CMP Associates Regulation Blog: Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk: Part II

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Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk: Part II

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Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

Executive Summary

I Twenty Eight Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

II Stagnating Real Wages

IIA United States International Trade

IIA1 United States International Trade

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	1.8	1.5	1.1	7.6
Japan	0.2	-0.7	-0.5	4.1
China	7.7	2.4	-2.6
UK	0.6	2.4* CPIH 2.2	1.1 output 0.8** input -0.1	7.8
Euro Zone	-1.1	1.2	-0.2	12.2
Germany	-0.3	1.1	0.1	5.4
France	-0.4	0.8	0.6	11.0
Nether-lands	-1.3	2.8	-1.5	6.5
Finland	-2.0	2.4	0.7	8.2
Belgium	-0.5	1.1	1.9	8.4
Portugal	-4.0	0.4	0.6	17.8
Ireland	NA	0.5	1.2	13.5
Italy	-2.3	1.3	-1.1	12.0
Greece	-5.3	-0.6	-2.4	NA
Spain	-2.0	1.5	-0.5	26.8

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/april-2013/index.html **Core

PPI http://www.ons.gov.uk/ons/rel/ppi2/producer-price-index/april-2013/stb-producer-price-index--april-2013.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 1.8 percent in IQ2013 relative to IQ2012 (Table 8 in http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp1q13_2nd.pdf http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). Japan’s GDP grew 0.9 percent in IQ2013 relative to IQ2012 and 0.2 percent relative to a year earlier. Japan’s grew at the seasonally adjusted annual rate (SAAR) of 3.5 percent in IQQ2013 (http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.htm). The UK grew at 0.3 percent in IQ2013 relative to IVQ2012 and GDP increased 0.6 percent in IQ2013 relative to IQ2012 (http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). The Euro Zone grew at minus 0.2 percent in IQ2013 and minus 1.1 percent in IQ2013 relative to IQ2012 (Section IVD and earlier http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html ). These are stagnating or “growth recession” rates, which are positive or about nil growth rates with some contractions that are insufficient to recover employment. The rates of unemployment are quite high: 7.5 percent in the US but 17.6 percent for unemployment/underemployment or job stress of 27.8 million (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html), 4.1 percent for Japan (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html and earlier http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html), 7.8 percent for the UK with high rates of unemployment for young people (see the labor statistics of the UK in Subsection VH at http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 1.1 percent in the US, -0.7 percent for Japan, 2.4 percent for China, 1.2 percent for the Euro Zone and 2.4 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/2013/06/mediocre-united-states-economic-growth.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/2013/06/mediocre-united-states-economic-growth.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html), weak hiring with the loss of 10 million full-time jobs (http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

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, writing on “Fed maps exit from stimulus,” on May 11, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887324744104578475273101471896.html?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzes the development of strategy for unwinding quantitative easing and how it can create uncertainty in financial markets. 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 1.6 to 2.1 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 US economic growth has been at only 2.1 percent on average in the cyclical expansion in the 15 quarters from IIIQ2009 to IQ2013. 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). The average of 7.8 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.7 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.

First, total nonfarm payroll employment seasonally adjusted (SA) increased 175,000 in May 2013 and private payroll employment rose 178,000. The average number of nonfarm jobs created in Jan-May 2012 was 204,800 while the average number of nonfarm jobs created in Jan-May 2013 was 189,200, or decline by 7.6 percent. The average number of private jobs created in the US in Jan-May 2012 was 213,600 while the average in Jan-May 2013 was 194,400, or decline by 9.0 percent. 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 five months from Jan to May 2013 was 189,200, which is an inadequate rate of job creation to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 27.8 million unemployed or underemployed. The difference between the average increase of 189,200 new private nonfarm jobs per month in the US from Jan to May 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 76,033 monthly new jobs net of absorption of new entrants in the labor force. There are 27.8 million in job stress in the US currently. Creation of 76,033 new jobs per month net of absorption of new entrants in the labor force would require 365 months to provide jobs for the unemployed and underemployed (27.780 million divided by 76,033) or 30.4 years (365 divided by 12). The civilian labor force of the US in May 2013 not seasonally adjusted stood at 155.734 million with 11.302 million unemployed or effectively 17.998 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 162.430 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 76,033 by 12, which is 912,396). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.787 million (0.05 times labor force of 155.734 million) for new net job creation of 3.515 million (11.302 million unemployed minus 7.787 million unemployed at rate of 5 percent) that at the current rate would take 3.9 years (3.515 million divided by 0.912396). Under the calculation in this blog, there are 17.998 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.430 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 9.876 million jobs net of labor force growth that at the current rate would take 10.8 years (17.998 million minus 0.05(162.430 million) = 9.876 million divided by 0.912396, 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 147.315 million in Jul 2007 to 144.432 million in May 2013, by 2.883 million, or decline of 2.0 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.363 million in May 2013, by 13.405 million or increase of 5.8 percent, using not seasonally adjusted data. There is actually not sufficient job creation in merely absorbing 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, the economy of the US can be summarized in growth of economic activity or GDP as decelerating from mediocre growth of 2.4 percent on an annual basis in 2010 and 1.8 percent in 2011 to 2.2 percent in 2012. Calculations below show that actual growth is around 1.9 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). United States real GDP grew at the rate of 3.2 percent between 1929 and 2012 and at 3.2 percent between 1947 and 2012 (http://www.bea.gov/iTable/index_nipa.cfm see http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html). Growth is not only mediocre but also sharply decelerating to a rhythm that is not consistent with reduction of unemployment and underemployment of 28.6 million people corresponding to 17.6 percent of the effective labor force of the United States (http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html). In the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013, 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, 0.4 percent in IVQ2012 and revised 2.4 percent in IQ2013. The annual equivalent rate of growth of GDP for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 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); discounting 0.4 percent to one quarter is 0.1 percent {[(1.004)^1/4 – 1]100}; and discounting 2.4 percent to one quarter is 0.59 percent {[(1.024)^1/4 -1}100}. Real GDP growth in the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 accumulated to 4.3 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0059) - 1]100 = 4.3%}. This is equivalent to growth from IQ2011 to IQ2013 obtained by dividing the seasonally-adjusted annual rate (SAAR) of IQ2013 of $13,746.2 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 {[($13,746.2/$13,181.2) - 1]100 = 4.3%}. The growth rate in annual equivalent for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0059)^4/9 -1]100 = 1.9%], or {[($13,746.2/$13,181.2)]^4/9-1]100 = 1.9%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 in Table I-6 below, obtaining the average for nine 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.

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 May 1, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130501a.htm):

“Release Date: May 1, 2013

For immediate release

Information received since the Federal Open Market Committee met in March suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown some improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. 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. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. 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.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.“

There are several important issues in this statement.

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”

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.”

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.”

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.”

Increase or Reduction of Asset Purchases. Market participants focused on slightly different wording about increasing asset purchases: “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. 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.” Will there be an increase in asset purchases?

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 IQ2013 is analyzed in Section I (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.htm) and the PCE inflation data from the report on personal income and outlays in Section IV (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html). The Bureau of Economic Analysis (BEA) provides the second estimate of IQ2013 GDP with the third estimate for IQ2013 to be released on Jun 26 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm See Section I (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.htm). 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/2013/06/mediocre-united-states-economic-growth.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html). The next report on “Personal Income and Outlays” for May will be released at 8:30 AM on Jun 27, 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 Apr 13 was released on May 3 and analyzed in this blog (http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-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 the fed funds rate in the range of 3.0 to 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

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

The producer price index of the euro zone decreased 0.2 percent in Dec 2012 and decreased 0.2 percent in Nov 2012 but increased 0.4 percent in Jan 2013 and 0.2 percent in Feb 2013, falling 0.2 percent in Mar 2013 and 0.6 percent in Apr 2013, as shown in Table IV-5. In Jan-Mar 2012, producer prices increased cumulatively 2.0 percent or at annual equivalent rate of 8.3 percent. Energy inflation has oscillated with the shocks of risk aversion that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices fell 0.8 percent in Dec 2012 but increased 0.4 percent in Feb 2013 and 0.8 percent in Jan 2013. Energy prices fell 0.8 percent in Dec 2012, 0.5 percent in Nov 2012 and fell 0.4 percent in Oct 2012 after -0.1 percent in Sep 2012, increased 2.4 percent in Aug, and 1.4 percent in Jul 2012 or at the annual equivalent rate of 16.2 percent in the quarter Jul-Sep 2012 and at 25.3 percent in Jul-Aug 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.5 percent. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Prices of capital goods have barely moved. Prices of durable consumer goods accelerated at annual equivalent rate of 3.3 percent in Jan-Mar 2012 but were flat in every month from Apr to Jun 2012, increasing 0.1 percent in both Aug and Jul 2012 but then remained unchanged in Sep 2012, increasing at 0.1 percent in Oct 2012 and increasing 0.2 percent in Jan 2013 and 0.1 percent in Feb-Mar 2013. Purchasing managers’ indexes worldwide reflect increasing prices of inputs for business while sales prices are stagnant or declining, squeezing economic activity (http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html). Unconventional monetary policy causes uncertainty in business decisions with shocks of declining net revenue margins during worldwide inflation waves (http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html).

Table IV-5, Euro Area, Industrial Producer Prices Month ∆%

	Apr 2013	Mar 2013	Feb 2013	Jan 2013	Dec 2012	Nov 2012	Oct 2012
Industry ex Construction	-0.6	-0.2	0.2	0.4	-0.2	-0.2	-0.1
Industry ex Construction & Energy	-0.2	0.0	0.1	0.2	0.0	-0.1	0.1
Intermediate Goods	-0.4	-0.1	0.0	0.1	0.0	-0.2	0.0
Energy	-1.6	-0.7	0.4	0.8	-0.8	-0.5	-0.4
Capital Goods	0.1	0.0	0.2	0.2	0.0	0.0	0.1
Durable Consumer Goods	0.0	0.1	0.1	0.2	-0.1	0.0	0.1
Nondurable Consumer Goods	-0.1	0.1	0.1	0.2	0.1	0.1	0.2

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

Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-6. The 12-month percentage change of industrial prices excluding construction fell from 4.5 percent in Dec 2011 to 2.0 percent in Jul 2012 but increased to 3.0 percent in Aug and 2.9 percent in Sep 2012, falling to 2.7 percent in Oct 2012, 2.3 percent in Nov 2012, 2.3 percent in Dec 2012, 1.7 percent in Jan 2013 and 1.3 percent in Feb 2013. The 12-month rate of increase of euro zone producer prices in Mar 2013 was 0.7 percent and minus 0.2 percent in Apr 2013. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.5 percent in the 12 months ending in Jul 2012, increasing to 7.5 percent in Aug 2012 and 6.4 percent in Sep 2012 but falling to 5.2 percent in Oct 2012, 3.9 percent in Nov 2012, 3.6 percent in Dec 2012, 2.2 percent in Jan 2013 and 1.6 percent in Feb 2013. Energy prices fell 0.3 unchanged in the 12 months ending in Mar 2013 and 2.0 percent in Apr 2013. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion. Business net revenue or prices of sold goods less costs of inputs suffers wide oscillation preventing sound calculation of risk/returns and capital budgeting (http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html).

Table IV-6 Euro Area, Industrial Producer Prices 12-Month ∆%

	Apr 2013	Mar 2013	Feb 2013	Jan 2013	Dec 2012	Nov 2012	Oct 2012
Industry ex Construction	-0.2	0.6	1.3	1.7	2.3	2.3	2.7
Industry ex Construction & Energy	0.6	1.0	1.2	1.5	1.7	1.6	1.6
Intermediate Goods	-0.3	0.4	0.8	1.3	1.6	1.4	1.3
Energy	-2.0	-0.3	1.6	2.2	3.6	3.9	5.2
Capital Goods	0.6	0.7	0.8	0.8	0.9	0.9	0.8
Durable Consumer Goods	0.7	0.6	0.6	0.8	1.0	1.1	1.3
Nondurable Consumer Goods	1.9	2.1	2.3	2.5	2.6	2.6	2.7

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

Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html), as shown in Table IV-7. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 11.4 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent producer price inflation declined at minus 0.6 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.8 percent. In the third wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.4 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 8.3 percent with a high annual equivalent rate of 9.4 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal of commodity carry trades with equivalent annual inflation of minus 2.0 percent in Apr-Jun 2012. In the seventh wave, annual equivalent inflation jumped to 7.4 percent in Jul-Aug 2012 while energy prices driven by carry trades increased at the annual equivalent rate of 25.3 percent. In the eighth wave, annual equivalent inflation retreated to 0.6 percent in Sep-Oct 2012. In the ninth wave, annual equivalent inflation was minus 2.4 percent in Nov-Dec 2012. In the tenth wave, annual equivalent inflation was 3.7 percent in Jan-Feb 2013. In the eleventh wave, annual equivalent inflation was minus 4.7 percent in Mar-Apr 2013. The bottom part of Table IV-7 provides 12-month percentage changes from 1999 to 2010. The final row of Table IV-7 provides the average annual rate of producer-price inflation in the euro area at 2.5 percent in Dec from 1999 to 2012.

Table IV-7, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Apr 2013	-0.6	-0.2
Mar	-0.2	0.6
AE ∆% Mar-Apr	-4.7
Feb	0.2	1.3
Jan	0.4	1.7
AE ∆% Jan-Feb	3.7
Dec 2012	-0.2	2.3
Nov	-0.2	2.3
AE ∆% Nov-Dec	-2.4
Oct	0.0	2.7
Sep	0.1	2.9
AE ∆% Sep-Oct	0.6
Aug	0.9	3.0
Jul	0.3	2.0
AE ∆% Jul-Aug	7.4
Jun	-0.4	2.3
May	-0.3	2.8
Apr	0.2	3.0
AE ∆% Apr-Jun	-2.0
Mar	0.5	3.9
Feb	0.6	4.1
Jan	0.9	4.2
AE ∆% Jan-Mar	8.3
Dec 2011	-0.2	4.5
Nov	0.2	5.5
Oct	0.1	5.7
AE ∆% Oct-Dec	0.4
Sep	0.2	5.7
Aug	-0.1	5.8
Jul	0.6	6.0
AE ∆% Jul-Sep	2.8
Jun	0.0	5.7
May	-0.1	6.1
AE ∆% May-Jun	-0.6
Apr	1.0	6.5
Mar	0.7	6.4
Feb	0.7	6.2
Jan	1.2	5.6
AE ∆% Jan-Apr	11.4
Dec 2012		2.3
Dec 2011		4.5
Dec 2010		5.1
Dec 2009		-3.0
Dec 2008		1.5
Dec 2007		4.4
Dec 2006		3.8
Dec 2005		4.5
Dec 2004		3.7
Dec 2003		1.0
Dec 2002		1.5
Dec 2001		-0.5
Dec 2000		4.7
Dec 1999		2.6
Average ∆% 1999-2012		2.5

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

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 3.3 percent in 2013 but accelerating to 4.0 percent in 2014, 4.4 percent in 2015 and 4.5 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $33,932 billion of world output of $71,707 billion, or 47.3 percent, but are projected to grow at much lower rates than world output, 2.1 percent on average from 2013 to 2016 in contrast with 4.1 percent for the world as a whole. While the world would grow 17.2 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.8 percent. The difference in dollars of 2012 is rather high: growing by 17.2 percent would add $12.3 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,964 but growing by 8.8 percent would add $6.3 trillion of output to the world, or about the output of Japan in 2012. 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 2012 of $27,290 billion, or 38.1 percent of world output. The EMDEs would grow cumulatively 25.2 percent or at the average yearly rate of 5.8 percent, contributing $6.9 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,227 billion of China in 2012. The final four countries in Table 1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,470 billion, or 20.2 percent of world output, which is equivalent to 42.6 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 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016
World	71,707	3.3	4.0	4.4	4.5
G7	33,932	1.3	2.2	2.5	2.5
Canada	1,819	1.5	2.4	2.5	2.4
France	2,609	-0.1	0.9	1.5	1.7
DE	3,401	0.6	1.5	1.3	1.3
Italy	2,014	-1.5	0.5	1.2	1.4
Japan	5,964	1.6	1.4	1.1	1.2
UK	2,441	0.7	1.5	1.8	1.9
US	15,685	1.9	2.9	3.6	3.4
Euro Area	12,198	-0.3	1.1	1.4	1.6
DE	3,401	0.6	1.5	1.3	1.3
France	2,609	-0.1	0.9	1.5	1.7
Italy	2,014	-1.5	0.5	1.2	1.4
POT	213	-2.3	0.6	1.5	1.8
Ireland	210	1.1	2.2	2.7	2.7
Greece	249	-4.2	0.6	2.9	3.7
Spain	1,352	-1.6	0.7	1.4	1.5
EMDE	27,290	5.3	5.7	6.0	6.1
Brazil	2,396	3.0	4.0	4.1	4.2
Russia	2,022	3.4	3.8	3.7	3.6
India	1,825	5.7	6.2	6.6	6.9
China	8,227	8.0	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/pubs/ft/weo/2013/01/weodata/index.aspx

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx). Table I-2 is constructed with the WEO database to provide rates of unemployment from 2012 to 2016 for major countries and regions. In fact, unemployment rates for 2012 in Table I-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. The rates of unemployment are particularly high for the countries with sovereign debt difficulties in Europe: 15.7 percent for Portugal (POT), 14.7 percent for Ireland, 24.2 percent for Greece, 25.0 percent for Spain and 10.6 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.4 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 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016
World	NA	NA	NA	NA	NA
G7	7.4	7.4	7.3	7.0	6.6
Canada	7.3	7.3	7.2	7.1	7.0
France	10.2	11.2	11.6	11.4	10.9
DE	5.5	5.6	5.7	5.6	5.6
Italy	10.6	12.0	12.4	12.0	11.2
Japan	4.4	4.1	4.1	4.1	4.1
UK	8.0	7.8	7.8	7.4	6.9
US	8.1	7.7	7.5	6.9	6.3
Euro Area	11.4	12.3	12.3	11.9	11.4
DE	5.5	5.6	5.7	5.6	5.6
France	10.2	11.2	11.6	11.4	10.9
Italy	10.6	12.0	12.4	12.0	11.2
POT	15.7	18.3	18.5	18.1	17.5
Ireland	14.7	14.2	13.8	12.9	11.9
Greece	24.2	27.0	26.1	24.0	21.0
Spain	25.0	27.0	26.5	25.6	24.7
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	6.0	6.5	6.5	6.5
Russia	6.0	5.5	5.5	5.5	5.5
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/pubs/ft/weo/2013/01/weodata/index.aspx

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IQ2013 available now for all countries. Growth is weak throughout most of the world. Japan’s GDP increased 1.3 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 5.3 percent in IQ2012. Growth of 4.0 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.9 percent in IIIQ2012 at the SAAR of minus 3.5 percent and increased 0.3 percent relative to a year earlier. Japan’s GDP grew 0.3 percent in IVQ2012 at the SAAR of 1.0 percent and increased 0.5 percent relative to a year earlier. Japan grew 0.9 percent in IQ2013 at the SAAR of 3.5 percent and 0.2 percent relative to a year earlier. China grew at 1.9 percent in IIQ2012, which annualizes to 7.8 percent and 7.6 percent relative to a year earlier. China grew at 2.1 percent in IIIQ2012, which annualizes at 8.7 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. In IQ2013, China grew at 1.6 percent, which annualizes at 6.6 percent and 7.7 percent relative to a year earlier. 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, 7.9 percent in IVQ2012 relative to year earlier and 7.7 percent in IQ2013. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.1 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.2 percent IIQ2012 and fell 0.5 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.1 percent and declined 0.7 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.6 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 percent and decreased 1.1 percent relative to a year earlier. Germany’s GDP increased 0.6 percent in IQ2012 and 1.8 percent relative to a year earlier. In IIQ2012, Germany’s GDP increased 0.2 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 0.7 percent in IVQ2012 and increased 0.0 percent relative to a year earlier. In IQ2013, Germany’s GDP increased 0.1 percent and fell 1.4 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.5 percent, at SAAR of 2.0 percent and higher by 2.4 percent relative to IQ2011. US GDP increased 0.5 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. In IQ2013, US GDP grew at 2.4 percent SAAR, 0.6 percent relative to the prior quarter and 1.8 percent relative to the same quarter in 2013 (Section) with weak hiring (http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html). In IQ2012, UK GDP fell 0.1 percent, increasing 0.5 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. UK GDP increased 0.3 percent in IQ2013 and 0.6 percent relative to a year earlier. Italy has experienced decline of GDP in seven consecutive quarters from IIIQ2011 to IQ2013. Italy’s GDP fell 1.0 percent in IQ2012 and declined 1.7 percent relative to IQ2011. Italy’s GDP fell 0.6 percent in IIQ2012 and declined 2.5 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. In IQ2013, Italy’s GDP contracted 0.5 percent and fell 2.3 percent relative to a year earlier. France’s GDP changed 0.0 percent in IQ2012 and increased 0.3 percent relative to a year earlier. France’s GDP decreased 0.2 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.1 percent and increased 0.0 percent relative to a year earlier. France’s GDP fell 0.2 percent in IVQ2012 and declined 0.3 percent relative to a year earlier. In IQ2013, France GDP fell 0.2 percent and declined 0.4 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: 1.3 SAAR: 5.3	3.4
China	1.6	8.1
Euro Area	-0.1	-0.1
Germany	0.6	1.8
France	0.0	0.3
Italy	-1.0	-1.7
United Kingdom	-0.1	0.5
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ:0.3 SAAR: 1.3	2.1
Japan	QOQ: -0.2 SAAR: -0.9	4.0
China	1.9	7.6
Euro Area	-0.2	-0.5
Germany	0.2	0.5 1.0 CA
France	-0.2	0.1
Italy	-0.6	-2.5
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: –3.5	0.3
China	2.1	7.4
Euro Area	-0.1	-0.7
Germany	0.2	0.4
France	0.1	0.0
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: 0.3 SAAR: 1.0	0.5
China	2.0	7.9
Euro Area	-0.6	-1.0
Germany	-0.7	0.0
France	-0.2	-0.3
Italy	-0.9	-2.8
United Kingdom	-0.3	0.2
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.6 SAAR: 2.4	1.8
Japan	QOQ: 0.9 SAAR: 3.5	0.2
China	1.6	7.7
Euro Area	-0.2	-1.1
Germany	0.1	-1.4
France	-0.2	-0.4
Italy	-0.5	-2.3
UK	0.3	0.6

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 recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier 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 and earlier 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 Apr 2013, Japan’s exports grew 3.8 percent in 12 months while imports increased 9.4 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 Apr 2013, China exports increased 14.7 percent relative to a year earlier and imports 16.8 percent. Germany’s exports increased 1.9 percent in the month of Apr 2013 and increased 8.5 percent in the 12 months ending in Apr 2013 while imports increased 2.2 percent in the month of Apr and increased 5.2 percent in the 12 months ending in Apr. Net trade contributed 0.4 percentage points to growth of GDP in IQ2012, contributed 1.3 percentage points in IIQ2012, contributed 1.4 percentage points in IIIQ2012, contributed 0.7 percentage points in IVQ2012 and contributed 1.0 percentage points in 2012. Net trade deducted 0.1 percentage points from Germany’s GDP growth. 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. In IQ2013, net trade deducted 0.1 percentage points from UK’s GDP growth. France’s exports increased 4.1 percent in Apr 2013 while imports increased 3.8 percent and net trade added 0.2 percentage points to GDP growth in IIQ2012, adding 0.2 percentage points in IIIQ2012 and 0.2 percentage points in IVQ2012. Net trade deducted 0.2 percentage points from France’s GDP growth in IQ2013. US exports decreased 0.9 percent in Mar 2013 and goods exports increased 2.2 percent in Jan-Mar 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. In IQ2013, net trade deducted 0.21 percentage points from US GDP growth. US imports increased 1.2 percent in Apr 2013 and goods imports increased 0.8 percent in Jan-Apr 2013 relative to a year earlier. In the six months ending in Apr 2013, United States national industrial production accumulated increase of 2.0 percent at the annual equivalent rate of 4.1 percent, which is higher than 1.9 percent growth in 12 months. Excluding 1.3 percent growth in Nov 2012 in the rebound from hurricane Sandy, growth in the five months from Dec 2012 to Apr 2013 accumulated to 0.7 percent or 1.7 percent annual equivalent. Business equipment decreased 0.5 percent in Apr 2013, growing 3.4 percent in the 12 months ending in Apr 2013 and at the annual equivalent rate of 5.6 percent in the six months ending in Apr 2013 and 0.9 percent annual equivalent in the five months ending in Apr 2013. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The rate of capacity utilization for total industry decreased 0.5 percentage point to 77.8 percent, a rate 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972--2012) average.” United States industry is apparently decelerating with some strength at the margin. Manufacturing decreased 0.4 percent in Apr 2013 seasonally adjusted, increasing 2.1 percent not seasonally adjusted in 12 months. Manufacturing grew cumulatively 2.1 percent in the six months ending in Apr 2013 or at the annual equivalent rate of 4.3 percent. Excluding the increase of 1.4 percent in Nov 2012 because of recovery from hurricane Sandy, manufacturing accumulated growth of 0.7 percent from Dec 2012 to Apr 2013 or at the annual equivalent rate of 1.7 percent. Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased 16.8 percent from the trough in Apr 2009 to Dec 2012. Manufacturing fell 7.0 percent from the peak in Jun 2007 to Mar 2013 and increased 19.4 from the trough in Apr 2008 to Mar 2013. Manufacturing grew 18.5 percent from the trough in Apr 2009 to Apr 2013. Manufacturing output in Apr 2013 is 7.4 percent below the peak in Jun 2007. Data do suggest that world trade slowdown is accompanying world economic slowdown.

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

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	1.2 Apr	0.8 Jan-Apr	2.4 Apr	-1.9 Jan-Apr
Japan		Apr 2013 3.8 Mar 2013 1.1 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		Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		14.7 Apr 10.0 Mar 13 17.3 Jan-Apr 13		16.8 Apr 14.1 Mar 13 10.6 Jan-Apr 13
Euro Area	0.1 12-M Mar	1.3 Jan-Mar	-9.9 12-Mar	-5.2 Jan-Mar
Germany	1.9 Apr CSA	8.5 Apr	2.3Apr CSA	5.2 Apr
France Apr	4.1	4.1	3.8	-0.6
Italy Mar	1.2	-6.0	0.2	-10.6
UK	-1.3 Apr	0.3 Feb-Apr 13 /Feb-Apr 12	-2.7 Apr	-0.9 Feb-Apr 13/Feb-Apr 12
Net Trade % Points GDP Growth	% Points
USA	IQ2013 -0.21 IVQ2012 +0.33 IIIQ2012 +0.38 IIQ2012 +0.23 IQ2012 +0.06
Japan	-1.1 IIQ2012 -2.8 IIIQ2012 -0.6 IVQ2012
Germany	0.4 IQ2012 1.3 IIQ2012 1.4 IIIQ2012 0.7 IVQ2012 1.0 2012 IQ2013 -0.1
France	0.2 IIQ2012 0.1 IIIQ2012 0.2 IVQ2012 -0.2 IQ2013
UK	-0.7 IQ2012 -0.8 IIQ2012 +0.4 IIIQ2012 -0.2 IVQ2012 -0.1 IQ2013

Sources: Country Statistical Agencies 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 Apr 2013. The share of Asia in Japan’s trade is more than one half, 54.5 percent of exports and 43.4 percent of imports. Within Asia, exports to China are 17.3 percent of total exports and imports from China 21.6 percent of total imports. While exports to China increased 0.3 percent in the 12 months ending in Apr 2013, imports from China increased 13.3 percent. The largest export market for Japan in Apr 2013 is the US with share of 19.1 percent of total exports and share of imports from the US of 8.1 percent in total imports. Western Europe has share of 9.8 percent in Japan’s exports and of 9.7 percent in imports. Rates of growth of exports of Japan in Mar 2013 are low or negative for several countries and regions with the exception of growth of 14.8 percent for exports to the US, 12.0 for exports to Mexico, 20.7 percent for exports to Brazil and 16.9 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 increase of Japan’s exports by 3.8 percent in Apr 2013 while imports increased 9.4 percent but higher levels after the earthquake and declining prices may be another factor. Growth rates of imports in the 12 months ending in Apr 2013 are positive for most trading partners. Imports from Asia increased 13.1 percent in the 12 months ending in Apr 2013 while imports from China increased 13.3 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

Apr 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,777,409	3.8	6,657,345	9.4
Asia	3,151,351	4.3	2,888,002	13.1
China	998,409	0.3	1,440,866	13.3
USA	1,101,287	14.8	538,297	0.8
Canada	67,974	-5.1	113,225	42.4
Brazil	47,383	20.7	71,162	-9.3
Mexico	82,091	12.0	34,516	31.7
Western Europe	568,417	-3.5	644,944	11.4
Germany	144,476	-1.3	175,918	18.4
France	59,019	12.5	95,282	12.1
UK	82,661	-5.9	50,925	1.0
Middle East	196,158	6.1	1,341,440	1.6
Australia	147,004	16.9	397,067	8.4

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 increasing growth of the volume of world trade of goods and services from 3.6 percent in 2013 to 6.1 percent in 2015 and 5.7 percent in 2018. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would more challenging with lower growth of world trade.

Table V-6, IMF, Projections of World Trade, ∆%

	2013	2014	2015	Average ∆% 2013-2018
World Trade Volume (Goods and Services)	3.6	5.3	6.1	5.7
Oil Price USD/Barrel	102.60	97.58	NA	NA
Commodity Price Index	181.84	174.06	NA	NA
Commodity Industrial Inputs Price 2005=100	170.04	164.66	NA	NA
Imports Goods & Services
G7	1.8	4.0	4.7	4.3
EMDE	6.2	7.3	7.9	7.5
Exports Goods & Services
G7	2.2	4.4	4.9	4.5
EMDE	4.8	6.5	7.6	7.1

Notes: Commodity Price Index includes Fuel and Non-fuel Prices; Commodity Industrial Inputs Price includes agricultural raw materials and metal prices; Oil price is average of WTI, Brent and Dubai

Source: International Monetary Fund World Economic Outlook databank

http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 53.1 in May from 51.9 in Apr, indicating expansion at a moderate rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/e1cd4b422e4142abb5b7cc388ed55e52).This index has remained above the contraction territory of 50.0 during 46 consecutive months. The employment index remained unchanged at 50.4 in May relative to 50.4 in Apr with input prices rising at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/e1cd4b422e4142abb5b7cc388ed55e52). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased marginally to 50.6 in May from 50.4 in Apr, which is the fifth consecutive reading above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/29fc067a0d4342edb2b0ba45b77a9bee). New export business is near stagnation and total new orders increased from 50.8 in Apr to 51.4 in May. The HSBC Brazil Composite Output Index, compiled by Markit, decreased marginally from 51.5 in Apr to 51.2 in May, indicating moderate increase in private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/de8a2ffef594427487be825fd917927c). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 51.3 in Apr to 51.0 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/de8a2ffef594427487be825fd917927c). Andre Loes, Chief Economist, Brazil, at HSBC, finds slower rate of increase in input prices but moderate growth of the private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/de8a2ffef594427487be825fd917927c). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased from 50.8 in Apr to 50.4 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/08d8ebe4ce0c4273aab97f69e1210b58). Andre Loes, Chief Economist, Brazil at HSBC, finds that companies may have time to improve profit margins because of increases in prices of output relative to prices of inputs (http://www.markiteconomics.com/Survey/PressRelease.mvc/08d8ebe4ce0c4273aab97f69e1210b58).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted fell to 52.0 in Apr from 54.6 in Mar, which is the lowest reading in six months (http://www.markiteconomics.com/Survey/PressRelease.mvc/8b5f686e481f42199fa60c1ae997959c).New export orders registered 52.2 in Apr from 51.8 in Mar, indicating expansion at a moderate rate while output fell from 56.6 in Mar to 53.6 in Apr. Chris Williams, Chief Economist at Markit, finds that the survey data are consistent with growth at only 2.0 percent annual rythm in the beginning of IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8b5f686e481f42199fa60c1ae997959c). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 52.3 in May from 52.1 in Apr (http://www.markiteconomics.com/Survey/PressRelease.mvc/1b6c8066bfa54224abb1ec66117c8e38). The index of new exports orders fell from 51.8 in Apr t0 49.8 in May while total new orders increased from 51.5 in Apr to 53.3 in May. Chris Williamson, Chief Economist at Markit, finds moderate growth in all segments of the index, suggesting risk of standstill (http://www.markiteconomics.com/Survey/PressRelease.mvc/1b6c8066bfa54224abb1ec66117c8e38). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 1.7 percentage points from 50.7 in Apr to 49.0 in May, which is the lowest reading since Jul 2009 that stood at 45.8 (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders decreased 3.5 percentage points from 52.3 in Apr to 48.8 in May. The index of exports decreased 3.0 percentage points from 54.0 in Apr to 51.0 in May, remaining in expansion territory. The Non-Manufacturing ISM Report on Business^® PMI increased 0.6 percentage points from 53.1 in Apr to 53.7 in May, indicating growth of business activity/production during 46 consecutive months, while the index of new orders increased 1.5 percentage points from 54.5 in A[t to 56.0 in May (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	Apr 12 months NSA ∆%: 1.1; ex food and energy ∆%: 1.7 Apr month SA ∆%: -0.4; ex food and energy ∆%: 0.1 Blog 5/19/13
Producer Price Index	Apr 12-month NSA ∆%: 0.6; ex food and energy ∆% 1.7 Apr month SA ∆% = -0.7; ex food and energy ∆%: 0.1 Blog 5/19/13
PCE Inflation	Apr 12-month NSA ∆%: headline 0.7; ex food and energy ∆% 1.1 Blog 6/2/13
Employment Situation	Household Survey: May Unemployment Rate SA 7.6% Blog calculation People in Job Stress May: 27.8 million NSA, 17.1% of Labor Force Establishment Survey: Nov Nonfarm Jobs +175,000; Private +178,000 jobs created Apr 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.2 Blog 6/9/13
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 Mar 2013 3.869 million lower by 0.746 million than 4.615 million in Mar 2007 Blog 5/12/13
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 2.4 IIQ2012/IIQ2011 2.1 IIIQ2012/IIIQ2011 2.6 IVQ2012/IVQ2011 1.7 IQ2013/IQ2012 1.8 IQ2012 SAAR 2.0 IIQ2012 SAAR 1.3 IIIQ2012 SAAR 3.1 IVQ2012 SAAR 0.4 IQ2013 SAAR 2.4 Blog 6/2/13
Real Private Fixed Investment	SAAR IQ2013 4.1 ∆% IVQ2007 to IIIQ2012: minus 8.8% Blog 6/2/13
Personal Income and Consumption	Apr month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.1 Real Personal Consumption Expenditures (RPCE): 0.1 12-month Apr NSA ∆%: RDPI: 1.0; RPCE ∆%: 2.1 Blog 6/2/13
Quarterly Services Report	IQ13/IQ12 SA ∆%: Information 4.3 Financial & Insurance 1.8 Blog 6/9/13
Employment Cost Index	Compensation Private IQ2013 SA ∆%: 0.3 Jan 13 months ∆%: 1.7 Blog 5/5/13
Industrial Production	Apr month SA ∆%: -0.5 Apr 12 months SA ∆%: 1.9 Manufacturing Apr SA ∆% -0.4 Apr 12 months SA ∆% 1.3, NSA 2.1 Capacity Utilization: 77.8 Blog 5/19/13
Productivity and Costs	Nonfarm Business Productivity IQ2013∆% SAAE 0.5; IQ2013/IQ2012 ∆% 0.9; Unit Labor Costs SAAE IQ2013 ∆% -4.3; IQ2013/IQ2012 ∆%: 1.1 Blog 6/9/2013
New York Fed Manufacturing Index	General Business Conditions From Apr 3.05 to May -1.43 New Orders: From Apr 2.20 to May -1.17 Blog 5/19/13
Philadelphia Fed Business Outlook Index	General Index from Apr 1.3 to May -5.2 New Orders from Apr -1.0 to May -7.9 Blog 5/19/13
Manufacturing Shipments and Orders	New Orders SA Apr ∆% 1.0 Ex Transport -0.1 Jan-Apr NSA New Orders 0.2 Ex transport 0.2 Blog 6/9/13
Durable Goods	Apr New Orders SA ∆%: minus 3.3; ex transport ∆%: 1.3 Jan-Apr 13/Jan-Apr 12 New Orders NSA ∆%: 0.7; ex transport ∆% 0.7 Blog 5/26/13
Sales of New Motor Vehicles	Jan-May 2013 6,424,707; Jan-May 2012 5,986,605. May 13 SAAR 15.31 million, Apr 13 SAAR 14.92 million, May 2012 SAAR 13.95 million Blog 6/9/13
Sales of Merchant Wholesalers	Jan-Mar 2013/Jan-Mar 2012 NSA ∆%: Total 1.2; Durable Goods: 0.5; Nondurable Goods: 1.8 Blog 5/12/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Mar 13/Mar 12 NSA ∆%: Sales Total Business 0.1; Manufacturers 0.2 Retailers 1.7; Merchant Wholesalers -1.5 Blog 5/19/13
Sales for Retail and Food Services	Jan-Apr 2013/Jan-Apr 2012 ∆%: Retail and Food Services 3.3; Retail ∆% 3.2 Blog 5/19/13
Value of Construction Put in Place	Apr SAAR month SA ∆%: -0.4 Apr 12-month NSA: 4.3 Jan-Apr 2013 ∆% 4.5 Blog 6/9/13
Case-Shiller Home Prices	Mar 2013/Mar 2012 ∆% NSA: 10 Cities 10.3; 20 Cities: 10.9 ∆% Mar SA: 10 Cities 1.4 ; 20 Cities: 1.1 Blog 6/2/13
FHFA House Price Index Purchases Only	Mar SA ∆% 1.3; 12 month NSA ∆%: 7.2 Blog 5/26/13
New House Sales	Apr 2013 month SAAR ∆%: minus 2.3 Jan-Apr 2013/Jan-Apr 2012 NSA ∆%: 26.8 Blog 5/26/13
Housing Starts and Permits	Apr Starts month SA ∆%: -16.5 ; Permits ∆%: +14.3 Jan-Apr 2013/Jan-Apr 2012 NSA ∆% Starts 28.9; Permits ∆% 27.3 Blog 5/19/13
Trade Balance	Balance Apr SA -$38,829 million versus Mar -$42,960 million Exports Apr SA ∆%: 1.2 Imports Apr SA ∆%: 2.4 Goods Exports Jan-Apr 2013/2012 NSA ∆%: 0.8 Goods Imports Jan-Apr 2013/2012 NSA ∆%: -1.9 Blog 6/9/13
Export and Import Prices	Apr 12-month NSA ∆%: Imports -2.6; Exports -0.9 Blog 5/19/13
Consumer Credit	Apr ∆% annual rate: 4.7 Blog 6/9/13
Net Foreign Purchases of Long-term Treasury Securities	Mar Net Foreign Purchases of Long-term Treasury Securities: -$13.5 billion Major Holders of Treasury Securities: China $1251 billion; Japan $1105 billion; Total Foreign US Treasury Holdings Feb $5758 billion Blog 5/19/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Apr: Receipts 15.9; Outlays minus 0.6; Individual Income Taxes 20.0 Deficit Fiscal Year 2011 $1,297 billion Deficit Fiscal Year 2012 $1,089,353 million Blog 5/12/2013
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	Apr 2013 SAAR ∆%: Securities 1.0 Loans 5.1 Cash Assets 9.0 Deposits 2.4 Blog 5/26/13
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:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/12/13 http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

5/5/13 http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html

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

The Bureau of Labor Statistics (BLS) of the Department of Labor provides the quarterly report on productivity and costs. The operational definition of productivity used by the BLS is (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.” The BLS has revised the estimates for productivity and unit costs. Table VA-1 provides revised data for nonfarm business sector productivity and unit labor costs for IQ2013 and the final two quarters of 2012 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 2.1 percent and of 1.6 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 0.5 percent in IQ2013, as shown in column 2 “IQ2013 SAEE.” The increase of labor productivity from IQ2012 to IQ2013 was 0.9 percent, reflecting increases in output of 2.4 percent and of hours worked of 1.5 percent, as shown in column 3 “IQ2013 YoY.” Hours worked increased from 1.6 percent in IIIQ2012 in SAAE to 2.4 percent in IVQ2012 and 1.6 percent in IQ2013 while output growth fell from 4.7 percent in IIIQ2011 to 0.7 percent in IVQ2012 and 2.1 percent in IQ2013. The BLS defines unit labor costs as (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.” Unit labor costs increased at the SAAE rate of minus 4.3 percent in IQ2013 and rose 1.1 percent in IQ2013 relative to IQ2012. Hourly compensation decreased at the SAAE rate of 3.8 percent in IQ2013, which deflating by the estimated consumer price increase SAAE rate in IQ2013 results in decrease of real hourly compensation at 5.2 percent. Real hourly compensation increased 0.3 percent in IQ2013 relative to IQ2012.

Table VA-1, US, Nonfarm Business Sector Productivity and Costs %

	IQ 2013 SAAE	IQ 2013 YoY	IVQ 2012 SAAE	IVQ 2012 YoY	IIIQ 2012 SAAE	IIIQ 2012 YoY
Productivity	0.5	0.9	-1.7	0.6	3.1	1.6
Output	2.1	2.4	0.7	2.5	4.7	3.7
Hours	1.6	1.5	2.4	1.9	1.6	2.1
Hourly Comp.	-3.8	2.0	9.9	4.4	1.2	1.7
Real Hourly Comp.	-5.2	0.3	7.5	2.5	-0.9	0.0
Unit Labor Costs	-4.3	1.1	11.8	3.8	-1.9	0.1
Unit Nonlabor Payments	7.6	1.5	-13.9	-1.4	9.3	3.6
Implicit Price Deflator	0.5	1.2	0.2	1.6	2.7	1.6

Notes: SAAE: seasonally adjusted annual equivalent; Comp.: compensation; YoY: Quarter on Same Quarter Year Earlier

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

In 2012, productivity increased 0.7 percent in the annual average, as shown in Table VA-2. Increases in productivity were 0.6 percent in 2011, 3.1 percent in 2010 and 2.9 percent in 2008. Savings of labor inputs have characterized the contraction period and the recovery period. Real hourly compensation fell 0.2 percent in 2012 and 0.6 percent in 2011, interrupting increases of 0.4 percent in 2010 and 1.8 percent in 2009. Unit labor costs fell 1.5 percent in 2009 and 1.0 percent in 2010 but increased 2.0 percent in 2011 and 1.2 percent in 2012.

Table VA-2, US, Revised Nonfarm Business Sector Productivity and Costs Annual Average, ∆% Annual Average

	2012 ∆%	2011 ∆%	2010 ∆%	2009 ∆%	2008 ∆%	2007 ∆%
Productivity	0.7	0.6	3.1	2.9	0.6	1.5
Real Hourly Compensation	-0.2	-0.6	0.4	1.8	-0.4	1.1
Unit Labor Costs	1.2	2.0	-1.0	-1.5	2.8	2.4

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Productivity jumped in the recovery after the recession from Mar IQ2001 to Nov IVQ2001 (http://www.nber.org/cycles.html). Table VA-3 provides quarter on quarter and annual percentage changes in nonfarm business output per hour, or productivity, from 1999 to 2012. The annual average jumped from 3.0 percent in 2001 to 4.5 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 8.9 percent in the first quarter after the recession in IQ2002. Productivity increases decline later in the expansion period. Productivity increases were mediocre during the recession from Dec IVQ2007 to Sep IIIQ2009 (http://www.nber.org/cycles.html) and increased during the first phase of expansion from IIQ2009 to IQ2010, trended lower and collapsed in 2011 and 2012 with sporadic jumps and declines in five out of eight quarters. Productivity increased at 0.5 percent in IQ2013.

Table VA-3, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	4.0	0.3	3.4	7.0	3.3
2000	-1.4	9.1	0.1	4.2	3.4
2001	-1.1	7.4	2.2	5.8	3.0
2002	8.9	0.2	3.9	-0.1	4.5
2003	3.5	5.6	9.6	1.4	3.7
2004	0.7	3.4	0.3	1.0	2.7
2005	4.3	-0.9	3.0	-0.1	1.7
2006	2.9	0.2	-2.4	2.8	0.9
2007	-0.2	3.3	4.7	2.0	1.5
2008	-2.5	2.4	-1.0	-3.4	0.6
2009	5.8	6.5	5.2	4.8	2.9
2010	3.1	-0.5	3.2	1.7	3.1
2011	-1.3	0.6	-0.1	2.3	0.6
2012	-0.7	1.7	3.1	-1.7	0.7
2013	0.5

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-1 of the Bureau of Labor Statistics (BLS) provides SAAE rates of nonfarm business productivity from 1999 to 2013. There is a clear pattern in both episodes of economic cycles in 2001 and 2007 of rapid expansion of productivity in the transition from contraction to expansion followed by more subdued productivity expansion. Part of the explanation is the reduction in labor utilization resulting from adjustment of business to the sudden shock of collapse of revenue. Productivity rose briefly in the expansion after 2009 but then collapsed and moved to negative change with some positive changes recently at lower rates.

Chart VA-1, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Percentage changes from prior quarter at SAAE rates and annual average percentage changes of nonfarm business unit labor costs are provided in Table VA-4. Unit labor costs fell during the contractions with continuing negative percentage changes in the early phases of the recovery. Weak labor markets partly explain the decline in unit labor costs. As the economy moves toward full employment, labor markets tighten with increase in unit labor costs. The expansion beginning in IIIQ2009 has been characterized by high unemployment and underemployment. Table VA-4 shows continuing subdued increases in unit labor costs in 2011 but with increase of 6.4 percent in IQ2012 followed by decrease of 0.5 percent in IIQ2012, decline of 1.9 percent in IIIQ2012 and increase of 11.8 percent in IVQ2012. Unit labor costs decreased at 4.3 percent in IQ2013.

Table VA-4, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	3.0	0.5	0.1	1.6	0.9
2000	17.4	-7.4	8.6	-1.5	3.9
2001	10.9	-5.8	-1.1	-1.7	1.5
2002	-4.1	3.3	-1.6	2.2	-1.3
2003	2.7	1.4	-3.5	1.8	1.0
2004	-2.5	2.4	5.8	2.7	0.7
2005	-1.0	3.5	2.6	2.6	2.3
2006	2.9	1.2	3.5	6.9	2.9
2007	4.0	-1.9	-1.9	4.3	2.4
2008	8.7	-3.4	4.2	5.7	2.8
2009	-8.1	-0.2	-3.1	-3.9	-1.5
2010	-1.2	3.3	-1.5	-1.4	-1.0
2011	11.4	-1.4	-0.6	-3.4	2.0
2012	6.4	-0.5	-1.9	11.8	1.2
2013	-4.3

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-2 provides percentage changes quarter on quarter at SAAE rates of nonfarm business unit labor costs. With the exception of 3.3 percent in IIQ2010, a jump of 11.4 percent in IQ2011, 6.4 percent in IQ2012 and 11.8 percent in IVQ2012, changes in nonfarm business unit labor costs have been negative.

Chart VA-2, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Table VA-5 provides percentage change from prior quarter at annual rates for nonfarm business real hourly worker compensation. The expansion after the contraction of 2001 was followed by strong recovery of real hourly compensation. Real hourly compensation increased at the rate of 5.3 percent in IQ2011 but fell at annual rates of 5.2 percent in IIQ2011, 3.6 percent in IIIQ2011 and 2.5 percent in IVQ2011. Real hourly compensation increased at 3.2 percent in IQ2012 and at 0.2 percent in IIQ2012, declining at 0.9 percent in IIIQ2012 and increasing at 7.5 percent in IVQ2012. Real hourly compensation fell 0.6 percent in 2011 and declined 0.2 percent in 2012. Real hourly compensation fell at 5.2 percent in IQ2013.

Table VA-5, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	5.5	-2.0	0.3	5.5	2.2
2000	11.4	-2.0	4.7	-0.2	3.9
2001	5.6	-1.6	0.0	4.5	1.7
2002	2.9	0.3	0.1	-0.4	1.5
2003	2.2	7.7	2.7	1.7	2.4
2004	-5.1	2.7	3.3	-0.6	0.6
2005	1.5	-0.2	-0.4	-1.3	0.6
2006	3.6	-2.0	-2.8	11.7	0.5
2007	-0.2	-3.1	0.2	1.3	1.1
2008	1.4	-6.1	-3.0	12.0	-0.4
2009	-0.3	4.4	-1.6	-2.3	1.8
2010	1.0	3.1	0.3	-2.7	0.4
2011	5.3	-5.2	-3.6	-2.5	-0.6
2012	3.2	0.2	-0.9	7.5	-0.2
2013	-5.2

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-3 provides percentage change from prior quarter at annual rate of nonfarm business real hourly compensation from 1999 to 2012. There are significant fluctuations in quarterly percentage changes oscillating between positive and negative. There is no clear pattern in the two contractions in the 2000s.

Chart VA-3, US, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2013

Chart VA-4 provides percentage change of nonfarm business output per hour in a quarter relative to the same quarter a year earlier. As in most series of real output, productivity increased sharply in 2010 but the momentum was lost after 2011 as with the rest of the real economy.

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-4, US, Nonfarm Business Output per Hour, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-5 provides percentage changes of nonfarm business unit labor costs relative to the same quarter a year earlier. Softening of labor markets caused relatively high yearly percentage changes in the recession of 2001 repeated in the recession in 2009. Recovery was strong in 2010 but then weakened.

Chart VA-5, US, Nonfarm Business Unit Labor Costs, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-6 provides percentage changes in a quarter relative to the same quarter a year earlier for nonfarm business real hourly compensation. Labor compensation eroded sharply during the recession with brief recovery in 2010 and another fall until recently.

Chart VA-6, US, Nonfarm Business Real Hourly Compensation, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Rapid increase of US labor productivity in the 1990s is shown in Chart VA-7 with the index of nonfarm business labor productivity from 1947 to 2013. The rate of productivity increase continued in the early part of the 2000s but then softened and fell during the global recession.

Chart VA-7, US, Nonfarm Business Labor Productivity, Output per Hour, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Unit labor costs increased sharply during the Great Inflation from the late 1960s to 1981 as shown by sharper slope in Chart VA-8. Unit labor costs continued to increase but at a lower rate.

Chart VA-8, US, Nonfarm Business, Unit Labor Costs, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Real hourly compensation increased at relatively high rates after 1947 to the early 1970s but reached a plateau that lasted until the early 1990s, as shown in Chart VA-9. There were rapid increases until the global recession.

Chart VA-9, US, Nonfarm Business, Real Hourly Compensation, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-10 of the US Census Bureau of the Department of Commerce provides the quarterly service report SA from IIIQ2003 to IQ2013. Services revenue contracted during the recession from IVQ2007 (December) to IIQ2009 (June) (http://wwwdev.nber.org/cycles/cyclesmain.html) but there appears to be continuing growth especially for professional, scientific and technical services with steeper slope from IVQ2010 through IVQ2012.

Chart VA-10, US, Quarterly Revenue for Selected Services, SA $ Billions

Source: US Census Bureau

http://www2.census.gov/services/qss/qss.gif

Total revenues of information services not seasonally adjusted in millions of current dollars are shown in Table VA-6 from IVQ2003, when they become available, to IQ2013. The row below current values provides percentage change in the quarter from the quarter a year earlier. Growth rates were robust before the global recession in the range from 3.9 percent in IVQ2005 to 5.5 percent in IQ2005. Percentage changes were negative in all quarters in 2009 with the largest losses in the first three quarters. Growth was milder in the expansion phase than before the global recession. As with most indicators of the US, growth was robust in the final three quarters of 2010 and initial quarters of 2011. Growth rates fell with the lowest of 2.5 percent in IIIQ2012 relative to IIIQ2011 and recovered to 5.3 percent in IVQ2012 and 4.3 percent in IQ2013.

Table VA-6, US, Information Services Revenue Not Seasonally Adjusted, Millions of Dollars, 2003-2013

Year	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2003	NA	NA	NA	237,399
2004	223,675	233,241	232,983	246,201
∆%	NA	NA	NA	3.7
2005	236,033	244,136	244,711	255,856
∆%	5.5	4.7	5.0	3.9
2006	245,182	254,735	255,745	271,401
∆%	3.9	4.3	4.5	6.1
2007	257,973	265,739	267,325	281,304
∆%	5.2	4.3	4.5	3.6
2008	270,217	277,643	277,604	282,885
∆%	4.7	4.5	3.8	0.6
2009	261,948	266,881	265,508	280,622
∆%	-3.1	-3.9	-4.4	-0.8
2010	267,483	274,697	276,055	291,990
∆%	2.1	2.9	4.0	4.1
2011	277,885	289,552	288,862	304,550
∆%	3.9	5.4	4.6	4.3
2012	290,131	297,462	296,119	320,584
∆%	4.4	2.7	2.5	5.3
2013	302,482	NA	NA	NA
∆%	4.3

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

Chart VA-11 provides total revenue of information services not seasonally adjusted from IVQ2013 to IVQ2012 in current millions of dollars not seasonally adjusted. Oscillating growth was strong before the drop of the global recession. Growth has been moderate in more recent quarters with strong increase in IVQ2012 and mild decline into IQ2013.

Chart VA-11, Quarterly Revenue for Information Services Not Seasonally Adjusted, Millions of Dollars 2003-2013

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

A similar pattern is provided by Chart VA-12 with quarterly total revenue of information services in current millions of dollars adjusted for seasonality. There is the same hump of the global recession followed by resumption of growth.

Chart VA-12, Quarterly Revenue for Information Services Seasonally Adjusted, Millions of Dollars 2003-2013

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

Table VA-7 provides total revenue of financial services and insurance in current million dollars not seasonally adjusted from IIIQ2009, when data first become available, to IQ2013. The row below values provides percentage changes in a quarter relative to the same quarter a year earlier. Percentage changes were negative until 2012 with 3.5 percent in IQ2012, 2.1 percent in IIQ2012, 6.6 percent in IIIQ2012 and 6.0 percent in IVQ2012. Revenue increased 1.8 percent in IQ2013 relative to a year earlier.

Table VA-7, US, Financial Services and Insurance Total Revenue Not Seasonally Adjusted, Millions of Dollars, 2003-2013

Year	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
2009	NA	NA	844,608	843,302
2010	831,558	832,016	830,991	831,420
∆%	NA	NA	-1.6	-1.4
2011	828,643	827,048	813,659	821,366
∆%	-0.4	-0.6	-2.1	-1.2
2012	858,053	844,148	867,281	870,349
∆%	3.5	2.1	6.6	6.0
2013	873,331	NA	NA	NA
∆%	1.8	NA	NA	NA

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

Chart VA-13 provides total quarterly revenue of financial services and insurance from IIIQ2009, when data first become available, to IQ2013. Total revenue of financial services and insurance contracted 2.6 percent between IVQ2009 and IVQ2011 and grew 6.0 percent between IVQ2011 and IVQ2012. Revenue increased 1.8 percent in IQ2013 relative to a year earlier.

Chart VA-13, Total Quarterly Revenue for Financial Services and Insurance Not Seasonally Adjusted, Millions of Dollars 2003-2012

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

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-8 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Jan-May 2013, light vehicle sales accumulated to 6,424,707, which is higher by 7.3 percent relative to 5,986,605 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 15.31 million in May 2013, higher than 14.92 million in Apr 2013 and higher than 13.95 million in May 2012 (http://motorintelligence.com/m_frameset.html).

Table VA-8, US, New Motor Vehicle Sales and Car Production, Thousand Units

	New Motor Vehicle Sales	New Car Sales and Leases	New Truck Sales and Leases	Domestic Car Production
1990	14,137	9,300	4,837	6,231
1991	12,725	8,589	4,136	5,454
1992	13,093	8,215	4,878	5,979
1993	14,172	8,518	5,654	5,979
1994	15,397	8,990	6,407	6,614
1995	15,106	8,536	6,470	6,340
1996	15,449	8,527	6,922	6,081
1997	15,490	8,273	7,218	5,934
1998	15,958	8,142	7,816	5,554
1999	17,401	8,697	8,704	5,638
2000	17,806	8,852	8,954	5,542
2001	17,468	8,422	9,046	4,878
2002	17,144	8,109	9,036	5,019
2003	16,968	7,611	9,357	4,510
2004	17,298	7,545	9,753	4,230
2005	17,445	7,720	9,725	4,321
2006	17,049	7,821	9,228	4,367
2007	16,460	7,618	8,683	3,924
2008	13,494	6,814	6.680	3,777
2009	10,601	5,456	5,154	2,247
2010	11,772	5,729	6,044	2,840

Source: US Census Bureau http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart VA-14 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2013. Output has stagnated since the late 1990s.

Chart VA-14, US, Motor Vehicles and Parts Output, 1972-2013

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/current/

Manufacturing jobs fell 8,000 in May 2013 relative to Apr 2013, seasonally adjusted, as shown in Table I-9 (and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 47,000 from May 2012 to May 2013 or at the average monthly rate of 3,917. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. In the six months ending in Apr 2013, United States national industrial production accumulated increase of 2.0 percent at the annual equivalent rate of 4.1 percent, which is higher than 1.9 percent growth in 12 months. Excluding 1.3 percent growth in Nov 2012 in the rebound from hurricane Sandy, growth in the five months from Dec 2012 to Apr 2013 accumulated to 0.7 percent or 1.7 percent annual equivalent. Business equipment decreased 0.5 percent in Apr 2013, growing 3.4 percent in the 12 months ending in Apr 2013 and at the annual equivalent rate of 5.6 percent in the six months ending in Apr 2013 and 0.9 percent annual equivalent in the five months ending in Apr 2013. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The rate of capacity utilization for total industry decreased 0.5 percentage point to 77.8 percent, a rate 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972--2012) average.” United States industry is apparently decelerating with some strength at the margin.

Manufacturing decreased 0.1 percent in Mar 2013 seasonally adjusted, increasing 2.1 percent not seasonally adjusted in 12 months, and increased 2.3 percent in the six months ending in Mar 2013 or at the annual equivalent rate of 4.7 percent. Manufacturing decreased 0.4 percent in Apr 2013 seasonally adjusted, increasing 2.1 percent not seasonally adjusted in 12 months. Manufacturing grew cumulatively 2.1 percent in the six months ending in Apr 2013 or at the annual equivalent rate of 4.3 percent. Excluding the increase of 1.4 percent in Nov 2012 because of recovery from hurricane Sandy, manufacturing accumulated growth of 0.7 percent from Dec 2012 to Apr 2013 or at the annual equivalent rate of 1.7 percent. Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased 16.8 percent from the trough in Apr 2009 to Dec 2012. Manufacturing fell 7.0 percent from the peak in Jun 2007 to Mar 2013 and increased 19.4 from the trough in Apr 2008 to Mar 2013. Manufacturing grew 18.5 percent from the trough in Apr 2009 to Apr 2013. Manufacturing output in Apr 2013 is 7.4 percent below the peak in Jun 2007.

Table I-11 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.4 percent in US national income in IVQ2012 and 86.4 percent in IQ2013. Most of US national income is in the form of services. In May 2013, there were 136.367 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 114.128 million NSA in May 2013 accounted for 83.7 percent of total nonfarm jobs of 136.367 million, of which 11.954 million, or 10.5 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 95.459 million NSA in May 2013, or 70.0 percent of total nonfarm jobs and 83.6 percent of total private-sector jobs. Manufacturing has share of 11.2 percent in US national income in IVQ2011, as shown in Table VA-9. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table VA-9, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IVQ2012	% Total	SAAR IQ2013	% Total
National Income WCCA	14,230.5	100.0	14,300.3	100.0
Domestic Industries	13,963.9	97.9	14,068.1	98.3
Private Industries	12,300.8	86.4	12,406.5	86.4
Agriculture	138.6	1.0
Mining	221.7	1.6
Utilities	211.7	1.5
Construction	606.9	4.3
Manufacturing	1599.8	11.2
Durable Goods	921.3	6.5
Nondurable Goods	678.4	4.8
Wholesale Trade	857.2	6.0
Retail Trade	973.3	6.8
Transportation & WH	417.9	2.9
Information	496.2	3.5
Finance, Insurance, RE	2377.2	16.7
Professional, BS	2042.5	14.4
Education, Health Care	1402.0	9.9
Arts, Entertainment	548.3	3.9
Other Services	406.6	2.9
Government	1663.0	11.7	1661.6	11.9
Rest of the World	266.6	1.9	232.2	1.7

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

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

Manufacturers’ shipments decreased 0.7 percent in Apr 2013 after decreasing 1.5 percent in Mar 2013 and increasing 1.3 percent in Feb 2013. New orders increased 1.0 percent in Apr 2013 following decrease by 4.7 percent in Mar 2013 and increase by 3.9 percent in Feb 2013, as shown in Table VA-10. These data are very volatile. Volatility is illustrated by increase of 2642.2 percent of new orders of nondefense aircraft in Sep 2012 following decline by 97.2 percent in Aug. New orders excluding transportation equipment decreased 0.1 percent in Apr 2013. Capital goods new orders, indicating investment, decreased 11.4 percent in Apr 2013 after decreasing 12.2 percent in Mar 2013 and increasing 10.3 percent in Feb 2013. New orders of nondefense capital goods increased 2.0 percent in Apr 2013, decreasing 10.1 percent in Mar 2013 and increasing 7.1 percent in Feb 2013. Excluding more volatile aircraft, capital goods orders increased 6.7 percent in Apr 2013 and 0.9 percent in Mar 2013 after decreasing 4.8 percent in Feb 2013.

Table VA-10, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Apr 2013 ∆%	Mar 2013 ∆%	Feb 2013 ∆%
Total
S	-0.7	-1.5	1.3
NO	1.0	-4.7	3.9
Excluding Transport
S	-0.7	-2.2	1.3
NO	-0.1	-2.8	1.1
Excluding Defense
S	-0.6	-1.7	1.3
NO	0.5	-4.0	3.5
Durable Goods
S	-0.4	0.9	0.7
NO	3.5	-5.9	6.4
Machinery
S	-1.3	0.7	2.4
NO	1.6	-1.5	-4.2
Computers & Electronic Products
S	-3.0	3.3	-1.1
NO	3.0	-0.6	-0.9
Computers
S	-17.5	8.9	-7.7
NO	-9.1	-27.6	34.9
Transport Equipment
S	-0.9	3.0	1.4
NO	8.4	-15.0	23.7
Automobiles
S	-2.5	0.9	5.4
Motor Vehicles
S	3.6	0.9	2.3
NO	3.9	-0.3	3.3
Nondefense Aircraft
S	-10.0	13.9	-11.7
NO	16.9	-43.3	112.8
Capital Goods
S	-2.7	2.4	0.6
NO	-11.4	-12.2	10.3
Nondefense Capital Goods
S	-1.6	2.3	0.1
NO	2.0	-10.1	7.1
Capital Goods ex Aircraft
S	-0.7	0.5	1.8
NO	6.7	0.9	-4.8
Nondurable Goods
S	-1.0	-3.5	1.9
NO	-1.0	-3.5	1.9

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

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

Chart VA-15 of the US Census Bureau provides new orders of manufacturers from Mar 2012 to Apr 2013. There is significant volatility that prevents discerning clear trends.

Chart VA-15, US, Manufacturers’ New Orders 2010-2011 Seasonally Adjusted, Month ∆%

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr022.html

Chart VA-16 of the US Census Bureau provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2013. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments occurred in earlier periods followed with continuing growth and stability currently.

Chart VA-16, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2013

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-11. Values are cumulative millions of dollars in Jan-Apr 2013 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Apr 2013 total $1891.6 billion and new orders total $1881.5 billion, growing respectively by 1.1 percent and 0.2 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 0.2 percent and new orders increased 0.2 percent. Excluding defense, shipments grew 1.1 percent and new orders grew 0.8 percent. Durable goods shipments reached $886.9 billion in Jan-Apr 2013, or 46.9 percent of the total, growing by 2.5 percent, and new orders $876.8 billion, or 46.6 percent of the total, growing by 0.7 percent. Important information in Table VA-10 is the large share of nondurable goods with shipments of $1004.7 billion or 53.1 percent of the total, growing by minus 0.2 percent. Capital goods have relatively high value of $317.5 billion for shipments, growing 1.1 percent, and new orders $330.6 billion, declining 2.7 percent, which could be an indicator of future investment. Excluding aircraft, capital goods shipments reached $255.5 billion, growing 1.3 percent, and new orders $270.9 billion, increasing 1.9 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 11.2 percent of US national income in IVQ2012. These data are not adjusted for inflation.

Table VA-11, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars

Jan-Apr 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/ 2012
Total	1,891,628	1.1	1,881,484	0.2
Excluding Transport	1,631,380	0.2	1,625,934	0.2
Excluding Defense	1,845,585	1.1	1,843,164	0.8
Durable Goods	886,948	2.5	876,804	0.7
Machinery	135,512	5.2	139,673	3.7
Computers & Electronic Products	105,657	-3.6	80,617	-9.0
Computers	2,055	-22.3	2,286	-13.5
Transport Equipment	260,248	6.8	255,550	0.5
Automobiles	42,362	27.7
Motor Vehicles	76,271	3.3	76,546	3.8
Nondefense Aircraft	37,853	0.9	42,969	-11.4
Capital Goods	317,450	1.1	330,622	-2.7
Nondefense Capital Goods	279,913	1.0	300,133	-0.3
Capital Goods ex Aircraft	255,535	1.3	270,968	1.9
Nondurable Goods	1,004,680	-0.2	1,004,680	-0.2
Food Products	242,849	3.3
Petroleum Refineries	271,662	-0.8
Chemical Products	254,333	-2.6

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

Chart VA-17 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Apr 2013. Fluctuations are evident, which are smoothed by seasonal adjustment in the earlier Chart VA-16. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend, flattening recently.

Chart VA-17, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2013

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Table VA-12, US, Value of Constr Construction spending at seasonally adjusted annualized rate (SAAR) reached $860.8 billion in Apr 2013, which was higher by 0.4 percent than in the prior month of Mar 2013, as shown in Table VA-12. Residential investment, with $308.3 billion accounting for 35.8 percent of total value of construction, decreased 0.2 percent in Apr and nonresidential investment, with $552.5 billion accounting for 64.2 percent of the total, increased 0.7 percent. Public construction decreased 4.1 percent while private construction decreased 1.2 percent. Data in Table VA-12 show that nonresidential construction at $552.5 billion is much higher in value than residential construction at $308.3 billion while total private construction at $601.9 billion is much higher than public construction at $258.8 billion, all in SAAR. Residential and nonresidential construction contributed positively to growth of GDP in the US in all quarters in 2012 with exception of deduction of 0.19 percentage points by nonresidential construction in IIIQ2012. Nonresidential investment deducted 0.19 percentage points from GDP growth in IIIQ2012 while residential construction added 0.31 percentage points and nonresidential construction added 1.28 percentage points in IVQ2012 with residential construction adding 0.41 percentage points. In IQ2013, nonresidential construction added 0.23 percentage points to GDP growth while residential construction added 0.30 percentage points. In 2012, residential construction added 0.27 percentage points to GDP growth while deducting 0.03 percentage points in 2011. Nonresidential construction added 0.78 percentage points to GDP growth in 2012 and 0.80 percentage points in 2011 (http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html http://www.bea.gov/iTable/index_nipa.cfm).

Table VA-12, Construction Put in Place in the United States Seasonally Adjusted Annual Rate Million Dollars and Month and 12-Month ∆%

	Apr 2013 SAAR $ Millions	Month ∆%	12-Month ∆%
Total	860,778	0.4	4.3
Residential	308,328	-0.2	18.3
Nonresidential	552,450	0.7	-2.1
Total Private	601,985	1.0	9.0
Private Residential	301,876	-0.1	18.8
New Single Family	165,767	1.4	38.6
New Multi-Family	29,178	3.4	48.6
Private Nonresidential	300,109	2.2	0.6
Total Public	258,793	-1.2	-5.1
Public Residential	6,453	-5.4	-0.6
Public Nonresidential	252,341	-1.1	-5.2

SAAR: seasonally adjusted annual rate; B: billions

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Further information on construction spending is provided in Table VA-13. The original monthly estimates not-seasonally adjusted (NSA) and their 12-month rates of change are provided in the first two columns while the SAARs and their monthly changes are provided in the final two columns. There has been improvement in construction in the US in 2011 but another bump in early 2012. On a monthly basis, construction fell three consecutive months from Dec 2010 to Feb 2011, increasing in ten of the eleven months from Mar 2011 to Jan 2012, with sole decline of 3.0 percent in Jul 2011. Improvement was interrupted in 2012 with decline of 0.5 percent in Feb 2012, further decline of 0.3 percent in Mar and recovery of 0.9 percent in Apr, 1.7 percent in May and 0.8 percent in Jun with strong 1.1 percent in Aug and 1.6 percent in Oct 2012. The value of construction contracted 4.0 percent in Jan 2013, rebounding 0.8 percent in Feb 2013 and contracting 0.8 percent in Mar 2013. Value of construction increased at 0.4 percent in Apr 2013. The 12-month rates of change improved from minus 8.6 percent in Apr 2011 to the first positive 12-month percentage change of 0.7 percent in Nov 2011 and further improvement with 10.7 percent in Dec 2012, 4.5 percent in Jan-Feb 2013, 4.6 percent in Mar 2013 and 4.5 percent in Apr 2013.

Table VA-13, US, Value and Percentage Change in Value of Construction Put in Place, Dollars Millions and ∆%

	Value NSA Month $ Millions	12-Month ∆% NSA	Value SAAR $ Millions	Month ∆% SA*
Apr 2013	69,190	4.5	860,778	0.4
Mar	63,746	4.6	857,745	-0.8
Feb	58,651	4.5	864,685	0.8
Jan	59,090	4.5	858,145	-4.0
Dec 2012	69,520	10.7	893,634	0.1
Nov	76,737	12.1	892,448	1.9
Oct	81,438	11.1	876,213	1.6
Sep	79,357	7.9	862,220	0.7
Aug	81,457	8.5	855,916	1.1
Jul	78,070	11.6	846,645	0.2
Jun	76,491	7.3	845,072	0.8
May	71,635	8.8	838,778	1.7
Apr	66,201	9.1	825,133	0.9
Mar	60,939	8.6	817,842	-0.3
Feb	56,108	11.8	820,677	-0.5
Jan	56,535	10.9	824,687	0.5
Dec 2011	62,825	4.4	820,614	2.1
Nov	68,476	0.7	804,046	1.0
Oct	73,282	-0.3	795,733	0.7
Sep	73,515	-1.7	790,294	0.5
Aug	75,101	-1.0	786,308	3.0
Jul	69,929	-4.3	763,468	-3.0
Jun	71,297	-3.7	786,784	1.4
May	65,845	-4.4	775,837	2.7
Apr	60,682	-8.6	755,420	0.3
Mar	56,130	-6.8	753,433	1.0
Feb	50,184	-7.1	746,056	-0.9
Jan	50,971	-8.3	752,638	-3.5
Dec 2010	60,202	-6.1	779,895	-2.3

SAAR: Seasonally-adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The sharp contraction of the value of construction in the US is revealed by Table VA-14. Construction spending in Jan-Apr 2013, not seasonally adjusted, reached $250.7 billion, which is higher by 4.5 percent than $239.8 billion in the same period in 2012. The depth of the contraction is shown by the decline of construction spending from $353.8 billion in Jan-Apr 2006 to only $250.7 billion in the same period in 2013, or decline by minus 29.2 percent. The comparable decline from Jan-Mar 2005 to Jan-Mar 2013 is minus 21.8 percent. Construction spending in Jan-Apr 2013 decreased by 2.1 percent relative to the same period in 2003. Construction spending is lower by 12.8 percent in Jan-Apr 2013 relative to the same period in 2009. Construction has been weaker than the economy as a whole.

Table VA-14, US, Value of Construction Put in Place in the United States, Not Seasonally Adjusted, $ Millions and ∆%

Jan-Apr 2013 $ MM	250,677
Jan-Apr 2012	239,783
∆% to 2013	4.5
Jan-Apr 2011 $ MM	222,238
∆% to 2013	12.8
Jan-Apr 2010 $ MM	243,044
∆% to 2013	3.1
Jan-Apr 2009 $MM	287,456
∆% to 2013	-12.8
Jan-Apr 2006 $ MM	353,830
∆% to 2013	-29.2
Jan-Apr 2005 $ MM	320,633
∆% to 2013	-21.8
Jan-Apr 2003 $ MM	256,127
∆% to 2013	-2.1

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-18 of the US Census Bureau provides value of construction spending in the US not seasonally adjusted from 2002 to 2013. There are wide oscillations requiring seasonal adjustment to compare adjacent data. There was sharp decline during the global recession followed in recent periods by a stationary series that may be moving upward again.

Chart VA-18, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Monthly construction spending in the US in Jan-Apr and Dec not seasonally adjusted is shown in Table VA-15 for the years between 2002 and 2013. The value of $69.2 billion in Apr 2013 is higher by 4.5 percent than $60.9 billion in Apr 2012. Construction fell by 27.4 percent from the peak of $95.3 billion in Apr 2006 to $69.2 billion in Apr 2013. The data are not adjusted for inflation or changes in quality.

Table VA-15, US, Value of Construction Spending Not Seasonally Adjusted, Millions of Dollars

Year	Jan	Feb	Mar	Apr	Dec
2002	59,516	58,588	63,782	69,504	63,984
2003	59,877	58,526	64,506	69,638	71,050
2004	64,934	64,138	73,238	78,354	77,733
2005	71,474	72,048	81,345	85,485	88,172
2006	81,058	81,478	92,855	95,324	86,436
2007	79,406	79,177	88,905	93,375	84,218
2008	77,349	77,227	82,779	87,743	76,645
2009	66,944	66,296	71,624	75,187	64,098
2010	55,586	54,019	60,228	66,422	60,202
2011	50,971	50,184	56,130	60,682	62,825
2012	56,535	56,108	60,939	66,201	69,520
2013	59,090	58,651	63,746	69,190	NA

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-19 of the US Census Bureau shows SAARs of construction spending for the US since 1993. Construction spending surged in nearly vertical slope after the stimulus of 2003 combining near zero interest rates and subsequent slow adjustment in 17 doses of increases by 25 basis points between Jun 2004 and Jun 2006 together with other housing subsidies. Construction spending collapsed after subprime mortgages defaulted with the fed funds rate increasing from 1.00 percent in Jun 2004 to 5.25 percent in Jun 2006. Subprime mortgages were programmed for refinancing in two years after increases in homeowner equity in the assumption that fed funds rates would remain low forever or increase in small increments (Gorton 2009EFM see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Price declines of houses or even uncertainty prevented refinancing of subprime mortgages that defaulted, causing the financial crisis that eventually triggered the global recession. Chart VA-19 shows a trend of increase in the final segment but it is difficult to assess if it will be sustained.

Chart VA-19, US, Construction Expenditures SAAR 1993-2012

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr050.html

Construction spending at SAARs in the four months Jan-Apr is shown in Table VA-16 for the years between 2002 and 2013. There is a peak in 2005 to 2007 with subsequent collapse of SAARs and rebound in 2011-2013.

Table VA-16, US, Value of Construction Spending SAAR Millions of Dollars

Year	Jan	Feb	Mar	Apr
2002	858,654	862,338	844,551	858,240
2003	863,855	859,225	851,132	859,459
2004	938,826	938,656	960,946	967,761
2005	1,036,187	1,056,492	1,065,262	1,058,365
2006	1,183,861	1,199,767	1,213,270	1,183,485
2007	1,149,899	1,156,008	1,167,402	1,159,124
2008	1,106,047	1,092,331	1,094,910	1,091,142
2009	962,704	959,907	954,984	929,593
2010	816,132	795,808	805,985	824,008
2011	752,638	746,056	753,433	755,420
2012	824,687	820,677	817,842	825,133
2013	858,145	864,685	857,745	860,778

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-29 of the US Census Bureau provides SAARs of value of construction from 2002 to 2013. There is clear acceleration after 2003 when fed funds rates were fixed at 1.0 percent from Jun 2003 until Jun 2004. Construction peaked in 2005-2006, stabilizing in 2007 at a lower level and then collapsed in a nearly vertical drop until 2011 with increases into 2012 and marginal drop in Jan 2013 followed by increase in Feb 2013 and decline in Mar 2013 followed by stability in Apr 2013.

Chart VA-20, US, Construction Expenditures SAAR 2002-2013

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Annual available data for the value of construction put in place in the US between 1993 and 2012 are provided in Table VA-17. Data from 1993 to 2001 are available for public and private construction with breakdown in residential and nonresidential only for private construction. Data beginning in 2002 provide aggregate residential and nonresidential values. Total construction value put in place in the US increased 76.0 percent between 1993 and 2012 but most of the growth, 65.3 percent, was concentrated in 1993 to 2000 with increase of 6.4 percent between 2000 and 2012. Total value of construction increased 0.8 percent between 2002 and 2012 with value of nonresidential construction increasing 28.4 percent while value of residential construction fell 29.8 percent. Value of total construction fell 25.0 percent between 2005 and 2012, with value of residential construction declining 54.3 percent while value of nonresidential construction rose 17.7 percent. Value of total construction fell 26.8 percent between 2006 and 2012, with value of nonresidential construction increasing 4.6 percent while value of residential construction fell 54.5 percent. In 2002, nonresidential construction had a share of 52.6 percent in total construction while the share of residential construction was 47.4 percent. In 2012, the share of nonresidential construction in total value rose to 67.0 percent while that of residential construction fell to 33.0 percent.

Table VA-17, Annual Value of Construction Put in Place 1993-2012, Millions of Dollars and ∆%

	Total	Private Nonresidential	Private Residential
1993	485,548	150,006	208,180
1994	531,892	160,438	241,033
1995	548,666	180,534	228,121
1996	599,693	195,523	257,495
1997	631,853	213,720	264,696
1998	688,515	237,394	296,343
1999	744,551	249,167	326,302
2000	802,756	275,293	346,138
2001	840,249	273,922	364,414
	Total	Total Nonresidential	Total Residential
2002	847,874	445,914	401,960
2003	891,497	440,246	451,251
2004	991,356	452,948	538,408
2005	1,140,136	486,629	617,507
2006	1,167,222	547,408	619,814
2007	1,152,351	651,883	500,468
2008	1,067,564	709,818	357,746
2009	903,201	649,273	253,928
2010	804,561	555,449	249,112
2011	778,238	532,552	245,686
2012	854,490	572,443	282,047
∆% 1993-2012	76.0
∆% 1993-2000	65.3
∆% 2000-2012	6.4
∆% 2002-2012	0.8	28.4	-29.8
∆% 2005-2012	-25.0	17.7	-54.3
∆% 2006-2012	-26.8	4.6	-54.5

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-21 shows sharp growth of residential construction spending in the US from 2002 to 2006. The value of construction spending dropped sharply during the global recession and has remained at a low plateau with an apparent increase in the final segment.

Chart VA-21, US, Residential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Nonresidential construction has been more resilient. Chart VA-22 provides the value of nonresidential construction not seasonally adjusted. There was more moderate growth of nonresidential construction with more prudent business management and fewer subsidies. Nonresidential construction also declined during the global recession but less sharply than residential construction and has remained at a lower plateau.

Chart VA-22, US, Nonresidential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-18. The data are in seasonally adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-18) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-18) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Apr 2013, revolving credit was $850 billion, or 30.1 percent of total consumer credit of $2820 billion, and non-revolving credit was $1970 billion, or 69.9 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 0.7 percent in annual data and sharp decline of 7.6 percent in revolving credit. In IVQ 2012, total consumer credit grew at 6.5 percent with increase of revolving credit at 0.3 percent and increase of non-revolving credit at 9.3 percent. Growth continued in Apr 2013 with total credit at 4.7 percent, revolving at 1.0 percent and non-revolving at 6.4 percent.

Table VA-18, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2013
Apr	4.7	1.0	6.4	2820	850	1970
Mar	3.6	-1.3	5.7	2809	849	1960
Feb	8.3	2.1	11.0	2800	850	1950
IQ	5.9	1.6	7.8	2809	849	1960
2012
IVQ	6.5	0.3	9.3	2768	846	1922
IIIQ	4.9	0.4	6.9	2724	845	1879
IIQ	6.4	1.0	8.9	2691	844	1847
IQ	5.4	-0.1	8.0	2651	842	1809
2012	5.9	0.4	8.5	2768	846	1922
2011	3.7	0.2	5.5	2616	842	1773
2010	-0.7	-7.6	3.4	2522	841	1681
2009	-4.4	-8.8	-1.5	2420	917	1503
2008	0.8	0.2	1.2	2526	1005	1521
2007	5.9	8.5	4.3	2529	1008	1521

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

Source: Board of Governors of the Federal Reserve System

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

Chart VA-23 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on 24-month personal loans at commercial banks, not seasonally adjusted, measured on the left axis. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.

Chart VA-23 US, Total Consumer Credit Owned and Securitized NSA and Financing Rate on 24-month Personal Loans at Commercial Banks NSA, Millions of Dollars and Percent, Feb 1972-Mar 2013

Source: Board of Governors of the Federal Reserve System

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

Chart VA-24 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on 24-month personal consumer loans at commercial banks, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012-2013 but with significant fluctuations.

Chart VA-24, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on 24-month Personal Loans at Commercial Banks NSA, Feb 1972-Mar 2013

Source: Board of Governors of the Federal Reserve System

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

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/mopo/outlook/gor1304b.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.4 and 3.0 percent, with the all items CPI less fresh food of 0.4 to 0.8 percent. The critical difference is forecast of the CPI excluding fresh food of 2.7 to 3.6 percent in 2014 and 1.6 to 2.9 percent in 2015. The new monetary policy of the Bank of Japan aims to increase inflation to 2 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:

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).
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.
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).
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	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2012
Apr 2013	+1.0 to +1.0 [+1.0]	-0.2
Jan 2013	+1.0 to +1.1 [+1.0]	-0.2 to –0.1 [-0.2]
2013
Apr 2013	+2.4 to +3.0 [+2.9]	+0.4 to +0.8 [+0.7]
Jan 2013	+1.9 to +2.5 [+2.3]	+0.3 to +0.6 [+0.4]
2014
Apr 2013	+1.0 to +1.5 [+1.4]	+2.7 to +3.6 [+3.4]	+0.7 to +1.6 [+1.4]
Jan 2013	+0.6 to +1.0 [+0.8]	+2.5 to +3.0 [+2.9]	+0.5 to +1.0 [+0.9]
2015
Apr 2013	+1.4 to +1.9 [+1.6]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]

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/gor1304a.pdf

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index increasing from 51.8 in Apr to 54.1 in May, which is a new high of the series (http://www.markiteconomics.com/Survey/PressRelease.mvc/eddc14aea9794212a1b77033f0ffae45). Paul Smith, economist at Markit and author of the report, finds that the survey data suggest continuing growth of the economy of Japan with performance that could exceed the annual rate of 3.5 percent in IQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/eddc14aea9794212a1b77033f0ffae45). The Markit Business Activity Index of Services increased from 51.7 in Apr, to 54.8 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/eddc14aea9794212a1b77033f0ffae45). Paul Smith, Senior Economist at Markit and author of the report, finds continuing confidence in demand for services that is generating record creation of jobs (http://www.markiteconomics.com/Survey/PressRelease.mvc/eddc14aea9794212a1b77033f0ffae45). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 51.1 in Apr to 51.5 in May, which is the highest reading in 21 months, indicating modest growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/be0802fd0033425db2b840bfd36d068e). Foreign and domestic business continued improvement with yen devaluation supporting foreign demand but with increases in input costs. Paul Smith, Senior Economist at Markit and author of the report, finds that output increased at the fastest rhythm in 19 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/be0802fd0033425db2b840bfd36d068e).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	Apr ∆% +0.3 12 months ∆% 0.0 Blog 5/19/13
Consumer Price Index	Apr NSA ∆% 0.3; Apr 12 months NSA ∆% -0.7 Blog 6/2/13
Real GDP Growth	IQ2013 ∆%: 0.9 on IVQ2012; IQ2013 SAAR 3.5; ∆% from quarter a year earlier: 0.2 % Blog 5/19/13
Employment Report	Apr Unemployed 2.91 million Change in unemployed since last year: minus 240 thousand Unemployment rate: 4.1% Blog 6/2/13
All Industry Indices	Mar month SA ∆% -0.3 12-month NSA ∆% -1.0 Blog 5/26/13
Industrial Production	Apr SA month ∆%: 1.7 12-month NSA ∆% -2.3 Blog 6/2/13
Machine Orders	Total Mar ∆% 27.8 Private ∆%: 22.3 Mar ∆% Excluding Volatile Orders 14.2 Blog 5/19/13
Tertiary Index	Mar month SA ∆% -1.3 Mar 12 months NSA ∆% -0.1 Blog 5/19/13
Wholesale and Retail Sales	Apr 12 months: Total ∆%: -0.2 Wholesale ∆%: -0.2 Retail ∆%: -0.1 Blog 6/2/13
Family Income and Expenditure Survey	Apr 12-month ∆% total nominal consumption 0.8, real 1.5 Blog 6/2/13
Trade Balance	Exports Apr 12 months ∆%: 3.8 Imports Apr 12 months ∆% 9.4 Blog 5/26/13

Links to blog comments in Table JPY:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

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

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. 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. The index fell to 54.5 in Apr 2013 and 54.3 in May 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
May 2013	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	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. The index fell again to 54.5 in Apr 2013 and 54.3 in May 2013.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct, 50.6 in Nov-Dec 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013. The index increased to 50.8 in May 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, 52.3 in Mar 2013 and 51.7 in Apr 2013. The index of new orders increased to 51.8 in May 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, 49.8 in Mar 2013 and 49.0 in Apr 2013. The index of employment fell to 48.8 in May 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
May 2013	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	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, 50.9 in Mar 2013 and 50.6 in Apr 2013 above the neutral zone of 50.0. The index increased to 50.8 in May 2013.

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

Source: National Bureau of Statistics of China

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

Growth of China’s GDP in IQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDP. Secondary industry accounts for 45.9 percent of GDP of which industry alone for 41.1 percent in IQ2013 and construction with the remaining 4.8 percent in the first three quarters of 2012. Tertiary industry accounts for 47.8 percent of GDP in the IQ2013 and primary industry for 6.3 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-1 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 IIQ2011 to 7.4 percent in IVQ2011 and 6.6 percent in IQ2012, rebounding to 7.8 percent in IIQ2012, 8.7 percent in IIIQ2012 and 8.2 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent.

Table VC-GDP, China, Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%

Cumulative GDP IQ2013	Value Current CNY 100 Million	2013 Year-on-Year ∆%
GDP	118855	7.7
Primary Industry	7427	3.4
Farming	7427	3.4
Secondary Industry	54569	7.8
Industry	48832	7.5
Construction	5737	9.8
Tertiary Industry	56859	8.3
Transport, Storage, Post	6563	7.0
Wholesale, Retail Trades	11914	10.5
Hotel & Catering Services	2419	4.5
Financial Intermediation	8099	11.5
Real Estate	8383	7.8
Other	19481	6.8
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2012
IQ2013	1.6	6.6
IVQ2012	2.0	8.2
IIIQ2012	2.1	8.7
IIQ2012	1.9	7.8
IQ2012	1.6	6.6
2011
IVQ2011	1.8	7.4
IIIQ2011	2.3	9.6
IIQ2011	2.4	9.9
IQ2011	2.3	9.5

Source: National Bureau of Statistics of China

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

Growth of China’s GDP in IQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDPA. Secondary industry accounts for 45.9 percent of GDP of which industry alone for 41.1 percent in IQ2013 and construction with the remaining 4.8 percent in the first three quarters of 2012. Tertiary industry accounts for 47.8 percent of GDP in the IQ2013 and primary industry for 6.3 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-1 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 IIQ2011 to 7.4 percent in IVQ2011 and 6.6 percent in IQ2012, rebounding to 7.8 percent in IIQ2012, 8.7 percent in IIIQ2012 and 8.2 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent.

Table VC-GDPA, China, Growth Rate of GDP, ∆% Relative to a Year Earlier and ∆% Relative to Prior Quarter

	IQ 2013
GDP	7.7
Primary Industry	3.4
Secondary Industry	7.8
Tertiary Industry	8.3
GDP ∆% Relative to a Prior Quarter	1.6
	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	2.3	2.4	2.3	1.8	1.6	1.9	2.1	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/

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

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/

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/b9665c962d7c420095bb66b35eada8a9) is moving at slower pace. The overall Flash China Manufacturing PMI^™ decreased marginally from 50.4 in Apr to 49.6 in May, which is moderately below the contraction frontier of 50.0, while the Flash China Manufacturing Output Index decreased from 51.1 in Apr to 51.0 in May, remaining in moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the economy of China is confronting weak internal and external demand, raising doubts on growth in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b9665c962d7c420095bb66b35eada8a9). The HSBC China Services PMI^™, compiled by Markit, shows marginal strength in business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 51.1 in Apr to 50.9 in May for the seventh consecutive month of expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/62bd462cd58e42b381bdd4ec852c8efa). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that combined manufacturing and services data suggest downward effects on growth and employment in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/62bd462cd58e42b381bdd4ec852c8efa). The HSBC Business Activity index increased from 51.1 in Apr to 51.2 in May at one of the slowest rates in the history of the index (http://www.markiteconomics.com/Survey/PressRelease.mvc/62bd462cd58e42b381bdd4ec852c8efa). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds concern with growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/62bd462cd58e42b381bdd4ec852c8efa). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased to 49.2 in May from 50.4 in Apr, indicating moderate contraction in manufacturing for the first time after six consecutive months of improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/374b1d5a958242508eb6aa9ec226002c). New export orders decreased for the second consecutive month. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds marginally deteriorating conditions because of weak internal demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/374b1d5a958242508eb6aa9ec226002c). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Apr 12-month ∆%: minus 2.6 Apr month ∆%: -0.6 Blog 5/12/13
Consumer Price Index	Apr month ∆%: 0.2 Apr 12 months ∆%: 2.4 Blog 5/12/13
Value Added of Industry	Apr month ∆%: 0.87 Jan-Apr 2013/Jan-Apr 2012 ∆%: 9.4 Blog 5/19/13
GDP Growth Rate	Year IQ2013 ∆%: 7.9 Quarter IQ2013 ∆%: 7.7 Blog 4/21/13
Investment in Fixed Assets	Apr month ∆%: 1.63 Total Jan-Apr 2012 ∆%: 20.6 Real estate development: 21.2 Blog 5/19/13
Retail Sales	Apr month ∆%: 1.23 Apr 12 month ∆%: 12.8 Jan-Apr ∆%: 12.5 Blog 5/19/13
Trade Balance	Apr balance $18.2 billion Exports 12M ∆% 14.7 Imports 12M ∆% 16.8 Cumulative Apr: $61.27 billion Blog 5/12/13

Links to blog comments in Table CNY:

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/12/13 http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

4/21/13 http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.4 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.6 percent in 2012 and minus 0.4 percent in 2013 but 1.2 percent in 2014.

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.2
2007	2.1	7.6	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.4
2010	1.6	10.1	2.0
2011	2.7	10.2	1.5
2012*	2.5	11.4	-0.6
2013*			-0.4
2014*			1.2

*EUROSTAT forecast Source: EUROSTAT

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*	1.2	1.8	1.1	0.7	0.9
2013*	-0.4	0.4	-0.1	-1.3	-1.5
2012	-0.6	0.7	0.0*	-2.4	-1.4*
2011	1.5	3.0	2.0	0.4	0.4
2010	2.0	4.2	1.7	1.7	-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/ http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 46.9 in Apr to 47.7 in May, for sixteen consecutive declines and seventeen drops in twenty months with deceleration of the rate of contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/e5677351fe634282a0bfa8a3e134b9d9). The reading for May is consistent with the average for IQ2013 when the euro area economy contracted 0.2 percent. Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index is consistent with the seventh quarterly contraction of economic across the region (http://www.markiteconomics.com/Survey/PressRelease.mvc/e5677351fe634282a0bfa8a3e134b9d9). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 46.9 in Apr to 47.7 in May with aggregate output declining during 16 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/f22c0e3f86d7424580bdf50ec8720e90). Chris Williamson, Chief Economist at Markit, finds that the data are consistent GDP falling in IIQ2012 at 0.2 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/f22c0e3f86d7424580bdf50ec8720e90). The Markit Eurozone Services Business Activity Index increased from 47.0 in Apr to 47.2 in May, indicating contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/f22c0e3f86d7424580bdf50ec8720e90). The Markit Eurozone Manufacturing PMI^® increased marginally to 48.3 in May from 46.7 in May, which indicates contraction for the twenty-second consecutive month but the slowest rate since Feb 2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/0df9b459246542d2a1b60332deb37e6a). New orders fell at the slowest rate since Jun 2011 with unchanged export orders and weak internal ordes. Chris Williamson, Chief Economist at Markit, finds the survey data consistent with contraction of GDP at 0.2 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/0df9b459246542d2a1b60332deb37e6a). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IQ2013 ∆% -0.2; IQ2013/IQ2012 ∆% -1.1 Blog 6/9/13
Unemployment	Apr 2013: 12.2% unemployment rate Apr 2013: 19.375 million unemployed Blog 6/2/13
HICP	Apr month ∆%: -0.1 12 months Apr ∆%: 1.2 Blog 5/19/13
Producer Prices	Euro Zone industrial producer prices Mar ∆%: -0.2 Mar 12-month ∆%: 0.7 Blog 5/5/13
Industrial Production	Mar month ∆%: 1.0; Mar 12 months ∆%: -1.7 Blog 5/19/13
Retail Sales	Apr month ∆%: -0.5 Mar 12 months ∆%: minus 1.1 Blog 6/9/13
Confidence and Economic Sentiment Indicator	Sentiment 89.4 May 2013 Consumer minus 21.9 Apr 2013 Blog 6/2/13
Trade	Jan-Mar 2013/Jan-Mar 2012 Exports ∆%: 1.3 Imports ∆%: -5.2 Mar 2013 12-month Exports ∆% 0.1 Imports ∆% -9.9 Blog 5/19/13

Links to blog comments in Table EUR:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/5/13 http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html

Table VD-1 provides percentage changes of euro area real GDP in a quarter relative to the prior quarter. Real GDP fell 0.3 percent in IVQ2011, fell 0.1 IQ2012 and fell in the final three quarters of 2012: 0.2 percent in IIQ2012, 0.1 percent in IIIQ2012 and 0.6 percent in IVQ2012. GDP fell 0.2 percent in IIIQ2013. The global recession manifested in the euro area in five consecutive quarterly declines from IIQ2008 to IIQ2009. The strongest impact was contraction of 2.8 percent in IQ2009. Recovery began in IIIQ2009 with cumulative growth of 3.7 percent to IQ2011 or at the annual equivalent rate of 2.1 percent. Growth was much more vigorous from IVQ2003 to IQ2008.

Table VD-1, Euro Area, Real GDP, Percentage Change from Prior Quarter, Calendar and Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2013	-0.2
2012	-0.1	-0.2	-0.1	-0.6
2011	0.7	0.2	0.1	-0.3
2010	0.4	1.0	0.4	0.4
2009	-2.8	-0.3	0.4	0.4
2008	0.5	-0.4	-0.6	-1.7
2007	0.8	0.4	0.6	0.4
2006	0.9	1.1	0.6	1.1
2005	0.2	0.7	0.6	0.6
2004	0.5	0.5	0.4	0.3
2003	-0.1	0.1	0.5	0.7
2002	0.1	0.6	0.3	0.1
2001	0.9	0.1	0.1	0.2
2000	1.3	0.9	0.5	0.6

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 percentage change in real GDP in the euro area in a quarter relative to the same quarter a year earlier. Growth rates were quite strong from 2004 to 2007. There were five consecutive quarters of sharp declines in GDP in a quarter relative to the same quarter a year earlier from IVQ2008 to IVQ2009 with sharp contractions of 5.4 percent in IQ2009, 5.3 percent in IIQ2009 and 4.3 percent in IIIQ2009. Growth rates decline in magnitude with 1.3 percent in IIIQ2011, 0.7 percent in IVQ211 and -0.1 percent in IQ2012 followed by contractions of 0.5 percent in IIQ2012, 0.7 percent in IIIQ2012 and 1.0 percent in IVQ2012. GDP contracted 1.1 percent in IQ2013 relative to a year earlier.

Table VD-2, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a Year Earlier, Not Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2013	-1.1
2012	-0.1	-0.5	-0.7	-1.0
2011	2.5	1.7	1.3	0.7
2010	1.0	2.3	2.3	2.2
2009	-5.4	-5.3	-4.3	-2.2
2008	2.1	1.2	0.0	-2.1
2007	3.7	3.0	3.0	2.3
2006	2.9	3.3	3.3	3.8
2005	1.4	1.6	1.9	2.2
2004	1.8	2.2	2.2	1.8
2003	0.8	0.3	0.5	1.2
2002	0.5	1.0	1.2	1.0
2001	2.9	2.1	1.7	1.3
2000	4.3	4.4	3.8	3.2

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

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

Table VD-3 provides GDP growth in IVQ2012 and relative to the same quarter a year earlier for the euro zone, European Union, Japan and the US. The GDP of the euro zone fell 0.2 percent in IQ2013 and declined 1.1 percent relative to a year earlier while the GDP of the European Union decreased 0.1 percent in IQ2013 and decreased 0.7 percent relative to a year earlier. Growth in IVQ2012 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/05/twenty-nine-million-unemployed-or.html) and motivate hiring (http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html).

Table VD-3, Euro Zone, European Union, Japan and USA, Real GDP Growth

	∆% IQ2013/ IVQ2012	∆% IQ2013/ IQ2012
Euro Zone	-0.2	-1.1
European Union	-0.1	-0.7
Germany	0.1	-0.3
France	-0.2	-0.4
Netherlands*	-0.1	-1.3
Finland	-0.1	-2.0
Belgium	0.1	-0.5
Portugal	-0.3	-4.0
Ireland	NA	NA
Italy	-0.5	-2.3
Greece	NA	-5.3
Spain	-0.5	-2.0
United Kingdom	0.3	0.6
Japan	0.9	0.0
USA	0.6	1.8

*Working-day adjusted

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

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

Advanced economies are experiencing weak demand. Table VD-4 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Apr 2013. Retail sales decreased 0.5 percent in Apr 2013 and fell 1.1 percent in 12 months. The 12-month rates of growth have become negative since Mar 2011 with exception of 1.2 percent in Apr 2011 and stability in Aug 2011 at 0.1 percent. The lower part of Table VD-6 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 2001. Retail sales fell 0.6 percent in 2010 after falling 0.4 percent in 2009 and 1.8 percent in 2008 and fell again by 1.4 percent in 2011 and 2.8 percent in 2012.

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

	Month ∆%	12-Month CA ∆%
Apr 2013	-0.5	-1.1
Mar	-0.2	-2.2
Feb	-0.3	-1.8
Jan	0.9	-1.8
Dec 2012	-0.8	-2.8
Nov	0.1	-1.9
Oct	-0.5	-3.2
Sep	-1.6	-2.0
Aug	0.6	-0.9
Jul	-0.1	-1.6
Jun	0.0	-1.0
May	1.1	-0.7
Apr	-1.6	-3.6
Mar	0.4	-0.1
Feb	-0.3	-2.3
Jan	-0.2	-1.1
Dec 2011	0.1	-1.4
Nov	-0.7	-1.2
Oct	0.1	-0.3
Sep	-0.4	-0.9
Aug	0.1	0.1
Jul	0.1	-0.1
Jun	0.7	-0.4
May	-1.5	-1.4
Apr	1.3	1.2
Mar	-1.5	-1.1
Feb	0.5	1.6
Jan	0.1	1.1
Dec ∆%
2012		-2.8
2011		-1.4
2010		-0.6
2009		-0.4
2008		-1.8
2007		-0.9
2006		2.5
2005		0.8
2004		2.3
2003		0.7
2002		-0.4
2001		1.9

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

Growth rates of retail sales of the euro zone by major segments are in Table VD-5. Total sales decreased 0.5 percent in Apr 2013 and declined 1.1 percent in the 12 months ending in Apr 2013. All 12-month and monthly percentage changes are negative with exception of increase by 0.6 percent of nonfood products and automotive fuel in Apr 2013.

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

Apr 2013	Month ∆%	12-Month ∆%
Total	-0.5	-1.1
Food, Drinks, Tobacco	-2.0	-1.9
Nonfood Products ex Automotive Fuel	0.6	-0.3
Automotive Fuel in Specialized Stores	0.2	0.2

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

Month and 12-month percentage rates of change of retail sales by member countries of the euro zone are shown in Table VD-6 for Apr 2013. Retail sales are weak throughout the euro zone. The 12-month percentage changes are negative for some members in Table VD-3 with the exception of 2.5 percent for France. The 12-month percentage change for the UK, which is not a member of the euro zone, was 0.3 percent. The European Union’s 12-month percentage change was minus 0.6 percent.

Table VD-6, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Mar 2013	Month ∆%	12-Month ∆%
Euro Zone	-0.5	-1.1
Germany	-0.4	-0.5
France	-0.9	2.5
Netherlands	NA	NA
Finland	-3.6	-2.0
Belgium	-1.1	-0.9
Portugal	0.4	-2.5
Ireland	-0.8	-2.0
Italy	NA	NA
Greece	NA	NA
Spain	0.4	-6.5
UK	-2.0	0.3
European Union	-0.7	-0.6

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

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 economies. The German economy grew at 4.2 percent in 2010, 3.0 percent in 2011 and 0.7 percent in 2012.

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, increased from 49.2 in Apr to 49.9 in May, which is virtually at the contraction frontier of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/7137bdb920f8427e8ebc20c14407e1ea). New export orders for manufacturing decreased for a third consecutive month. Tim Moore, Senior Economist at Markit and author of the report, finds limited growth impulse in Germany’s manufacturing and services (http://www.markiteconomics.com/Survey/PressRelease.mvc/7137bdb920f8427e8ebc20c14407e1ea). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 49.2 in Apr to 50.2 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/534dd918be41426f9cbc8ab706af3607). Tim Moore, Senior Economist at Markit and author of the report, finds risks of standstill in the economy of Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/534dd918be41426f9cbc8ab706af3607). The Germany Services Business Activity Index increased from 49.6 in Apr to 49.7 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/534dd918be41426f9cbc8ab706af3607). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 48.1 in Apr to 49.4 in May, in very moderate contraction territory below 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f33b9dcfa04642c781b5b3e9810e06fc). New export orders were unchanged in May with strength in orders from China and the US compensating for weakness in new orders inside the euro area. Tim Moore, Senior Economist at Markit and author of the report, finds improving conditions in German manufacturing with stronger output and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/f33b9dcfa04642c781b5b3e9810e06fc).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IQ2013 0.1 ∆%; I/Q2013/IQ2012 ∆% -1.4 2012/2011: 0.7% GDP ∆% 1992-2012 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13
Consumer Price Index	Apr month NSA ∆%: -0.5 Apr 12-month NSA ∆%: 1.2 Blog 5/19/13
Producer Price Index	Apr month ∆%: -0.2 CSA, -0.2 NSA 12-month NSA ∆%: 0.1 Blog 5/26/13
Industrial Production	MFG Apr month CSA ∆%: 1.5 12-month NSA: 8.9 Blog 6/9/13
Machine Orders	MFG Apr month ∆%: -2.3 Mar 12-month ∆%: 5.6 Blog 6/9/13
Retail Sales	Apr Month ∆% -0.4 12-Month ∆% 1.8 Blog 6/2/13
Employment Report	Unemployment Rate SA Mar 5.4% Blog 6/2/13
Trade Balance	Exports Apr 12-month NSA ∆%: 8.5 Imports Apr 12 months NSA ∆%: 5.2 Exports Apr month CSA ∆%: 1.9; Imports Apr month SA 2.3 Blog 6/9/13

Links to blog comments in Table DE:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

2/24/13 http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-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 0.6 percent in Feb 20, declining 5.1 percent in 12 months. In Mar 2013, the production index of Germany increased 1.2 percent and fell 8.7 percent in 12 months. The production index jumped 1.8 percent in Apr 2013 and 8.0 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
Apr 2013	8.0	1.8
Mar	-8.7	1.2
Feb	-5.1	0.6
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	0.4
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 Sep 2012 to Apr 2013. The index increased 1.8 percent in Apr 2013 with increases of 1.5 percent in industry, 1.5 percent in manufacturing, 4.0 percent in capital goods and 0.5 percent in nondurable goods while other segments decreased with 2.1 percent in durable goods, 1.5 percent in energy and 0.6 percent in intermediate goods. Performance was strong in Mar 2013 with growth of 1.2 percent for the index, 1.2 percent for manufacturing, 2.1 percent for durable goods, 1.6 percent for capital goods and 7.3 percent for energy. 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, 0.8 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 ∆%

	Apr	Mar 2013	Feb	Jan	Dec	Nov	Oct	Sep
Production Industries	1.8	1.2	0.6	-0.6	0.2	-0.4	-1.5	-1.3
Industry	1.5	1.2	0.9	-1.1	1.1	-0.3	-1.5	-1.6
Mfg	1.5	1.2	0.8	-1.1	1.1	-0.3	-1.5	-1.5
Intermediate Goods	-0.6	0.7	0.1	-0.1	0.1	-0.8	-0.3	-1.3
Capital Goods	4.0	1.6	2.7	-1.9	0.9	1.1	-3.0	-2.5
Durable Goods	-2.1	2.1	1.4	1.3	0.8	-1.2	-3.4	-1.9
Nondurable Goods	0.5	0.9	-3.0	-1.8	4.4	-2.5	0.5	0.3
Energy	-1.5	7.3	0.8	-0.4	-4.6	-1.2	-2.2	-1.3

Seasonally Calendar Adjusted

Source: 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 four months from Dec 2012 to Mar 2013. There is sharp recovery in Apr 2013 with growth of manufacturing by 8.9 percent and capital goods by 14.0 percent. 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
Apr	9.0	8.9	3.6	14.0	8.9	8.1	-1.1
Mar	-8.4	-8.3	-8.2	-8.7	-9.4	-7.6	-0.2
Feb	-5.0	-5.1	-5.8	-5.1	-6.3	-2.3	-12.3
Jan	-0.7	-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	17.6	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 followed by recovery in Feb-Apr 2013.

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.

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 Apr 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 0.8 percent in Feb 2013, declining 5.1 percent in 12 months. In Mar 2013, manufacturing increased 1.2 percent but fell 8.3 percent in 12 months. There is strong recovery in Apr 2013 with growth of 1.5 percent and 8.9 percent in 12 months.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Apr 2013	8.9	1.5
Mar	-8.3	1.2
Feb	-5.1	0.8
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.

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

Table VE-5 provides month and 12-month rates of growth of new orders of manufacturing in Germany from Jan 2010 to Apr 2013. There are fluctuations in both monthly rates and in the past 12 months. In the five months Dec 2012 to Apr 2013, total orders for manufacturing grew cumulatively 1.6 percent for annual equivalent 3.9 percent. Foreign orders grew cumulatively 2.1 percent in Dec 2012-Apr 2013, at annual equivalent 5.1 percent while domestic orders grew 1.2 percent, or at annual equivalent 2.9 percent. Table VE-1 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany with strength in 2013. The same behavior is observed for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. There is weakening world trade affecting export economies. As in other countries, data on orders for manufacturing are highly volatile. Most 12-month percentage changes from Jan 2012 to Sep 2012 in Table VE-1 are negative largely because of the unusual strength of the Germany economy in the beginning of 2011 but more recently because of slowing world economy in 2012.

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

	Total 12 M	Total M	Foreign 12 M	Foreign M	Home 12 M	Home M
2013
Apr	5.6	-2.3	7.2	-1.5	3.5	-3.2
Mar	-5.9	2.3	-4.9	2.7	-7.3	2.0
Feb	-3.1	2.2	-2.0	2.1	-4.6	2.1
Jan	-1.0	-1.6	0.5	-2.7	-2.7	0.1
2012
Dec	-9.1	1.1	-6.7	1.6	-12.6	0.3
Nov	-0.9	-2.7	2.4	-4.7	-5.1	-0.1
Oct	4.5	4.1	7.0	6.9	1.3	0.7
Sep	-8.9	-1.9	-6.6	-2.4	-11.7	-1.2
Aug	-4.4	-0.9	-2.1	-0.5	-7.1	-1.5
Jul	-1.6	0.2	0.6	0.3	-4.2	0.2
Jun	-4.5	-1.3	-6.4	-0.9	-1.7	-1.9
May	-11.0	0.5	-3.7	1.3	-18.8	-0.7
Apr	-3.9	-2.1	-4.4	-3.1	-3.1	-0.9
Mar	-2.2	2.6	-1.2	3.5	-3.3	1.6
Feb	-4.3	0.2	-4.7	1.1	-3.8	-0.8
Jan	-2.6	-1.5	-4.6	-2.7	-0.2	0.0
2011
Dec	0.0	2.0	-0.3	4.2	0.5	-0.6
Nov	-4.8	-2.9	-8.2	-5.1	-0.3	-0.2
Oct	0.1	1.9	2.1	3.3	-2.1	0.3
Sep	2.2	-3.3	1.9	-3.6	2.6	-2.9
Aug	7.1	-0.8	5.2	0.1	9.4	-1.9
Jul	4.9	-2.6	4.6	-6.7	5.4	2.8
Jun	3.5	0.4	7.8	10.2	-2.0	-10.3
May	23.1	2.3	16.0	-4.5	31.8	10.9
Apr	6.7	1.5	9.6	2.0	3.0	0.9
Mar	9.8	-3.0	12.3	-3.0	6.9	-3.0
Feb	21.5	0.8	24.1	0.0	18.4	1.8
Jan	22.5	4.2	26.1	4.2	18.2	4.3
2010
Dec	21.8	-2.9	26.8	-4.1	15.4	-1.4
Nov	21.4	5.4	27.1	8.6	15.0	1.6
Oct	14.2	0.7	18.2	0.2	10.0	1.3
Sep	13.9	-1.2	15.6	-3.0	11.9	1.0
Aug	22.2	2.3	29.7	4.3	14.5	0.0
Jul	14.1	-1.1	21.4	-1.3	6.4	-0.9
Jun	27.6	3.3	30.6	4.4	24.2	1.9
May	24.8	-0.3	29.6	0.2	19.4	-1.1
Apr	29.9	2.8	34.0	2.9	25.7	2.9
Mar	29.4	5.0	32.9	5.1	25.8	5.0
Feb	24.0	-0.2	28.7	0.3	18.6	-0.9
Jan	17.0	4.1	23.8	4.7	9.8	3.3
Dec 2009	9.1	-1.7	10.5	-2.6	7.3	-0.5
Dec 2008	-28.3	-6.7	-31.5	-9.5	-23.7	-2.9
Dec 2007	7.1	-0.9	9.1	-2.0	4.4	0.2
Dec 2006	2.8	0.8	3.4	0.5	2.2	1.1
Dec 2005	5.0	-0.5	10.4	-1.1	-1.4	0.3
Dec 2004	12.7	6.5	13.0	8.5	12.7	4.9
Dec 2003	10.7	2.4	16.4	5.4	5.1	-0.8
Dec 2002	-0.2	-3.4	-0.8	-6.6	0.2	-0.3
Average ∆% 2003-2007	7.6		10.4		4.5
Average ∆% 2003-2012	2.3		3.9		0.3

Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally adjusted; 12 M: Non-adjusted Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Orders for capital goods of Germany are shown in Table VE-6. Total capital goods orders decreased 3.6 percent in Apr 2013 with decrease in foreign orders of 4.0 percent and decline of domestic orders of 3.2 percent. Total capital goods orders increased 2.2 percent in Mar 2013 with increases of 0.7 percent of domestic orders and 3.2 percent of foreign orders. The rates of change in 12 months in Apr 2013 are: 5.1 percent for total, 6.1 percent for domestic and 3.3 percent for foreign. The four-month period from Dec 2012 to Mar 2013 was quite strong with cumulative growth of total orders of 5.4 percent at annual equivalent 17.1 percent. There has been evident deceleration from 2010 and early 2011 with growth rates falling from two digit levels to single digits and multiple negative changes. An important aspect of Germany’s economy shown in Tables VE-5 and VE-6 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007. Germany adopted fiscal and labor market reforms to increase productivity.

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

	Total 12 M	Total M	Foreign 12 M	Foreign M	Domestic 12 M	Domestic M
2013
Apr	5.1	-3.6	6.1	-4.0	3.3	-3.2
Mar	-6.1	2.2	-4.6	3.2	-8.5	0.7
Feb	-0.7	3.1	1.6	2.6	-4.3	4.0
Jan	1.3	-2.3	3.6	-3.0	-2.3	-1.1
2012
Dec	-7.7	2.4	-4.6	2.8	-13.3	1.8
Nov	-0.7	-3.9	3.1	-5.6	-6.5	-0.8
Oct	4.6	5.4	6.3	7.2	2.1	1.9
Sep	-7.5	-1.1	-4.8	-0.8	-11.6	-1.4
Aug	-4.6	-2.0	-2.6	-1.4	-7.4	-2.9
Jul	-0.3	0.1	1.2	0.2	-2.7	-0.3
Jun	-7.1	-0.8	-9.9	-0.4	-1.9	-1.3
May	-12.0	0.3	-2.8	0.7	-23.9	-0.4
Apr	-3.3	-3.9	-4.2	-4.7	-1.7	-2.3
Mar	2.2	5.4	3.3	7.6	0.2	1.9
Feb	-5.9	1.2	-7.0	1.2	-4.2	1.2
Jan	-3.7	-3.6	-6.5	-4.2	1.0	-2.8
2011
Dec	1.2	2.7	-0.1	4.1	3.5	0.6
Nov	-6.5	-3.6	-10.5	-6.8	0.7	1.8
Oct	3.1	3.3	6.2	5.3	-2.0	0.2
Sep	2.9	-3.6	2.2	-3.9	4.0	-3.0
Aug	6.7	-0.4	4.5	0.5	10.6	-1.6
Jul	7.2	-6.8	6.4	-10.9	8.8	0.6
Jun	9.1	2.6	13.3	16.2	2.0	-15.4
May	27.5	4.0	17.7	-5.7	43.5	20.5
Apr	11.0	3.3	14.1	4.3	6.3	1.4
Mar	12.0	-5.7	14.4	-5.3	8.5	-6.2
Feb	29.3	2.4	32.5	0.7	24.8	5.3
Jan	26.8	3.9	32.8	4.4	17.7	2.9
2010
Dec	27.4	-5.1	31.2	-6.8	21.1	-2.0
Nov	30.4	9.5	37.0	13.8	20.1	2.6
Oct	20.5	0.1	24.9	-1.4	14.3	2.5
Sep	18.2	-2.3	20.3	-4.0	14.7	0.7
Aug	27.5	5.3	40.0	7.1	11.5	2.3
Jul	14.1	-2.8	28.1	-3.0	-2.5	-2.5
Jun	32.0	4.8	38.7	7.2	22.1	1.2
May	26.2	1.1	36.6	0.7	12.8	1.6
Apr	31.0	2.6	41.4	3.2	18.1	1.6
Mar	25.8	6.5	33.8	7.4	15.7	5.1
Feb	21.2	-1.1	31.3	-0.1	8.3	-2.7
Jan	17.0	4.6	29.6	3.1	2.8	7.1
Dec 2009	8.1	-1.2	13.6	-1.5	0.3	-1.0
Dec 2008	-32.2	-7.2	-36.8	-10.0	-24.5	-3.6
Dec 2007	9.4	-0.6	11.6	-2.3	6.1	2.2
Dec 2006	3.5	2.2	3.9	2.9	2.9	1.2
Dec 2005	1.8	-2.1	9.7	-2.5	-8.4	-1.6
Dec 2004	19.5	11.2	18.6	12.2	20.6	9.7
Dec 2003	11.7	2.1	17.2	5.0	5.4	-1.6
Dec 2002	-2.8	-4.3	-3.7	-8.1	-1.8	0.2
Average ∆% 2003-2007	9.0		12.1		4.9
Average ∆% 2003-2012	3.0		4.7		0.5

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

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

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

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

Source: Statistisches Bundesamt Deutschland

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

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

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

Source: Statistisches Bundesamt Deutschland

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

Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-7. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.6 percent and imports 13.2 percent. In Sep 2011, exports grew 10.5 percent relative to a year earlier and imports grew 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 and declined 4.2 percent in the 12 months ending in Mar 2013. In Apr 2013, exports increased 8.5 percent relative to a year earlier. 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 and declined 7.0 percent in Mar 2013. In Apr 2013, imports increased 5.2 percent relative to a year earlier. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.

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

	Exports EURO Billions	12- Month ∆%	Imports EURO Billions	12-Month ∆%
Apr 2013	94.5	8.5	76.4	5.2
Mar	94.6	-4.2	75.7	-7.0
Feb	88.6	-2.8	71.8	-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	77.3	-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	31.2
Apr	75.2	16.7	62.2	14.5
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-6 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that is milder than earlier in the recovery but could be flattening.

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

Source: Statistisches Bundesamt Deutschland

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

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

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

Source: Statistisches Bundesamt Deutschland

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

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

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

Source: Statistisches Bundesamt Deutschland

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

Table VE-8 provides monthly rates of growth of exports and imports of Germany. There is strong recovery in Apr 2013 with growth of exports of 1.9 percent and of imports of 2.3 percent. Export growth has been relatively strong from Dec 2012 to Apr 2013 with only one monthly decline of 1.2 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 consistent in following months as world trade weakens.

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

	Exports	Imports
Apr 2013	1.9	2.3
Mar	0.5	0.7
Feb	-1.2	-3.9
Jan	1.6	3.4
Dec 2012	0.4	-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	3.3	5.0
Apr	-1.0	-4.0
Mar	-0.2	0.6
Feb	1.2	2.9
Jan	2.8	0.2
Dec 2011	-2.8	-1.8
Nov	2.8	-0.2
Oct	-3.4	-0.3
Sep	1.8	0.1
Aug	2.8	-0.1
Jul	-1.4	0.3
Jun	-0.1	0.1
May	1.5	1.1
Apr	-3.0	-0.3
Mar	4.7	2.1
Feb	1.2	1.7
Jan	1.0	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-9 for the current sovereign risk crisis in the euro zone. Table VE-9 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Apr 2013. German exports to other European Union (EU) members are 55.9 percent of total exports in Apr 2013 and 57.4 percent in cumulative Jan-Apr 2013. Exports to the euro area are 34.5 percent in Apr and 37.6 percent cumulative in Jan-Apr. Exports to third countries are 41.7 percent of the total in Apr and 42.6 percent cumulative in Jan-Apr. There is similar distribution for imports. Exports to non-euro countries are increasing 5.6 percent in Apr 2013, increasing 1.7 percent cumulative in Jan-Apr 2013 while exports to the euro area are increasing 4.3 percent in Apr 2013, and decreasing 2.0 percent cumulative in Jan-Apr 2013. Exports to third countries, accounting for 44.1 percent of the total in Apr 2013, are increasing 13.6 percent in Apr 2013 and increasing 3.1 percent cumulative in Jan-Apr 2013, accounting for 42.6 percent of the cumulative total in Jan-Apr 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-9, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

	Apr 2013 € Billions	Apr 12-Month ∆%	Cumulative Jan-Apr 2012 € Billions	Cumulative Jan-Apr 2013/ Jan-Apr 2012 ∆%
Total Exports	94.5	8.5	366.3	0.2
A. EU Members	52.8 % 55.9	4.7	210.1 % 57.4	-0.8
Euro Area	34.5 % 36.5	4.3	137.7 % 37.6	-2.0
Non-euro Area	18.4 % 19.5	5.6	72.3 % 19.7	1.7
B. Third Countries	41.7 % 44.1	13.6	156.2 % 42.6	3.1
Total Imports	76.4	5.2	298.9	-1.4
C. EU Members	49.4 % 64.7	6.8	193.0 % 64.6	0.5
Euro Area	34.5 % 45.2	5.4	134.4 % 44.9	-0.7
Non-euro Area	14.9 % 19.5	10.1	58.6 % 19.6	3.5
D. Third Countries	27.1 % 35.5	2.4	105.9 % 35.4	-4.8

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

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2013/06/PE13

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 was unchanged from 44.3 in Apr to 44.3 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/26f7683d6be5424291b20988f0408c51). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest the index another possible contraction of GDP in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/26f7683d6be5424291b20988f0408c51).

The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 44.3 in Apr to 44.6 in May, indicating of private sector activity at the slowest rate of deterioration in 2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/ee6a106df24542c89bb47f88945390d5). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds that composite data for manufacturing and services indicate another quarter of contraction of GDP (http://www.markiteconomics.com/Survey/PressRelease.mvc/ee6a106df24542c89bb47f88945390d5). The Markit France Services Activity index was unchanged from 43.3 in Apr to 44.3 in May (http://www.markiteconomics.com/Survey/PressRelease.mvc/ee6a106df24542c89bb47f88945390d5). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 46.4 in May from 44.4 in Apr, for the highest reading in about a year but remaining deeply below the neutral level of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/5e6a4fec63424237bab6e6d0f3e8083c). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds slower decline in manufacturing but that the current period of 15 consecutive months of deterioration is the longest since beginning of the survey in 1998 (http://www.markiteconomics.com/Survey/PressRelease.mvc/5e6a4fec63424237bab6e6d0f3e8083c). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Apr month ∆% -0.1 12 months ∆%: 0.7 5/19/13
PPI	Apr month ∆%: -0.9 Apr 12 months ∆%: 0.6 Blog 6/2/13
GDP Growth	IQ2013/IQ2012 ∆%: -0.2 IVQ2012/IVQ2011 ∆%: -0.4 Blog 3/31/13 5/19/12
Industrial Production	Mar ∆%: Manufacturing -1.0 12-Month ∆%: Manufacturing minus 4.9 Blog 5/12/13
Consumer Spending	Manufactured Goods Apr ∆%: -0.4 Apr 12-Month Manufactured Goods ∆%: 0.2 Blog 6/2/13
Employment	Unemployment Rate: 10.4% Blog 6/9/13
Trade Balance	Apr Exports ∆%: month 4.1, 12 months 4.1 Apr Imports ∆%: month 3.8, 12 months -0.6 Blog 6/9/13
Confidence Indicators	Historical averages 100 Apr Mfg Business Climate 92 Blog 5/26/13

Links to blog comments in Table FR:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/12/13 http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

The number of unemployed in France rose from 2.098 million in IV2007, for a rate of unemployment of 7.5 percent, to 2.944 million in IVQ2012, for a rate of unemployment of 10.1 percent, as shown in Table VF-1. At the same time, the rate of employment fell from 64.6 percent in IV2007 to 64.1 percent in IVQ2012. The preliminary estimate for IQ2013 is 10.4 percent for the rate of unemployment.

Table VF-1, France, Metropolitan France, Employment Rate, Unemployed and Unemployment Rate, Millions and %

	Unemployed Millions	Unemployed Percent	Employment Rate
IQ2013		10.4
IVQ2012	2.944	10.1	64.1
IIIQ2012	2.820	9.9	63.9
IIQ2012	2.791	9.8	63.9
IQ2012	2.732	9.6	63.8
IVQ2011	2.678	9.4	63.9
IIIQ2011	2.608	9.2	63.9
IIQ2011	2.569	9.1	63.9
IQ2011	2.593	9.1	63.9
IVQ2010	2.630	9.3	63.8
IIIQ2010	2.626	9.3	63.9
IIQ2010	2.630	9.3	63.9
IQ2010	2.671	9.4	63.9
IVQ2009	2.713	9.6	63.7
IIIQ2009	2.584	9.2	63.9
IIQ2009	2.593	9.2	64.1
IQ2009	2.414	8.6	64.4
IVQ2008	2.182	7.8	64.8
IIIQ2008	2.063	7.4	64.8
IIQ2008	2.029	7.3	64.8
IQ2008	1.982	7.1	64.9
IV2007	2.098	7.5	64.6
IIIQ2007	2.215	8.0	64.4
IIQ2007	2.250	8.1	64.1
IQ2007	2.338	8.4	63.9
IVQ2006	2.326	8.4	63.9
IVQ2005	2.494	9.1	63.5
IVQ2004	2.434	8.9	63.7
IVQ2003	2.374	8.8	63.8
IVQ2002	2.143	8.0
IVQ2001	2.067	7.8
IVQ2000	2.115	8.0
IVQ1999	2.476	9.5
IVQ1995	2.546	10.0
IVQ1990	1.958	7.9
IVQ1985	2.173	8.9
IVQ1980	1.331	5.6
IVQ1975	0.847	3.7

Source: Institut National de la Statistique et des Études Économiques http://www.insee.fr/fr/ppp/comm_presse/comm/Communique_presse_060613.pdf

http://www.insee.fr/en/themes/info-rapide.asp?id=14&date=20130307

Chart VF-1 of the Institut National de la Statistique et des Études Économiques of France provides the unemployment rate according to the ILO (International Labor Organization) quarterly from 1975 to 2012. The preliminary estimate for IQ2013 is 10.4 percent. The rate of unemployment had decline before the global recession, rising again recently.

Chart VF-2, France, Unemployment Rate According to ILO, Quarterly SA, 1975-2012

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=14&date=20130307

Chart VF-2 of the Institut National de la Statistique et des Études Économiques of France provides an excellent view of the unemployment rate in France. The rate of unemployment rose from 2003 to 2006 and then fell sharply in 2007. The global recession caused sharp increase in the French rate of unemployment that has declined from the peak, stabilized at a high level and is climbing again.

Chart VF-2, France, Unemployment Rate International Labor Organization Criterion, Seasonally Adjusted Average over Quarter, Percent

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=14&date=20130307

France has been running a trade deficit fluctuating around €6,000 million as shown in Table VF-3. Exports increased 4.1 percent in Apr 2013 while imports increased 3.8 percent. The trade deficit increased marginally from revised €4456 million in Mar 2013 to €4515 million in Apr 2013 because of the higher value of imports than exports in Mar 2013.

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

	Exports	Imports	Trade Balance
Apr 2013	37,827	42,342	-4,515
Mar	36,354	40,810	-4,456
Feb	35,797	41,544	-5,747
Jan	36,557	42,008	-5,451
Dec 2012	37,416	42,876	-5,460
Nov	36,218	41,167	-4,949
Oct	37,300	42,367	-5,067
Sep	37,222	42,401	-5,179
Aug	38,203	43,887	-5,684
Jul	36,662	41,347	-4,685
Jun	36,329	42,836	-6,507
May	37,604	43,171	-5,567
Apr	36,369	42,603	-6,234
Mar	36,510	42,350	-5,840
Feb	37,259	43,533	-6,274
Jan	36,676	42,264	-5,588
Dec 2011	36,009	41,453	-5,444
Dec 2010	33,818	39,497	-5,679

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 increased 4.1 percent in Apr 2013 and increased 4.1 percent in the 12 months ending in Apr 2013. Imports increased 3.8 percent in Apr 2013 and decreased 0.6 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 ∆%
Apr 2013	4.1	4.1	3.8	-0.6
Mar	1.6	-0.4	-1.8	-3.6
Feb	-2.1	-3.9	-1.1	-4.6
Jan	-2.3	-0.3	-2.0	-0.6
Dec 2012	3.3	3.9	4.2	3.4
Dec 2011		6.5		5.0
Dec 2010		13.5		15.0
Dec 2009		-9.7		-2.2
Dec 2008		-6.8		-10.8
Dec 2007		5.9		8.1
Dec 2006		6.3		6.8
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 €73,713 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 €67,181 million with growth of exports of 3.1 percent and of imports of 1.3 percent.

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

	Exports € Millions	∆%	Imports € Millions	∆%	Balance € Millions
Apr 2013 12 Months	441,312		504,763		-63,451
Year
2012	441,474	3.1	508,665	1.3	-67,181
2011	428,180	8.4	501,893	12.2	-73,713
2010	394,865	13.9	447,242	14.1	-52,377
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

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.5 percent in IVQ2011 to minus 2.8 percent in IIIQ2012. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates.

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

	GDP	Imports	Consumption	GFCF	Exports
2012
IVQ	-2.8	-6.6	-3.9	-7.6	1.9
IIIQ	-2.6	-8.0	-4.3	-8.5	2.5
IIQ	-2.6	-7.5	-4.1	-8.6	2.5
IQ	-2.6	-9.0	-3.4	-7.2	1.9
2011
IVQ	-0.5	-6.8	-1.9	-3.2	3.2
IIIQ	0.4	0.1	-0.6	-2.2	5.7
IIQ	0.9	3.1	0.6	-0.3	7.0
IQ	1.2	8.8	1.0	0.3	10.8
2010
IVQ	1.9	15.4	1.0	0.9	13.3
IIIQ	1.7	13.2	1.2	2.7	12.1
IIQ	1.9	13.5	0.9	0.8	12.0
IQ	1.2	7.1	0.9	-2.1	7.1
2009
IVQ	-3.4	-6.4	0.2	-7.8	-9.3
IIIQ	-4.9	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.5	-13.6	-21.4
IQ	-7.0	-17.2	-1.7	-12.6	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/84408

The Markit/ADACI Business Activity Index decreased from 47.0 in Apr to 46.5 in May, indicating contraction of output of Italy’s services sector for 24 consecutive months of decline since Jun 2011 with some respondents experiencing moderately faster rate of contraction than in the first quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/812d0745b08d42d682b788f614dd7d5b). Phil Smith, economist at Markit and author of the Italy Services PMI^®, finds that the index suggests slower rate of decline of GDP in the second quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/812d0745b08d42d682b788f614dd7d5b). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 45.5 in Apr to 47.3 in May for 22 consecutive months of contraction of Italy’s manufacturing below 50.0 with the May at the highest in four months (http://www.markiteconomics.com/Survey/PressRelease.mvc/c45abc76abab42639cb3813e1c38539e). Phil Smith, economist at Markit and author of the Italian Manufacturing PMI^®, finds that manufacturing has been improving by obtaining foreign orders with internal demand still weak (http://www.markiteconomics.com/Survey/PressRelease.mvc/c45abc76abab42639cb3813e1c38539e). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	May month ∆%: 0.1 May 12-month ∆%: 1.2 Blog 6/2/13
Producer Price Index	Apr month ∆%: -0.5 Apr 12-month ∆%: -1.1 Blog 6/2/13
GDP Growth	IQ2013/IVQ2012 SA ∆%: minus 0.5 IQ2013/IQ2012 NSA ∆%: minus 2.3 Blog 3/17/13 5/19/13
Labor Report	Apr 2013 Participation rate 63.8% Employment ratio 56.0% Unemployment rate 12.0% Blog 6/2/13
Industrial Production	Mar month ∆%: -0.8 12 months CA ∆%: -5.2 Blog 5/12/13
Retail Sales	Mar month ∆%: -0.3 Mar 12-month ∆%: -3.0 Blog 5/26/13
Business Confidence	Mfg May 88.5, Jan 88.3 Construction May 81.8, Jan 80.4 Blog 6/2/13
Trade Balance	Balance Mar SA €2384 million versus Feb €2067 Exports Mar month SA ∆%: 1.2; Imports Mar month ∆%: 0.2 Exports 12 months Mar NSA ∆%: -6.0 Imports 12 months NSA ∆%: -10.6 Blog 5/19/13

Links to blog comments in Table IT:

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/12/13 http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

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

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 4.0 percent in 2009 after dropping 1.0 percent in 2008. Recovery of 1.8 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 1.0 percent in 2011 and 0.3 percent in 2012. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent on average between 1948 and 2012, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.0 percent as advanced economies struggle with weak internal demand and world trade.

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

	∆% on Prior Year
1998	3.5
1999	3.2
2000	4.2
2001	2.9
2002	2.4
2003	3.8
2004	2.9
2005	2.8
2006	2.6
2007	3.6
2008	-1.0
2009	-4.0
2010	1.8
2011	1.0
2012	0.3
Average ∆% per Year
1948-2012	2.6
1948-1959	2.9
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.6
2000-2012	1.6
2000-2007	3.0
2009-2012	1.0

Source: UK Office for National Statistics Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 52.9 in Apr to 54.9 in May, indicating increase in activity in every month since the beginning of 2013 and at the fastest rate since Mar 2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9fbd7a9c2e7042f4b2b9eb9c479673c8). Chris Williamson, Chief Economist at Markit, finds continuing improvement in the UK’s economy that depending on Jun could result in growth of GDP of 0.5 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9fbd7a9c2e7042f4b2b9eb9c479673c8). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 50.2 in Apr to 51.3 in May, which is the highest reading since Mar 2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/ff4aa4ed5e41429c86b62108fe19555d). Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds manufacturing improving throughout all segments with the impulse originating in the internal market but increases in demand from Asia, North America and some countries in the euro area such as Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/ff4aa4ed5e41429c86b62108fe19555d). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators


CPI	Apr month ∆%: 0.2 Apr 12-month ∆%: 2.4 Blog 5/26/13
Output/Input Prices	Output Prices: Apr 12-month NSA ∆%: 1.1; excluding food, petroleum ∆%: 0.8 Input Prices: Apr 12-month NSA ∆%: -0.1 Excluding ∆%: 1.1 Blog 5/26/13
GDP Growth	IQ2013 prior quarter ∆% 0.3; year earlier same quarter ∆%: 0.6 Blog 3/31/13 4/28/13 5/26/13
Industrial Production	Mar 2013/Mar 2012 ∆%: Production Industries minus 1.4; Manufacturing minus 1.4 Blog 5/12/13
Retail Sales	Mar month ∆%: -0.7 Mar 12-month ∆%: -0.5 Blog 4/28/13
Labor Market	Jan-Mar Unemployment Rate: 7.8%; Claimant Count 4.5%; Earnings Growth 0.4% Blog 5/19/13
Trade Balance	Balance Apr minus ₤2579 million Exports Apr ∆%: -1.3; Feb-Apr ∆%: 0.3 Imports Apr ∆%: -2.7 Feb-Apr ∆%: -0.9 Blog 6/9/13

Links to blog comments in Table UK:

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html

5/19/13 http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html

5/12/13 http://cmpassocregulationblog.blogspot.com/2013/05/recovery-without-hiring-collapse-of.html

4/28/13 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html

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

The UK’s trade account is shown in Table VH-1. In Apr 2013, the UK ran a deficit in trade of goods and services (total trade) of ₤2579 million. The deficit in trade of goods was ₤8224 million and ₤6876 million in goods excluding oil. A surplus in services of ₤5645 million contributed to the smaller overall deficit in goods and services (-₤8224 million plus ₤5645 million equal to -₤2579 million). Services have contributed to lower trade account deficits and softened the impact of the global recession on the UK economy. Exports of goods and services decreased 1.3 percent in Apr 2013 and increased 0.3 percent in the quarter Feb-Apr 2013 relative to the same quarter a year earlier with imports decreasing 2.7 percent in Apr and decreasing 0.9 percent in Feb-Apr 2013 relative to the same quarter a year earlier. Excluding oil, UK exports of goods decreased 1.6 percent in Apr 2013 and increased 2.1 percent in Feb-Apr 2013 relative to a year earlier while imports decreased 4.8 percent in Apr and increased 0.5 percent in Feb-Apr 2013 relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports decreased 1.1 percent in Apr and fell 0.2 percent in Feb-Apr 2013 relative to a year earlier and imports increased 1.2 percent in Apr and decreased 0.9 percent in Feb-Apr 2013 relative to a year earlier.

Table VH-1, Value of UK Trade in Goods and Services, Balance of Payments Basis, ₤ Million and ∆%

	₤ Million SA Apr 2013	Month ∆% Apr 2013	Feb-Apr 2013 ∆% Feb-Apr 2012
Total Trade
Exports	40,629	-1.3	0.3
Imports	43,208	-2.7	-0.9
Balance	-2,579
Trade in Goods
Exports	25,208	-1.4	0.6
Imports	33,432	-3.8	-0.8
Balance	-8,224
Trade in Goods Excluding Oil
Exports	22,267	-1.6	2.1
Imports	29,143	-4.8	0.5
Balance	-6,876
Trade in Services
Exports	15,421	-1.1	-0.2
Imports	9,776	1.2	-0.9
Balance	5,645

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/april-2013/index.html

Longer Run