacturing Output Index increased from 50.8 in Feb to 52.8 in Mar, 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 toward moderate growth (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10856).The HSBC China Services PMI, compiled by Markit, shows relative strength in business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 51.4 in Feb to 53.5 in Mar for the seventh consecutive month of expansion (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10939). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest continuing growth supported by improving labor markets (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10939). The HSBC Business Activity index increased from 52.1 in Feb to 54.3 in Mar with continuing growth in services at the fastest rate in six months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10939). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds strength in services with sound labor markets and continuing recovery in manufacturing (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10939). The HSBC Purchasing Managers’ Index (PMI), compiled by Markit, increased to 51.6 in Mar from 50.4 in Mar, indicating moderate activity in five consecutive months of improvement (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10883). New export orders increased marginally. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds manufacturing is gaining traction from internal demand (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10883). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry

Mar 12-month ∆%: minus 1.9

Mar month ∆%: 0.0
Blog 4/14/13

Consumer Price Index

Mar month ∆%: -0.9 Mar 12 months ∆%: 2.1
Blog 4/14/13

Value Added of Industry

Feb month ∆%: 0.79

Jan-Feb 2013/Jan-Feb 2012 ∆%: 9.9
Blog 3/17/13

GDP Growth Rate

Year IVQ2012 ∆%: 7.9
Quarter IIQ2012 ∆%: 2.0
Blog 1/20/13

Investment in Fixed Assets

Feb month ∆%: -0.23

Total Jan-Feb 2012 ∆%: 21.2

Real estate development: 16.9
Blog 3/17/13

Retail Sales

Feb month ∆%: 0.99
Feb 12 month ∆%: 12.3

Jan-Feb ∆%: 12.3
Blog 3/17/13

Trade Balance

Mar balance -$0.88 billion
Exports 12M ∆% 10.0
Imports 12M ∆% 14.1

Cumulative Mar: $43.27 billion
Blog 4/14/13

Links to blog comments in Table CNY:

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

1/20/13 http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html

Table VC-1 provides China’s exports, imports, trade balance and percentage changes from Dec 2010 to Mar 2013. Exports increased 10.0 percent in Mar 2013 relative to a year earlier and imports increased 14.1 percent for trade deficit of $0.88 billion. Exports increased 18.4 percent in Jan-Mar 2013 relative to a year earlier and imports 8.4 percent for surplus of $43.27 billion. Exports increased 21.8 percent in Feb 2013 relative to a year earlier and imports fell 15.0 percent for trade surplus of $15.25 billion. China’s trade growth was stronger in Jan 2013 with growth of exports of 25.0 percent in 12 months and of imports of 28.8 percent for trade surplus of $29.15 billion. China’s trade growth strengthened in Dec 2012 with growth in 12 months of exports of 14.1 percent and of imports of 6.0 percent. China’s trade growth weakened again in Nov 2012 with growth of exports of 2.9 percent and no change in imports. China’s trade growth rebounded with growth of exports in 12 months of 11.6 percent in Oct 2012 and 9.9 percent in Sep 2012 after 2.7 percent in Aug 2012 and 1.0 percent in Jul 2012 while imports grew 2.4 percent in both Sep and Oct 2012, stagnating in Nov 2012. As a result, the monthly trade surplus increased from $25.2 billion in Jul 2012 to $31.9 billion in Oct 2012, declining to $19.6 billion in Nov 2012 but increasing to $31.67 billion in Dec 2012. China’s trade growth rebounded in Oct 2012 with growth of exports of 11.6 percent in 12 months and 2.4 percent for imports and trade surplus of $31.9 billion. The number that caught attention in financial markets was growth of 1.0 percent in exports in the 12 months ending in Jul 2012. Imports were also weak, growing 4.7 percent in 12 months ending in Jul 2012. Exports increased 11.3 percent in Jun 2012 relative to a year earlier while imports grew 6.3 percent. The rate of growth of exports fell to 4.9 percent in Apr 2012 relative to a year earlier and imports increased 0.3 percent but export growth was 15.3 percent in May and imports increased 12.7 percent. China reversed the large trade deficit of USD 31.48 billion in Feb 2012 with a surplus of $5.35 billion in Mar 2012, $18.42 billion in Apr 2012, $18.7 billion in May 2012, $31.7 billion in Jun 2012, $25.2 billion in Jul 2012, $26.7 billion in Aug 2012, $27.7 billion in Sep 2012, $31.9 billion in Oct 2012 and $19.6 billion in Nov 2012. Exports fell 0.5 percent in the 12 months ending in Jan while imports fell 15.3 percent for a still sizeable trade surplus of $27.3 billion. In Feb, exports increased 18.4 percent while imports jumped 39.6 percent for a sizeable deficit of $31.48 billion. There are distortions from the New Year holidays.

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

 

Exports
USD
Billion

∆% Relative
Year Earlier

Imports USD
Billion

∆% Relative
Year Earlier

Balance
USD
Billion

Mar 2013

182.19

10.0

183.07

14.1

-0.88

Feb

139.37

21.8

124.12

-15.2

15.25

Jan

187.37

25.0

158.22

28.8

29.15

Dec 2012

199.23

14.1

167.61

6.0

31.62

Nov

179.38

2.9

159.75

0.0

19.63

Oct

175.57

11.6

143.58

2.4

31.99

Sep

186.35

9.9

158.68

2.4

27.67

Aug

177.97

2.7

151.31

-2.6

26.66

Jul

176.94

1.0

151.79

4.7

25.15

Jun

180.20

11.3

148.48

6.3

31.72

May

181.14

15.3

162.44

12.7

18.70

Apr

163.25

4.9

144.83

0.3

18.42

Mar

165.66

8.9

160.31

5.3

5.35

Feb

114.47

18.4

145.95

39.6

-31.48

Jan

149.94

-0.5

122.66

-15.3

27.28

Dec 2011

174.72

13.4

158.20

11.8

16.52

Nov

174.46

13.8

159.94

22.1

14.53

Oct

157.49

15.9

140.46

28.7

17.03

Sep

169.67

17.1

155.16

20.9

14.51

Aug

173.32

24.5

155.56

30.2

17.76

Jul

175.13

20.4

143.64

22.9

31.48

Jun

161.98

17.9

139.71

19.3

22.27

May

157.16

19.4

144.11

28.4

13.05

Apr

155.69

29.9

144.26

21.8

11.42

Mar

152.20

35.8

152.06

27.3

0.14

Feb

96.74

2.4

104.04

19.4

-7.31

Jan

150.73

37.7

144.27

51.0

6.46

Dec 2010

154.15

17.9

141.07

25.6

13.08

Source: http://english.mofcom.gov.cn/article/statistic/BriefStatistics/

Table VC-2 provides cumulative exports, imports and the trade balance of China together with percentage growth of exports and imports. Exports increased 18.4 percent in Jan-Mar 2013 relative to a year earlier while imports increased 8.4 percent for cumulative surplus of $43.27 billion. Cumulative exports in Jan-Feb 2013 grew 23.6 percent relative to a year earlier and imports 5.1 percent for trade surplus of $44.40 billion. There is strong beginning of 2013 with trade surplus of $29.15 in Jan 2013 and growth of exports of 17.3 percent and imports of 19.6 percent. The trade balance of $231.1 billion in 2012 is stronger than the trade balance of $155.14 billion in 2011. The trade balance in 2011 of $155.14 billion is lower than those from 2008 to 2010. China’s trade balance reached $231.1 billion in Jan-Dec 2012 with cumulative growth of exports of 7.9 percent and 4.3 percent of imports, which is much lower than 20.3 percent for exports and 24.9 percent for imports in 2011 and 31.3 percent for exports and 38.7 percent for imports in 2010. There is a rare cumulative deficit of $4.2 billion in Feb 2012 reversed to a small surplus in Mar 2012 and a higher surplus of $19.3 billion in Apr 2012, increasing to $37.9 billion in May, $68.9 billion in Jun 2012, $94.1 billion in Jul 2012, $120.8 billion in Aug 2012, $148.3 billion in Sep 2012, $180.24 billion in Oct 2012, $199.54 billion in Nov 2012 and $231.1 billion in Dec 2012. More observations are required to detect trends of Chinese trade but available data suggest deceleration that would be expected from the large share of trade with Europe.

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

 

Exports
USD
Billion

∆% Relative
Year Earlier

Imports USD
Billion

∆% Relative
Year Earlier

Balance
USD
Billion

Mar 2013

508.92

18.4

465.65

8.4

43.27

Feb

326.73

23.6

282.58

5.0

44.15

Jan

187.37

25.0

158.22

28.8

29.15

Dec 2012

2048.93

7.9

1817.83

4.3

231.11

Nov

1849.91

7.3

1650.37

4.1

199.54

Oct

1670.90

7.8

1490.67

4.6

180.24

Sep

1495.39

7.4

1347.08

4.8

148.31

Aug

1309.11

7.1

1188.51

5.1

120.61

Jul

1131.24

7.8

1037.14

6.4

94.10

Jun

954.38

9.2

885.46

6.7

68.91

May

774.40

8.7

736.49

6.7

37.92

Apr

593.24

6.9

573.94

5.1

19.3

Mar

430.02

7.6

429.36

6.6

0.66

Feb

264.40

6.9

268.64

7.7

-4.24

Jan

149.94

-0.5

122.66

-15.3

27.28

Dec 2011

1,898.60

20.3

1,743.46

24.9

155.14

Nov

1,724.01

21.1

1585.61

26.4

138.40

Oct

1,549.71

22.0

1,425.68

26.9

124.03

Sep

1,392.27

22.7

1,285.17

26.7

107.10

Aug

1,222.63

23.6

1,129.90

27.5

92.73

Jul

1,049.38

23.4

973.17

26.9

76.21

Jun

874.3

24.0

829.37

27.6

44.93

May

712.37

25.5

689.41

29.4

22.96

Apr

555.30

27.4

545.02

29.6

10.28

Mar

399.64

26.5

400.66

32.6

-1.02

Feb

247.47

21.3

248.36

36.0

-0.89

Jan

150.7

37.7

144.27

51.0

6.46

Dec 2010

1577.93

31.3

1394.83

38.7

183.10

Source: http://english.mofcom.gov.cn/article/statistic/BriefStatistics/

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 0.6 percent in 2012 and minus 0.3 percent in 2013 but 1.4 percent in 2014.

Table VD-EUR, Euro Area, Yearly Percentage Change of Harmonized Index of Consumer Prices, Unemployment and GDP ∆%

Year

HICP ∆%

Unemployment
%

GDP ∆%

1999

1.2

9.6

2.9

2000

2.2

8.7

3.8

2001

2.4

8.1

2.0

2002

2.3

8.5

0.9

2003

2.1

9.0

0.7

2004

2.2

9.3

2.2

2005

2.2

9.2

1.7

2006

2.2

8.5

3.2

2007

2.1

7.6

3.0

2008

3.3

7.6

0.4

2009

0.3

9.6

-4.4

2010

1.6

10.1

2.0

2011

2.7

10.1

1.4

2012*

2.5

11.4

-0.6

2013*

   

-0.3

2014*

   

1.4

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

The GDP of the euro area in 2011 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $13,114.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France is $2778.1 billion with the GDP of Germany of $3607.4 billion, Italy of $2198.7 billion and Spain $1479.6 billion is $10,063.8 billion or 76.7 percent of total euro area GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013 and 2014 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

Table VD-EUR1, Euro Area, Real GDP Growth Rate, ∆%

 

Euro Area

Germany

France

Italy

Spain

2014*

1.4

2.0

1.2

0.8

0.8

2013*

-0.3

0.5

0.1

-1.0

-1.4

2012

-0.6

0.7

0.0*

-2.2*

-1.4*

2011

1.4

3.0

1.7

0.4

0.4

2010

2.0

4.2

1.7

1.8

-0.3

2009

-4.4

-5.1

-3.1

-5.5

-3.7

2008

0.4

1.1

-0.1

-1.2

0.9

2007

3.0

3.3

2.3

1.7

3.5

2006

3.2

3.7

2.5

2.2

4.1

2005

1.7

0.7

1.8

0.9

3.6

2004

2.2

1.2

2.5

1.7

3.3

2003

0.7

-0.4

0.9

0.0

3.1

2002

0.9

0.0

0.9

0.5

2.7

2001

2.0

1.5

1.8

1.9

3.7

2000

3.8

3.1

3.7

3.7

5.0

1999

2.9

1.9

3.3

1.5

4.7

1998

2.8

1.9

3.4

1.4

4.5

1997

2.6

1.7

2.2

1.9

3.9

1996

1.5

0.8

1.1

1.1

2.5

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI®, combining activity in manufacturing and services, decreased from 47.9 in Feb to 46.5 in Mar, for fourteen consecutive declines and seventeen drops in eighteen months with acceleration of the rate of contraction (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10860). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with GDP declining in a fourth consecutive quarter but at a rate around 0.3 percent, which would be lower than the decline of 0.6 percent in IVQ2012 in EUROSTAT estimates (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10860). The Markit Eurozone PMI® Composite Output Index, combining services and manufacturing activity with close association with GDP, decreased from 47.9 in Feb to 46.5 in Mar, which is the nineteenth contraction in 19 months with only one marginal increase in the beginning of 2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10945). Chris Williamson, Chief Economist at Markit, finds that the data are consistent with milder contraction of GDP in IQ2013 in contrast with fall of 0.6 percent in IVQ2012 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10945). The Markit Eurozone Services Business Activity Index decreased from 48.6 in Jan to 47.9 in Feb (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10814). The Markit Eurozone Manufacturing PMI® decreased to 46.8 in Mar from 47.9 in Feb, which indicates contraction in twenty consecutive months of deterioration of manufacturing business in the euro zone since Aug 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10921). Total orders contracted for the twenty second consecutive month with weakness at home and abroad. Chris Williamson, Chief Economist at Markit, finds weakness with accelerating pace of decline in Mar

Table EUR, Euro Area Economic Indicators

GDP

IVQ2012 ∆% -0.6; IVQ2012/IVQ2011 ∆% -0.9 Blog 4/7/13

Unemployment 

Feb 2013: 12.0% unemployment rate Feb 2013: 10.071 million unemployed

Blog 4/7/13

HICP

Feb month ∆%: 0.4

12 months Feb ∆%: 1.8
Blog 3/17/13

Producer Prices

Euro Zone industrial producer prices Feb ∆%: 0.2
Feb 12-month ∆%: 1.3
Blog 4/7/13

Industrial Production

Feb month ∆%: 0.4; Feb 12 months ∆%: -3.1
Blog 4/14/13

Retail Sales

Feb month ∆%: -0.3
Feb 12 months ∆%: minus 1.4
Blog 4/5/13

Confidence and Economic Sentiment Indicator

Sentiment 90.0 Mar 2013

Consumer minus 23.5 Mar 2013

Blog 3/31/13

Trade

Jan-Dec 2012/Jan-Dec 2011 Exports ∆%: 7.4
Imports ∆%: 1.8

Jan 2013 12-month Exports ∆% 5.2 Imports ∆% 1.4
Blog 3/24/13

Links to blog comments in Table EUR:

4/7/13 http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.htm

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

3/24/13 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html

3/17/13 http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html

3/10/13 http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html

Industrial production in the euro area increased 0.4 percent in Feb 2013, declining in five of nine months from Jun 2012 to Feb 2013 for cumulative growth of minus 2.4 percent that is equivalent to minus 3.2 percent in a year, as shown in Table VD-1 with revised estimates by EUROSTAT. The global recession caused sharp contraction of euro area industrial production with declines of 12.6 percent in the 12 months ending in Dec 2008, 3.8 percent in the 12 months ending in Dec 2009, 1.8 percent in the 12 months ending in Dec 2011 and 2.0 percent in the 12 months ending in Dec 2012.

Table VD-1, Euro Zone, Industrial Production, ∆%

 

Month ∆%

12-Month ∆%

Feb 2013

0.4

-3.1

Jan

-0.6

-2.4

Dec 2012

0.7

-2.0

Nov

-0.6

-4.0

Oct

-0.7

-3.1

Sep

-2.1

-2.7

Aug

0.7

-1.3

Jul

0.5

-2.4

Jun

-0.7

-1.9

May

0.5

-2.4

Apr

-0.6

-2.5

Mar

-0.4

-2.2

Feb

0.7

-1.7

Jan

-0.2

-1.8

Dec 2011

 

-1.8

Dec 2010

 

9.0

Dec 2009

 

-3.8

Dec 2008

 

-12.6

Dec 2007

 

1.4

Dec 2006

 

5.2

Dec 2005

 

3.0

Dec 2004

 

0.8

Dec 2003

 

2.2

Dec 2002

 

-0.1

Dec 2001

 

-4.3

Dec 2000

 

5.9

Dec 1999

 

4.7

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

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

Table VD-2 provides monthly industrial production percentage changes for total production and major segments. Total production increased 0.4 percent in Feb 2013 with growth in all segments except decline of 0.1 percent in intermediate goods and 1.5 percent in nondurable goods. All segments declined in Jan 2013 with exception of growth of 0.1 percent in energy, 0.0 percent in intermediate goods and 0.3 percent for nondurable goods. There was recovery in Dec 2012 with growth of capital goods of 1.0 percent, durables goods of 1.8 percent and nondurable goods of 1.9 percent. Total production and all segments fell in Sep-Nov 2012 with exception of 1.0 percent in nondurable goods in Oct 2012 and 0.2 percent for capital goods in Nov 2012.

Table VD-2, Euro Zone, Industrial Production Month ∆%

 

Total

INT

ENE

CG

DUR

NDUR

Feb 2013

0.4

-0.1

2.6

0.9

1.3

-1.5

Jan

-0.6

0.0

0.1

-1.7

-1.7

0.3

Dec 2012

0.7

0.2

-1.5

1.0

1.8

1.9

Nov

-0.6

-0.9

-0.4

0.2

-1.3

-1.4

Oct

-0.7

-0.7

-1.1

-2.0

-1.7

1.0

Sep

-2.1

-1.9

-1.4

-2.5

-3.4

-2.4

Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods Source: Eurostat http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

Table VD-3 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. All 12-month percentage changes in Table VD-2 are negative in the 12 months ending in Feb 2013. Industrial production increased 0.4 percent in the month of Feb 2013 and fell 3.1 percent in the 12 months ending in Feb 2013. Industrial production deteriorated at unusually high rates in the earlier months of Oct and Sep 2012.

Table VD-3, Euro Zone, Industrial Production 12-Month ∆%

2013

Feb Month ∆%

Feb 12-Month ∆%

Total

0.4

-3.1

Intermediate Goods

-0.1

-3.0

Energy

2.6

-6.1

Capital Goods

0.9

-3.5

Durable Consumer Goods

1.3

-4.8

Nondurable Consumer Goods

-1.5

0.1

Source: Eurostat

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

There has been significant decline in percentage changes of industrial production and major categories in 12-month rates into 2012 and 2013 as shown in Table VD-4. Negative percentage changes moderated from the high rates in Oct-Nov 2012 but are still high. There is only growth of 0.1 percent for nondurable consumer goods in the 12 months ending in Feb 2013.

Table VD-4, Euro Zone, Industrial Production 12-Month ∆%

 

Total

INT

ENE

CG

DUR

NDUR

Feb 2013

-3.1

-3.0

-6.1

-3.5

-4.8

0.1

Jan

-2.4

-4.0

-0.9

-3.7

-7.3

1.8

Dec 2012

-2.0

-4.7

-0.3

-1.5

-2.7

-0.5

Nov

-4.0

-5.6

-0.3

-4.4

-6.5

-2.5

Oct

-3.1

-4.2

-0.3

-3.5

-5.2

-1.9

Sep

-2.7

-4.3

-0.7

-1.5

-4.1

-2.7

Notes: INT: Intermediate; ENE: Energy; CG: Capital Goods; DUR: Durable Consumer Goods; NDUR: Nondurable Consumer Goods

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

Table VD-5 provides industrial production of member countries of the euro zone, the UK and the European Union. Twelve-month percentage changes in Dec 2012 are negative for all countries and regions in Table VD-5

Table VD-5, Euro Zone, Industrial Production by Member Countries, ∆%

Feb 2013

Month ∆%

12-Month ∆%

Euro Zone

0.4

-3.1

Germany

0.9

-2.5

France

0.8

-2.9

Netherlands

3.4

-3.2

Finland

-1.6

-7.5

Belgium

NA

NA

Portugal

1.3

-0.4

Ireland

0.5

-0.5

Italy

-0.8

-3.8

Greece

-1.0

-3.9

Spain

-1.3

-6.5

UK

1.0

-0.6

European Union

0.4

-2.5

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economy. The German economy grew at 3.7 percent in 2010, 3.0 percent in 2011 and 0.7 percent in 2012. Growth slowed in 2011 from 1.2 percent in IQ2011, 0.5 percent in IIQ2011 and 0.4 percent in IIIQ2011 to decline of 0.1 percent in IVQ2011 and growth of 0.5 percent in IQ2012, 0.3 percent in IIQ2012, 0.2 percent in IIIQ2012 and decline of 0.6 percent in IVQ2012.

The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

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

Table VE-DE, Germany, GDP Year ∆%

 

Price Adjusted Chain-Linked

Price- and Calendar-Adjusted Chain Linked

2012

0.7

0.9

2011

3.0

3.1

2010

4.2

4.0

2009

-5.1

-5.1

2008

1.1

0.8

2007

3.3

3.4

2006

3.7

3.9

2005

0.7

0.8

2004

1.2

0.7

2003

-0.4

-0.4

2002

0.0

0.0

2001

1.5

1.6

2000

3.1

3.3

1999

1.9

1.8

1998

1.9

1.7

1997

1.7

1.8

1996

0.8

0.8

1995

1.7

1.8

1994

2.5

2.5

1993

-1.0

-1.0

1992

1.9

1.5

Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/02/PE13_066_811.html;jsessionid=59DE7E440F9F7393B12C16FDA63BEB66.cae1

The Flash Germany Composite Output Index of the Markit Flash Germany PMI®, combining manufacturing and services, decreased from 53.3 in Feb to 51.0 in Mar, which indicates moderate expansion with the decline of 2.3 points in one month being the sharpest since Jul 2011 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10862). New export orders for manufacturing decreased, with respondents finding soft demand in southern Europe but enhanced demand in Asia and North America. 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 in IQ2013 but with risks of moderation in the latest survey (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10862). The Markit Germany Composite Output Index of the Markit Germany Services PMI®, combining manufacturing and services with close association with Germany’s GDP, decreased from 53.3 in Feb to 50.6 in Mar (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10968). Tim Moore, Senior Economist at Markit and author of the report, finds that the economy of Germany will grow modestly in IQ2013 while the strength of the recovery is declining (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10968). The Germany Services Business Activity Index decreased from 54.7 in Feb to 50.9 in Mar (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10968). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing conditions, decreased from 50.3 in Feb to 49.0 in Mar, returned to contraction territory below 50.0 and below the long-term average of 51.9 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10931). New export orders decreased in Mar after the fastest rate in 12 months in Feb with broad geographical reach in Asia and outside Europe. Tim Moore, Senior Economist at Markit and author of the report, finds moderate deteriorating conditions in German manufacturing with weakness in export markets in the euro area after stronger demand from emerging Asian markets in Germany’s return to manufacturing growth in the prior month of Feb propelled by the fastest growth rate of new export orders in almost two years (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10931).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP

IVQ2012 -0.6 ∆%; IV/Q2012/IVQ2011 ∆% 0.1

2012/2011: 0.7%

GDP ∆% 1992-2012

Blog 8/26/12 5/27/12 11/25/12 2/17/13 2/24/13

Consumer Price Index

Mar month NSA ∆%: 0.5
Mar 12-month NSA ∆%: 1.4
Blog 4/14/13

Producer Price Index

Feb month ∆%: -0.1 CSA, 0.1 NSA
12-month NSA ∆%: 1.2
Blog 3/24/13

Industrial Production

Mfg Feb month CSA ∆%: 0.4
12-month NSA: -5.4
Blog 4/14/13

Machine Orders

MFG Feb month ∆%: 2.3
Feb 12-month ∆%: -2.9
Blog 4/7/13

Retail Sales

Feb Month ∆% 0.4

12-Month ∆% -2.2

Blog 3/31/13

Employment Report

Unemployment Rate SA Feb 5.4%
Blog 3/31/13

Trade Balance

Exports Feb 12-month NSA ∆%: -2.8
Imports Feb 12 months NSA ∆%: -5.9
Exports Feb month CSA ∆%: -1.5; Imports Feb month SA -3.8

Blog 4/14/13

Links to blog comments in Table DE:

4/7/13 http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.htm

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

3/24/13 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html

2/24/13 http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html

2/17/13 http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html

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

The production industries index of Germany in Table VE-1 shows increase of 0.2 percent in Dec 2012 and decrease of 9.4 percent in the 12 months ending in Dec 2012. The index decreased 0.6 percent in Jan 2013 and 1.2 percent in 12 months and increased 0.5 percent in Feb 20, declining 5.3 percent in 12 months. Germany’s production industries suffered decline of 7.3 percent in Dec 2008 relative to Dec 2007 and decline of 2.3 percent in 2009. Recovery was vigorous with 17.1 percent in the 12 months ending in Dec 2010. The first quarter of 2011 was quite strong when the German economy outperformed the other advanced economies. The performance of Germany’s production industries from 2002 to 2006 was vigorous with average rate of 4.5 percent. Data for the production industries index of Germany fluctuate sharply from month to month and in 12-month rates.

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

 

12-Month ∆% NSA

Month ∆% Calendar SA

Feb 2013

-5.3

0.5

Jan

-1.2

-0.6

Dec 2012

-9.4

0.2

Nov

-3.0

-0.4

Oct

4.1

-1.5

Sep

-6.8

-1.3

Aug

-0.7

-0.1

Jul

2.2

0.8

Jun

4.3

-0.6

May

-6.2

1.0

Apr

-0.5

-1.9

Mar

-0.1

2.2

Feb

2.5

-0.3

Jan

4.9

0.7

Dec 2011

1.5

-1.7

Nov

3.6

0.0

Oct

-0.4

1.0

Sep

4.0

-1.9

Aug

9.8

-0.6

Jul

5.4

2.8

Jun

-1.1

-1.1

May

17.5

0.4

Apr

4.7

0.3

Mar

9.2

0.7

Feb

15.1

1.1

Jan

14.4

0.9

Dec 2010

17.1

 

Dec 2009

-2.3

 

Dec 2008

-7.3

 

Dec 2007

-0.1

 

Dec 2006

2.5

 

Dec 2005

4.9

 

Dec 2004

5.3

 

Dec 2003

5.1

 

Dec 2002

2.0

 

Average ∆% per Year

   

Dec 1994 to Dec 2012

0.7

 

Dec 1994 to Dec 2000

0.8

 

Dec 1994 to Dec 2006

1.3

 

Dec 2002 to Dec 2006

4.5

 

Source: Source: Statistisches Bundesamt Deutschland (Destatis)

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

Table VE-2 provides monthly percentage changes of the German production industries index by components from Jul 2012 to Feb 2013. The index increased 0.5 percent in Feb 2013 with increases of 0.5 percent in industry, 0.4 percent in manufacturing, 2.4 percent in capital goods and 3.9 percent in energy while other segments increased with particular strength in 1.8 percent in durable goods but decline of 3.5 percent in nondurable goods. There was recovery in Dec 2012 with growth of 0.2 percent in production industries, 1.1 percent in manufacturing, 0.9 percent in capital goods, 0.9 percent in durable goods and 4.4 percent in nondurable goods but 0.1 percent in intermediate goods and decline 4.6 percent of energy. There were four sharp declines in the monthly production industries index of 1.7 percent in Dec 2011, 1.9 percent in Apr 2012, 1.3 percent in Sep 2012 and 1.5 percent in Oct 2012. The declines of investment or capital goods were quite sharp with 1.4 percent in Jun 2012, 2.5 percent in Sep 2012, 3.0 percent in Oct 2012 and 1.9 percent in Jan 2013. Durable goods fell in seven of eleven months from Dec 2011 to Oct 2012 and nondurable goods also fell in multiple months.

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

 

Feb 2013

Jan

Dec

Nov

Oct

Sep

Aug

Jul

Production
Industries

0.5

-0.6

0.2

-0.4

-1.5

-1.3

-0.1

0.8

Industry

0.5

-1.1

1.1

-0.3

-1.5

-1.6

-0.2

0.9

Mfg

0.4

-1.1

1.1

-0.3

-1.5

-1.5

-0.2

0.9

Intermediate Goods

-0.3

-0.1

0.1

-0.8

-0.3

-1.3

-0.7

-0.3

Capital
Goods

2.4

-1.9

0.9

1.1

-3.0

-2.5

-0.1

2.5

Durable Goods

1.8

1.3

0.8

-1.2

-3.4

-1.9

-1.4

1.3

Nondurable Goods

-3.5

-1.8

4.4

-2.5

0.5

0.3

1.4

-1.0

Energy

3.9

-0.4

-4.6

-1.2

-2.2

-1.3

3.3

-1.5

Seasonally Calendar Adjusted

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Table VE-3 provides 12-month unadjusted percentage changes of industry and components in Germany. There have been percentage declines of 12-month rates in the production index of Germany and all segments in the quarter from Dec 2012 to Feb 2013. Percentage declines in 12 months are quite sharp in Dec 2012 with all percentage changes negative around two-digits. Although there are sharp fluctuations in the data there is suggestion of deceleration that would be expected from much higher earlier rates. The deceleration is quite evident in single-digit percentage changes from Sep 2011 to Dec 2012 relative to high double-digit percentage changes in Jan-Mar 2011. There are multiple negative 12-month percentage changes across many segments. Growth rates in the recovery from the global recession from IVQ2007 to IIQ2009 were initially very vigorous in comparison with the growth rates before the contraction that are shown in the bottom part of Table VE-3.

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

 

IND

MFG

INTG

CG

DG

NDG

EN

2013

             

Feb

-5.4

-5.4

-6.2

-5.5

-5.9

-2.8

-9.6

Jan

-0.6

-0.6

-1.5

-1.9

-1.9

5.1

-4.8

2012

             

Dec

-9.6

-9.3

-11.8

-8.5

-12.4

-7.1

-2.3

Nov

-3.2

-3.1

-4.0

-2.7

-7.6

-1.3

0.7

Oct

3.9

3.8

2.9

4.0

0.7

6.9

3.2

Sep

-7.7

-7.6

-9.0

-7.2

-11.1

-5.4

3.9

Aug

-1.1

-1.1

-3.3

0.3

0.6

0.5

4.4

Jul

2.0

1.9

0.3

4.7

-2.3

-0.8

2.1

Jun

4.0

3.9

2.1

6.5

7.4

0.4

6.9

May

-6.8

-6.7

-7.2

-5.9

-10.6

-7.7

4.0

Apr

-0.9

-0.9

-1.8

1.9

-5.3

-5.7

4.0

Mar

-0.4

-0.3

-3.0

2.8

-6.0

-2.2

-0.8

Feb

3.3

3.3

1.1

7.4

0.0

-2.3

5.8

Jan

5.7

5.6

3.2

10.4

5.0

0.1

-3.3

2011

             

Dec

0.9

0.8

1.0

0.9

0.1

1.0

-9.3

Nov

4.0

3.9

2.2

7.5

2.1

-1.4

-5.8

Oct

0.1

0.2

-1.0

2.7

-2.5

-3.8

-6.1

Sep

5.2

5.2

4.1

8.8

3.2

-1.6

-6.3

Aug

11.6

11.5

8.6

20.0

4.6

0.7

-3.2

Jul

7.3

7.3

4.4

13.1

6.6

-0.7

-5.9

Jun

-0.1

-0.2

-0.6

1.9

-10.3

-2.5

-4.8

May

20.8

20.5

16.9

27.7

20.5

12.4

-7.4

Apr

6.8

6.7

5.3

10.6

4.4

1.3

-5.7

Mar

10.5

10.4

9.7

14.5

8.1

1.1

2.5

Feb

16.5

16.3

15.0

22.6

9.7

5.4

-0.6

Jan

16.3

16.0

16.1

22.9

9.7

2.7

-2.7

2010

             

Dec

17.6

17.6

15.0

25.8

8.3

1.5

2.5

Nov

14.0

14.0

13.0

19.3

7.7

3.7

3.5

Oct

9.9

9.9

9.8

14.1

6.3

0.6

2.4

Sep

9.8

9.5

12.1

10.1

8.3

2.8

2.1

Aug

17.0

17.0

19.3

19.9

18.3

7.1

1.3

Jul

9.0

8.7

13.1

8.7

7.4

1.0

1.9

Jun

16.3

16.2

20.7

16.1

19.6

4.9

-2.8

May

13.0

13.3

19.9

12.0

11.2

1.2

11.1

Apr

14.8

14.9

21.6

15.5

8.8

-0.1

9.4

Mar

14.3

14.5

20.4

12.1

12.0

5.9

4.2

Feb

6.8

7.4

10.6

6.5

8.0

-0.9

3.7

Jan

0.4

0.9

6.4

-3.9

0.7

-2.8

0.8

Dec 2010

17.5

17.6

15.0

25.8

8.3

1.5

2.5

Dec 2009

-3.2

-3.1

3.3

-9.9

-0.1

1.1

3.7

Dec 2008

-7.6

-7.4

-14.3

-5.4

-11.2

3.7

-9.0

Dec 2007

0.0

-0.3

-0.6

2.5

-10.0

-2.7

1.6

Dec 2006

3.2

3.1

5.2

2.3

8.6

-0.9

-5.3

Dec 2005

5.8

5.9

3.5

9.0

3.2

2.1

0.6

Dec 2004

5.3

5.5

7.7

3.4

0.8

5.7

9.6

Dec 2003

5.5

5.3

5.5

6.4

1.7

4.4

0.3

Dec 2002

3.7

3.3

5.4

3.4

-5.9

2.3

-2.6

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

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Broader perspective since 2005 is provided by Chart VE-1 of the Statistisches Bundesamt Deutschland, Federal Statistical Agency of Germany. The index of production industries not seasonally adjusted rises by more than one third between 2003 and 2008 with sharp fluctuations and then collapses during the global recession in 2008. Recovery has been in a steep upward trajectory that has recovered at the more recent peaks the losses during the contraction. Recovery was reversed by the drop in Dec 2011 with strong rebound into 2012 and another sharp drop in Apr 2012 with recovery in May 2012 and drops in Jun, Aug, Sep, Oct and Jan 2013.

clip_image040

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

Source: Statistiche Bundesamt Deutschland

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

More detail is provided by Chart VE-2 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2009 to 2013. There could be some flattening in recent months probably leading into mild downturn as depicted by trend.

clip_image042

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

Source: Statistiche Bundesamt Deutschland

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

Table VE-4 provides month and 12-month rates of growth of manufacturing in Germany from Dec 2010 to Feb 2013. There are fluctuations in both monthly rates and in the past 12 months. Recovery is strong in Jan-Mar 2012 with cumulative growth of 2.1 percent at the high annual equivalent rate of 8.7 percent but the drop in Apr 2012 of 1.8 percent results in increase of 0.3 percent in the first four months of 2012 that pulls down the 12-month rate of Apr 2012 to minus 0.9 percent. Growth of 1.5 percent in May 2012 is insufficient to prevent decline of 6.7 percent in 12 months because production was quite strong in the first part of 2011. Manufacturing decreased 0.8 percent in Jun 2011 but the 12-month change was 3.9 percent. In Jul 2012, manufacturing grew 0.9 percent in the month and 1.9 percent in 12 months. Declining of manufacturing by 0.2 percent in Aug 2012 brought down the 12-month percentage change to minus 1.1 percent. In Sep, manufacturing output fell 1.5 percent, pulling down the 12-month rate to minus 7.6 percent. Manufacturing decreased 1.5 percent in Oct but increased 3.8 percent in 12 months. In Nov 2012, manufacturing decreased 0.3 percent but fell 3.1 percent in 12 months. Manufacturing increased 1.1 percent in Dec 2012 but fell 9.3 percent in 12 months. In Jan 2013, manufacturing fell 1.1 percent and decreased 0.6 percent in 12 months. Manufacturing increased 0.4 percent in Feb 2013, declining 5.4 percent in 12 months.

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

 

12-Month ∆% NSA

Month ∆% SA and Calendar Adjusted

Feb 2013

-5.4

0.4

Jan

-0.6

-1.1

Dec 2012

-9.3

1.1

Nov

-3.1

-0.3

Oct

3.8

-1.5

Sep

-7.6

-1.5

Aug

-1.1

-0.2

Jul

1.9

0.9

Jun

3.9

-0.8

May

-6.7

1.5

Apr

-0.9

-1.8

Mar

-0.3

1.2

Feb

3.3

0.4

Jan

5.6

0.5

Dec 2011

0.8

-1.6

Nov

3.9

-0.3

Oct

0.2

0.9

Sep

5.2

-2.0

Aug

11.5

-0.5

Jul

7.3

2.9

Jun

-0.2

-1.1

May

20.5

0.7

Apr

6.7

0.6

Mar

10.4

0.9

Feb

16.3

1.4

Jan

16.0

-0.9

Dec

17.6

1.3

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, provides the manufacturing index of Germany from 2009 to 2013. Manufacturing was already flattening in 2007 and fell sharply in 2008 to the beginning of 2010. Manufacturing grew sharply in the initial phase of recovery but has flattened in recent months as revealed by the trend that may be turning downward.

clip_image044

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

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

Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-5. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.6 percent and imports 13.2 percent. In Sep 2011, exports grew 10.5 percent relative to a year earlier and imports grew 11.7 percent. Growth rates in 12 months ending in Oct 2011 fell significantly to 3.6 percent for exports and 9.2 percent for imports. Lower prices may explain part of the decline in nominal values. Exports fell 3.4 percent in 12 months ending in Sep 2012, rebounding to growth of 10.5 percent in Oct 2012 and minus 0.1 percent in Nov 2012 but sharp decline of 6.9 percent in Dec 2012 followed by rebound of 3.0 percent in Jan 2013. Exports fell 2.8 percent in the 12 months ending in Feb 2013. Imports decreased 3.6 percent in the 12 months ending in Sep 2012, rebounding to growth of 6.0 percent in Oct 2012, decreasing 1.1 percent in Nov 2012 and 7.5 percent in Dec 2012 and rebounding 2.9 percent in Jan 2013. Imports fell 5.9 percent in the 12 months ending in Feb 2013. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.

Table VE-5, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%

 

Exports

EURO Billions

12- Month
∆%

Imports
EURO
Billions

12-Month
∆%

Feb

88.7

-2.8

71.9

-5.9

Jan

88.5

3.0

74.9

2.9

Dec 2012

79.0

-6.9

66.9

-7.5

Nov

94.0

-0.1

77.1

-1.1

Oct

98.4

10.5

82.7

6.0

Sep

91.7

-3.4

74.8

-3.6

Aug

90.2

5.7

73.9

0.5

Jul

93.5

9.2

76.6

2.1

Jun

94.7

7.5

76.8

2.1

May

92.7

0.4

77.2

-0.5

Apr

87.1

3.1

72.7

-1.3

Mar

98.8

0.1

81.4

2.0

Feb

91.2

7.9

76.3

5.4

Jan

86.0

8.4

72.8

4.9

Dec 2011

84.8

4.7

72.3

5.6

Nov

94.1

7.4

78.0

5.8

Oct

89.1

3.6

78.1

9.2

Sep

95.0

10.5

77.7

11.7

Aug

85.3

14.6

73.5

13.2

Jul

85.6

5.2

75.0

9.7

Jun

88.1

3.3

75.2

5.6

May

92.4

21.2

77.5

17.4

Apr

84.5

12.4

73.7

18.5

Mar

98.7

15.3

79.8

15.1

Feb

84.5

20.8

72.5

27.6

Jan

79.3

25.2

69.4

26.0

Dec 2010

81.0

20.0

68.4

24.3

Nov

87.6

21.2

73.7

30.9

Oct

86.0

18.7

71.5

19.2

Sep

86.0

21.2

69.5

17.0

Aug

74.4

23.8

64.9

27.1

Jul

81.4

15.3

68.4

24.4

Jun

85.3

27.5

71.2

33.9

May

76.2

25.6

66.1

31.3

Apr

75.2

16.7

62.2

14.4

Mar

85.6

22.0

69.3

18.0

Feb

70.0

9.7

56.8

3.2

Jan

63.4

-0.3

55.1

-1.9

Dec 2009

67.5

1.2

55.0

-7.3

Dec 2008

66.7

-8.6

59.4

-5.0

Dec 2007

73.0

-0.6

62.5

-0.1

Dec 2006

73.4

10.2

62.6

8.5

Dec 2005

66.6

11.5

57.7

18.1

Dec 2004

59.7

9.2

48.9

10.8

Dec 2003

54.7

7.6

44.1

3.9

Dec 2002

50.8

5.5

42.5

6.4

Dec 2001

48.2

-3.7

39.9

-17.5

Dec 2000

50.0

 

48.4

 

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

Chart VE-4 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that is milder than earlier in the recovery but could be flattening.

clip_image046

Chart VE-4, Germany, Exports Original Value and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-5 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend that could be flattening.

clip_image048

Chart VE-5, Germany, Imports Original Value and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-6 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2008. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization followed by stronger trend in recent months and flattening/declining recently.

clip_image050

Chart VE-6, Germany, Trade Balance Original and Trend 2008-2012

Source: Statistisches Bundesamt Deutschland

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

Table VE-6 provides monthly rates of growth of exports and imports of Germany. Exports decreased 2.0 percent in Sep 2012 after increasing 1.8 percent in Aug 2012, remaining unchanged 0.1 percent in Oct 2012, decreasing 2.2 percent in Nov 2012 and increasing 0.2 percent in Dec 2012 and 1.3 percent in Jan 2013. Exports fell 1.5 percent in Feb 2013. Imports decreased 0.8 percent in Sep 2012 after being flat in Aug 2012, growing 2.8 percent in Oct 2012 and declining 3.8 percent in Nov 2012 and 1.5 percent in Dec 2012, rebounding 3.3 percent in Jan 2013. Imports fell 3.8 percent in Feb 2013. Export growth and import growth were vigorous in Jan-Mar 2011 when Germany’s economy outperformed most advanced economies but less dynamic and consistently in following months as world trade weakens.

Table VE-6, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted 

 

Exports

Imports

Feb 2013

-1.5

-3.8

Jan

1.3

3.3

Dec 2012

0.2

-1.5

Nov

-2.2

-3.8

Oct

0.1

2.8

Sep

-2.0

-0.8

Aug

1.8

0.0

Jul

0.0

0.2

Jun

-0.5

-2.0

May

3.4

5.0

Apr

-1.2

-4.0

Mar

0.4

0.6

Feb

1.0

2.9

Jan

2.3

0.2

Dec 2011

-2.9

-1.8

Nov

2.9

-0.2

Oct

-3.5

-0.3

Sep

1.8

0.1

Aug

2.8

-0.1

Jul

-1.4

0.3

Jun

-0.2

0.1

May

1.7

1.1

Apr

-3.2

-0.3

Mar

5.2

2.1

Feb

1.0

1.7

Jan

0.7

3.3

Dec 2010

-0.1

-1.9

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

There is extremely important information in Table VE-7 for the current sovereign risk crisis in the euro zone. Table VE-7 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Feb 2013. German exports to other European Union (EU) members are 58.1 percent of total exports in Feb 2013 and 58.4 percent in cumulative Jan-Feb 2013. Exports to the euro area are 38.1 percent in Feb and 38.4 percent cumulative in Jan-Feb. Exports to third countries are 41.9 percent of the total in Jan-Feb and 41.6 percent cumulative in Jan-Feb. There is similar distribution for imports. Exports to non-euro countries are decreasing 1.9 percent in Feb 2013 and increasing 1.2 percent cumulative in Jan-Feb 2013 while exports to the euro area are decreasing 4.1 percent in Feb 2013 and decreasing 2.0 percent cumulative in Jan-Feb 2013. Exports to third countries, accounting for 41.9 percent of the total in Jan 2013, are decreasing 1.9 percent in Jan 2013 and increasing 1.2 percent cumulative in Jan-Feb 2013, accounting for 41.6 percent of the cumulative total in Jan-Feb 2013. Price competitiveness through devaluation could improve export performance and growth. Economic performance in Germany is closely related to its high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone. Germany could benefit from depreciation of the euro because of high share in its exports to countries not in the euro zone but breakdown of the euro zone raises doubts on the region’s economic growth that could affect German exports to other member states.

Table VE-7, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

 

Feb 2013 
€ Billions

Feb 12-Month
∆%

Cumulative Jan-Feb 2012 € Billions

Cumulative

Jan-Feb 2013/
Jan-Feb 2012 ∆%

Total
Exports

88.7

-2.8

177.2

0.0

A. EU
Members

51.5

% 58.1

-3.4

103.5

% 58.4

-0.8

Euro Area

33.8

% 38.1

-4.1

68.1

% 38.4

-2.0

Non-euro Area

17.7

% 19.9

-1.9

35.4

% 20.0

1.6

B. Third Countries

37.2

% 41.9

-1.9

73.7

% 41.6

1.2

Total Imports

71.9

-5.9

146.8

-1.6

C. EU Members

46.4

% 62.6

-4.5

93.3

% 63.6

-0.1

Euro Area

32.1

% 43.1

-5.7

64.4

% 43.9

-1.6

Non-euro Area

14.3

% 19.5

-1.5

28.9

% 19.7

3.3

D. Third Countries

25.5

% 37.4

-8.3

53.5

% 36.4

-4.0

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

Source: https://www.destatis.de/EN/PressServices/Press/pr/2013/04/PE13_130_51.html;jsessionid=7C55A5AC7F08380B900542EE84791700.cae1

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.2 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 fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

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

Period

Average ∆%

1949-2012

3.2

2000-2012

1.0

2000-2011

1.1

2000-2007

1.7

1990-1999

1.9

1980-1989

2.6

1970-1979

3.8

1960-1969

5.7

1950-1959

4.2

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130327

The Markit Flash France Composite Output Index fell from 43.1 in Feb to 42.1 in Mar for the lowest reading in four years (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10859). 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 since IQ2009 with expectations on the economic environment at depressed levels (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10859).

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, fell from 43.1 in Feb to 41.9 in Mar, indicating significant contraction of private sector activity for the lowest reading in 48 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10970). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI®, finds that composite data for manufacturing and services indicating expected weakening of business during the next year (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10970). The Markit France Services Activity index decreased from 43.7 in Feb to 41.3 in Mar, which is the lowest reading in 49 months (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10970). The Markit France Manufacturing Purchasing Managers’ Index® increased marginally to 44.0 in Mar from 43.9 in Feb, remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10903). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds continuing weakness in manufacturing with weakness in new internal orders because of weak domestic economic views (http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=10903). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI

Mar month ∆% 0.8
12 months ∆%: 1.0
4/14/13

PPI

Feb month ∆%: 0.4
Feb 12 months ∆%: 1.9

Blog 3/31/13

GDP Growth

IVQ2012/IIIQ2012 ∆%: -0.3
IVQ2012/IVQ2011 ∆%: -0.3
Blog 3/31/12

Industrial Production

Feb ∆%:
Manufacturing 0.8 12-Month ∆%:
Manufacturing minus 1.9
Blog 4/14/13

Consumer Spending

Manufactured Goods
Feb ∆%: -0.7 Feb 12-Month Manufactured Goods
∆%: -2.5
Blog 4/7/13

Employment

IVQ2012 Unemployed 2.944 million
Unemployment Rate: 10.2%
Employment Rate: 64.1%
Blog 3/10/13

Trade Balance

Feb Exports ∆%: month -1.9, 12 months -3.6

Feb Imports ∆%: month -0.8, 12 months -4.2

Blog 4/14/13

Confidence Indicators

Historical averages 100

Mar Mfg Business Climate 90

Blog 3/24/13

Links to blog comments in Table FR:

4/7/13 http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.htm

03/31/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html

3/24/13 http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html

3/10/13 http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html

Table VF-1 provides longer historical perspective of manufacturing in France. Output of manufacturing increased 0.8 percent in Feb 2013 and fell 1.9 percent in the 12 months ending in Feb 2013. Manufacturing fell 1.3 percent in Jan 2013 and 4.7 percent relative to a year earlier. Growth of 1.2 percent in Dec 2012 pulled down the 12-month rate of decline from 6.3 percent in Nov 2012 to 3.4 percent in Dec 2012. Manufacturing in France fell 14.1 percent in 2008 and 4.1 percent in Dec 2009.

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

 

Month ∆%

12-Month ∆%

Feb 2013

0.8

-1.9

Jan

-1.3

-4.7

Dec 2012

1.2

-3.4

Nov

-0.8

-6.3

Oct

-1.2

-3.5

Sep

-2.7

-2.6

Aug

1.8

-1.1

Jul

1.7

-2.8

Jun

-0.7

-3.9

May

-1.1

-5.6

Apr

-0.7

-3.2

Mar

1.2

-2.8

Feb

-2.1

-5.4

Jan

0.0

-2.7

Dec 2011

-1.7

-0.7

Nov

2.1

1.7

Oct

-0.3

1.8

Sep

-1.2

1.2

Aug

0.0

3.7

Jul

0.6

3.3

Jun

-2.5

3.2

May

1.4

4.7

Apr

-0.3

4.0

Mar

-1.5

5.1

Feb

0.8

8.9

Jan

2.0

8.0

Dec 2010

0.6

5.7

Dec 2009

 

-4.1

Dec 2008

 

-14.1

Dec 2007

 

-1.0

Dec 2006

 

2.7

Dec 2005

 

0.7

Dec 2004

 

1.0

Dec 2003

 

0.1

Dec 2002

 

-1.0

Dec 2001

 

-5.5

Dec 2000

 

4.6

Source:

Institut National de la Statistique et des Études Économique

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130410

Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques shows indices of manufacturing in France from 2009 to 2013. Manufacturing, which is CZ in Chart VF-1, fell deeply in 2008 and part of 2009. All curves of industrial indices tend to flatten recently with oscillations and declines and marginal improvement followed by renewed decline/stability in the final segment.

clip_image051

Chart VF-2, France, Industrial Production Indices 2007-2011

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20130410

France has been running a trade deficit fluctuating around €6,000 million as shown in Table VF-2. Exports decreased 1.9 percent in Feb 2013 while imports decreased 0.8 percent, resulting in increase of the trade deficit from revised €5653 million in Jan 2013 to €6011 million in Feb 2013.

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

 

Exports

Imports

Trade Balance

Feb 2013

35,841

41,852

-6,011

Jan

36,546

42,199

-5,653

Dec 2012

37,463

42,950

-5,487

Nov

36,270

41,082

-4,812

Oct

37,409

42,454

-5,045

Sep

37,274

42,554

-5,280

Aug

38,244

44,076

-5,832

Jul

36,788

41,461

-4,673

Jun

36,290

42,820

-6,530

May

37,529

43,140

-5,611

Apr

36,613

42,771

-6,158

Mar

36,209

41,919

-5,710

Feb

37,169

43,675

-6,506

Jan

36,658

42,313

-5,655

Dec 2011

35,982

41,506

-5,524

Nov

37,309

42,039

-4,730

Oct

35,813

42,075

-6,262

Sep

35,626

42,566

-6,940

Aug

37,012

42,161

-5,149

Jul

35,299

41,860

-6,561

Jun

35,286

40,929

-5,643

May

34,970

41,765

-6,795

Apr

34,731

41,687

-6,956

Mar

35,316

41,672

-6,356

Feb

34,866

41,469

-6,603

Jan

34,411

41,059

-6,648

Dec 2010

33,790

39,483

-5,693

Source: France, Direction générale des douanes et droits indirects

http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

Table VF-3 provides month and 12-month percentage changes of France’s exports and imports. Exports decreased 1.9 percent in Feb 2013 and decreased 3.6 percent in the 12 months ending in Feb 2013. Imports decreased 0.8 percent in Feb and decreased 4.2 percent in 12 months. Growth of exports and imports has fluctuated in 2011 and 2012 because of price surges of commodities and raw materials.

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

 

Exports
Month ∆%

Exports
12-Month ∆%

Imports
Month ∆%

Imports 12-Month ∆%

Feb 2013

-1.9

-3.6

-0.8

-4.2

Jan

-2.4

-0.3

-1.7

-0.3

Dec 2012

3.3

4.1

4.5

3.5

Nov

-3.0

-2.8

-3.2

-2.3

Oct

0.4

4.5

-0.2

0.9

Sep

-2.5

4.6

-3.5

0.0

Aug

3.9

3.3

6.3

4.5

Jul

1.4

4.2

-3.2

-0.9

Jun

-3.3

2.8

-0.7

4.6

May

2.5

7.3

0.9

3.3

Apr

1.1

5.4

2.0

2.6

Mar

-2.6

2.5

-4.0

0.6

Feb

1.4

6.6

3.2

5.3

Jan

1.9

6.5

1.9

3.0

Dec 2011

 

6.5

 

5.1

Dec 2012

 

4.1

 

3.5

Dec 2011

 

6.5

 

5.1

Dec 2010

 

13.3

 

14.7

Dec 2009

 

-9.7

 

-2.0

Dec 2008

 

-6.7

 

-10.8

Dec 2007

 

6.0

 

8.2

Dec 2006

 

6.2

 

6.6

Dec 2005

 

11.5

 

15.1

Dec 2004

 

-3.7

 

5.8

Dec 2003

 

7.1

 

1.6

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

Annual data for France’s exports, imports and trade balance are provided in Table VF-4. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €73,913 million in 2011. Annual growth rates of exports have not been sufficiently high to compensate for growth of imports driven in part by commodity price increases. In 2012, the trade deficit declined to €67,457 million with growth of exports of 3.1 percent and of imports of 1.4 percent.

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

 

Exports € Millions

∆%

Imports € Millions

∆%

Balance € Millions

Feb 2013 12 Months

440,270

 

507,224

 

-66,954

Year

         

2012

441,576

3.1

509,033

1.4

-67,457

2011

428,137

8.4

502,050

12.3

-73,913

2010

394,843

13.9

447,194

14.1

-52,351

2009

346,481

-17.0

391,872

-17.3

-45,391

2008

417,636

2.7

473,853

5.5

-56,217

2007

406,487

3.0

448,981

5.8

-42,494

2006

394,621

9.5

424,549

10.4

-29,928

2005

360,376

4.4

384,588

9.6

-24,212

2004

345,256

5.4

350,996

7.0

-5,740

2003

327,653

 

327,884

 

-231

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

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

No comments:

Post a Comment