Duration Dumping and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Exodus of Foreign Financing of US Fiscal and Balance of Payments Deficits, United States Industrial Production, World Economic Slowdown and Global Recession Risk: Part III

 

 

Duration Dumping and Peaking Valuations of Risk Financial Assets, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Exodus of Foreign Financing of US Fiscal and Balance of Payments Deficits, United States Industrial Production, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013

Executive Summary

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IA1 Theory

IA2 Policy

IA3 Evidence

IA4 Unwinding Strategy

IB United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History and Monetary Policy Based on Fear of Deflation

II United States Industrial Production

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

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 IMF provides an update of the macroeconomic forecast of the world (http://www.imf.org/external/pubs/ft/weo/2013/update/02/). The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the global recession that affected the US economy from IVQ2007 (Dec) to IIQ2009 (Jun) (http://www.nber.org/cycles.html). A new fact is slowing growth in emerging and developing economies. The IMF has lowered its forecast of the world economy to 3.1 percent in 2013 but accelerating to 3.8 percent in 2014 with the unmodified earlier forecasts of 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, 1.2 percent in 2013 and 2.1 percent in 2014 and 2.1 on average from 2013 to 2016 in contrast with 3.9 percent for the world as a whole. While the world would grow 16.8 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.6 percent. The difference in dollars of 2012 is rather high: growing by 16.8 percent would add $12.0 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,964 but growing by 8.6 percent would add $6.2 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 24.5 percent or at the average yearly rate of 5.6 percent, contributing $6.7 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.

The IMF explains the major factors of the change in forecast (http://www.imf.org/external/pubs/ft/weo/2013/update/02/):

“Global growth is projected to remain subdued at slightly above 3 percent in 2013, the same as in 2012. This is less than forecast in the April 2013 World Economic Outlook (WEO), driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area. Downside risks to global growth prospects still dominate: while old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, especially given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals. Stronger global growth will require additional policy action. Specifically, major advanced economies should maintain a supportive macroeconomic policy mix, combined with credible plans for reaching medium-term debt sustainability and reforms to restore balance sheets and credit channels. Many emerging market and developing economies face a tradeoff between macroeconomic policies to support weak activity and those to contain capital outflows. Macroprudential and structural reforms can help make this tradeoff less stark.”

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	3.1	3.8	4.4	4.5
G7	33,932	1.2	2.1	2.5	2.5
Canada	1,819	1.7	2.2	2.5	2.4
France	2,609	-0.2	0.8	1.5	1.7
DE	3,401	0.3	1.3	1.3	1.3
Italy	2,014	-1.8	0.7	1.2	1.4
Japan	5,964	2.0	1.2	1.1	1.2
UK	2,441	0.9	1.5	1.8	1.9
US	15,685	1.7	2.7	3.6	3.4
Euro Area	12,198	-0.3	1.1	1.4	1.6
DE	3,401	0.3	1.3	1.3	1.3
France	2,609	-0.2	0.8	1.5	1.7
Italy	2,014	-1.8	0.7	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	5.0	5.4	6.0	6.1
Brazil	2,396	2.5	3.2	4.1	4.2
Russia	2,022	2.5	3.3	3.7	3.6
India	1,825	5.6	6.3	6.6	6.9
China	8,227	7.8	7.7	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 http://www.imf.org/external/pubs/ft/weo/2013/update/02/

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 V-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 1.2 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 4.8 percent in IQ2012. Growth of 3.8 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.9 percent in IIIQ2012 at the SAAR of minus 3.6 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 0.4 percent relative to a year earlier. Japan grew 0.9 percent in IQ2013 at the SAAR of 3.8 percent and 0.3 percent relative to a year earlier. Japan’s GDP increased 0.4 percent in IIQ2013 at the SAAR of 1.7 percent and increased 1.4 percent relative to a year earlier. China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 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. In IIQ2013, China grew at 1.7 percent, which annualizes at 7.0 percent and 7.5 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2013. 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 0.9 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.3 percent and decreased 1.1 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.7 percent relative to a year earlier. Germany’s GDP increased 0.7 percent in IQ2012 and 1.8 percent relative to a year earlier. In IIQ2012, Germany’s GDP decreased 0.1 percent and increased 0.6 0.5 percent relative to a year earlier but 1.1 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 0.5 percent in IVQ2012 and increased 0.0 percent relative to a year earlier. In IQ2013, Germany’s GDP increased 0.0 percent and fell 1.6 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.7 percent and 0.9 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.9 percent, at SAAR of 3.7 percent and higher by 3.3 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.2 percent at SAAR and 2.8 percent relative to a year earlier. In IIIQ2012, GDP grew 0.7 percent, 2.8 percent at SAAR and 3.1 percent relative to IIIQ2011. In IVQ2012, GDP grew 0.0 percent, 0.1 percent at SAAR and 2.0 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.1 percent SAAR, 0.3 percent relative to the prior quarter and 1.3 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 1.7 percent in SAAR, 0.4 percent relative to the prior quarter and 1.4 percent relative to IIQ2012 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/recovery-without-hiring-tapering.htm). In IQ2012, UK GDP changed 0.0 percent, increasing 0.6 percent relative to a year earlier. UK GDP fell 0.5 percent in IIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.7 percent in IIIQ2012 and increased 0.1 percent relative to a year earlier. UK GDP fell 0.2 percent in IVQ2012 relative to IIIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.3 percent in IQ2013 and 0.3 percent relative to a year earlier. UK GDP increased 0.6 percent in IIQ2013 and 1.4 percent relative to a year earlier. Italy has experienced decline of GDP in eight consecutive quarters from IIIQ2011 to IIQ2013. 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 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.3 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 0.6 percent and fell 2.3 percent relative to a year earlier. Italy’s GDP fell 0.2 percent in IIQ2013 and 2.0 percent relative to a year earlier. France’s GDP changed 0.0 percent in IQ2012 and increased 0.4 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and increased 0.0 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 0.5 percent relative to a year earlier. The GDP of France increased 0.5 percent in IIQ2013 and 0.3 percent relative to a year earlier.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.9        SAAR: 3.7	3.3
Japan	QOQ: 1.2 SAAR: 4.8	3.4
China	1.5	8.1
Euro Area	-0.1	-0.1
Germany	0.7	1.8
France	0.0	0.4
Italy	-1.0	-1.7
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3         SAAR: 1.2	2.8
Japan	QOQ: -0.2 SAAR: -0.9	3.8
China	2.1	7.6
Euro Area	-0.2	-0.5
Germany	-0.1	0.6 1.1 CA
France	-0.3	0.1
Italy	-0.6	-2.4
United Kingdom	-0.5	0.0
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.7  SAAR: 2.8	3.1
Japan	QOQ: –0.9 SAAR: –3.6	0.3
China	2.0	7.4
Euro Area	-0.1	-0.7
Germany	0.2	0.4
France	0.2	0.0
Italy	-0.3	-2.6
United Kingdom	0.7	0.1
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	2.0
Japan	QOQ: 0.3 SAAR: 1.0	0.4
China	1.9	7.9
Euro Area	-0.6	-0.9
Germany	-0.5	0.0
France	-0.2	-0.3
Italy	-0.9	-2.8
United Kingdom	-0.2	0.0
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.3 SAAR: 1.1	1.3
Japan	QOQ: 0.9 SAAR: 3.8	0.3
China	1.6	7.7
Euro Area	-0.3	-1.1
Germany	0.0	-1.6
France	-0.2	-0.5
Italy	-0.6	-2.3
UK	0.3	0.3
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.4 SAAR: 1.7	1.4
Japan	QOQ: 0.6 SAAR: 2.6	0.9
China	1.7	7.5
Euro Area	0.3	-0.7
Germany	0.7	0.9
France	0.5	0.3
Italy	-0.2	-2.0
UK	0.6	1.4

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 (http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier 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 Jun 2013, Japan’s exports grew 7.4 percent in 12 months while imports increased 11.8 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 Jul 2013, China exports increased 5.1 percent relative to a year earlier and imports increased 10.9 percent. Germany’s exports decreased 2.4 percent in the month of May 2013 and decreased 4.8 percent in the 12 months ending in May 2013 while imports increased 1.7 percent in the month of May and decreased 2.6 percent in the 12 months ending in May. 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 0.7 percentage points in IIQ2012, added 0.4 percentage points in IIIQ2012 and subtracted 0.3 percentage points in IVQ2012. In IQ2013, net trade added 0.6 percentage points to UK’s growth of value added. France’s exports increased 0.6 percent in Jun 2013 while imports decreased 2.6 percent and net trade added 0.10 percentage points to GDP growth in IIQ2012, 0.10 percentage points in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.2 percentage points from France’s GDP growth in IQ2013 and was neutral in IIQ2013. US exports increased 2.2 percent in Jun 2013 and goods exports increased 0.9 percent in Jan-Jun 2013 relative to a year earlier but net trade deducted 0.03 percentage points to GDP growth in IIIQ2012 and added 0.68 percentage points in IVQ2012. Net trade deducted 0.28 percentage points from US GDP growth in IQ2013 and deducted 0.81 percentage points in IIQ2013. US imports decreased 2.5 percent in Jun 2013 and goods imports decreased 1.7 percent in Jan-Jun 2013 relative to a year earlier. Industrial production increased 0.3 percent in Jun 2013 after changing 0.0 percent in May 2013 and falling 0.3 percent in Apr 2013, as shown in Table II-1, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production was unchanged in July after having gained 0.2 percent in June. In July, manufacturing production declined 0.1 percent. The output of mines advanced 2.1 percent, its fourth consecutive monthly increase, and the production of utilities fell 2.1 percent, its fourth consecutive monthly decrease. At 98.9 percent of its 2007 average, total industrial production in July was 1.4 percent above its year-earlier level.”

In the six months ending in Jul 2013, United States national industrial production accumulated increase of 0.7 percent at the annual equivalent rate of 1.4 percent, which is equal to growth of 1.4 percent in 12 months. Excluding growth of 0.7 in Feb 2013, growth in the remaining five months from Mar 2012 to Jul 2013 accumulated to 0.0 percent or 0.0 percent annual equivalent. Industrial production stagnated in two of the past six months and fell in one. Business equipment accumulated growth of 2.0 percent in the six months from Feb to Jul 2013 at the annual equivalent rate of 1.8 percent, which is much higher than growth of 2.1 percent in 12 months. Growth of business equipment accumulated 0.1 percent from Mar to July 2013 at the annual equivalent rate of 0.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry edged down 0.1 percentage point to 77.6 percent in July, a rate 0.3 percentage point below its level of a year earlier and 2.6 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating. Manufacturing decreased 0.1 percent in Jul 2013 after increasing 0.2 percent in Jun 2013 and 0.3 percent in May 2013 seasonally adjusted, increasing 1.4 percent not seasonally adjusted in 12 months ending in Jul 2013, as shown in Table II-2. Manufacturing grew cumulatively 0.3 percent in the six months ending in Jul 2013 or at the annual equivalent rate of 0.6 percent. Excluding the increase of 0.6 percent in Feb 2012, manufacturing accumulated growth of minus 0.3 percent from Mar 2013 to Jul 2013 or at the annual equivalent rate of minus 0.7 percent.

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	2.2 Jun	0.9 Jan-Jun	-2.5 Jun	-1.7 Jan-Jun
Japan		Jun 2013 7.4 May 2013 10.1 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		Jun 2013 11.8 May 2013 10.0 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		5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb		10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb
Euro Area	-2.5 12-M Jun	1.6 Jan-Jun	-5.8 12-M Jun	-4.2 Jan-Jun
Germany	-2.4 Jun CSA	-2.1 Jun	1.7 May CSA	-1.2 Jun
France Jun	0.6	-2.7	-2.6	-5.6
Italy Jun	1.2	4.4	1.6	-2.6
UK	3.2 Apr	4.3 Apr-Jun 13 /Apr-Jun 12	0.6 Apr	0.9 Apr-Jun 13/Apr-Jun 12
Net Trade % Points GDP Growth	% Points
USA	IIQ2013 -0.81 IQ2013 -0.28 IVQ2012 +0.68 IIIQ2012 -0.03 IIQ2012 +0.10 IQ2012 +0.44
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	0.1 IIIQ2012 0.2 IVQ2012 -0.2 IQ2013 0.0 IIQ2013
UK	-0.7 IQ2012 -0.7 IIQ2012 +0.4 IIIQ2012 -0.3 IVQ2012 0.6 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 Jun 2013. The share of Asia in Japan’s trade is more than one-half for 54.9 percent of exports and 44.3 percent of imports. Within Asia, exports to China are 17.8 percent of total exports and imports from China 21.3 percent of total imports. While exports to China increased 4.8 percent in the 12 months ending in Jun 2013, imports from China increased 14.3 percent. The largest export market for Japan in Jun 2013 is the US with share of 18.7 percent of total exports, which is almost equal to that of China, and share of imports from the US of 9.4 percent in total imports. Western Europe has share of 9.5 percent in Japan’s exports and of 10.6 percent in imports. Rates of growth of exports of Japan in May 2013 are relatively high for several countries and regions with growth of 14.6 percent for exports to the US, 9.6 for exports to Mexico, 10.4 percent for exports to Brazil and 21.5 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. Growth rates of imports in the 12 months ending in Jun 2013 are positive for all trading partners. Imports from Asia increased 10.0 percent in the 12 months ending in Jun 2013 while imports from China increased 14.3 percent. Data are in millions of yen, which may have 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

Jun 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,061,431	7.4	6,242,207	11.8
Asia	3,330,000	7.4	2,762,718	10.0
China	1,080,621	4.8	1,327,321	14.3
USA	1,133,856	14.6	589,179	18.8
Canada	76,204	12.1	91,279	5.6
Brazil	45,894	10.4	86,816	17.3
Mexico	81,492	9.5	34,500	23.5
Western Europe	575,348	8.4	664,680	16.1
Germany	164,936	17.3	167,493	15.1
France	45,672	7.2	107,293	15.2
UK	85,134	9.2	53,281	22.5
Middle East	209,370	12.2	1,115,449	8.0
Australia	150,485	21.5	416,161	29.2

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 revised 3.1 percent in 2013 and 5.4 percent in 2014 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)	3.1	5.4	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	1.4	4.3	4.7	4.3
EMDE	6.0	7.3	7.9	7.5
Exports Goods & Services
G7	2.4	4.7	4.9	4.5
EMDE	4.3	6.3	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 http://www.imf.org/external/pubs/ft/weo/2013/update/02/

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 54.1 in Jul from 51.2 in Jun, indicating expansion at a higher rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/0e5d5a0562a842dba2c773a70c8be7ba). This index has remained above the contraction territory of 50.0 during 48 consecutive months. The employment index decreased from 51.6 in Jun to 51.0 in Jul with input prices rising at higher rate and new orders and output increasing at higher rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/0e5d5a0562a842dba2c773a70c8be7ba). Joe Lupton, Senior Economist at JP Morgan, finds that output increased to a high of 16 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/0e5d5a0562a842dba2c773a70c8be7ba). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was marginally higher at 50.8 in Jul from 50.6 in Jun, which is the seventh consecutive reading above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/760ccbef0b1742ed8fc69acc37857228). The HSBC Brazil Composite Output Index, compiled by Markit, decreased marginally from 51.1 in Jun to 49.6 in Jul, indicating moderate contraction in private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/f27cd5ad8b6d423291c9afd416d7d72b). The HSBC Brazil Services Business Activity index, compiled by Markit, fell from 51.0 in Jun to 50.3 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f27cd5ad8b6d423291c9afd416d7d72b). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the survey data suggest weaker services in the beginning of the second semester (http://www.markiteconomics.com/Survey/PressRelease.mvc/f27cd5ad8b6d423291c9afd416d7d72b). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) fell from 50.4 in Jun to 48.5 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/056864bbd85642759ac5fd903f1dcf4d). Andre Loes, Chief Economist, Brazil at HSBC, finds contraction of manufacturing in the first month since Sep 2012 (http://www.markiteconomics.com/Survey/PressRelease.mvc/056864bbd85642759ac5fd903f1dcf4d).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 53.2 in Jul from 51.9 in Jun, for the highest reading in four months (http://www.markiteconomics.com/Survey/PressRelease.mvc/60b7d12f272b42cc9ac764e0cd386ab6).New export orders registered 47.5 in Jun down from 49.8 in Apr, indicating contraction at a faster 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 2.4 percent annual rhythm in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/60b7d12f272b42cc9ac764e0cd386ab6). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 53.7 in Jul from 51.9 in Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/37ac7bf07d1d423bb8c53ef451373170). The index of new exports orders rose from 46.3 in Jun to 52.5 in Jul while total new orders increased from 53.4 in Jun to 55.5 in Jul. Mark Wingham, Economist at Markit, finds that the index increased in Jul at the highest rate in four months(http://www.markiteconomics.com/Survey/PressRelease.mvc/37ac7bf07d1d423bb8c53ef451373170). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 4.5 percentage points from 50.9 in Jun to 55.4 in Jul, which indicates growth at a higher ate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 6.4 percentage points from 51.9 in Jun to 58.3 in Jul. The index of exports decreased 1.0 percentage point from 54.5 in Jun to 53.5 in Jul, growing at a lower rate. The Non-Manufacturing ISM Report on Business^® PMI increased 3.8 percentage points from 52.2 in Jun to 56.0 in Jul, indicating growth of business activity/production during 48 consecutive months, while the index of new orders increased 6.9 percentage points from 50.8 in Jun to 57.7 in Jul (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	Jul 12 months NSA ∆%: 2.0; ex food and energy ∆%: 1.7 Jul month SA ∆%: 0.2; ex food and energy ∆%: 0.2 Blog 8/18/13
Producer Price Index	Jul 12-month NSA ∆%: 2.1; ex food and energy ∆% 1.2 Jul month SA ∆% = 0.0; ex food and energy ∆%: 0.1 Blog 8/18/13
PCE Inflation	Jun 12-month NSA ∆%: headline 1.3; ex food and energy ∆% 1.2 Blog 8/4/13
Employment Situation	Household Survey: Jul Unemployment Rate SA 7.4% Blog calculation People in Job Stress Jul: 28.3 million NSA, 17.4% of Labor Force Establishment Survey: Nov Nonfarm Jobs +162,000; Private +202,000 jobs created  Jun 12-month Average Hourly Earnings Inflation Adjusted ∆%: 1.1 Blog 8/4/13
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 Jun 2013 4.918 million lower by 1.221 million than 6.139 million in Jun 2006 Blog 8/11/13
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 3.3 IIQ2012/IIQ2011 2.8 IIIQ2012/IIIQ2011 3.1 IVQ2012/IVQ2011 2.0 IQ2013/IQ2012 1.3 IIQ2013/IIQ2012 1.4 IQ2012 SAAR 3.7 IIQ2012 SAAR 1.2 IIIQ2012 SAAR 2.8 IVQ2012 SAAR 0.1 IQ2013 SAAR 1.1 IIQ2013 SAAR 1.7 Blog 8/4/13
Real Private Fixed Investment	SAAR IIQ2013 6.3 ∆% IVQ2007 to IIQ2013: minus 5.0% Blog 8/4/13
Personal Income and Consumption	Jun month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% minus 0.1 Real Personal Consumption Expenditures (RPCE): 0.5 12-month Jun NSA ∆%: RDPI: 0.6; RPCE ∆%: 0.9 Blog 8/4/13
Quarterly Services Report	IQ13/IQ12 SA ∆%: Information 4.3 Financial & Insurance 1.8 Blog 6/9/13
Employment Cost Index	Compensation Private IIQ2013 SA ∆%: 0.5 Jun 13 months ∆%: 1.9 Blog 8/11/13
Industrial Production	Jul month SA ∆%: 0.0 Jul 12 months SA ∆%: 1.4 Manufacturing Jul SA ∆% minus 0.1 Jul 12 months SA ∆% 1.3, NSA 1.4 Capacity Utilization: 77.6 Blog 8/18/13
Productivity and Costs	Nonfarm Business Productivity IIQ2013∆% SAAE 0.7; IIQ2013/IIQ2012 ∆% 0.3; Unit Labor Costs SAAE IIQ2013 ∆% 1.7; IIQ2013/IIQ2012 ∆%: 1.6 Blog 8/18/2013
New York Fed Manufacturing Index	General Business Conditions From Jul 9.46 to Aug 8.24 New Orders: From Jul 3.77 to Aug 0.27 Blog 8/18/13
Philadelphia Fed Business Outlook Index	General Index from Jul 19.8 to Aug 9.3 New Orders from Jul 10.2 to Aug 5.3 Blog 8/18/13
Manufacturing Shipments and Orders	New Orders SA Jun ∆% 1.5 Ex Transport -0.4 Jan-Jun NSA New Orders 1.8 Ex transport 0.8 Blog 8/11/13
Durable Goods	Jun New Orders SA ∆%: 4.2; ex transport ∆%: 0.0 Jan-Jun 13/Jan-Jun 12 New Orders NSA ∆%: 3.7; ex transport ∆% 1.7 Blog 7/28/13
Sales of New Motor Vehicles	Jan-Jul 2013 9,144,335; Jan-Jul 2012 8,425,842. Jul 13 SAAR 15.80 million, Jun 13 SAAR 15.88 million, Jul 2012 SAAR 14.21 million Blog 8/11/13
Sales of Merchant Wholesalers	Jan-Jun 2013/Jan-Jun 2012 NSA ∆%: Total 2.4; Durable Goods: 2.4; Nondurable Goods: 2.3 Blog 8/11/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jun 13/Jun 12 NSA ∆%: Sales Total Business 2.6; Manufacturers 1.7 Retailers 4.2; Merchant Wholesalers 2.4 Blog 8/18/13
Sales for Retail and Food Services	Jan-Jul 2013/Jan-Jul 2012 ∆%: Retail and Food Services 4.2; Retail ∆% 4.3 Blog 8/18/13
Value of Construction Put in Place	Jun SAAR month SA ∆%: -0.6 Jun 12-month NSA: 2.6 Jan-Jun 2013 ∆% 5.1 Blog 8/11/13
Case-Shiller Home Prices	May 2013/May 2012 ∆% NSA: 10 Cities 11.8; 20 Cities: 12.2 ∆% May SA: 10 Cities 1.1 ; 20 Cities: 1.0 Blog 8/4/13
FHFA House Price Index Purchases Only	May SA ∆% 0.7; 12 month NSA ∆%: 7.3 Blog 7/28/13
New House Sales	Jun 2013 month SAAR ∆%: 8.3 Jan-Jun 2013/Jan-Jun 2012 NSA ∆%: 28.4 Blog 7/28/13
Housing Starts and Permits	Jul Starts month SA ∆%: 5.9 ; Permits ∆%: 2.7 Jan-Jul 2013/Jan-Jul 2012 NSA ∆% Starts 23.9; Permits  ∆% 23.3 Blog 8/18/13
Trade Balance	Balance Jun SA -$34,224 million versus May -$40,097 million Exports Jun SA ∆%: 2.2 Imports Jun SA ∆%: -2.5 Goods Exports Jan-Jun 2013/2012 NSA ∆%: 1.1 Goods Imports Jan-Jun 2013/2012 NSA ∆%: -2.1 Blog 8/11/13
Export and Import Prices	Jul 12-month NSA ∆%: Imports 1.0; Exports 0.4 Blog 8/18/13
Consumer Credit	Jun ∆% annual rate: 5.9 Blog 8/11/13
Net Foreign Purchases of Long-term Treasury Securities	Jun Net Foreign Purchases of Long-term US Securities: $-66.9 billion Major Holders of Treasury Securities: China $1276 billion; Japan $1083 billion; Total Foreign US Treasury Holdings Feb $5601 billion Blog 8/18/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Jul: Receipts 13.9; Outlays minus 2.9; Individual Income Taxes 17.2 Deficit Fiscal Year 2011 $1,296 billion Deficit Fiscal Year 2012 $1,087 billion Blog 8/18/2013
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	Jun 2013 SAAR ∆%: Securities -8.2 Loans 2.2 Cash Assets 44.8 Deposits 5.9 Blog 7/28/13
Flow of Funds	IQ2013 ∆ since 2007 Assets +$2612.8 MM Real estate -$2733.8 MM Financial +4799.7 MM Net Worth +$3487.4 MM Blog 6/16/13
Current Account Balance of Payments	IQ2013 -83,219 MM %GDP 2.7 Blog 6/16/13

Links to blog comments in Table USA:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

7/7/13 http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

6/9/13 http://cmpassocregulationblog.blogspot.com/2013/06/twenty-eight-million-unemployed-or.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 the new estimate for IIQ2013 and revised data for nonfarm business sector productivity and unit labor costs for IQ2013 and IVQ2012 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 2.6 percent and of 1.7 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 0.9 percent in IIQ2013, as shown in column 2 “IIQ2013 SAEE.” The increase of labor productivity from IIQ2012 to IIQ2013 was 0.0 percent, reflecting increases in output of 1.8 percent and of hours worked of 1.8 percent, as shown in column 3 “IIQ2013 YoY.” Hours worked decreased from 2.4 percent in IVQ2012 in SAAE to 1.5 percent in IQ2013 and 1.7 percent in IIQ2013 while output growth increased from 0.7 percent in IVQ2011 to minus 0.3 percent in IQ2013 and 2.6 percent in IIQ2013. 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 1.4 percent in IIQ2013 and rose 1.6 percent in IIQ2013 relative to IIQ2012. Hourly compensation increased at the SAAE rate of 2.3 percent in IIQ2013, which deflating by the estimated consumer price increase SAAE rate in IIQ2013 results in increase of real hourly compensation at 2.3 percent. Real hourly compensation increased 0.1 percent in IIQ2013 relative to IIQ2012.

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

	IIQ 2013 SAAE	IIQ 2013 YoY	IQ 2013 SAAE	IQ 2013 YoY	IVQ 2012 SAAE	IVQ 2012 YoY
Productivity	0.9	0.0	-1.7	0.0	-1.7	0.9
Output	2.6	1.8	-0.3	1.5	0.7	2.8
Hours	1.7	1.8	1.5	1.5	2.4	1.9
Hourly Comp.	2.3	1.6	-5.9	1.5	9.9	5.3
Real Hourly Comp.	2.3	0.1	-7.3	-0.2	7.5	3.3
Unit Labor Costs	1.4	1.6	-4.2	1.4	11.8	4.4
Unit Nonlabor Payments	0.4	0.6	7.8	1.5	-12.0	-1.8
Implicit Price Deflator	1.0	1.2	1.8	1.5	0.8	1.7

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 1.5 percent in the annual average, as shown in Table VA-2. Increases in productivity were 0.5 percent in 2011, 3.3 percent in 2010 and 3.2 percent in 2009. Savings of labor inputs have characterized the contraction period and the recovery period. Real hourly compensation increased 0.5 percent in 2012 and fell 0.8 percent in 2011, interrupting increases of 0.4 percent in 2010 and 1.5 percent in 2009. Unit labor costs fell 2.0 percent in 2009 and 1.2 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	1.5	0.5	3.3	3.2	1.0	1.4
Real Hourly Compensation	0.5	-0.7	0.4	1.5	-1.1	1.4
Unit Labor Costs	1.2	2.0	-1.2	-2.0	1.7	2.9

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 2.7 percent in 2001 to 4.3 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 9.5 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. Productivity increased at 0.9 percent in IIQ2013.

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	4.5	0.8	3.5	6.8	3.5
2000	-1.4	8.6	0.1	3.8	3.3
2001	-1.2	6.8	2.3	4.9	2.7
2002	9.5	0.3	3.1	-0.7	4.3
2003	6.1	7.4	10.0	3.9	4.6
2004	-0.5	3.8	0.9	1.1	3.1
2005	4.8	-0.3	2.8	0.0	2.0
2006	2.4	-0.6	-2.1	2.9	0.7
2007	0.0	2.5	4.7	2.1	1.4
2008	-3.5	4.3	1.1	-2.6	1.0
2009	3.1	8.1	5.8	4.7	3.2
2010	1.9	1.5	2.4	2.1	3.3
2011	-3.2	1.9	0.0	2.9	0.5
2012	1.5	1.2	2.5	-1.7	1.5
2013	-1.7	0.9

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 7.4 percent in IQ2012 followed by increase of 0.7 percent in IIQ2012, decline of 1.8 percent in IIIQ2012 and increase of 11.8 percent in IVQ2012. Unit labor costs decreased at 4.2 percent in IQ2013 and increased 1.4 percent in IIQ2013.

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	2.0	0.1	-0.1	1.7	0.7
2000	17.4	-6.8	8.2	-1.5	4.0
2001	11.4	-5.4	-1.8	-1.3	1.6
2002	-6.7	3.3	-1.1	1.8	-1.9
2003	-3.4	-0.1	-3.6	1.5	-0.8
2004	0.0	4.1	6.0	0.6	1.4
2005	-1.6	2.5	2.1	2.6	1.6
2006	6.3	0.7	2.6	4.4	3.2
2007	10.1	-2.5	-3.2	2.4	2.9
2008	7.7	-3.9	2.3	7.3	1.7
2009	-12.2	2.0	-2.9	-2.2	-2.0
2010	-4.4	3.5	-0.1	-0.1	-1.2
2011	10.2	-2.9	3.0	-7.3	2.0
2012	7.4	0.7	-1.8	11.8	1.2
2013	-4.2	1.4

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 3.5 percent in IIQ2010, a jump of 10.2 percent in IQ2011, 3.0 percent in IIIQ2011, 7.4 percent in IQ2012 and 11.8 percent in IVQ2012, 0.7 percent in IIQ2012 and 1.4 percent in IIQ2013, 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 2.1 percent in IQ2011 but fell at annual rates of 5.4 percent in IIQ2011 and 5.9 percent in IVQ2011. Real hourly compensation increased at 6.5 percent in IQ2012 and at 0.9 percent in IIQ2012, declining at 1.3 percent in IIIQ2012 and increasing at 7.5 percent in IVQ2012. Real hourly compensation fell 0.7 percent in 2011 and increased 0.5 percent in 2012. Real hourly compensation fell at 7.3 percent in IQ2013 and increased at 2.3 percent in IIQ2013.

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	5.1	-1.9	0.3	5.5	2.1
2000	11.5	-1.8	4.4	-0.5	3.9
2001	6.0	-1.8	-0.7	4.0	1.5
2002	0.7	0.4	-0.2	-1.4	0.7
2003	-1.5	8.0	3.0	3.9	1.5
2004	-3.9	4.8	4.2	-2.5	1.8
2005	1.2	-0.6	-1.1	-1.2	0.3
2006	6.5	-3.3	-3.4	9.2	0.6
2007	6.0	-4.5	-1.2	-0.5	1.4
2008	-0.5	-4.7	-2.7	14.7	-1.1
2009	-7.1	8.2	-0.8	-0.8	1.5
2010	-3.3	5.3	0.9	-1.0	0.4
2011	2.1	-5.4	0.0	-5.9	-0.7
2012	6.5	0.9	-1.3	7.5	0.5
2013	-7.3	2.3

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

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

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.

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/

Sales of manufacturers decreased 0.4 percent in Jun after increasing 1.0 percent in May and increased 1.7 percent in the 12 months ending in Jun. Retailers’ sales increased 0.8 percent in Jun after increasing 0.6 percent in May and increased 4.2 percent in 12 months ending in Jun. Sales of merchant wholesalers increased 0.4 percent in Jun, 1.5 percent in May and increased 2.4 percent in 12 months ending in Jun. These data are not adjusted for price changes such that they reflect increases in both quantities and prices

Table VA-6, US, Percentage Changes for Sales of Manufacturers, Retailers and Merchant Wholesalers

	Jun 13/   May 13 ∆% SA	Jun 2013 Millions of Dollars NSA	May 13/ Apr 13  ∆% SA	Jun 13/ Jun 12 ∆% NSA
Total Business	0.2	1,293,148	1.1	2.6
Manufacturers	-0.4	498,324	1.0	1.7
Retailers	0.8	375,075	0.6	4.2
Merchant Wholesalers	0.4	419,749	1.5	2.4

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

Chart VA-10 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers seasonally adjusted (SA) in millions of dollars. Seasonal adjustment softens adjacent changes for purposes of comparing short-term variations free of seasonal factors. There was sharp drop in the global recession followed by sharp recovery with decline and recovery in the final segment above the peak before the global recession. Data are not adjusted for price changes.

Chart VA-10, US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jun 2013

US Census Bureau

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

Chart VA-11 of the US Census Bureau provides total US sales of manufacturing, retailers and wholesalers not seasonally adjusted (NSA) in millions of dollars. The series without adjustment shows sharp jagged behavior because of monthly fluctuations following seasonal patterns. There is sharp recovery from the global recession in a robust trend, which is mixture of price and quantity effects because data are not adjusted for price changes. There is stability in the final segment with monthly marginal strength.

Chart VA-11 US, Total Business Sales of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2013

US Census Bureau

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

Businesses added cautiously to inventories to replenish stocks. Retailers added 0.1 percent to inventories in Jun and 0.5 percent in May 2013 with growth of 5.6 percent in 12 months, as shown in Table VA-7. Total business changed inventories by 0.0 percent in Jun, minus 0.1 percent in Apr and 3.5 percent in 12 months. Inventories sales/ratios of total business continued at a level close to 1.29 under judicious management to avoid costs and risks. Inventory/sales ratios of manufacturers and retailers are higher than for merchant wholesalers. There is stability in inventory/sales ratios in individual months and relative to a year earlier.

Table VA-7, US, Percentage Changes for Inventories of Manufacturers, Retailers and Merchant Wholesalers and Inventory/Sales Ratios

Inventory Change	Jun 13 Millions of Dollars NSA	Jun 13/ May 13 ∆% SA	May 13/  Apr 13 ∆% SA	Jun 13/  Jun 12 ∆% NSA
Total Business	1,637,671	0.0	-0.1	3.5
Manufacturers	623,618	0.1	-0.1	2.2
Retailers	520,920	0.1	0.5	5.6
Merchant Wholesalers	493,133	-0.2	-0.6	3.1
Inventory/ Sales Ratio NSA	Jun 13 Billions of Dollars NSA	Jun 2013 SA	May 2013 SA	Jun 2012 SA
Total Business	1,637,671	1.29	1.29	1.30
Manufacturers	623,618	1.30	1.30	1.31
Retailers	520,920	1.40	1.41	1.40
Merchant Wholesalers	493,133	1.17	1.18	1.20

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

Chart VA-12 of the US Census Bureau provides total business inventories of manufacturers, retailers and merchant wholesalers seasonally adjusted (SA) in millions of dollars from Jan 1992 to Jun 2013. The impact of the two recessions of 2001 and IVQ2007 to IIQ2009 is evident in the form of sharp reductions in inventories. Inventories have surpassed the peak before the global recession. Data are not adjusted for price changes.

Chart VA-12, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, SA, Millions of Dollars, Jan 1992-Jun 2013

US Census Bureau

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

Chart VA-13 provides total business inventories of manufacturers, retailers and merchant wholesalers not seasonally adjusted (NSA) from Jan 1992 to Jun 2013 in millions of dollars. The recessions of 2001 and IVQ2007 to IIQ2009 are evident in the form of sharp reductions of inventories. There is sharp upward trend of inventory accumulation after both recessions. Total business inventories are higher than in the peak before the global recession.

Chart VA-13, US, Total Business Inventories of Manufacturers, Retailers and Merchant Wholesalers, NSA, Millions of Dollars, Jan 1992-Jun 2013

US Census Bureau

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

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

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

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

This is the pure inventory cycle.

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

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

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

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

Chart VA-14 shows the increase in the inventory/sales ratios during the recession of 2007-2009. The inventory/sales ratio fell during the expansions. The inventory/sales ratio declined to a trough in 2011, climbed and then stabilized at current levels in 2012 and beginning of 2013.

Chart VA-14, Total Business Inventories/Sales Ratios 2002 to 2013

Source: US Census Bureau

http://www2.census.gov/retail/releases/historical/mtis/img/mtisbrf.gif

Sales of retail and food services increased 0.2 percent in Jul 2013 after increasing 0.6 percent in Jun 2013 seasonally adjusted (SA), growing 4.2 percent in Jan-Jul 2013 relative to Jan-Jul 2012 not seasonally adjusted (NSA), as shown in Table VA-8. Excluding motor vehicles and parts, retail sales increased 0.5 percent in Jul 2013, increasing 0.1 percent in Jun 2013 SA and increasing 3.2 percent NSA in Jan-Jul 2013 relative to a year earlier. Sales of motor vehicles and parts decreased 1.0 percent in Jul 2013 after increasing 2.9 percent in Jun 2013 SA and increasing 8.6 percent NSA in Jan-Jul 2013 relative to a year earlier. Gasoline station sales increased 0.9 percent SA in Jul 2013 after increasing 0.6 percent in Jun 2013 in oscillating prices of gasoline that are moderating, increasing 0.7 percent in Jan-Jul 2013 relative to a year earlier.

Table VA-8, US, Percentage Change in Monthly Sales for Retail and Food Services, ∆%

	Jul/Jun ∆% SA	Jun/ May ∆% SA	Jan-Jul 2013 Million Dollars NSA	Jan-Jul 2013 from Jan-Jul 2012 ∆% NSA
Retail and Food Services	0.2	0.6	2,896,307	4.2
Excluding Motor Vehicles and Parts	0.5	0.1	2,334,953	3.2
Motor Vehicles & Parts	-1.0	2.9	561,354	8.6
Retail	0.1	0.8	2,575,666	4.3
Building Materials	-0.4	-1.6	183,847	6.0
Food and Beverage	0.8	0.2	372,960	2.7
Grocery	0.6	0.2	334,172	2.3
Health & Personal Care Stores	0.7	0.1	162,457	0.6
Clothing & Clothing Accessories Stores	0.9	0.0	133,795	3.6
Gasoline Stations	0.9	0.6	321,074	0.7
General Merchandise Stores	0.4	0.0	364,274	0.5
Food Services & Drinking Places	0.6	-0.5	320,641	3.9

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

Chart VA-15 of the US Bureau of the Census shows percentage change of retail and food services sales. Auto sales have been increasing monthly, and particularly relative to a year earlier, but with weakness in the total excluding auto sales and declines or mild growth in general merchandise.

Chart VA-15, US, Percentage Change of Retail and Food Services Sales

Source: US Census Bureau

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

Chart VA-16 of the US Census Bureau provides total sales of retail trade and food services seasonally adjusted (SA) from Jan 1992 to Jul 2013 in millions of dollars. The impact on sales of the shallow recession of 2001 was much milder than the sharp contraction in the global recession from IVQ2007 to IIQ2009. There is flattening in the final segment of the series followed by another increase. Data are not adjusted for price changes.

Chart VA-16, US, Total Sales of Retail Trade and Food Services, SA, Jan 1992-Jul 2013, Millions of Dollars

Source: US Census Bureau

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

Chart VA-17 of the US Census Bureau provides total sales of retail trade and food services not seasonally adjusted (NSA) in millions of dollars from Jan 1992 to Jul 2013. Data are not adjusted for seasonality, which explains sharp jagged behavior, or price changes. There was contraction during the global recession from IVQ2007 to IIQ2009 with strong rebound to a higher level and stability followed by strong increase in the final segment.

Chart VA-17, US, Total Sales of Retail Trade and Food Services, NSA, Jan 1992-Jul 2013, Millions of Dollars

Source: US Census Bureau

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

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-9. Housing starts increased 5.9 percent in Jul 2013 after decreasing 7.9 percent in Jun 2013 and increasing 7.9 percent in May 2013. Housing permits, indicating future activity, increased 2.7 percent in Jul 2013 after decreasing 6.8 percent in Jun 2013 and decreasing 2.0 percent in May 2013. While single unit houses started decreased 2.2 percent in Jul 2013, structures with five units or more increased 25.5 percent. Multifamily residential construction is increasing at a faster rate than single-family construction. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-9.

Table VA-9, US, Housing Starts and Permits SSAR Month ∆%

	Housing  Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Jul 2013	896	5.9	943	2.7
Jun	846	-7.9	918	-6.8
May	919	7.9	985	-2.0
Apr	852	-15.2	1005	12.9
Mar	1005	3.7	890	-6.5
Feb	969	7.9	952	4.0
Jan	898	-8.6	915	-3.0
Dec 2012	983	16.7	943	1.1
Nov	842	-2.5	933	2.8
Oct	864	1.2	908	-1.4
Sep	854	14.0	921	11.4
Aug	749	1.1	827	-1.4
Jul	741	-2.1	839	6.9
Jun	757	6.5	785	-2.6
May	711	-5.7	806	7.6
Apr	754	6.6	749	-4.6
Mar	707	-0.8	785	6.2
Feb	713	-1.4	739	3.5
Jan	723	4.2	714	2.4
Dec 2011	694	-2.4	697	-1.3
Nov	711	16.6	706	5.2
Oct	610	-6.2	671	10.0
Sep	650	11.1	610	-5.7
Aug	585	-6.1	647	4.2
Jul	623	2.5	621	-2.4
Jun	608	8.4	636	2.9
May	561	1.3	618	6.4
Apr	554	-7.7	581	-0.3
Mar	600	16.1	583	7.6
Feb	517	-17.9	542	-5.9
Jan	630	16.9	576	-8.9
Dec 2010	539	-1.1	632	12.9
Nov	545	0.4	560	0.4
Oct	543	-8.6	558	-0.9
Sep	594	-0.8	563	-2.9

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Jul not-seasonally adjusted are provided in Table VA-10. Housing starts increased 23.9 percent in Jan-Jul 2013 relative to Jan-Jul 2012 and in the same period new permits increased 23.3 percent. Single-family housing starts increased 20.1 percent in Jan-Jun 20013 not seasonally adjusted relative to a year earlier while multifamily housing starts increased 33.4 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 53.1 percent in Jan-Jul 2013 relative to Jan-Jul 2006 and fell 55.7 percent relative to Jan-Jul 2005. Housing permits fell 52.4 percent in Jan-Jul 2013 relative to Jan-Jul 2006 and fell 55.3 percent in Jan-Jul 2013 from Jan-Jul 2005.

Table VA-10, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Jul 2013	537.0	564.5
Jan-Jul 2012	433.4	457.8
∆% Jan-Jul 2013/Jan-Jul 2012	23.9	23.3
Jan-Jul 2006	1,145.8	1,185.1
∆% Jan-Jul 2013/Jan-Jul 2006	-53.1	-52.4
Jan-Jul 2005	1,211.2	1,264.1
∆% Jan-Jul 2013/Jan-Jul 2005	-55.7	-55.3

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-18 of the US Census Bureau shows the sharp increase in construction of new houses from 2000 to 2006. Housing construction fell sharply through the recession, recovering from the trough around IIQ2009. The right-hand side of Chart VA-18 shows a mild downward trend or stagnation from mid-2010 to the present in single-family houses with a recent mild upward trend in recent months in the category of two or more units but marginal decline in recent months.

Chart VA-18, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Table VA-11 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) from Jan to Jul of the year from 2000 to 2013. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 707,000 in Mar 2012 to 983,000 in Dec 2012 and 1,005,000 in Mar 2013, which is an improvement over the range of 517,000 in Feb 2011 to 708,000 in Nov 2011.  There is improvement in Jun 2013 with SAAR of 846,000 relative to 757,000 in Jun 2012 and in Jul 2013 with 896,000 relative to 741,000 in Jul 2012.

Table VA-11, New Housing Units Started in the US, Seasonally Adjusted Annual Rates, Thousands of Units

Year	Jan	Feb	Mar	Apr	May	Jun	Jul
2000	1,636	1,737	1,604	1,626	1,575	1,559	1,463
2001	1,600	1,625	1,590	1,649	1,605	1,636	1,670
2002	1,698	1,829	1,642	1,592	1,764	1,717	1,655
2003	1,853	1,629	1,726	1,643	1,751	1,867	1,897
2004	1,911	1,846	1,998	2,003	1,981	1,828	2,002
2005	2,144	2,207	1,864	2,061	2,025	2,068	2,054
2006	2,273	2,119	1,969	1,821	1,942	1,802	1,737
2007	1,409	1,480	1,495	1,490	1,415	1,448	1,354
2008	1,084	1,103	1,005	1,013	973	1,046	923
2009	490	582	505	478	540	585	594
2010	614	604	636	687	583	536	546
2011	630	517	600	554	561	608	623
2012	723	713	707	754	711	757	741
2013	898	969	1,005	852	919	846	896

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Chart VA-19 of the US Census Bureau provides construction of new housing units started in the US at seasonally adjusted annual rate (SAAR) from Jan 1959 to Jul 2013 that help to analyze in historical perspective the debacle of US new house construction. There are three periods in the series. (1) There is stationary behavior with wide fluctuations from 1959 to the beginning of the decade of the 1970s. (2) There is sharp upward trend from the 1990s to 2006 propelled by the US housing subsidy, politics of Fannie Mae and Freddie Mac and unconventional monetary policy of near zero interest rates from Jun 2003 to Jun 2004 and suspension of the auction of 30-year Treasury bonds intended to lower mortgage rates. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html  . (3) Housing construction dropped vertically during the global recession. There was initial stability followed by some recovery in recent months.

Chart VA-19, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Jul 2013

Source: US Census Bureau http://www.census.gov/construction/nrc/

Table VA-7 provides actual new housing units started in the US, not seasonally adjusted, from Jan to Jul in the years from 2000 to 2013. The number of housing units started fell from the peak of 197.9 thousand in May 2005 to 83.7 thousand in Jul 2013 or decline of 57.7 percent. The number of housing units started jumped from 57.6 thousand in Jul 2011 to 83.7 thousand in Jul 2013 or by 45.3 percent and increase of 62.5 percent from 51.5 thousand in Jul 2010.

Table VA-12, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

Year	Jan	Feb	Mar	Apr	May	Jun	Jul
2000	104.0	119.7	133.4	149.5	152.9	146.3	135.0
2001	106.4	108.2	133.2	151.3	154.0	155.2	154.6
2002	110.4	120.4	138.2	148.8	165.5	160.3	155.9
2003	117.8	109.7	147.2	151.2	165.0	174.5	175.8
2004	124.5	126.4	173.8	179.5	187.6	172.3	182.0
2005	142.9	149.1	156.2	184.6	197.9	192.8	187.6
2006	153.0	145.1	165.9	160.5	190.2	170.2	160.9
2007	95.0	103.1	123.8	135.6	136.5	137.8	127.9
2008	70.8	78.4	82.2	89.5	91.7	102.5	86.7
2009	31.9	39.8	42.7	42.5	52.2	59.1	56.8
2010	38.9	40.7	54.7	62.0	56.2	53.8	51.5
2011	40.2	35.4	49.9	49.0	54.0	60.5	57.6
2012	47.2	49.7	58.0	66.8	67.8	74.7	69.2
2013	58.7	66.1	83.3	76.3	87.2	81.8	83.7

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-20 of the US Census Bureau provides new housing units started in the US not seasonally adjusted (NSA) from Jan 1959 to Jul 2013. There is the same behavior as in Chart VA-19 SA but with sharper fluctuations in the original series without seasonal adjustment. There are the same three periods. (1) The series is virtually stationary with wide fluctuations from 1959 to the late 1980s. (2) There is downward trend during the savings and loans crisis of the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $4346.7 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 3.45 percent of GDP in a year. US GDP in 2012 is estimated at $16,244.6 billion, such that the bailout would be equivalent to cost to taxpayers of about $560.4 billion in current GDP terms. A major difference with the Troubled Asset Relief Program (TARP) for private-sector banks is that most of the costs were recovered with interest gains whereas in the case of savings and loans there was no recovery. (3) There is vertical drop of new housing construction in the US during the global recession from (Dec) IVQ2007 to (Jun) IIQ2009 (http://www.nber.org/cycles/cyclesmain.html). The final segment shows upward trend but it could be simply part of yet another fluctuation. Marginal improvement in housing in the US should not obscure the current depressed levels relative to earlier periods.

Chart VA-20, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Jun 2013

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-21 of the US Census Bureau provides single-family houses started without seasonal adjustment. There was sharp increase from 1992 to 2007 followed by sharp decline. The recovery is sluggish.

Chart VA-21, US, Single-family Houses Started, Thousands of Units, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-22 of the US Census Bureau provides housing units started with five units or more. Construction was stagnant before the drop in the global recession. Recovery is stronger than in the case of single-family units.

Chart VA-22, US, Housing Units Stated in Buildings with Five Units or More, Thousands of Units

Source: US Census Bureau http://www.census.gov/construction/nrc/

A longer perspective on residential construction in the US is provided by Table VA-23 with annual data from 1960 to 2012. Housing starts fell 62.3 percent from 2005 to 2012, 50.2 percent from 2000 to 2012 and 45.4 percent relative to the average from 1959 to 1963. Housing permits fell 61.5 percent from 2005 to 2012, 47.9 percent from 2000 to 2012 and 28.4 percent from the average of 1969-1963 to 2012. Housing starts rose 31.8 from 2000 to 2005 while housing permits grew 35.4 percent. From 1990 to 2000, housing starts increased 31.5 percent while permits increased 43.3 percent.

Table VA-23, US, Annual New Privately Owned Housing Units Authorized by Building Permits in Permit-Issuing Places and New Privately Owned Housing Units Started, Thousands

	Starts	Permits
2012	780.6	829.7
∆% 2012/2011	28.2	32.9
∆% 2012/2010	33.0	37.2
∆% 2012/2005	-62.3	-61.5
∆% 2012/2000	-50.2	-47.9
∆% 2012/Av 1959-1963	-45.4	-28.4
2011	608.8	624.1
∆% 2011/2005	-70.6	-71.0
∆% 2011/2000	-61.2	-60.8
∆% 2011/Av 1959-1963	-57.4	-46.1
2010	586.9	604.6
2009	554.0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889.2
2002	1,704.9	1,747.2
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
Average 1959-63	1,429.7	1,158.2

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart IIA2-1 provides prices of total US imports 2001-2013. Prices fell during the contraction of 2001. Import price inflation accelerated after unconventional monetary policy of near zero interest rates in 2003-2004 and quantitative easing by withdrawing supply with the suspension of 30-year Treasury bond auctions. Slow pace of adjusting fed funds rates from 1 percent by increments of 25 basis points in 17 consecutive meetings of the Federal Open Market Committee (FOMC) between Jun 2004 and Jun 2006 continued to give impetus to carry trades. The reduction of fed funds rates toward zero in 2008 fueled a spectacular global hunt for yields that caused commodity price inflation in the middle of a global recession. After risk aversion in 2009 because of the announcement of TARP (Troubled Asset Relief Program) creating anxiety on “toxic assets” in bank balance sheets (see Cochrane and Zingales 2009), prices collapsed because of unwinding carry trades. Renewed price increases returned with zero interest rates and quantitative easing. Monetary policy impulses in massive doses have driven inflation and valuation of risk financial assets in wide fluctuations over a decade.

Chart IIA2-1, US, Prices of Total US Imports 2001=100, 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-2 provides 12-month percentage changes of prices of total US imports from 2001 to 2013. The only plausible explanation for the wide oscillations is by the carry trade originating in unconventional monetary policy. Import prices jumped in 2008 during deep and protracted global recession driven by carry trades from zero interest rates to long, leveraged positions in commodity futures. Carry trades were unwound during the financial panic in the final quarter of 2008 that resulted in flight to government obligations. Import prices jumped again in 2009 with subdued risk aversion because US banks did not have unsustainable toxic assets. Import prices then fluctuated as carry trades were resumed during periods of risk appetite and unwound during risk aversion resulting from the European debt crisis.

Chart IIA2-2, US, Prices of Total US Imports, 12-Month Percentage Changes, 2001-2013

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-3 provides prices of US imports from 1982 to 2013. There is no similar episode to that of the increase of commodity prices in 2008 during a protracted and deep global recession with subsequent collapse during a flight into government obligations. Trade prices have been driven by carry trades created by unconventional monetary policy in the past decade.

Chart IIA2-3, US, Prices of Total US Imports, 2001=100, 1982-2013

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-4 provides 12-month percentage changes of US total imports from 1982 to 2013. There have not been wide consecutive oscillations as the ones during the global recession of IVQ2007 to IIQ2009.

Chart IIA2-4, US, Prices of Total US Imports, 12-Month Percentage Changes, 1982-2013

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-5 provides the index of US export prices from 2001 to 2013. Import and export prices have been driven by impulses of unconventional monetary policy in massive doses. The most recent segment in Chart IIA2-5 shows declining trend resulting from a combination of the world economic slowdown and the decline of commodity prices as carry trade exposures are unwound because of risk aversion to the sovereign debt crisis in Europe and slowdown in the world economy.

Chart IIA2-5, US, Prices of Total US Exports, 2001=100, 2001-

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-6 provides prices of US total exports from 1982 to 2013. The rise before the global recession from 2003 to 2008, driven by carry trades, is also unique in the series and is followed by another steep increase after risk aversion moderated in IQ2009.

Chart IIA2-6, US, Prices of Total US Exports, 2001=100, 1982-2013

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-7 provides 12-month percentage changes of total US exports from 1982 to 2013. The uniqueness of the oscillations around the global recession of IVQ2007 to IIQ2009 is clearly revealed.

Chart IIA2-7, US, Prices of Total US Exports, 12-Month Percentage Changes, 1982-2013

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Twelve-month percentage changes of US prices of exports and imports are provided in Table IIA2-1. Import prices have been driven since 2003 by unconventional monetary policy of near zero interest rates influencing commodity prices according to moods of risk aversion. In a global recession without risk aversion until the panic of Sep 2008 with flight to government obligations, import prices increased 21.4 percent in the 12 months ending in Jul 2008, 18.1 percent in the 12 months ending in Aug 2008, 13.1 percent in the 12 months ending in Sep 2008, 4.9 percent in the twelve months ending in Oct 2008 and fell 5.9 percent in the 12 months ending in Nov 2008 when risk aversion developed in 2008 until mid 2009 (http://www.bls.gov/mxp/data.htm). Import prices rose again sharply in Nov 2010 by 4.1 percent and in Nov 2011 by 0.1 percent in the presence of zero interest rates with relaxed mood of risk aversion until carry trades were unwound in May 2011 and following months as shown by decrease of import prices by 1.4 percent in the 12 months ending in Nov 2012 and 1.8 percent in Dec 2012 and decrease of 0.3 percent in prices of exports in the 12 months ending in Dec 2012. Import prices increased 15.2 percent in the 12 months ending in Mar 2008, fell 14.9 percent in the 12 months ending in Mar 2009 and increased 11.2 percent in the 12 months ending in Mar 2010. Fluctuations are much sharper in imports because of the high content of oil that as all commodities futures contracts increases sharply with zero interest rates and risk appetite, contracting under risk aversion. There is similar behavior of prices of imports ex fuels, exports and exports ex agricultural goods but less pronounced than for commodity-rich prices dominated by carry trades from zero interest rates. A critical event resulting from unconventional monetary policy driving higher commodity prices by carry trades is the deterioration of the terms of trade, or export prices relative to import prices, that has adversely affected US real income growth relative to what it would have been in the absence of unconventional monetary policy. Europe, Japan and other advanced economies have experienced similar deterioration of their terms of trade. Because of unwinding carry trades of commodity futures as a result of risk aversion, import prices increased 1.0 percent in the 12 months ending in Jul 2013, export prices increased 0.4 percent and prices of nonagricultural exports changed 0.0 percent. Imports excluding fuel fell 1.0 percent in the 12 months ending in Jul 2013. At the margin, price changes over the year in world exports and imports are decreasing or increasing moderately because of unwinding carry trades in a temporary mood of risk aversion that reverses exposures in commodity futures.

Table IIA2-1, US, Twelve-Month Percentage Rates of Change of Prices of Exports and Imports

	Imports	Imports Ex Fuels	Exports	Exports Non-Ag
Jul 2013	1.0	-1.0	0.4	0.0
Jul 2012	-3.3	0.0	-1.3	-1.9
Jul 2011	13.7	5.4	9.8	8.2
Jul 2010	4.9	2.8	3.9	4.1
Jul 2009	-19.1	-5.3	-8.3	-6.6
Jul 2008	21.4	6.7	10.2	7.6
Jul 2007	2.8	2.4	4.0	2.9
Jul 2006	7.0	2.5	4.5	4.7
Jul 2005	8.2	1.8	2.8	3.2
Jul 2004	5.6	2.3	4.5	3.7
Jul 2003	2.3	0.5	1.1	0.7
Jul 2002	-1.7	NA	-0.7	-0.9
Jul 2001	-4.1	NA	-1.0	-1.4

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Table IIA2-2 provides 12-month percentage changes of the import price index all commodities from 2001 to 2013. Interest rates moving toward zero during unconventional monetary policy in 2008 induced carry trades into highly leveraged commodity derivatives positions that caused increases in 12-month percentage changes of import prices of around 20 percent. The flight into dollars and Treasury securities by fears of toxic assets in banks in the proposal of TARP (Cochrane and Zingales 2009) caused reversion of carry trades and collapse of commodity futures explaining sharp declines in trade prices in 2009. Twelve-month percentage changes of import prices at the end of 2012 and into 2013 occurred during another bout of risk aversion.

Table IIA2-2, US, Twelve-Month Percentage Changes of Import Price Index All Commodities, 2001-2013

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Dec
2001	2.8	0.2	-1.6	-0.7	-0.8	-2.6	-4.1	-4.4	-9.1
2002	-8.9	-8.3	-5.6	-3.6	-3.7	-3.6	-1.7	-1.3	4.2
2003	5.8	7.5	6.8	1.8	1.0	2.2	2.3	2.0	2.4
2004	2.2	0.9	1.1	4.6	6.9	5.7	5.6	7.1	6.7
2005	5.7	6.1	7.6	8.4	5.9	7.4	8.2	8.2	8.0
2006	8.7	6.9	4.5	5.8	8.6	7.4	7.0	6.0	2.5
2007	0.0	1.2	2.8	2.1	1.2	2.3	2.8	1.9	10.6
2008	13.6	13.5	15.2	16.9	19.1	21.3	21.4	18.1	-10.1
2009	-12.5	-12.7	-14.9	-16.4	-17.3	-17.5	-19.1	-15.3	8.6
2010	11.4	11.3	11.2	11.2	8.5	4.3	4.9	3.8	5.3
2011	5.6	7.6	10.3	11.9	12.9	13.6	13.7	12.9	8.5
2012	6.9	5.1	3.5	0.8	-0.8	-2.5	-3.3	-1.8	-2.0
2013	-1.5	-0.6	-2.1	-2.7	-1.8	0.1	1.0

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

There is finer detail in one-month percentage changes of imports of the US in Table IIA2-3. Carry trades into commodity futures induced by interest rates moving to zero in unconventional monetary policy caused sharp monthly increases in import prices for cumulative increase of 13.8 percent from Mar to Jul 2008 at average rate of 2.6 percent per month or annual equivalent in five months of 36.4 percent (3.1 percent in Mar 2008, 2.8 percent in Apr 2008, 2.8 percent in May 2008, 3.0 percent in Jun 2008 and 1.4 percent in Jul 2008, data from http://www.bls.gov/mxp/data.htm). There is no other explanation for increases in import prices during sharp global recession and contracting world trade. Import prices then fell 23.4 percent from Aug 2008 to Jan 2009 or at the annual equivalent rate of minus 41.4 percent in the flight to US government securities in fear of the need to buy toxic assets from banks in the TARP program (Cochrane and Zingales 2009). Risk aversion during the first sovereign debt crisis of the euro area in May-Jun 2010 caused decline of US import prices at the annual equivalent rate of 11.4 percent. US import prices have been driven by combinations of carry trades induced by unconventional monetary policy and bouts of risk aversion (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html). US import prices increased 0.5 percent in Jan 2013 and 0.9 percent in Feb 2013 for annual equivalent rate of 8.7 percent, similar to those in national price indexes worldwide, originating in carry trades from zero interest rates to commodity futures. Import prices fell 0.1 percent in Mar 2013, 0.7 percent in Apr 2013, 0.6 percent in May 2013 and 0.4 percent in Jun 2013. Import prices increased 0.2 percent in Jul 2013.

Table IIA2-3, US, One-Month Percentage Changes of Import Price Index All Commodities, 2001-2013

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Dec
2001	0.0	-0.6	-1.6	-0.5	0.2	-0.4	-1.5	-0.1	-0.1	-1.0
2002	0.2	0.0	1.3	1.6	0.1	-0.3	0.4	0.3	0.7	0.6
2003	1.8	1.7	0.6	-3.1	-0.7	0.9	0.5	0.0	-0.5	0.7
2004	1.5	0.4	0.8	0.2	1.5	-0.2	0.4	1.5	0.5	-1.4
2005	0.6	0.9	2.2	0.9	-0.8	1.2	1.2	1.4	2.1	0.0
2006	1.2	-0.8	-0.1	2.1	1.8	0.1	0.8	0.5	-2.2	1.1
2007	-1.2	0.4	1.6	1.4	0.9	1.2	1.3	-0.3	0.6	-0.2
2008	1.5	0.2	3.1	2.8	2.8	3.0	1.4	-3.1	-3.6	-4.6
2009	-1.3	0.0	0.5	1.1	1.7	2.7	-0.6	1.5	0.2	0.2
2010	1.2	-0.1	0.4	1.1	-0.8	-1.2	0.0	0.4	0.0	1.4
2011	1.5	1.7	3.0	2.6	0.1	-0.6	0.1	-0.4	-0.1	0.0
2012	0.0	0.0	1.4	-0.1	-1.5	-2.3	-0.7	1.2	1.0	-0.6
2013	0.5	0.9	-0.1	-0.7	-0.6	-0.4	0.2

Source: Bureau of Labor Statistics http://www.bls.gov/mxp/data.htm

Chart IIA2-8 shows the US monthly import price index of all commodities excluding fuels from 2001 to 2013. All curves of nominal values follow the same behavior under the influence of unconventional monetary policy. Zero interest rates without risk aversion result in jumps of nominal values while under strong risk aversion even with zero interest rates there are declines of nominal values.

Chart IIA2-8, US, Import Price Index All Commodities Excluding Fuels, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-9 provides 12-month percentage changes of the US import price index excluding fuels between 2001 and 2013. There is the same behavior of carry trades driving up without risk aversion and down with risk aversion prices of raw materials, commodities and food in international trade during the global recession of IVQ2007 to IIQ2009 and in previous and subsequent periods.

Chart IIA2-9, US, Import Price Index All Commodities Excluding Fuels, 12-Month Percentage Changes, 2002-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-10 provides the monthly US import price index ex petroleum from 2001 to 2013. Prices including or excluding commodities follow the same fluctuations and trends originating in impulses of unconventional monetary policy of zero interest rates.

Chart IIA2-10, US, Import Price Index ex Petroleum, 2001=100, 2000-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-11 provides the US import price index ex petroleum from 1985 to 2013. There is the same unique hump in 2008 caused by carry trades from zero interest rates to prices of commodities and raw materials.

Chart IIA2-11, US, Import Price Index ex Petroleum, 2001=100, 1985-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-12 provides 12-month percentage changes of the import price index ex petroleum from 1986 to 2013. The oscillations caused by the carry trade in increasing prices of commodities and raw materials without risk aversion and subsequently decreasing them during risk aversion are unique.

Chart IIA2-12, US, Import Price Index ex Petroleum, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-13 of the US Energy Information Administration shows the price of WTI crude oil since the 1980s. Chart IA2-13 captures commodity price shocks during the past decade. The costly mirage of deflation was caused by the decline in oil prices during the recession of 2001. The upward trend after 2003 was promoted by the carry trade from near zero interest rates. The jump above $140/barrel during the global recession in 2008 at $145.29/barrel on Jul 3, 2008, can only be explained by the carry trade promoted by monetary policy of zero fed funds rate. After moderation of risk aversion, the carry trade returned with resulting sharp upward trend of crude prices. Risk aversion resulted in another drop in recent weeks followed by some recovery and renewed deterioration.

Chart IIA2-13, US, Crude Oil Futures Contract

Source: US Energy Information Administration

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

The price index of US imports of petroleum and petroleum products in shown in Chart IIA2-14. There is similar behavior of the curves all driven by the same impulses of monetary policy.

Chart IIA2-14, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-15 provides the price index of petroleum and petroleum products from 1982 to 2013. The rise in prices during the global recession in 2008 and the decline after the flight to government obligations is unique in the history of the series. Increases in prices of trade in petroleum and petroleum products were induced by carry trades and declines by unwinding carry trades in flight to government obligations.

Chart IIA2-15, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-16 provides 12-month percentage changes of the price index of US imports of petroleum and petroleum products from 1982 to 2013. There were wider oscillations in this index from 1999 to 2001 (see Barsky and Killian 2004 for an explanation).

Chart IIA2-16, US, Import Price Index of Petroleum and Petroleum Products, 12-Month Percentage Changes, 1982-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

The price index of US exports of agricultural commodities is in Chart IIA2-17 from 2001 to 2013. There are similar fluctuations and trends as in all other price index originating in unconventional monetary policy repeated over a decade. The most recent segment in 2011 has declining trend in a new flight from risk resulting from the sovereign debt crisis in Europe followed by declines in Jun 2012 and Nov 2012 with stability in Dec 2012 into 2013.

Chart IIA2-17, US, Exports Price Index of Agricultural Commodities, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-18 provides the price index of US exports of agricultural commodities from 1982 to 2013. The increase in 2008 in the middle of deep, protracted contraction was induced by unconventional monetary policy. The decline from 2008 into 2009 was caused by unwinding carry trades in a flight to government obligations. The increase into 2011 and current pause were also induced by unconventional monetary policy in waves of increases during relaxed risk aversion and declines during unwinding of positions because of aversion to financial risk.

Chart IIA2-18, US, Exports Price Index of Agricultural Commodities, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-19 provides 12-month percentage changes of the index of US exports of agricultural commodities from 1986 to 2013. The wide swings in 2008, 2009 and 2011 are only explained by unconventional monetary policy inducing carry trades from zero interest rates to commodity futures and reversals during risk aversion.

Chart IIA2-19, US, Exports Price Index of Agricultural Commodities, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-20 shows the export price index of nonagricultural commodities from 2001 to 2013. Unconventional monetary policy of zero interest rates drove price behavior during the past decade. Policy has been based on the myth of stimulating the economy by climbing the negative slope of an imaginary short-term Phillips curve.

Chart IIA2-20, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Chart IIA2-21 provides a longer perspective of the price index of US nonagricultural commodities from 1982 to 2013. Increases and decreases around the global contraction after 2007 were caused by carry trade induced by unconventional monetary policy.

Chart IIA2-21, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Finally, Chart IIA2-22 provides 12-month percentage changes of the price index of US exports of nonagricultural commodities from 1986 to 2013. The wide swings before, during and after the global recession beginning in 2007 were caused by carry trades induced by unconventional monetary policy.

Chart IIA2-22, US, Exports Price Index of Nonagricultural Commodities, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/mxp/data.htm

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of three trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table VA-13) deteriorated sharply from minus $27.0 billion in May 2013 to minus $66.9 billion in Jun 2013. Foreign (residents) purchases minus sales of US long-term securities (row A in Table VA-13) in May 2013 of $0.0 billion decreased to minus $77.8 billion in Jun 2013. Net US (residents) purchases of long-term foreign securities (row B in Table VA-3) increased from minus $27.0 billion in May 2013 to $11.0 billion in Jun 2013. In Jun 2013,

C = A + B = -$77.8 billion + $11.0 billion = -$66.9 billion

There are minor rounding errors. There is decreasing demand in Table VA-1 in Jan in A1 private purchases by residents overseas of US long-term securities of $81.6 billion of which decreases in A11 Treasury securities of $40.1 billion, decrease in A12 of $9.1 billion in agency securities, decrease by $6.9 billion of corporate bonds and decrease of $25.5 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 increased $3.8 billion with decrease of Treasury securities of $0.7 billion in Jun 2013. Official purchases of agency securities increased $3.9 billion in Jun. Row D shows decrease in Jun 2013 of 4.4 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills increased $25.9 billion (row D11) with foreign official holdings decreasing $17.1 billion while the category “other” decreased $13.2 billion. Foreign private holdings of US Treasury bills increased $25.9 billion in what could be reduction of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions

Table VA-13, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Jun 2012 12 Months	Jun 2013 12 Months	May 2013	Jun 2013
A Foreign Purchases less Sales of US LT Securities	500.4	328.0	0.0	-77.8
A1 Private	321.0	137.3	-43.8	-81.6
A11 Treasury	325.6	-5.4	-29.0	-40.1
A12 Agency	104.7	69.0	-9.3	-9.1
A13 Corporate Bonds	-78.2	10.4	4.6	-6.9
A14 Equities	-31.0	63.3	-10.2	-25.5
A2 Official	179.4	190.7	43.8	3.8
A21 Treasury	177.5	109.7	40.3	-0.7
A22 Agency	-4.3	53.6	-1.1	3.9
A23 Corporate Bonds	0.8	19.7	3.0	1.9
A24 Equities	5.4	7.6	1.6	-1.4
B Net US Purchases of LT Foreign Securities	19.1	-156.2	-27.0	11.0
B1 Foreign Bonds	59.4	-48.7	-11.4	13.3
B2 Foreign Equities	-40.2	-107.5	-15.6	-2.4
C Net Foreign Purchases of US LT Securities	519.5	171.8	-27.0	-66.9
D Increase in Foreign Holdings of Dollar Denominated Short-term	-40.7	41.1	-35.8	-4.4
D1 US Treasury Bills	-11.3	44.6	-39.2	8.8
D11 Private	35.4	46.4	-19.8	25.9
D12 Official	-46.7	-1.7	-19.4	-17.1
D2 Other	-29.4	-3.5	3.4	-13.2

C = A + B;

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/index.aspx

Table VA-14 provides major foreign holders of US Treasury securities. China is the largest holder with $1275.8 billion in Jun 2013, increasing 11.2 percent from $1147.0 billion in Jun 2012 while decreasing $21.5 billion from May 2013 or 1.7 percent. Japan decreased its holdings from $1108.4 billion in Jun 2012 to $1083.4 billion in Jun 2013 or by 2.3 percent. Japan reduced its holdings from $1103.7 billion in May 2013 to $1083.4 billion in Jun 2013 by $20.3 billion or 1.8 percent. Total foreign holdings of Treasury securities rose from $5313.5 billion in Jun 2012 to $5600.6 billion in Jun 2013, or 5.4 percent. Foreign holdings of Treasury securities fell from $5740.4 in Mar 2013 to $5670.8 in Apr 2013 or 1.2 percent. Foreign holdings of US Treasury securities fell from $5657.1 billion in May 2013 to $5600.6 billion in Jun 2013, by $56.5 billion or by 1.0 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

Table VA-14, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Jun 2013	May 2013	Jun 2012
Total	5600.6	5657.1	5313.5
China	1275.8	1297.3	1147.0
Japan	1083.4	1103.7	1108.4
Caribbean Banking Centers	290.8	280.0	244.6
Oil Exporters	256.8	264.5	270.2
Brazil	253.7	255.2	244.3
Taiwan	186.2	188.8	196.4
Switzerland	180.4	182.6	172.4
Belgium	176.1	175.2	144.5
United Kingdom	162.6	155.8	138.0
Luxembourg	150.6	143.2	137.8
Russia	138.0	143.4	163.8
Hong Kong	124.2	136.4	136.0
Foreign Official Holdings	4009.2	4072.8	3857.9
A. Treasury Bills	362.7	379.8	364.5
B. Treasury Bonds and Notes	3646.4	3693.0	3493.4

Source: http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/ticsec2.aspx#ussecs

Table VA-15 provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2013 fiscal year to Jul 2013; federal fiscal data for the years from 2009 to 2012; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2012. Receipts increased 13.9 percent in the cumulative fiscal year 2013 for Jul 2013 relative to the cumulative in fiscal year 2012. Individual income taxes increased 17.5 percent relative to the same period a year earlier. Outlays decreased 2.9 percent relative to a year earlier. Total revenues of the US from 2009 to 2012 accumulate to $9020 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,109 billion, or $14.1 trillion, with the deficit accumulating to $5089 billion, or $5.1 trillion. Revenues decreased 6.6 percent from $9653 billion in the four years from 2005 to 2008 to $9020 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and by growth of only 2.2 percent on average in the cyclical expansion from IIIQ2009 to IIQ2013 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html). In contrast with the decline of revenue, outlays or expenditures increased 30.2 percent from $10,839 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,109 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.2 percent while revenue declined by 6.6 percent caused the increase in the federal deficit from $1186 billion in 2005-2008 to $5089 billion in 2009-2012. Federal revenue was 15.4 percent of GDP on average in the years from 2009 to 2012, which is well below 18.0 percent of GDP on average from 1970 to 2010. Federal outlays were 24.0 percent of GDP on average from 2009 to 2012, which is well above 21.9 percent of GDP on average from 1970 to 2010. The lower part of Table IIB-4 shows that debt held by the public swelled from $5803 billion in 2008 to $11,281 billion in 2012, by $5478 billion or 94.4 percent. Debt held by the public as percent of GDP or economic activity jumped from 40.5 percent in 2008 to 72.6 percent in 2012, which is well above the average of 37.0 percent from 1970 to 2010. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures.

Table VA-15, US, Treasury Budget in Fiscal Year to Date Million Dollars

Jul 2013	Fiscal Year 2013	Fiscal Year 2012	∆%
Receipts	2,287,172	2,008,667	13.9
Outlays	2,894,592	2,982,507	-2.9
Deficit	-607,420	-973,840	NA
Individual Income Taxes	1,090,250	928,172	17.5
Social Insurance	559,239	477,346	17.2
	Receipts	Outlays	Deficit (-), Surplus (+)
$ Billions
2012	2,450	3,537	-1,087
Fiscal Year 2011	2,302	3,598	-1,296
Fiscal Year 2010	2,163	3,456	-1,293
Fiscal Year 2009	2,105	3,518	-1,413
Total 2009-2012	9,020	14,109	-5,089
Average % GDP 2009-2012	15.4	24.0	-8.7
Fiscal Year 2008	2,524	2,983	-459
Fiscal Year 2007	2,568	2,729	-161
Fiscal Year 2006	2,407	2,655	-248
Fiscal Year 2005	2,154	2,472	-318
Total 2005-2008	9,653	10,839	-1,186
Average % GDP 2005-2008	17.9	20.1	-2.2
Debt Held by the Public	Billions of Dollars	Percent of GDP
2005	4,592	36.9
2006	4,829	36.6
2007	5,035	36.3
2008	5,803	40.5
2009	7,545	54.0
2010	9,019	62.9
2011	10,128	67.8
2012	11,281	72.6

Source: http://www.fms.treas.gov/mts/index.html CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. Congressional Budget Office, 2013CBOHBDMay14. Historical budget data—May 2013. CBO, Washington, DC, May 14.

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/announcements/release_2013/k130711a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.5 and 3.0 percent, with the all items CPI less fresh food of 0.5 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:

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
Apr 2013	+2.4 to +3.0 [+2.9]	+0.4 to +0.8 [+0.7]
2014
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
Apr 2013	+1.0 to +1.5 [+1.4]	+2.7 to +3.6 [+3.4]	+0.7 to +1.6 [+1.4]
2015
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
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/announcements/release_2013/k130711a.pdf

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index decreasing from 52.3 in Jun to 50.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9dc3d734ac8426192c88ddcb88e2093). Claudia Tillbrooke, Economist at Markit and author of the report, finds that the survey data suggest continuing growth of the economy of Japan but concern on future performance (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9dc3d734ac8426192c88ddcb88e2093). The Markit Business Activity Index of Services decreased from 52.1 in Jun to 50.6 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9dc3d734ac8426192c88ddcb88e2093). Claudia Tillbrooke, Economist at Markit and author of the report, finds doubts in stagnation of employment and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/f9dc3d734ac8426192c88ddcb88e2093). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from from 52.3 in Jun, which is the highest reading in 28 months, to 50.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/a4089748b4f0420abec9564566928b16). New orders grew for a fifth consecutive month with support by yen depreciation. Claudia Tillbrooke, Economist at Markit and author of the report, finds manufacturing expanding with deceleration of output and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/a4089748b4f0420abec9564566928b16).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	Jul ∆% +0.5 12 months ∆% 2.2 Blog 8/18/13
Consumer Price Index	Jun NSA ∆% 0.0; Jun 12 months NSA ∆% 0.2 Blog 7/28/13
Real GDP Growth	IIQ2013 ∆%: 0.6 on IQ2013;  IQ2013 SAAR 2.6; ∆% from quarter a year earlier: 0.0 % Blog 6/16/13 8/18/13
Employment Report	Jun Unemployed 2.60 million Change in unemployed since last year: minus 280 thousand Unemployment rate: 3.9 % Blog 8/4/13
All Industry Indices	May month SA ∆% 1.1 12-month NSA ∆% 1.2 Blog 7/21/13
Industrial Production	Jun SA month ∆%: -3.3 12-month NSA ∆% -4.8 Blog 8/4/13
Machine Orders	Total Jun ∆% -14.3 Private ∆%: -6.0 Jun ∆% Excluding Volatile Orders -2.7 Blog 8/18/13
Tertiary Index	Jun month SA ∆% -0.3 Jun 12 months NSA ∆% 1.0 Blog 8/11/13
Wholesale and Retail Sales	Jun 12 months: Total ∆%: 0.5 Wholesale ∆%: 0.1 Retail ∆%: 1.6 Blog 8/4/13
Family Income and Expenditure Survey	Jun 12-month ∆% total nominal consumption -0.1, real -0.4 Blog 8/4/13
Trade Balance	Exports Jun 12 months ∆%: 7.4 Imports Jun 12 months ∆% 11.8 Blog 7/28/13

Links to blog comments in Table JPY:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

7/21/2013 http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

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

The economy of Japan grew 0.6 percent in IIQ2013 after 0.9 percent in IQ2013, seasonally adjusted, as shown in Table VB-1, incorporating the latest estimates and revisions. Japan’s GDP increased 0.3 percent in IVQ2012 relative to IIIQ2012. IQ2012 GDP growth was revised to 1.2 percent; IIQGDP growth was revised to -0.2 percent; and IIIQ2012 growth was revised to -0.9 percent. The economy of Japan had already weakened in IVQ2010 when GDP fell revised 0.3 percent. As in other advanced economies, Japan’s recovery from the global recession has not been robust. GDP fell 2.0 percent in IQ2011 and fell again 0.8 percent in IIQ2011 as a result of the disruption of the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Recovery was robust in the first two quarters of 2010 but GDP grew at 1.5 percent in IIIQ2010 and fell 0.3 percent in IVQ2010. The deepest quarterly contractions in the recession were 3.3 percent in IVQ2008 and 4.0 percent in IQ2009.

Table VB-1, Japan, Real GDP ∆% Changes from the Previous Quarter Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2013	0.9	0.6
2012	1.2	-0.2	-0.9	0.3
2011	-2.0	-0.8	2.6	0.3
2010	1.4	0.9	1.5	-0.3
2009	-4.0	1.6	0.1	1.8
2008	0.7	-1.2	-1.0	-3.3
2007	1.0	0.1	-0.4	0.9
2006	0.4	0.4	-0.1	1.3
2005	0.2	1.3	0.4	0.2
2004	1.1	-0.1	0.2	-0.2
2003	-0.5	1.2	0.4	1.1
2002	-0.2	1.0	0.6	0.4
2001	0.7	-0.2	-1.1	-0.1
2000	1.7	0.2	-0.3	0.7
1999	-0.9	0.4	-0.1	0.4

Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Table VB-2 provides contributions to real GDP at seasonally adjusted annual rates (SAAR). Japan grew at 2.6 percent SAAR in IIQ2013 driven by contributions of 1.9 percent of personal consumption (PC) and 0.7 percent of net trade. In IQ2013, Japan’s GDP increased at the SAAR of 3.8 percent in large part because of 2.1 percent in personal consumption and 1.6 percent in trade. The SAAR of GDP in IVQ2012 was 1.0 percent: 1.2 percentage points from growth of personal consumption expenditures (PC) less 0.2 percentage points of net trade (exports less imports) less 0.7 percentage points of private inventory investment (PINV) plus 0.5 percentage points of government consumption and 0.3 percentage points of gross fixed capital formation (GFCF). The SAAR of GDP in IIIQ2011 was revised to a high 10.6 percent. Net trade deducted from GDP growth in three quarters of 2011 and provided the growth impulse of 3.4 percentage points in IIIQ2011. Growth in 2011 and IQ2012 was driven by personal consumption expenditures that deducted 0.9 percentage points from GDP growth in IIIQ2012 but added 1.2 percentage points to GDP growth in IVQ2012.

Table VB-2, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	GDP	PC	GFCF	Trade	PINV	GOVC
2013
I	3.8	2.1	0.4	1.6	-0.3	0.0
II	2.6	1.9	0.3	0.7	-1.1	0.7
2012
I	4.8	2.2	-0.3	0.3	1.2	1.3
II	-0.9	0.2	1.0	-1.0	-1.0	0.0
III	-3.6	-0.9	-0.9	-2.7	0.5	0.3
IV	1.0	1.2	0.3	-0.2	-0.7	0.5
2011
I	-7.8	-3.7	-0.5	-1.2	-2.6	0.1
II	-3.1	2.1	-0.4	-4.1	-1.1	0.2
III	10.6	3.7	1.4	3.4	1.8	0.2
IV	1.4	1.6	3.7	-2.8	-1.2	0.2
2010
I	5.8	1.4	0.2	2.1	2.4	-0.4
II	3.8	0.0	0.7	0.2	1.9	1.1
III	6.1	3.3	1.0	0.3	1.4	0.3
IV	-1.3	-0.5	-0.7	-0.3	-0.2	0.3
2009
I	-15.1	-2.1	-1.9	-4.4	-7.4	0.8
II	6.7	4.0	-3.3	7.5	-2.1	0.6
III	0.4	0.1	-1.3	2.1	-1.5	1.0
IV	7.5	3.7	0.3	2.8	0.5	0.3
2008
I	2.7	1.4	0.4	1.2	-0.3	0.0
II	-4.8	-3.3	-2.4	0.5	1.1	-0.8
III	-4.0	-0.4	-0.9	-0.1	-2.6	0.0
IV	-12.4	-2.8	-4.5	-11.4	5.7	0.3
2007
I	4.0	0.8	0.6	1.2	1.2	0.4
II	0.5	0.5	-1.6	0.8	0.1	0.5
III	-1.4	-0.8	-1.7	2.0	-0.7	-0.2
IV	3.5	0.3	0.3	1.4	0.9	0.6

Note: PC: Private Consumption; GFCF: Gross Fixed Capital Formation; PINV: Private Inventory; Trade: Net Exports; GOVC: Government Consumption

Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008, IIIQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.4 percent in IIIQ2011. Net trade added 1.6 percentage points to GDP growth in IQ2013 and 0.7 percentage points in IIQ2013. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	Net Trade	Exports	Imports
2013
I	1.6	2.2	-0.7
II	0.7	1.7	-1.0
2012
I	0.3	1.6	-1.3
II	-1.0	-0.1	-0.9
III	-2.7	-2.7	0.0
IV	-0.2	-1.6	1.3
2011
I	-1.2	-0.5	-0.7
II	-4.1	-4.5	0.4
III	3.4	5.4	-2.0
IV	-2.8	-1.7	-1.1
2010
I	2.1	3.5	-1.3
II	0.2	2.7	-2.5
III	0.3	1.2	-0.9
IV	-0.3	0.2	-0.5
2009
I	-4.4	-16.4	12.0
II	7.5	4.7	2.7
III	2.1	5.2	-3.1
IV	2.8	4.2	-1.4
2008
I	1.2	2.2	-1.0
II	0.5	-1.6	2.1
III	-0.1	0.1	-0.1
IV	-11.4	-10.2	-1.2
2007
I	1.2	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.1	-0.7

Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Japan’s percentage growth of GDP not seasonally adjusted in a quarter relative to the same quarter a year earlier is shown in Table VB-4. Contraction of GDP in a quarter relative to the same quarter a year earlier extended over seven quarters from IIQ2008 through IVQ2009. Contraction was sharpest in IQ2009 with output declining 9.4 percent relative to a year earlier. Yearly quarterly rates of growth of Japan were relatively high for a mature economy through the decade with the exception of the contractions from IVQ2001 to IIQ2002 and after 2007. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 caused flat GDP in IQ2011 relative to the same quarter a year earlier and decline of 1.5 percent in IIQ2011. GDP fell 0.6 percent in IIIQ2011 relative to a year earlier and fell 0.2 percent in IVQ2011 relative to a year earlier. Growth resumed with 3.4 percent in IQ2012 relative to a year earlier. Growth of 3.8 percent in IIQ2012 is largely caused by the low level in IIQ2011 resulting from the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP increased 0.3 percent in IIIQ2012 relative to a year earlier and 0.4 percent in IVQ2012 relative to a year earlier. GDP grew 0.3 percent in IQ2013 relative to a year earlier and 0.9 percent in IIQ2013. Japan faces the challenge of recovery from the devastation of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 in an environment of declining world trade and bouts of risk aversion that cause appreciation of the Japanese yen that erode the country’s competitiveness in world markets.

Table VB-4, Japan, Real GDP ∆% Changes from Same Quarter Year Earlier, NSA ∆%

	IQ	IIQ	IIIQ	IVQ
2013	0.3	0.9
2012	3.4	3.8	0.3	0.4
2011	0.0	-1.5	-0.6	-0.2
2010	4.9	4.4	6.0	3.3
2009	-9.4	-6.6	-5.6	-0.5
2008	1.4	-0.1	-0.6	-4.7
2007	2.8	2.3	2.0	1.6
2006	2.6	1.3	0.9	2.0
2005	0.4	1.4	1.5	1.9
2004	4.0	2.6	2.2	0.7
2003	1.7	1.8	1.5	1.8
2002	-1.6	-0.2	1.4	1.6
2001	1.6	0.9	0.0	-1.0
2000	2.7	2.4	2.2	1.8
1999	-0.3	0.1	-0.1	-0.5

Source: http://www.esri.cao.go.jp/en/sna/sokuhou/sokuhou_top.html

Japan’s total machinery orders seasonally adjusted in Table VB-5 weakened in Jun 2013, decreasing 14.3 percent seasonally adjusted. Private sector orders decreased 6.0 and 2.7 percent excluding volatile orders. Orders from overseas decreased 16.7 percent and manufacturing orders 2.4 percent.

Table VB-5, Japan, Machinery Orders, Month ∆%, SA 

2013	Jun 13	May 13	Apr 13	Mar 13
Total	-14.3	12.0	-14.2	27.8
Private Sector	-6.0	12.4	-12.4	22.3
Excluding Volatile Orders	-2.7	10.5	-8.8	14.2
Mfg	2.4	3.8	-7.3	13.3
Non Mfg ex Volatile	-17.	25.4	-6.0	14.3
Government	-28.2	44.8	-6.3	15.2
From Overseas	-16.7	10.3	-19.9	52.1
Through Agencies	6.6	22.7	-38.2	35.2

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

Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/index-e.html

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

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Table VB-6 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 2,051,847 million in Jun 2013 are divided between JPY 741,702 million overseas orders, or 36.1 percent of the total, and domestic orders of JPY 1,210,029 million, or 59.0 percent of the total, with orders through agencies of JPY 100,116 million, or 4.8 percent of the total. Orders through agencies are not shown in the table because of the minor value. Twelve-month percentages changes in Jun 2013 are weaker with increases of 2.7 percent for total orders, 4.1 percent for domestic orders and 4.9 percent for orders excluding volatile components. Overseas orders rose 0.1 percent in 12 months.

Table VB-6, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series  

	Total	Overseas	Domestic	Private ex Volatile
Value Jun 2013	2,051,847	741,702	1,210,029	841,639
% Total	100.0	36.1	59.0	41.0
Value Jun 2012	1,998,609	740,813	1,162,753	802,210
% Total	100.0	37.1	58.2	40.1
12-month ∆%	2.7	0.1	4.1	4.9
Jun 2013	2.7	0.1	4.1	4.9
May 2013	18.1	17.1	20.8	16.5
Apr 2013	-4.3	6.7	-9.9	-1.1
Mar 2013	11.5	27.5	3.3	2.4
Feb 2013	-14.8	-21.0	-10.7	-11.3
Jan 2013	-24.8	-36.7	-11.8	-9.7
Dec 2012	-12.5	-24.1	-3.3	-3.4
Nov 2012	-8.6	-9.6	-8.5	0.3
Oct 2012	-6.9	-12.8	-2.6	1.2
Sep 2012	-7.8	-18.4	-1.8	-7.8
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Jun 2013 were JPY 100,116 million or 4.8 percent of the total and JPY 95,043 or 4.8 percent of the total in Jun 2012, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office http://www.esri.cao.go.jp/index-e.html

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012. Improvement continued with 56.1 in Dec 2012 and 56.2 in Jan 2013, declining marginally to 54.5 in Feb 2013 and 55.6 in Mar 2013. The index fell to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013, rebounding to 54.1 in Jul 2013

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jul 2013	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	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, 54.3 in May 2013 and 53.9 in Jun 2013, rebounding to 54.1 in Jul 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, falling to 50.1 in Jun 2013 and rebounding to 50.3 in Jul 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, falling to 50.4 in Jun 2013 and 50.6 in Jul 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 and 48.7 in Jun 2013, increasing to 49.1 in Jul 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Jul 2013	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	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 and fell to 50.1 in Jun 2013, increasing to 50.3 in Jul 2013.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.6 percent, as shown in Table VC-GDP. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in IQ2013 and construction with the remaining 6.2 percent in the first three quarters of 2012. Tertiary industry accounts for 45.3 percent of cumulative GDP in IIQ2013 and primary industry for 7.5 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 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.2 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent and to 7.0 percent in IIQ2013.

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

Cumulative GDP IIQ2013	Value Current CNY 100 Million	2013 Year-on-Year Constant Prices ∆%
GDP	248009	7.6
Primary Industry	18622	3.0
Farming	18622	3.0
Secondary Industry	117037	7.6
Industry	101601	7.3
Construction	15436	9.6
Tertiary Industry	112350	8.3
Transport, Storage, Post	12995	6.8
Wholesale, Retail Trades	23291	10.2
Hotel & Catering Services	4824	4.7
Financial Intermediation	16036	10.8
Real Estate	16127	7.5
Other	39077	7.4
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IIQ2013	1.7	7.0
IQ2013	1.6	6.6
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.5	6.2
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

Source: National Bureau of Statistics of China

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

Growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.5 percent, as shown in Table VC-GDPA. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in cumulative IIQ2013 and construction with the remaining 7.5 percent in the first two quarters of 2013. Tertiary industry accounts for 45.3 percent of GDP in the cumulative to IIQ2013 and primary industry for 7.5 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). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013 and 7.5 percent in IIQ2013.

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

	IQ 2013	IIQ 2013
GDP	7.7	7.5
Primary Industry	3.4	3.0
Secondary Industry	7.8	7.6
Tertiary Industry	8.3	8.3
GDP ∆% Relative to a Prior Quarter	1.6	1.7
	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/69676b0fae3d429b89c74bcf671abde4) is moving at slower pace. The overall Flash HSBC China Manufacturing PMI^™ decreased from 48.2 in Jun to 47.7 in Jul, which is moderately below the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index decreased from 48.6 in Jun to 48.2 in Jul, moving into moderate contraction territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that weakness in the index suggests need for further stimulus to support growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/69676b0fae3d429b89c74bcf671abde4). The HSBC China Services PMI^™, compiled by Markit, shows marginal weakness in business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 49.8 in Jun to 49.5 in Jul with the second consecutive output contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/c48cd865e52342d9bdc53c597f4a1162). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds weak growth without increasing demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/c48cd865e52342d9bdc53c597f4a1162). The HSBC Business Activity index remained unchanged from 51.3 in Jun to 51.3 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/c48cd865e52342d9bdc53c597f4a1162). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds stabilizing services at low levels of activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/c48cd865e52342d9bdc53c597f4a1162). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased to 47.7 in Jul from 48.2 in Jun, indicating deterioration in manufacturing during three consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/d05ba17e11194262b7c4f1209c96bb39). New export orders decreased for the fourth consecutive month with the fastest decline in total orders in 11 months. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that weak internal and external demand set pressure on manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/d05ba17e11194262b7c4f1209c96bb39). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Jul 12-month ∆%: minus 2.3 Jul month ∆%: -0.3 Blog 8/11/13
Consumer Price Index	Jul month ∆%: 0.1 Jul 12 months ∆%: 2.7 Blog 8/11/13
Value Added of Industry	Jul month ∆%: 0.88 Jan-Jul 2013/Jan-Jul 2012 ∆%: 9.4 Blog 8/11/13
GDP Growth Rate	Year IIQ2013 ∆%: 7.5 Quarter IIQ2013 AE ∆%: 7.0 Blog 7/21/13
Investment in Fixed Assets	Jul month ∆%: 1.58 Total Jan-Jul 2013 ∆%: 20.1 Real estate development: 20.5 Blog 8/11/13
Retail Sales	Jul month ∆%: 1.23 Jul 12 month ∆%: 13.2 Jan-Jul ∆%: 12.8 Blog 8/11/13
Trade Balance	Jul balance $17.82 billion Exports 12M ∆% 5.1 Imports 12M ∆% 10.9 Cumulative Jun: $126.37 billion Blog 8/11/13

Links to blog comments in Table CNY:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

7/21/2013 http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.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 1.5 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 http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

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

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/

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 48.7 in Jun to 50.4 in Jul, interrupting seventeen consecutive contractions with the highest reading in eighteen months. The respondents indicated the highest growth of output since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b9f7cd408c63428ca6cab343f4dbed5d). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the euro area could move out of contraction in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b9f7cd408c63428ca6cab343f4dbed5d). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 49.7 in Jun to 50.4 in Jul with interruption of output declining during 17 consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6abc923913042d3b5cb3a57aa4bd32f). Rob Dobson, Senior Economist at Markit, finds hopes in growth at the beginning of the third quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6abc923913042d3b5cb3a57aa4bd32f). The Markit Eurozone Services Business Activity Index increased from 48.3 in Jun to 49.8 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/b6abc923913042d3b5cb3a57aa4bd32f). The Markit Eurozone Manufacturing PMI^® increased to 50.3 in Jul from 48.8 in Jun, which interrupts contraction for the twenty-third consecutive month since Aug 2011 for the first reading above 50.0 since Jul 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ea9b5e21c5642c3a4c4894546102f47). New orders increased for the first time in two years with growth in new export orders. Rob Dobson, Senior Economist at Markit, finds increase in demand for exports while internal markets are stabilizing (http://www.markiteconomics.com/Survey/PressRelease.mvc/9ea9b5e21c5642c3a4c4894546102f47). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2013 ∆% 0.3; IIQ2013/IIQ2012 ∆% -0.7 Blog 8/18/13
Unemployment	Jun 2013: 12.1% unemployment rate May 2013: 19.266 million unemployed Blog 8/4/13
HICP	Jul month ∆%: -0.5 12 months Jul ∆%: 1.6 Blog 8/18/13
Producer Prices	Euro Zone industrial producer prices Jun ∆%: 0.0 Jun 12-month ∆%: 0.3 Blog 8/11/13
Industrial Production	Jun month ∆%: 0.7; Jun 12 months ∆%: 0.3 Blog 8/18/13
Retail Sales	Jun month ∆%: -0.5 Jun 12 months ∆%: minus 0.9 Blog 8/11/13
Confidence and Economic Sentiment Indicator	Sentiment 92.5 Jul 2013 Consumer minus 17.4 Jul 2013 Blog 8/4/13
Trade	Jan-Jun 2013/Jan-Jun 2012 Exports ∆%: 1.6 Imports ∆%: -4.2 Jun 2013 12-month Exports ∆% -2.5 Imports ∆% -5.6 Blog 8/18/13

Links to blog comments in Table EUR:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

Table VD-1 provides percentage changes of euro area real GDP in a quarter relative to the prior quarter. Real GDP fell 0.6 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 0.3 percent in IQ2013 and increased 0.3 percent in IIQ2013. 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 3.8 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 and Working Day Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2013	-0.3	0.3
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	0.6	-0.4	-0.6	-1.7
2007	0.8	0.5	0.6	0.4
2006	0.9	1.1	0.7	1.0
2005	0.2	0.7	0.6	0.7
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	0.4	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 4.4 percent in IIIQ2009. Growth rates decline in magnitude with 1.4 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 0.9 percent in IVQ2012. GDP contracted 1.1 percent in IQ2013 relative to a year earlier and contracted 0.7 percent in IIQ2013.

Table VD-2, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a

Year Earlier, Seasonally and Working Day Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2013	-1.1	-0.7
2012	-0.1	-0.5	-0.7	-0.9
2011	2.5	1.7	1.4	0.7
2010	1.0	2.3	2.3	2.2
2009	-5.4	-5.3	-4.4	-2.3
2008	2.1	1.2	0.0	-2.1
2007	3.7	3.0	3.0	2.3
2006	3.0	3.3	3.4	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	3.3

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-3 provides growth of euro area real GDP in a quarter relative to the same quarter a year earlier not seasonally adjusted. GDP in IQ2013 fell 1.7 percent relative to a year earlier without seasonal adjustment. Data for IIQ2013 are not yet available. Growth rates in 2006 and 2007 were quite strong followed by sharp declines of 5.6 percent in IQ2009, 5.8 percent in IIQ2009 and 4.2 percent in IQ2009.

Table VD-3, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a Year Earlier, Not Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2013	-1.7	NA
2012	0.3	-0.8	-0.8	-1.0
2011	2.7	1.8	1.4	0.3
2010	1.2	2.5	2.2	2.1
2009	-5.6	-5.8	-4.2	-1.9
2008	1.6	1.6	0.5	-2.1
2007	3.5	3.1	3.1	2.4
2006	3.6	2.6	3.1	3.7
2005	1.0	2.1	1.8	1.8
2004	2.1	2.6	2.2	2.0
2003	1.0	0.1	0.5	1.2
2002	0.1	1.2	1.5	0.9
2001	2.7	2.0	1.7	1.5
2000	4.9	4.3	3.3	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

Table VD-3 provides GDP growth in IIQ2013 and relative to the same quarter a year earlier with SAWDA (seasonal and working day adjustment) and NSA (not seasonally adjusted) for the euro zone, European Union, Japan and the US. The GDP of the euro zone increased 0.3 percent in IIQ2013 and declined 0.7 percent relative to a year earlier SWDA while the GDP of the European Union increased 0.3 percent in IIQ2013 and decreased 0.7 percent relative to a year earlier. Growth in IIQ2013 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html) and motivate hiring (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html).

Table VD-4, Euro Zone, European Union, Japan and USA, Real GDP Growth

	∆% IIQ2013/ IQ2013 SAWDA	∆% IIQ2013/ IIQ2012 SWDA	∆% IQ2013/ IQ2012 NSA
Euro Zone	0.3	-0.7	-1.7
European Union	0.3	-0.2	-1.5
Germany	0.7	0.5	-1.4
France	0.5	0.3	-0.9
Netherlands	-0.2	-1.8	-1.8
Finland	0.7	0.0	-2.5
Belgium	0.1	-0.1	-0.6
Portugal	1.1	-2.0	-4.1
Ireland	NA	NA	-0.9
Italy	-0.2	-2.0	-2.8
Greece	NA	NA	-5.6
Spain	-0.1	-1.7	-2.3
United Kingdom	0.6	1.4	0.3
Japan	0.6	0.9	0.3
USA	0.4	1.4	1.3

*SAWDA: Seasonally and Working Day Adjusted except UK, Japan and USA

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-5 provides monthly industrial production percentage changes for total production and major segments. Total production increased 0.7 percent in Jun 2013 with declines of 1.6 percent in energy and 0.6 percent in nondurable goods. Capital goods increased 2.5 percent and durable goods 4.9 percent. Industrial production increased in all months from Dec 2012 to Jun 2013 with exception of declines of 0.2 percent in May 2013 and 0.4 percent in Jan 2013.

Table VD-5, Euro Zone, Industrial Production Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Jun 2013	0.7	0.5	-1.6	2.5	4.9	-0.6
May	-0.2	0.6	0.1	-1.1	-1.9	0.7
Apr	0.4	0.1	-1.4	2.2	-1.6	0.9
Mar	0.9	0.0	3.7	1.0	1.8	0.0
Feb	0.2	-0.2	1.7	0.8	0.8	-1.5
Jan	-0.4	0.2	0.1	-1.7	-1.8	-0.3

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

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

Table VD-6 provides monthly and 12-month percentage changes of industrial production and major industrial categories in the euro zone. Several 12-month percentage changes in Table VD-2 are negative in the 12 months ending in Jun 2013 with exception of growth of 3.3 percent for capital goods. Industrial production increased 0.7 percent in the month of Jun 2013 and increased 0.3 percent in the 12 months ending in Jun 2013.

Table VD-6, Euro Zone, Industrial Production, Month and 12-Month ∆%

2013	Jun Month ∆%	Jun 12-Month ∆%
Total	0.7	0.3
Intermediate Goods	0.5	-1.3
Energy	-1.6	-1.7
Capital Goods	2.5	3.3
Durable Consumer Goods	4.9	-1.0
Nondurable Consumer Goods	-0.6	-1.1

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

There has been significant decline in percentage changes of industrial production and major categories in 12-month rates into 2012 and 2013 as shown in Table VD-7. Negative percentage changes moderated from the high rates in Oct-Nov 2012 but are still high. There is only growth of 0.3 percent for energy in the 12 months ending in Jun 2013 and of 3.3 percent for capital goods.

Table VD-7, Euro Zone, Industrial Production 12-Month ∆%

	Total	INT	ENE	CG	DUR	NDUR
Jun 2013	0.3	-1.3	-1.7	3.3	-1.0	-1.1
May	-1.3	-2.6	0.2	-0.6	-6.1	-0.1
Apr	-0.5	-2.5	-0.7	1.5	-4.5	0.6
Mar	-1.4	-4.1	8.7	-3.1	-1.9	-2.6
Feb	-3.2	-2.9	-6.7	-3.9	-4.9	-0.1
Jan	-2.4	-3.8	-1.0	-3.8	-7.2	1.4

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

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

Table VD-8 provides industrial production of member countries of the euro zone, the UK and the European Union. Many twelve-month percentage changes in Jun 2013 are negative countries and regions in Table VD-8 with exception of growth of 2.4 percent for Germany, 2.2 percent for Portugal, 3.3 percent for Ireland, 0.5 percent for Greece, 2.1 percent for the UK and 0.4 percent for the European Union.

Table VD-8, Euro Zone, Industrial Production by Member Countries, ∆%

Jun 2013	Month ∆%	12-Month ∆%
Euro Zone	0.7	0.3
Germany	2.5	2.4
France	-1.5	-0.3
Netherlands	-4.1	-2.0
Finland	-1.3	-5.9
Belgium	NA	NA
Portugal	-2.8	2.2
Ireland	8.7	3.3
Italy	0.3	-2.1
Greece	2.5	0.5
Spain	-0.5	-1.9
UK	1.1	2.1
European Union	0.9	0.4

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

Euro zone trade growth continues to be relatively strong as shown in Table VD-9 but with deceleration at the margin. Exports grew at 1.6 percent and imports fell 4.2 percent in Jan-Jun 2013 relative to Jan-Jun 2012. The 12-month rate of growth of exports was minus 2.5 percent in Jun 2013 while imports decreased 5.8 percent. In May 2013, exports decreased 0.2 percent in 12 months and imports decreased 5.6 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-9, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-Jun 2013	938.5	864.7
Jan-Jun 2012	923.9	902.7
∆%	1.6	-4.2
Jun 2013	157.9	140.6
Jun 2012	162.0	149.2
∆%	-2.5	-5.8
May 2013	158.6	144.1
May 2012	158.9	152.7
∆%	-0.2	-5.6
Trade Balance	Jan-Jun 2013	Jan-Jun 2012
€ Billions	73.8	21.3

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 structure of trade of the euro zone in Jan-May 2013 is provided in Table VD-10. Data are still not available for trade structure for Jun 2013. Manufactured exports increased 1.9 percent in Jan-May 2013 relative to Jan-May 2012 while imports decreased 2.6 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-May 2013 but only marginally higher in Jan-May 2012 partly because of the commodity shock caused by carry trades.

Table VD-10, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-May 2013 € B	125.2	631.6	23.8	780.6
Jan-May 2012 € B	120.0	620.0	22.0	762.0
∆%	4.3	1.9	8.2	2.4
Imports
Jan-May 2013 € B	263.8	446.4	13.9	724.1
Jan-May 2012  € B	281.8	458.1	13.6	753.5
∆%	-6.4	-2.6	2.2	-3.9
Trade Balance € B
Jan-May 2013	-138.5	185.2	9.9	56.5
Jan-May 2012	-161.8	161.9	8.3	8.5

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

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 4.0 percent in 2010, 3.3 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	3.3	3.4
2010	4.0	3.9
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/2013/08/PE13_269_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 50.4 in Jun to 52.8 in Jul, for the highest reading in five months with stronger improvement in services at 52.4 in Jul while manufacturing moved into expansion at 50.3 (http://www.markiteconomics.com/Survey/PressRelease.mvc/813702faa006423d91c19091988c8c89). New export orders for manufacturing decreased for the fifth consecutive month with internal activities compensating for the weakness in markets in China and the euro area. Tim Moore, Senior Economist at Markit, finds improvement in manufacturing and services in the beginning of IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/813702faa006423d91c19091988c8c89). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 50.4 in Jun to 52.1 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/305c1f0089434295afc013df5a31d460). Tim Moore, Senior Economist at Markit and author of the report, finds support in rising performance in manufacturing and services (http://www.markiteconomics.com/Survey/PressRelease.mvc/305c1f0089434295afc013df5a31d460). The Germany Services Business Activity Index increased from 50.4 in Jun to 51.3 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/305c1f0089434295afc013df5a31d460). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 48.6 in Jun to 50.7 in Jul, in movement away from contraction territory below 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c17b2ae1bc9b420189c254061bf6a045). New export orders restrained growth with weak exports to China and inside the euro area. Tim Moore, Senior Economist at Markit and author of the report, finds restrain from weakness in markets, especially in exports, with growth driven by increasing internal spending (http://www.markiteconomics.com/Survey/PressRelease.mvc/c17b2ae1bc9b420189c254061bf6a045).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2013 0.7 ∆%; II/Q2013/IIQ2012 ∆% 0.9 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 8/18/13
Consumer Price Index	Jul month NSA ∆%: 0.5 Jul 12-month NSA ∆%: 1.9 Blog 8/18/13
Producer Price Index	Jun month ∆%: 0.0 CSA, 0.3 12-month NSA ∆%: 0.6 Blog 7/21/13
Industrial Production	MFG Jun month CSA ∆%: minus 2.2 12-month NSA: 1.6 Blog 8/11/13
Machine Orders	MFG Jun month ∆%: 3.8 Jun 12-month ∆%: 3.4 Blog 8/11/13
Retail Sales	Jun Month ∆% -1.5 12-Month ∆% -2.9 Blog 8/4/13
Employment Report	Unemployment Rate SA Jun 5.4% Blog 8/4/13
Trade Balance	Exports Jun 12-month NSA ∆%: minus 2.1 Imports Jun 12 months NSA ∆%: minus 1.2 Exports Jun month CSA ∆%: 0.6; Imports Jun month SA -0.8 Blog 8/11/13

Links to blog comments in Table DE:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

7/21/2013 http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html

http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html

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

Table VE-1 provides percentage change of Germany’s GDP in one quarter relative to the prior quarter from 2003 to 2013. Germany’s GDP contracted during four consecutive quarters from IIQ2008 to IQ2009. The deepest contraction was 4.1 percent in IQ2009. Growth was quite strong from IIIQ2009 to IQ2011 for cumulative growth of 7.5 percent in seven quarters or at the average rate of 1.0 percent per quarter, which is equivalent to 4.2 percent per year. Economic growth decelerated in IIQ2011 to 0.1 percent and 0.4 percent in IIIQ2011. The economy grew 0.1 percent in IVQ2011 and grew 0.7 percent in IQ2012 but contracted 0.1 percent in IIQ2012. GDP growth in IIIQ2012 was 0.2 percent relative to IIQ2012. Germany’s GDP contracted 0.5 percent in IVQ2012 relative to IIIQ2012. GDP changed 0.0 percent in IQ2013 and increased 0.7 percent in IIQ2013. The Federal Statistical Office of Germany (Destatis) finds that growth in IIQ213 originated mostly in domestic demand with contributions by consumption of households and government and fixed capital formation while net trade (balance of exports less imports) also contributed (https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_269_811.html).

Table VE-1, Germany Quarter GDP ∆% Relative to Prior Quarter, Seasonally and Calendar Adjusted 

	IQ	IIQ	IIIQ	IV
2013	0.0	0.7
2012	0.7	-0.1	0.2	-0.5
2011	1.5	0.1	0.4	0.1
2010	0.5	2.0	0.8	0.8
2009	-4.1	0.2	0.7	1.0
2008	1.0	-0.4	-0.4	-2.0
2007	0.6	0.5	0.9	0.4
2006	1.1	1.5	1.0	1.3
2005	-0.1	0.6	0.8	0.3
2004	0.0	0.3	-0.2	0.0
2003	-0.8	-0.1	0.5	0.4
2002	-0.4	0.3	0.4	-0.2
2001	1.5	0.1	-0.3	0.2

Seasonal and calendar adjusted https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_269_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_269_811.html

Table VE-2 provides percentage changes of Germany’s GDP in a quarter relative to the same quarter a year earlier. Growth was weak in the recovery from the recession of 2001 through 2005, as in most of the euro area (see Pelaez and Pelaez, The Global Recession Risk (2007), 116-46). Germany’s economy then grew robustly in 2006 and 2007 until the global recession after 2007. Germany recovered with strong growth in 2010 and vigorous 5.7 percent in IQ2011. The economy decelerated in the final three quarters of 2011, growing 1.8 percent in IQ2012 relative to IQ2011. Growth decelerated further to 0.6 percent in IIQ2012 without calendar adjustment and 1.1 percent with calendar adjustment and to 0.4 percent in IIIQ2012. Growth in IVQ2012 relative to IVQ2011 was 0.0 percent. GDP fell 1.6 percent in IQ2013 relative to a year earlier and increased 0.9 percent in IIQ2013 relative to a year earlier.

Table VE-2, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Price Adjusted NCSA 

	IQ	IIQ	IIIQ	IV
2013	-1.6	0.9
2012	1.8	0.6	0.4	0.0
2011	5.7	3.4	2.9	1.6
2010	2.7	4.7	4.4	4.2
2009	-6.5	-7.5	-5.0	-1.6
2008	2.1	3.1	1.1	-1.9
2007	4.3	3.4	3.3	2.2
2006	4.3	2.4	3.5	4.6
2005	-0.8	1.2	1.2	1.0
2004	1.5	1.6	0.6	0.9
2003	0.0	-1.1	-0.5	0.1

Price adjusted NSA Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_269_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

There are strong calendar effects in economic activity in Germany. Table VE-3 provides Germany’s percentage change in a quarter relative to the same quarter a year earlier adjusting for price changes and calendar effects. Germany’s GDP increased 1.1 percent in IIQ2012 calendar-adjusted in contrast with only 0.6 percent without calendar adjustment. GDP growth adjusting for calendar effects was 0.9 percent in IIIQ2012 relative to IIIQ2011 and 0.4 percent without calendar adjustment. Growth in IVQ2012 was 0.3 percent calendar and price adjusted in contrast with 0.0 percent without calendar adjustment. Growth in IQ2013 was minus 0.3 percent relative to a year earlier with adjustment for calendar effects and minus 1.6 percent without adjustment. GDP without calendar adjustment increased 0.9 percent in IIQ2013 relative to a year earlier and 0.5 percent with calendar adjustment.

Table VE-3, Germany, Quarter GDP ∆% Relative to Same Quarter a Year Earlier, Calendar and Price Adjusted NSA 

	IQ	IIQ	IIIQ	IV
2013	-0.3	0.5
2012	1.3	1.1	0.9	0.3
2011	5.3	3.3	3.0	2.1
2010	2.6	4.3	4.4	4.1
2009	-6.7	-6.3	-5.1	-2.3

Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_269_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.2 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 4.0 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. The growth rate from 2000 to 2012 is 1.0 percent. 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	2.5
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

The Markit Flash France Composite Output Index increased from 47.4 in Jun to 48.8 in Jul for the highest reading in seventeen months (http://www.markiteconomics.com/Survey/PressRelease.mvc/ff874f59bf1442d3a8c96ef0a33d8ac0). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest improvement with manufacturing suggestin increase in output while decline of services slowed (http://www.markiteconomics.com/Survey/PressRelease.mvc/ff874f59bf1442d3a8c96ef0a33d8ac0). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 47.2 in Jun to 48.6 in Jul, indicating contraction of private sector activity at the slowest rate of deterioration in 2013 and the highest reading in 11 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/7abaa1cb58d042259fc021c8296d53b1). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds highest expectations of future activity in service providers in a year (http://www.markiteconomics.com/Survey/PressRelease.mvc/7abaa1cb58d042259fc021c8296d53b1). The Markit France Services Activity index increased from 47.2 in Jun to 48.6 in Jul for the highest reading in 11 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/7abaa1cb58d042259fc021c8296d53b1). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 49.7 in Jul from 48.4 in May, for the highest reading in sixteen consecutive months below the neutral level of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/e26a4ad0796b42ac96c0c345d8d518c0). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds the first increase in manufacturing output in 17 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/e26a4ad0796b42ac96c0c345d8d518c0). Table FR provides the country data table for France.

Table VF-1, France, Quarterly Real GDP G Table FR, France, Economic Indicators

CPI	Jul month ∆% -0.3 12 months ∆%: 1.1 8/18/13
PPI	Jun month ∆%: -0.2 Jun 12 months ∆%: 0.2 Blog 8/4/13
GDP Growth	IIQ2013/IQ2013 ∆%: 0.5 IIQ2013/IIQ2012 ∆%: 0.3 Blog 3/31/13 5/19/12 6/30/13 8/18/13
Industrial Production	Jun ∆%: Manufacturing minus 0.4 12-Month ∆%: Manufacturing minus 0.6 Blog 8/11/13
Consumer Spending	Manufactured Goods Jun ∆%: -0.4 Jun 12-Month Manufactured Goods ∆%: -0.8 Blog 8/11/13
Employment	Unemployment Rate: 10.4% Blog 6/9/13
Trade Balance	Jun Exports ∆%: month 0.6, 12 months -1.2 Jun Imports ∆%: month -2.6, 12 months -5.9 Blog 8/11/13
Confidence Indicators	Historical averages 100 Jul Mfg Business Climate 95 Blog 7/28/13

Links to blog comments in Table FR:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

6/30/13 http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

6/9/13 http://cmpassocregulationblog.blogspot.com/2013/06/twenty-eight-million-unemployed-or.html

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

Growth of GDP in a quarter relative to the prior quarter is provided for France in Table VF-1. GDP fell 0.2 percent in IVQ201 and fell 0.2 percent in IQ2013, rebounding with growth of 0.5 percent in IIQ2013. The French economy grew 0.2 percent in IVQ2011, stagnating in IQ2012, contracting 0.3 percent in IIQ2011 and growing 0.2 percent in IIIQ2012. In the four quarters of 2012 and the first quarter of 2013, France’s GDP contracted 0.5 percent. Growth in the ten quarters of expansion from IIIQ2009 to IVQ2011 accumulated 4.2 percent at the annual equivalent rate of 1.6 percent. Recovery has been much weaker than the cumulative 2.6 percent in the four quarters of 2006. Weak recoveries in advanced economies have prevented full utilization of labor, capital and productive resources.

Table VF-1, France, Quarterly Real GDP Growth, Quarter on Prior Quarter ∆%

	IQ	IIQ	IIIQ	IVQ
2013	-0.2	0.5
2012	0.0	-0.3	0.2	-0.2
2011	1.1	-0.1	0.2	0.2
2010	0.3	0.6	0.5	0.5
2009	-1.7	0.0	0.1	0.7
2008	0.4	-0.7	-0.4	-1.6
2007	0.7	0.5	0.4	0.2
2006	0.7	1.1	0.0	0.8
2005	0.2	0.3	0.6	0.7
2004	0.5	0.7	0.4	0.8
2003	0.2	0.0	0.6	0.7
2002	0.6	0.5	0.1	0.0
2001	0.6	0.1	0.3	-0.3
2000	1.1	0.7	0.5	0.9
1999	0.5	0.9	1.0	1.3

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

Growth rates of France’s real GDP in a quarter relative to the same quarter a year earlier are shown in Table VF-2. France has not recovered the rates of growth in excess of 2 percent prior to the global recession. GDP fell 4.3 percent in IQ2009, 3.7 percent in IIQ2009, 3.2 percent in IIIQ2009 and 1.0 percent in IVQ2009. Growth in IVQ2011 relative to IVQ2010 was 1.4 percent and GDP growth declined to 0.4 percent in IQ2012, 0.1 percent in IIQ2012 relative to the same quarter a year earlier, 0.0 percent in IIIQ2012 relative to a year earlier and minus 0.3 percent in IVQ2012 relative to a year earlier. Growth in 2013 relative to a year earlier was minus 0.5 percent. France’s GDP increased 0.3 percent in IIQ2013 relative to a year earlier.

Table VF-2, France, Real GDP Growth Current Quarter Relative to Same Quarter Year Earlier ∆%

	IQ	IIQ	IIIQ	IVQ
2013	-0.5	0.3
2012	0.4	0.1	0.0	-0.3
2011	2.7	2.1	1.8	1.4
2010	1.0	1.6	2.1	1.9
2009	-4.3	-3.7	-3.2	-1.0
2008	1.6	0.5	-0.4	-2.3
2007	2.6	2.1	2.4	1.8
2006	2.3	3.2	2.6	2.7
2005	2.1	1.6	1.9	1.8
2004	1.9	2.6	2.4	2.4
2003	0.8	0.3	0.8	1.6
2002	0.6	1.0	0.9	1.2
2001	2.7	2.1	1.9	0.6
2000	4.4	4.2	3.6	3.2
1999	2.9	2.8	3.2	3.7

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

Chart VF-1 of the Institut National de la Statistique et des Études Économiques provides France’s quarterly real GDP from IQ1949 to IIQ2013. France’s economy has grown dynamically over decades. Recovery from the global recession in 2008-2009 has flattened.

Chart VF-1, France, Quarterly Real GDP, IQ1949-IIQ2013

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

Percentage changes and contributions of segments of GDP in France are provided in Table VF-3. Internal demand deducted 0.1 percentage points from GDP growth in IQ2013 and added 0.3 percentage points in IIQ2013. Net foreign trade deducted 0.2 percentage from growth in IQ2013 and was neutral in IIQ2013.

Table VF-3, France, Contributions to GDP Growth, Calendar and Seasonally Adjusted, %

∆% from Prior Period	IIIQ 2012	IVQ 2012	IQ 2013	IIQ 2013	2012	2013 OVHG
GDP	0.2	-0.2	-0.2	0.5	0.0	0.1
Imports	-0.1	-1.2	0.1	1.9	-0.9	0.5
Household Consump.	0.1	0.1	-0.1	0.4	-0.4	0.2
Govt. Consump.	0.4	0.4	0.3	0.5	1.4	1.3
GFCF	-0.5	-0.8	-1.0	-0.5	-1.2	-2.3
Exports	0.2	-0.7	-0.5	2.0	2.5	0.6
% Point Contribs.
Internal Demand ex Inventory Changes	0.1	0.0	-0.1	0.3	-0.1	0.0
Inventory Changes	0.0	-0.3	0.1	0.2	-0.8	-0.1
Net Foreign Trade	0.1	0.2	-0.2	0.0	1.0	0.0

Notes: Consump.: Consumption; Gvt.: Government; GFCF: Gross Fixed Capital Formation; Contribus.: Contributions; OVHG: “annual growth rate carried over at the mid-year point.

Source:  Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

Chart VF-1 of France’s Institut National de la Statistique et des Études Économiques provides percentage point contributions to GDP growth. The economy was driven in IQ2013 by changes in inventories with net trade and gross fixed capital formation (GFCF) deducting from growth. Final consumption drove the economy in IIQ2013 together with inventory changes while net trade was neutral and gross fixed capital formation deducted from growth.

Chart VF-2, France, Percentage Point Contributions to GDP Growth

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814

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 IVQ2012, minus 2.4 percent in IQ2013 and minus 2.0 percent in IIQ2013. 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
2013
IIQ2013	-2.0
IQ	-2.3	-5.2	-2.7	-7.5	-0.2
2012
IVQ	-2.8	-6.7	-4.2	-7.8	1.8
IIIQ	-2.6	-8.1	-4.3	-8.2	2.5
IIQ	-2.4	-7.5	-3.9	-8.3	2.5
IQ	-1.7	-8.9	-3.3	-7.6	2.1
2011
IVQ	-0.5	-6.9	-1.8	-3.3	3.1
IIIQ	0.3	0.1	-0.7	-2.1	5.6
IIQ	0.9	3.1	0.6	-0.6	7.0
IQ	1.3	8.8	0.9	0.6	10.9
2010
IVQ	2.0	15.3	1.1	0.8	13.2
IIIQ	1.8	13.2	1.3	2.4	12.0
IIQ	1.9	13.5	0.8	1.1	12.0
IQ	1.1	7.2	0.8	-2.0	7.3
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/92338 http://www.istat.it/it/archivio/97261

The Markit/ADACI Business Activity Index increased from 45.8 in Jun to 48.7 in Jun, indicating marginal contraction of output of Italy’s services sector for 26 consecutive months of decline since Jun 2011 with contraction at moderate rhythm (http://www.markiteconomics.com/Survey/PressRelease.mvc/5f3d71c9285442b7abcf5bd2a2b99b5b). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds weak new business for services providers (http://www.markiteconomics.com/Survey/PressRelease.mvc/5f3d71c9285442b7abcf5bd2a2b99b5b). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 49.1 in Jun to 50.4 in Jul, interrupting 23 consecutive months of contraction of Italy’s manufacturing below 50.0 with the Jul reading at the highest level since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a32a5ae7763342d280c903358a424ade). 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/a32a5ae7763342d280c903358a424ade). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jul month ∆%: 0.1 Jul 12-month ∆%: 1.2 Blog 8/11/13
Producer Price Index	Jun month ∆%: 0.4 Jun 12-month ∆%: -0.7 Blog 8/4/13
GDP Growth	IIQ2013/IQ2013 SA ∆%: minus 0.2 IIQ2013/IIQ2012 NSA ∆%: minus 2.0 Blog 3/17/13 6/16/13 8/11/13
Labor Report	Apr 2013 Participation rate 63.8% Employment ratio 56.0% Unemployment rate 12.0% Blog 6/2/13
Industrial Production	Jun month ∆%: 0.3 12 months CA ∆%: -2.1 Blog 8/11/13
Retail Sales	May month ∆%: 0.1 May 12-month ∆%: -1.1 Blog 7/28/13
Business Confidence	Mfg Jul 91.7, Mar 89.0 Construction Jul 76.5, Mar 79.4 Blog 8/4/13
Trade Balance	Balance Jun SA €3155 million versus May €2683 Exports Jun month SA ∆%: 1.2; Imports Jun month ∆%: 1.6 Exports 12 months Jun NSA ∆%: -2.7 Imports 12 months NSA ∆%: -5.6 Blog 8/11/13

Links to blog comments in Table IT:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

8/4/13 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

6/16/13 http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million.html

6/2/13 http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.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 5.2 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.7 percent in 2010 is relatively low compared to annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.2 percent in 2012.

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

	∆% on Prior Year
1998	3.6
1999	2.9
2000	4.4
2001	2.2
2002	2.3
2003	3.9
2004	3.2
2005	3.2
2006	2.8
2007	3.4
2008	-0.8
2009	-5.2
2010	1.7
2011	1.1
2012	0.2

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q1-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from 56.9 in Jun to 60.2 in Jul, indicating increase in activity in every month since the beginning of 2013 and at the fastest rate since Dec 2006 (http://www.markiteconomics.com/Survey/PressRelease.mvc/77ad41eb34aa425b94ca829ef60beebc). Paul Smith, Senior Economist at Markit, finds continuing improvement in the UK’s economy with possible strength in IIIQ2013 GDP (http://www.markiteconomics.com/Survey/PressRelease.mvc/77ad41eb34aa425b94ca829ef60beebc). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 52.9 in Jun to 54.6 in Jul, which is the highest reading in 28 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/8b3b3e48988142f1a9c4a6c6491e6f4d). Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds manufacturing improving at the highest rates since the beginning of 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8b3b3e48988142f1a9c4a6c6491e6f4d). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jul month ∆%: 0.0 Jul 12-month ∆%: 2.8 Blog 8/18/13
Output/Input Prices	Output Prices: Jul 12-month NSA ∆%: 2.1; excluding food, petroleum ∆%: 1.1 Input Prices: Jul 12-month NSA ∆%: 5.0 Excluding ∆%: 3.9 Blog 8/18/13
GDP Growth	IIQ2013 prior quarter ∆% 0.6; year earlier same quarter ∆%: 1.4 Blog 3/31/13 4/28/13 5/26/13 7/28/13
Industrial Production	Jun 2013/Jun 2012 ∆%: Production Industries 1.2; Manufacturing 2.0 Blog 8/11/13
Retail Sales	Jul month ∆%: 1.1 Jul 12-month ∆%: 3.0 Blog 8/18/13
Labor Market	Apr-Jun Unemployment Rate: 7.8%; Claimant Count 4.3%; Earnings Growth 2.1% Blog 8/18/13
Trade Balance	Balance Jun minus ₤1548 million Exports Jun ∆%: 3.2; Apr-Jun ∆%: 4.3 Imports Jun ∆%: 0.6 Apr-Jun ∆%: 0.9 Blog 8/11/13

Links to blog comments in Table UK:

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html

7/28/13 http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html

5/26/13 http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.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 Office for National Statistics provides important analysis of the relation of GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/index.html

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--january-gdp-update/sum-jan13.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--february-labour-market-update/sum-2012-q4---february-labour-update.html). The UK economy grew 0.6 percent in IQ2013 but output is still 3.3 below the level before the global recession in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html). Chart VH-1 of the UK Office for National Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) shows weakening output but relatively faster increases in employment and hours worked.

Chart VH-1, UK, Employment Level Ages 16 and Over, Total Weekly Hours and GDP, 2008-2013

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html

Table VH-2 of the UK Office for national Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) provides total weekly hours, output and employment quarterly from 2008 to 2013. Weakening output has been accompanied recently by improvements in hours worked and employment.

Table VH-1, UK, Indices of Quarterly Employment Ages 16 and Over, Total Hours Worked and GDP, 2008-2013

	Total weekly hours, Aged 16 +	GDP, CVM	Employment, Aged 16 +
	YBUS	ABMI	MGRZ
2008 Q1	100.0	100.0	100.0
Q2	98.9	99.1	100.1
Q3	98.9	97.7	99.6
Q4	98.3	95.6	99.4
2009 Q1	96.7	93.3	98.9
Q2	96.3	92.9	98.0
Q3	95.8	92.9	97.9
Q4	95.9	93.3	98.0
2010 Q1	95.7	93.7	97.7
Q2	96.5	94.7	98.2
Q3	97.0	95.1	98.9
Q4	97.4	94.9	98.7
2011 Q1	97.5	95.3	99.1
Q2	96.3	95.4	99.1
Q3	97.1	96.0	98.5
Q4	97.3	95.9	98.8
2012 Q1	98.0	95.9	99.3
Q2	98.5	95.4	99.9
Q3	99.6	96.1	100.3
Q4	99.9	95.9	100.9
2013 Q1	100.2	96.1	100.7
Q2	100.5	96.7	101.0

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html

Labor market statistics of the UK for the quarter Apr-Jun 2013 are provided in Table VH-1. The unemployment rate decreased to 7.8 percent and the number unemployed decreased 49,000 in the year, reaching 2.514 million. The employment rate is 71.5 percent. Earnings growth including bonuses was 2.1 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 4.3 percent, down 0.1 percentage points on the month and down 0.4 percentage points on the year.

Table VH-2, UK, Labor Market Statistics

	Quarter Apr-Jun 2013
Unemployment Rate	7.8% unchanged on quarter and down 0.2 from year earlier
Number Unemployed	(1) Down 4,000 on quarter and down 49,000 from year earlier to reach 2.514 million (2) Unemployment rate 16 to 24 years of age 20.7% of that age group (3) Unemployed 16 to 24 years excluding those in full-time education 676,000 (297,000 in full-time education) up 8,000 on quarter; unemployment rate 19.8% +0.3 % Points
Number Unemployed > one and two years	(1) Number unemployed over one year: 909,000, up 7,000 on quarter (2) Number unemployed over two years: 474,000, up 10,000 on quarter
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.3%, 0.0 % points on quarter, down 0.3 on year (2) Economically inactive 16-64 years down 10,000 on quarter and down 105,000 on year to 8.993 million
Employment Rate	71.5%, up 0.1 on quarter, up 0.4 % points on year
Number Employed	(1) Up 69,000 on quarter, +301,000 on year to 29.777 million                              (2) Number of employees up 34,000 on quarter to 25.27 million (3) Self-employed rose 6,000 on quarter to 4.18 million (4) Full-time 21.71 million, up 31,000 on quarter, up 60,000 on year
Earnings Growth Rates Year on Year	(1) Total +2.1% (including bonuses) over year earlier; regular 1.1%; private sector 2.6% on year earlier, public sector rose 0.9% on year earlier   (2) Regular private 1.2 % (excluding bonuses); regular public 1.1% on year earlier
Full-time and Part-time	(1) Number full-time 21.71 million, up 31,000 on quarter (2) Number part-time 8.07 million, down 38,000 on quarter
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 1.442 million; down 29,200 in month, down 145,000 on year earlier (2) Claimant count 4.3%, down 0.1 on month and down 0.4 % points on year
Labor Productivity	(1) Output per worker changed 0.0% from IVQ2012 to IQ2013 (2) Unit labor costs fell 0.4% from IVQ2012 to IQ2013

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/august-2013/index.html

Table VH-3 provides indicators of the labor force survey of the UK for Apr-Jun 2013 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 8.0 percent in Apr-Jun 2012 to 7.8 percent in Apr-Jun 2013.

Table VH-3, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Apr-Jun 2011	40,151	29,224	70.6	2,513	7.9
Apr-Jun 2012	40,186	29,476	71.0	2,564	8.0
Jun-Sep 2012	40,198	29,576	71.2	2,514	7.8
Oct-Dec 2012	40,214	29,751	71.6	2,503	7.8
Jan-Mar 2013	40,231	29,708	71.4	2,518	7.8
Apr-Jun 2013	40,248	29,777	71.5	2,514	7.8

Notes: LFHP: Labor Force Household Population Ages 16 to 64 in thousands; EMP: Employed Ages 16 and over in thousands; PART: Employment as % of Population Ages 16 to 64; UNE: Unemployed Ages 16 and over in thousands; Rate: Number Unemployed Ages 16 and over as % of Employed plus Unemployed

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/august-2013/index.html

Table VH-4, UK, Volum The volume of retail sales in the UK increased 1.1 percent in Jul 2013 and increased 3.0 percent in the 12 months ending in Jul 2013, as shown in Table VH-4. Percentage changes of retail sales in 12 months had been positive in several months since Sep 2011 with exceptions such as decline of 2.4 percent in Apr 2012, 0.8 percent in Jan 2013, 0.6 percent in Mar 2013 and 0.6 percent in Apr 2013. The quarter ending in Jul 2013 is quite strong with growth of 1.9 percent in May, 0.2 percent in Jun and 1.1 percent in Jul.

e of Retail Sales ∆%

	Month ∆%	12-Month ∆%
Jul 2013	1.1	3.0
Jun	0.2	1.9
May	1.9	1.9
Apr	-0.6	1.1
Mar	-0.6	-0.7
Feb	2.1	2.2
Jan	-0.8	-1.0
Dec 2012	-0.1	0.1
Nov	0.1	0.3
Oct	-0.9	0.2
Sep	0.5	2.1
Aug	0.0	2.1
Jul	0.0	1.7
Jun	0.3	1.8
May	1.1	1.5
Apr	-2.4	-1.9
Mar	2.4	2.8
Feb	-1.1	0.3
Jan	0.4	0.6
Dec 2011	0.1	2.4
Nov	0.0	0.2
Oct	0.9	0.5
Sep	0.6	0.1
Aug	-0.4	-1.3
Jul	0.1	-1.0
Jun	0.0	-0.9
May	-2.3	-0.9
Apr	2.2	2.1
Mar	-0.1	-0.2
Feb	-0.8	-0.1
Jan	2.2	3.4
Dec 2010	-2.1	-2.3

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2013/index.html

Retail sales in the UK struggle with oscillating and relatively high inflation. Table VH-5 provides 12-month percentage changes of the implied deflator of UK retail sales. The implied deflator of all retail sales increased 1.8 percent in the 12 months ending in Jun 2013 while that of sales excluding auto fuel increased 1.7 percent. The 12-month increase of the implied deflator of auto fuel sales rose to 17.0 percent in Sep 2011, which is the highest 12-month increase in 2011, but then declined to 0.3 percent in Dec 2012 and minus 0.2 percent in Jan 2013 but decreased 2.2 percent in May 2013, increasing 1.3 percent in Jun 2013 and 2.6 percent in Jul 2013. The percentage change of the implied deflator of sales of food stores at 3.4 percent in Jul 2013 is higher than for total retail sales. Increases in fuel prices at the retail level have occurred throughout most years since 2005 with exception of the decline of 9.5 percent in 2008 when commodity carry trades were reversed in the panic of the financial crisis. UK inflation is particularly sensitive to changes in commodity prices.

Table VH-5, UK, Implied Deflator of Retail Sales, 12-Month Percentage Changes, ∆%

		All Retail	Ex Auto Fuel	Mostly Food	Mostly Nonfood	Auto Fuel
2009	Dec	3.7	2.4	2.2	1.8	17.0
2010	Jan	4.1	2.0	2.7	1.2	23.3
	Feb	3.0	1.0	1.5	0.8	20.5
	Mar	3.6	1.4	2.2	0.9	22.7
	Apr	4.0	2.0	2.9	1.3	23.3
	May	3.4	1.5	2.0	1.1	20.9
	Jun	2.6	1.3	2.1	0.8	14.7
	Jul	2.7	1.6	3.0	0.5	13.5
	Aug	2.6	1.7	3.4	0.4	11.4
	Sep	3.1	2.6	4.3	1.2	8.3
	Oct	3.3	2.5	4.1	1.1	10.8
	Nov	3.6	3.0	4.9	1.4	9.8
	Dec	3.7	3.2	5.2	1.4	12.4
2011	Jan	4.4	3.3	5.4	1.4	14.5
	Feb	4.9	3.8	5.6	2.2	15.1
	Mar	4.3	3.0	4.3	1.9	14.9
	Apr	4.2	3.3	4.8	1.9	12.3
	May	4.6	3.5	5.6	1.8	13.2
	Jun	4.7	3.4	6.2	1.2	14.5
	Jul	5.1	3.9	6.0	2.2	14.5
	Aug	5.4	4.0	6.0	2.4	16.2
	Sep	5.1	3.7	6.2	1.7	17.0
	Oct	4.7	3.5	5.1	2.3	14.8
	Nov	4.0	3.0	4.7	1.7	12.6
	Dec	3.3	2.4	4.3	1.0	9.1
2012	Jan	2.6	2.2	3.6	1.1	5.3
	Feb	2.8	2.4	4.0	0.9	5.4
	Mar	3.0	2.7	4.5	1.1	4.9
	Apr	2.3	2.0	3.8	0.4	5.2
	May	1.4	1.5	3.1	0.2	1.2
	Jun	0.6	0.9	2.3	-0.2	-1.2
	Jul	0.4	0.7	2.0	-0.2	-1.4
	Aug	0.5	0.6	2.1	-0.8	0.4
	Sep	0.9	0.7	2.1	-0.4	2.9
	Oct	1.1	1.0	2.8	-0.4	2.6
	Nov	0.7	0.7	3.1	-1.0	1.3
	Dec	0.9	1.0	3.0	-0.3	0.3
2013	Jan	1.1	1.3	3.8	-0.7	-0.2
	Feb	0.9	1.0	3.2	-0.7	1.1
	Mar	0.9	1.1	3.1	-0.7	0.5
	Apr	0.6	1.1	3.4	-0.7	-3.0
	May	1.0	1.5	3.5	-0.2	-2.2
	Jun	1.7	1.7	3.4	0.5	1.3
	Jul	1.8	1.7	3.4	0.4	2.6

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2013/index.html

UK monthly retail volume of sales is quite volatile, as shown in Table VH-6. Total volume of sales decreased 0.6 percent in Apr 2013 and increased 1.9 percent in May 2013, 0.2 percent in Jun 2013 and 1.1 percent in Jul 2013. There was increase of 1.1 percent in retail sales excluding auto fuels in Jul 2013 and decrease of 2.5 percent in food stores, decrease of 0.3 percent in nonfood stores and increase of 1.0 percent in auto fuel stores. Multiple positive and negative variations and changes in magnitudes confirm high volatility.

VH-6, UK, Growth of Retail Sales Volume by Component Groups Month SA ∆%

		All Retail	Ex Auto Fuel	Mostly Food	Mostly Nonfood	Auto Fuel
2011	Jan	2.2	1.4	0.6	2.1	10.3
	Feb	-0.8	-0.9	-0.3	-1.5	-0.3
	Mar	-0.1	-	0.5	-0.1	-0.8
	Apr	2.2	2.3	4.1	0.4	1.8
	May	-2.3	-2.6	-4.6	-1.0	-0.3
	Jun	-	-	-0.2	-0.5	0.3
	Jul	0.1	0.2	0.7	0.1	-0.6
	Aug	-0.4	-0.4	-	-1.1	-0.5
	Sep	0.6	0.6	0.1	1.2	0.3
	Oct	0.9	0.9	0.8	1.0	1.0
	Nov	-	-0.4	-0.5	-1.0	3.1
	Dec	0.1	0.2	-	0.9	-0.8
2012	Jan	0.4	0.4	0.3	0.4	-0.1
	Feb	-1.1	-0.9	-0.2	-1.6	-2.4
	Mar	2.4	1.9	-0.5	4.5	5.8
	Apr	-2.4	-1.1	0.4	-3.2	-12.6
	May	1.1	0.6	-	1.1	5.3
	Jun	0.3	0.6	0.2	1.1	-2.4
	Jul	-	-0.3	-	-0.8	2.1
	Aug	-	-	0.1	0.5	0.6
	Sep	0.5	0.5	-0.1	0.5	0.9
	Oct	-0.9	-0.6	-0.9	-0.8	-3.4
	Nov	0.1	0.3	-0.2	0.6	-1.7
	Dec	-0.1	-0.4	-	-1.2	3.1
2013	Jan	-0.8	-0.5	-0.9	-0.5	-3.8
	Feb	2.1	2.1	0.7	3.1	3.0
	Mar	-0.6	-0.7	1.8	-3.4	0.2
	Apr	-0.6	-0.7	-3.6	2.3	-0.1
	May	1.9	1.9	2.6	1.1	1.7
	Jun	0.2	0.3	0.2	0.3	0.2
	Jul	1.1	1.1	2.5	-0.3	1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2013/index.html

Percentage growth in 12 months of retail sales volume by component groups in the UK is provided in Table VH-7. Total retail sales increased 3.0 percent in the 12 months ending in Jul 2013 with increase of 3.1 percent in sales excluding auto fuel. Sales of food stores increased 2.1 percent in the 12 months ending in Jul 2013 while sales of nonfood stores increased 2.0 percent and sales of auto fuel stores increased 1.5 percent.

Table VH-7, UK, Growth of Retail Sales Volume by Component Groups 12-Month ∆%

		All Retail	Ex Auto Fuel	Mostly Food	Mostly Nonfood	Auto Fuel
	Dec	-2.3	-1.7	-4.3	-0.4	-8.5
2011	Jan	3.4	2.9	-2.5	7.0	7.6
	Feb	-0.1	-0.6	-2.5	-0.4	4.7
	Mar	-0.2	-0.6	-1.6	-0.6	3.6
	Apr	2.1	1.9	2.2	0.4	3.9
	May	-0.9	-1.3	-3.3	-1.0	2.2
	Jun	-0.9	-1.4	-4.0	-1.1	3.2
	Jul	-1.0	-1.4	-1.2	-2.9	2.0
	Aug	-1.3	-1.7	-0.7	-4.0	1.9
	Sep	0.1	-0.2	-0.3	-1.6	3.3
	Oct	0.5	0.3	0.4	-1.1	2.5
	Nov	0.2	-0.4	-1.1	-1.9	5.2
	Dec	2.4	1.2	1.1	0.4	13.9
2012	Jan	0.6	0.3	0.8	-1.2	3.1
	Feb	0.3	0.2	0.9	-1.4	0.9
	Mar	2.8	2.2	-0.1	3.2	7.6
	Apr	-1.9	-1.2	-3.7	-0.4	-7.5
	May	1.5	2.0	1.0	1.7	-2.3
	Jun	1.8	2.6	1.4	3.3	-5.0
	Jul	1.7	2.2	0.6	2.4	-2.5
	Aug	2.1	2.5	0.8	4.1	-1.4
	Sep	2.1	2.4	0.6	3.3	-0.8
	Oct	0.2	0.9	-1.1	1.4	-5.1
	Nov	0.3	1.6	-0.9	3.1	-9.5
	Dec	0.1	0.9	-0.9	0.9	-6.0
2013	Jan	-1.0	-	-2.1	-	-9.4
	Feb	2.2	3.0	-1.2	4.7	-4.4
	Mar	-0.7	0.4	1.1	-3.2	-9.5
	Apr	1.1	0.8	-2.9	2.2	3.4
	May	1.9	2.1	-0.4	2.2	-0.1
	Jun	1.9	1.8	-0.4	1.5	2.6
	Jul	3.0	3.1	2.1	2.0	1.5

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2013/index.html

Table VH-8 provides the analysis of the UK Office for National Statistics of contributions to 12-month percentage changes of value and volume of retail sales in the UK. The volume of retail sales seasonally adjusted increased 3.0 percent in the 12 months ending in Jul 2013. Sales of predominantly food stores with weight of 41.5 percent increased 2.1 percent in the 12 months ending in Jul 2013, adding 0.8 percentage points. Mostly nonfood stores with weight of 41.3 percent increased 2.0 percent with contribution of 1.0 percentage points. Positive contribution to 12-month percentage changes of volume was made by non-store retailing with weight of 5.7 percent, growth of 18.1 percent and positive contribution of 1.0 percentage points. Automotive fuel with weight of 11.5 percent and growth of 1.5 percent added 0.2 percentage points. The value of retail sales increased 4.9 percent in the 12 months ending in Jul 2013. There were positive contributions: 2.4 percentage points for predominantly nonfood stores and 1.1 percentage points for non-store retailing. Automotive fuel stores added 0.5 percentage points while food stores added 2.4 percentage points.

Table VH-8, UK, Volume and Value of Retail Sales 12-month ∆% and Percentage Points Contributions by Sectors

Jun 2013	Weight % of All Retailing	Volume SA 12- Month ∆%	PP Cont. % points	Value SA 12- Month ∆%	PP Cont. % points
All Retailing	100.0	3.0		4.9
Mostly Food Stores	41.5	2.1	1.0	5.7	2.4
Mostly Nonfood Stores	41.3	2.0	0.8	2.3	1.0
Non-store Retailing	5.7	18.1	1.0	17.7	1.0
Automotive Fuel	11.5	1.5	0.2	4.4	0.5

Cont.: Contribution

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/rsi/retail-sales/july-2013/index.html

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013