CMP Associates Regulation Blog: Interest Rate Risks, Duration Dumping and Peaking Valuations of Risk Financial Assets, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, United States Housing Collapse, World Economic Slowdown and Global Recession Risk: Part III

Interest Rate Risks, Duration Dumping and Peaking Valuations of Risk Financial Assets, Collapse of United States Dynamism of Income Growth and Employment Creation, United States Commercial Banks Assets and Liabilities, United States Housing Collapse, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

Executive Summary

IA United States Commercial Banks Assets and Liabilities

IA1 Transmission of Monetary Policy

IA2 Functions of Banks

IA3 United States Commercial Banks Assets and Liabilities

IA4 Theory and Reality of Economic History and Monetary Policy Based on Fear of Deflation

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

II United States Housing Collapse

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 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 0.7 percent in IIQ2013 and 1.5 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	0.7	1.5

QOQ: Quarter relative to prior quarter; SAAR: seasonally adjusted annual rate

Source: Country Statistical Agencies http://www.bea.gov/national/index.htm#gdp

There is evidence of deceleration of growth of world trade and even contraction in recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB and earlier 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 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Jul 2013, Japan’s exports grew 12.2 percent in 12 months while imports increased 19.6 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 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.2 percentage points in IQ2012 and added 0.2 percentage points in IIQ2013. 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 and added 0.3 percentage points in IIQ2013. 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		Jul 2013 12.2 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		Jul 2013 19.6 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	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.2 IIQ2013 0.2
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 0.3 IIQ2013

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 Jul 2013. The share of Asia in Japan’s trade is more than one-half for 54.1 percent of exports and 44.7 percent of imports. Within Asia, exports to China are 18.5 percent of total exports and imports from China 21.3 percent of total imports. While exports to China increased 9.5 percent in the 12 months ending in Jul 2013, imports from China increased 18.3 percent. The second largest export market for Japan in Jul 2013 is the US with share of 18.5 percent of total exports, which is almost equal to that of China, and share of imports from the US of 8.7 percent in total imports. Western Europe has share of 9.8 percent in Japan’s exports and of 10.5 percent in imports. Rates of growth of exports of Japan in Jul 2013 are relatively high for several countries and regions with growth of 18.4 percent for exports to the US, 24.4 for exports to Mexico, 36.4 percent for exports to Brazil and 30.8 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 Jul 2013 are positive for all trading partners. Imports from Asia increased 18.5 percent in the 12 months ending in Jul 2013 while imports from China increased 18.3 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

Jul 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5.962,031	12.2	6,985,990	19.6
Asia	3,223,106	9.1	3,120,670	18.5
China	1,104,485	9.5	1,490,877	18.3
USA	1,105,866	18.4	605,890	18.2
Canada	66,302	4.0	112,292	19.8
Brazil	52,567	36.4	93,169	30.1
Mexico	86,036	24.4	40,103	33.7
Western Europe	585,031	14.4	736,306	15.1
Germany	159,224	15.6	200,542	17.9
France	54,097	41.1	101,758	7.6
UK	93,899	33.7	54,786	14.7
Middle East	207,473	12.3	1,251,104	26.4
Australia	144,951	30.8	463,196	15.8

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

World trade projections of the IMF are in Table V-6. There is 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 53.9 in Aug from 53.7 in Jul, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/3098549eef6c47e6a5fafaa84ae66cd8). New export orders registered 52.0 in Aug down from 52.5 in Jul, indicating expansion at slower rate. Chris Williamson, Chief Economist at Markit, finds that the survey data are consistent with continuing moderate growth in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/3098549eef6c47e6a5fafaa84ae66cd8). 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	Jun SA ∆% 0.6; 12 month NSA ∆%: 7.8 Blog 8/25/13
New House Sales	Jul 2013 month SAAR ∆%: minus 13.4 Jan-Jul 2013/Jan-Jul 2012 NSA ∆%: 21.8 Blog 8/25/13
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	Jul 2013 SAAR ∆%: Securities -14.6 Loans 1.4 Cash Assets 44.9 Deposits 8.9 Blog 8/25/13
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:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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

6/9/13 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

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:

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
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	Jun month SA ∆% -0.6 12-month NSA ∆% 0.3 Blog 8/25/13
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 ∆%: 12.2 Imports Jun 12 months ∆% 19.6 Blog 8/25/13

Links to blog comments in Table JPY:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 0.6 percent in IIQ2013 (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html), industry increased 1.5 percent, the tertiary sector increased 0.9 percent, government decreased 0.4 percent and construction increased 4.6 percent. The report shows that the all industry index increased 1.1 percent in IQ2013. Industry added 0.25 percentage points to growth of the all industry index and the tertiary index added 0.9 percentage points. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.3 percent (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html), when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 2.0 percent in IQ2012 and 0.8 percent in IIQ2011. GDP was flat in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

Table VB-1, Japan, Indices of All Industry Activity Percentage Change from Prior Quarter SA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2013
IIQ2013	4.6	1.5	0.9	-0.4	1.1	0.6
Cont to IIQ % Change	0.22	0.25	0.60	-0.05
IQ2013	-0.5	0.6	0.2	0.1	0.0	0.9
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	0.3
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.9
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.2
IQ	2.0	1.6	0.0	0.2	0.1	1.2

AG: indices of agriculture, forestry and fisheries has weight of 1.4% and is not included in official report or in this table; CON: indices of construction industry activity; IND: indices of industrial production; TERT: indices of tertiary industry activity; GOVT: indices of government services, etc.; ALL IND: indices of all industry activity

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

There are more details in Table VB-2. In Jun 2013, the all industry activity index decreased 0.6 percent with industry falling 3.0 percent and services 0.3 percent while construction increased 3.4 percent and government changed 0.0 percent. Industry deducted 0.53 percentage points and services 0.20 percentage points while construction added 0.17 percentage points and government contributed 0.00 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.4 percent in Mar 2013, 0.1 percent in Apr 2013 and 1.2 percent in May 2013. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.1 percent in Mar 2013, 0.9 percent in Apr 2013 and 1.9 percent in May 2013. The highest risk to Japan is if weakening world growth would affect Japanese exports.

Table VB-2, Japan, Indices of All Industry Activity Percentage Change from Prior Month SA ∆%

	CON	IND	TERT	GOVT	ALL IND
Jun 2013	3.4	-3.0	-0.3	0.0	-0.6
Cont to Jun % Change	0.17	-0.53	-0.20	0.00
May 2013	5.2	1.9	1.3	0.1	1.2
Apr	-0.1	0.9	-0.5	0.2	0.1
Mar	0.6	0.1	0.2	-0.9	0.4
Feb	-1.3	0.9	1.3	-0.2	0.4
Jan	-1.4	-0.7	-0.8	0.6	-0.7
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index increased 0.7 percent in IIQ2013 relative to a year earlier and GDP increased 0.9 percent relative to a year earlier (Table VB-4 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html). Industry decreased 3.1 percent relative to a year earlier while the tertiary sector increased 1.4 percent, adding combined 0.40 percentage points to growth of the all industry activity index of 0.7 percent while construction added 0.35 percentage points and government deducted 0.02 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 1.2 percent in 2012 and real GDP increased 2.0 percent. Industry increased 0.1 percent, adding 0.02 percentage points, while the tertiary sector increased 1.4 percent, adding 0.94 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

Table VB-3, Japan, Indices of All Industry Activity Percentage Change from Earlier Calendar Year and Same Quarter Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2012	3.2	0.1	1.4	0.3	1.2	2.0
Cont to 2012 % Change	0.15	0.02	0.94	0.04
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.6
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2013
IIQ	8.7	-3.1	1.4	-0.2	0.7	0.9
Cont to IIQ % Change	0.35	-0.55	0.95	-0.02
IQ2013	5.4	-7.8	-0.2	0.7	-1.2	0.3
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	0.4
IIIQ	3.1	-4.2	0.5	0.4	-0.2	0.3
IIQ	4.9	5.5	2.1	0.6	2.6	3.8
IQ	-1.1	6.2	2.4	0.3	2.6	3.4

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

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index increased 0.3 percent in Jun 2013 relative to Jun 2012. Industry fell 4.6 percent in Jun 2013 relative to a year earlier, subtracting 0.84 percentage points to growth of the all industry activity index. The tertiary sector increased 1.0 percent, adding 0.66 percentage points. Construction added 0.44 percentage points to the index and government added 0.05 percentage points.

Table VB-4, Japan, Indices of All Industry Activity Percentage Change from Same Month Year Earlier NSA ∆%

	CON	IND	TERT	GOVT	ALL IND
Jun 2013	10.8	-4.6	1.0	0.4	0.3
Cont to Jun % Change	0.44	-0.84	0.66	0.05
May 2013	8.9	-1.0	1.8	-0.2	1.3
Apr	6.3	-3.4	1.3	-0.9	0.4
Mar	5.4	-7.1	0.7	0.1	-0.7
Feb	4.3	-10.1	-1.6	1.9	-2.4
Jan	6.8	-6.1	0.1	-0.1	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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

The structure of exports and imports of Japan is in Table VB-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 31.4 percent of Japan’s imports and increased 20.7 percent in the 12 months ending in Jul 2013 because of alternating carry trades into commodity futures in accordance with risk aversion. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 13.1 percent of Japan’s exports with increase of 9.0 percent in the 12 months ending in Jul 2013. Machinery contributes 19.3 percent of Japan’s exports with increase of 7.5 percent in the 12 months ending in Jul 2013. Electrical machinery contributes 19.3 percent of Japan’s exports with increase of 7.4 percent in the 12 months ending in Jul 2013. Exports of transport equipment with share of 24.0 percent in total exports increased 13.5 percent in the 12 months ending in Jul 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-5 shows increase of the major categories of motor vehicles of 14.3 percent: cars increased 17.0 percent with decrease of 2.5 percent in the minor category of buses and trucks, increase of 8.7 percent for parts of motor vehicles, increase of 23.9 percent for motorcycles and increase of 19.1 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

Table VB-5, Japan, Structure and Growth of Exports and Imports % and ∆% Millions Yens

Jul 2013	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	5,962,031	100.0	12.2	12.2
Foodstuffs	35,343	0.6	28.5	0.1
Raw Materials	96,319	1.6	16.6	0.3
Mineral Fuels	141,634	2.4	36.1	0.7
Chemicals	628,291	10.5	22.4	2.2
Manufactured Goods	781,400	13.1	9.0	1.2
Machinery	1,148,295	19.3	7.4	1.5
Electrical Machinery	1,022,346	17.1	6.4	1.2
Transport Equipment	1,432,082	24.0	13.5	3.2
Motor Vehicles	920,899	15.4	14.3	2.2
Cars	794,870	13.3	17.0	2.2
Buses & Trucks	111,213	1.9	-2.5	-0.1
Parts of Motor Vehicles	296,339	5.0	8.7	0.4
Motorcycles	17,049	0.3	23.9	0.1
Ships	144,207	2.4	19.1	0.4
Other	676,321	11.3	17.4	1.9
Imports	6,985.990	100.0	19.6	19.6
Foodstuffs	577,418	8.3	16.2	1.4
Raw Materials	503,468	7.2	24.2	1.7
Mineral Fuels	2,192,070	31.4	20.7	6.4
Chemicals	599,349	8.6	14.4	1.3
Manufactured Goods	563,719	8.1	18.6	1.5
Machinery	547,892	7.8	24.2	1.8
Electrical Machinery	839,828	12.0	13.3	1.7
Transport Equipment	246,021	3.8	30.8	1.1
Other	898,225	12.9	21.6	2.7

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

Table VB-6 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2012. Exports grew at the average yearly rate of 3.2 percent while imports grew at 3.3 percent per year in the years from 1979 to 2012. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficit in 2012.

Table VB-6, Japan, Exports and Imports Calendar Year 1979-2010 Billion Yens

Years	Exports	Imports	Balance
1950	298	348	-50
1955	723	889	-166
1960	1,459	1,616	-157
1965	3,042	2,940	102
1970	6,954	6,797	157
1975	16,545	17,170	-625
1979	22,531	24,245	-1,714
1980	29,382	31,995	-2,613
1981	33,468	31,464	2,004
1982	34,432	32,656	1,776
1983	34,909	30,014	4,895
1984	40,325	32,321	8,004
1985	41,955	31,084	10,871
1986	35,289	21,550	13,739
1987	33,315	21,736	11,579
1988	33,939	24,006	9,933
1989	37,822	28,978	8,844
1990	41,456	33,855	7,601
1991	42,359	31,900	10,459
1992	43,012	29,527	13,485
1993	40,202	26,826	13,376
1994	40,497	28,104	12,393
1995	41,530	31,548	9,982
1996	44,731	37,993	6,738
1997	50,937	40,956	9,981
1998	50,645	36,653	13,992
1999	47,547	35,268	12,279
2000	51,654	40,938	10,716
2001	48,979	42,415	6,564
2002	52,108	42,227	9,881
2003	54,548	44,362	10,186
2004	61,169	49,216	11,953
2005	65,656	56,949	8,707
2006	75,246	67,344	7,902
2007	83,931	73,135	10,796
2008	81,018	78,955	2,063
2009	54,170	51,499	2,671
2010	67,399	60,764	6,635
2011	65,546	68,111	-2,565
2012	63,748	70,689	-6,941

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for Jul 2013. The share of Asia in Japan’s trade is more than one-half for 54.1 percent of exports and 44.7 percent of imports. Within Asia, exports to China are 18.5 percent of total exports and imports from China 21.3 percent of total imports. While exports to China increased 9.5 percent in the 12 months ending in Jul 2013, imports from China increased 18.3 percent. The second largest export market for Japan in Jul 2013 is the US with share of 18.5 percent of total exports, which is almost equal to that of China, and share of imports from the US of 8.7 percent in total imports. Western Europe has share of 9.8 percent in Japan’s exports and of 10.5 percent in imports. Rates of growth of exports of Japan in Jul 2013 are relatively high for several countries and regions with growth of 18.4 percent for exports to the US, 24.4 for exports to Mexico, 36.4 percent for exports to Brazil and 30.8 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 Jul 2013 are positive for all trading partners. Imports from Asia increased 18.5 percent in the 12 months ending in Jul 2013 while imports from China increased 18.3 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 VB-7, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yens

Jul 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,962,031	12.2	6,985,990	19.6
Asia	3,223,106	9.1	3,120,670	18.5
China	1,104,485	9.5	1,490,877	18.3
USA	1,105,866	18.4	605,890	18.2
Canada	66,302	4.0	112,292	19.8
Brazil	52,567	36.4	93,169	30.1
Mexico	86,036	24.4	40,103	33.7
Western Europe	585,031	14.4	736,306	15.1
Germany	159,224	15.6	200,542	17.9
France	54,097	41.1	101,758	7.6
UK	93,899	33.7	54,786	14.7
Middle East	207,473	12.3	1,251,104	26.4
Australia	144,951	30.8	463,196	15.8

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

Table VB-8 provides the trade balance of Japan by countries and regions in Jul 2013. The significantly large deficits of JPY 1,043,661 million with the Middle East, JPY 386,392 million with China, JPY 318,245 million with Australia and JPY 151,275 million with Western Europe do not compensate surpluses of JPY 102,436 million with Asia and JPY 499,976 million with the US.

Table VB-8, Japan, Trade Balance, Millions of Yen

Jul 2013	Millions of Yen
Total	-1.023,959
Asia	102,436
China	-386,392
USA	499,976
Canada	-45,990
Brazil	-40,602
Mexico	45,933
Western Europe	-151,275
Germany	-41,318
France	-47,661
UK	39,113
Middle East	-1,043,631
Australia	-318,245

Source: Japan, Ministry of Finance http://www.customs.go.jp/toukei/info/index_e.htm

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-9 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-9, 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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-1 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-7 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 107.4 in Jul 2013 for a gain of 14.3 percent relative to Jan 2012 and 2.4 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart IV-1, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart IV-1A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 1.2 percent to 99.1 in Jun 2013 relative to Jun 2009.

Chart IV-1A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-2 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates collapsing to zero into commodity futures and decline during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan. The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 122.8 in Jul 2013 or gain of 8.6 percent relative to Apr 2012 and 31.3 percent relative to Jun 2009.

Chart IV-2, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart IV-2A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 111.6 in Jul 2013 or minus 6.6 percent relative to Apr 2012 and gain of 29.5 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 5.3 percent from Jun 2009 to Apr 2012 while the import corporate goods price index increased 38.6 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-2A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

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

Table IV-10provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Jun 2013. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Jul 2013, the export index on the contract currency basis decreased 0.1 percent and decreased 7.0 percent on the yen basis. For the entire period from Jan 2008 to Jul 2013, the import index increased 10.8 percent on the contract currency basis and increased 3.2 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-10, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

Month	Exports Contract Currency	Exports Yen	Imports Contract Currency	Imports Yen
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.2	96.3	118.1	109.9
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.6
2012/08	100.8	94.1	112.4	103.6
2012/09	100.9	94.0	114.7	105.2
2012/10	101.0	94.7	113.8	105.2
2012/11	100.9	95.9	113.3	106.6
2012/12	100.7	98.0	113.6	109.7
2013/01	101.0	102.5	114.0	115.5
2013/02	101.5	105.9	114.9	120.4
2013/03	101.3	106.7	115.2	122.2
2013/04	100.2	107.5	114.3	124.0
2013/05	99.6	109.1	112.7	125.4
2013/06	99.2	106.1	112.2	121.4
2013/7	99.1	107.4	111.6	122.8

Source: Bank of Japan http://www.boj.or.jp/en/statistics/pi/cgpi_2010/index.htm/

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-11. Petroleum and coal with weight of 5.7 percent increased 2.1 percent in Jul 2013 and increased 16.8 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, increased 0.2 percent in Jul 2013 and increased 1.2 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income.

Table IV-11, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Jul 2013	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.5	2.2
Food, Beverages, Tobacco, Feedstuffs	137.5	0.2	1.1
Petroleum & Coal	57.4	2.1	16.8
Production Machinery	30.8	0.2	1.2
Electronic Components	31.0	0.6	-0.8
Electric Power, Gas & Water	52.7	5.1	9.5
Iron & Steel	56.6	0.3	-1.7
Chemicals	92.1	0.1	5.0
Transport Equipment	136.4	0.0	-1.5

Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1307.pdf

Percentage point contributions to change of the corporate goods price index (CGPI) in Jul 2013 are provided in Table IV-12 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.5 percent in Jul 2013, the energy shock is evident in the contribution of 0.33 percentage points by electric power, gas and water in new carry trades of exposures in commodity futures. The exports CGPI decreased 0.1 percent on the basis of the contract currency with deduction of 0.09 percentage points by metals and related products. The imports CGPI decreased 0.5 percent on the contract currency basis. Metals & related products deducted 0.37 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table IV-12, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Jul 2013	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 0.5%
Electric Power, Gas & Water	0.33
Petroleum & Coal Products	0.15
Food, Beverages, Tobacco & Feedstuff	0.04
Lumber & Wood Products	0.02
Agriculture, Forestry & Fishery Products	0.02
Iron & Steel	0.02
Nonferrous Metals	-0.02
B. Export Price Index	Monthly Change: -0.1% contract currency
Metals & Related Products	-0.09
Transportation Equipment	-0.08
General Purpose, Production & Business Oriented Machinery	-0.05
Electric & Electronic Products	0.12
Chemicals & Related Products	0.03
C. Import Price Index	Monthly Change: -0.5 % contract currency basis
Metals & Related Products	-0.37
Petroleum, Coal & Natural Gas	-0.11
Foodstuffs & Feedstuffs	-0.05
Chemicals & Related Products	-0.03
Electric & Electronic Products	0.02

Source: Bank of Japan http://www.boj.or.jp/en/ http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1307.pdf

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/

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.

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/6db45ffe4c024d7aadb1e6e701bd9f02) is moving at faster pace. The overall Flash HSBC China Manufacturing PMI^™ increased from 47.7 in Jul to 50.1 in Aug, which is moderately above the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index increased from 48.0 in Jul to 50.6 in Aug, moving into moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the stabilizing index suggests recent stimulus is influencing economic activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/6db45ffe4c024d7aadb1e6e701bd9f02). 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

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 50.5 in Jul to 51.7 in Aug, which is a high in 26 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd58998f084a468c8df4ba5b07d4754b). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the euro area is experiencing the fastest growth of business in about two years (http://www.markiteconomics.com/Survey/PressRelease.mvc/fd58998f084a468c8df4ba5b07d4754b). 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:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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

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	3.8
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_278_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 52.1 in Jul to 53.4 in Aug, for the highest reading in seven months with stronger improvement in manufacturing output at 55.3 in Aug, which is a 26 month high, while services increased to 52.4 for a six-month high (http://www.markiteconomics.com/Survey/PressRelease.mvc/aca6a0c2f9ea4c13a1a33a78a2d4f84f). New export orders for manufacturing increased after five consecutive months of decline. Tim Moore, Senior Economist at Markit, finds that the data is consistent with expansion of the German economy in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/aca6a0c2f9ea4c13a1a33a78a2d4f84f). 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 8/25/13
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:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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 2001 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	-0.5	-2.0
2007	0.6	0.6	0.8	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 Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Table VE-2 provides percentage changes of Germany’s GDP in a quarter relative to the same quarter a year earlier. Growth was weak in the recovery from the recession of 2001 through 2005, as in most of the euro area (see Pelaez and Pelaez, The Global Recession Risk (2007), 116-46). Germany’s economy then grew robustly in 2006 and 2007 until the global recession after 2007. Germany recovered with strong growth in 2010 and vigorous 5.7 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_278_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

Table VE-4 provides annual 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.

Table VE-4, 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	3.8
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

The Statistisches Bundesamt provides the analysis of percentage point contributions to GDP on growth from the prior quarter, shown in Table VE-5. The original data are adjusted for price but not for seasonality. There is strong internal demand, or consumption and investment, which is uncommon in advanced economies. Consumption provided 0.3 percentage points to growth in IIIQ2012 and grew 0.4 percent from the prior quarter; provided 0.0 percentage points in IVQ2012 with growth of 0.0 percent; provided 0.1 percentage points in IQ2013 with growth of 0.2 percent; and added 0.4 percentage points in IIQ2013with growth of 0.5 percent. Growth of fixed capital formation (GFCF) contributed 0.0 percentage points to growth of GDP in IIIQ2012 and increased 0.1 percent; deducted 0.1 percentage points in IVQ2012 and declined 3.0 percent relative to a year earlier; deducted 1.0 percentage points in IVQ2012 and declined 0.6 percent; deducted 0.4 percentage points in IQ2013 and declined 2.1 percent relative; and added 0.3 percentage points in IIQ2013, increasing 1.9 percent. Domestic uses added 0.5 percentage points in IIQ2013 and grew 0.6 percent. Net exports contributed 0.3 percentage points in IIIQ2012; deducted 0.5 percentage points in IVQ2012; deducted 0.2 percentage points in IQ2013; and added 0.3 percentage points in IIQ2013. The rates of growth of exports and imports fell from over 10 percent to single digits and negative changes in IVQ2012 and IQ2013, rebounding with growth of exports of 2.2 percent in IIQ2013 and of imports of 2.0 percent. GDP per person in employment grew minus 0.6 percent in IIQ2013.

Table VE-5, Germany, Percentage Point Contributions of Use of Gross Domestic Product on Growth from Prior Quarter, Price Adjusted

	IIIQ 11 PP	∆% IIIQ 12	IVQ 12 PP	∆% IVQ 12	IQ13 PP	∆% IQ 13	IIQ 13 PP	∆% IIQ 13
Consumption Total	0.3	0.4	0.0	0.1	0.1	0.2	0.4	0.5
Households Consumption	0.2	0.3	0.0	0.1	0.1	0.2	0.3	0.5
Government Consumption	0.1	0.6	0.0	0.1	0.0	0.1	0.1	0.6
Gross Capital Formation	-0.3	-1.8	0.0	-0.3	0.0	0.2	0.2	0.9
Gross Fixed Capital Formation (GFCF)	0.0	0.1	-0.1	-0.6	-0.4	-2.1	0.3	1.9
GFCF in Machinery & Equipment	0.0	-0.6	0.0	-0.3	-0.1	-2.1	0.1	0.9
GFCF in Construction	0.0	0.5	-0.1	-1.0	-0.2	-2.2	0.3	2.6
Change in Inventories	-0.3		0.1		0.4		-0.1
Domestic Uses	0.0	0.0	0.0	0.0	0.2	0.2	0.5	0.6
Net Exports	0.3		-0.5		-0.2		0.2
Exports		0.5		-1.6		-0.7		2.2
Imports		0.1		-0.9		-0.4		2.0
GDP		0.2		-0.5		0.0		0.7
GDP per Person in Employment		0.0		-0.6		-0.2		0.6
GDP per Hour Worked		-0.4		0.3		-0.3		0.1

PP: Percentage Points

Table VE-6 provides segments of Germany’s GDP with growth in IIQ2013 and contributions to growth in percentage points. The impulse of growth of GDP in IIQ2013 originated in 0.9 percentage points added by consumption of which 0.6 percentage points by household consumption and 1.0 percentage points by domestic uses. Gross capital formation added 0.1 percentage points.

Table VE-6, Germany, Percentage Point Contributions of Use of Gross Domestic Product on Growth from Year Earlier, Price Adjusted

	IIQ2013 PP	∆% IIQ2013
Consumption Total	0.9	1.1
Households Consumption	0.6	1.1
Government Consumption	0.2	1.3
Gross Capital Formation	0.1	0.6
Gross Fixed Capital Formation (GFCF)	0.1	0.5
GFCF in Machinery & Equipment	-0.1	-1.2
GFCF in Construction	0.1	1.2
Change in Inventories	0.0
Domestic Uses	1.0	1.0
Net Exports	-0.1
Exports		1.1
Imports		1.4
GDP		0.9
GDP per Person in Employment		0.3
GDP per Hour Worked		-0.3

PP Percentage Points

Percentage changes from year earlier of gross value added by economic sectors in Germany are in Table VE-7. The two rows of industry ex construction and manufacturing reveal sharp reductions in yearly growth rates from double digits in 2010, upper single digits in 2011, contractions in 2012 and IQ2013 and mild growth in IIQ2013. Finance and insurance rebounded from decline of 1.7 percent in 2007 to growth from 2010 to 2012 and IQ2013 but decline in IIQ2013. Business services also grew at relatively higher rates from minus 12.3 percent in 2007 to 5.5 percent in 2010, 3.1 percent in 2011, 2.9 percent in 2012, 1.7 percent in IQ2013 and 3.4 percent in IIQ2013.

Table VE-7, Germany, Percentage Change from Year Earlier of Gross Value Added by Economic Sector, Price Adjusted NSA

	2010	2011	2012	IQ 2013	IIQ 2013
Agriculture	-15.0	-22.5	1.6	-2.6	-1.6
Industry ex Construction	16.5	-5.5	-0.4	-4.9	0.4
Manufacturing	20.1	9.1	-0.7	-5.1	0.8
Construction	8.7	4.6	-2.4	-9.4	-0.5
Trade, Transport, Accommodation & Food Services	-4.9	2.7	0.6	-2.4	1.0
Information & Communications.	-0.2	8.4	2.0	1.9	2.3
Finance & Insurance	1.3	2.2	1.8	2.8	-3.5
Real Estate	0.1	3.5	1.6	1.2	1.3
Business Services	5.5	3.1	2.9	1.7	3.5
Public Services, Education & Health	2.1	1.5	0.9	0.2	0.2
Other Services	0.3	0.2	1.4	-1.3	-0.3
Total Gross Value Added	4.4	3.3	0.8	-1.5	0.7

Chart VE-1 of the Statistisches Bundesamt Deutschland (Federal Statistics Agency of Germany) provides GDP at current prices from 2005 to 2013. The German economy is productive with significant dynamism over the long term. There are fluctuations in an increasing trend since 2009.

Chart VE-1, Germany, GDP, Current Prices, Billion Euro

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Table VE-1A provides US GDP in current prices at seasonally adjusted annual rates (SAAR) from 2005 to 2013. There is sharp decline with the recession beginning in IVQ2007 and upward trend during the expansion after IIIQ2009.

Chart VE-1A, US, Gross Domestic Product, Current Prices, Seasonally Adjusted at Annual Rates, Billions of Dollars, 2005-2013

Sources: Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart VE-2 of the Statistisches Bundesamt Deutschland (Federal Statistics Agency of Germany) provides the index of price-adjusted chain-linked GDP of Germany from 2009 to 2013. Germany was growing rapidly before the global contraction and rebounded with significant strength along a strong upward trend that could be flattening.

Chart VE-2, Germany, Index of Price-Adjusted Chain-Linked GDP, 2000=100

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Chart VE-2A provides US real GDP, seasonally adjusted at annual rates (SAAR) in billions of chained dollars of 2005 from 2009 to 2013. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 15 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html).

Chart VE-2A, US, Real Gross Domestic Product, Seasonally Adjusted at Annual Rates, Billions of Chained 2005 Dollars, 2009-2013

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

Table VE-8 provides Germany’s GDP of €674.39 billion in IQ2013 and €694.91 billion in IIQ2013 and its uses. Private consumption is 57.3 percent of GDP in IIQ2013 and gross capital formation 17.0 percent with government consumption of 19.4 percent and net exports 6.3 percent. Germany’s savings ratio has been in the range of 8.8 percent to 13.1 percent. Structural reforms in the early 2000s provided strength and dynamism to Germany’s economic performance.

Table VE-8, Germany, GDP and Uses, Euro Billions and %

	IQ2013	IIQ2013
GDP Euro Billions	674.39	684.91
Percent Distribution of Uses
Gross Capital Formation	17.0	17.0
Household and NPISH Consumption	57.6	57.3
Balance of Exports and Imports	5.9	6.3
Government Consumption	19.5	19.4
Memo: Savings Ratio %	13.1	9.6
2012	10.3
2011	10.4
2010	10.9
2009	10.9
2008	11.5

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html

Chart VE-3 provides US personal savings as a percentage of disposable personal income from IQ1980 to IQ2013. The US savings ratio recovered during the global recession but fell again because of financial repression of zero interest rates.

Chart VE-3, US, Personal Savings as Percent of Disposable Personal Income, Quarterly, 1980-2013

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

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 fell from 49.1 in Jul to 47.9 in Aug for a two-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/547cb0f2e4bd47a791b811e256927034). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data suggest sharper deceleration with encouragement in growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/547cb0f2e4bd47a791b811e256927034). 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 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:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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

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 5.1 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.6 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.2 percent in 2012. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2012, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 percent. Growth in the current cyclical expansion has been only at 1.0 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2012 was lower by 3.1 percent than in 2007.

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

	∆% on Prior Year
1998	3.5
1999	2.9
2000	4.4
2001	2.1
2002	2.3
2003	3.9
2004	3.3
2005	3.3
2006	2.7
2007	3.4
2008	-0.8
2009	-5.1
2010	1.6
2011	1.1
2012	0.2
Average Growth Rates ∆% per Year
1948-2012	2.6
1950-1959	2.7
1960-1969	3.2
1970-1979	2.5
1980-1989	3.2
1990-1999	2.9
2000-2007	3.0
2007-2012	-3.1%
2000-2012	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2013/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 ∆% 0.7; year earlier same quarter ∆%: 1.5 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13
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:

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html

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-gdp-update/index.html 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 accelerating 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-gdp-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-gdp-update/index.html

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. Improving 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

			Index, 2008 Q1 =100
	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	93.2	98.9
Q2	96.3	92.8	98.0
Q3	95.8	92.8	97.9
Q4	95.9	93.2	98.0
2010 Q1	95.7	93.7	97.7
Q2	96.5	94.7	98.2
Q3	97.0	95.0	98.9
Q4	97.4	94.8	98.7
2011 Q1	97.5	95.3	99.1
Q2	96.3	95.4	99.1
Q3	97.1	95.9	98.5
Q4	97.3	95.8	98.8
2012 Q1	98.0	95.8	99.3
Q2	98.5	95.4	99.9
Q3	99.6	96.1	100.3
Q4	99.9	95.8	100.9
2013 Q1	100.2	96.1	100.7
Q2	100.5	96.8	101.0

Source: UK Office for National Statistics

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

The UK Office for National Statistics provides an important revision of the national accounts of the UK (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q1-2013/index.html http://www.ons.gov.uk/ons/dcp171778_314093.pdf pages 5-6 and reference to Hardie and Lee (2013) ‘Impact of changes in the national accounts and

economic commentary for Q1 2013 (193.4 Kb Pdf)’.):

“Revisions resulting from the incorporation of new data, new methodology, replacement of forecasts, improvements to seasonal adjustment and rebalancing of annual supply and use tables have been taken back to the first quarter of 1997. Methodological revisions have been modelled back to 1991 in such a way as to avoid any discontinuities. Data has also been rebased back to the beginning of the time series.”

The new data, additions and revisions are analyzed here. Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the second estimate for IIQ2013 (http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2013/index.html). GDP grew 0.7 percent in IIQ2013 relative to IQ2013. Growth of 0.7 percent in IIIQ2012 interrupted two consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IIQ2013 is lower by 3.3 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q2-2013/stb-gdp-preliminary-estimate--q2-2013.html).

Table VH-1A, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2013	0.3	0.7
2012	0.0	-0.5	0.7	-0.2
2011	0.5	0.1	0.6	-0.1
2010	0.5	1.0	0.4	-0.2
2009	-2.5	-0.4	0.0	0.4
2008	0.1	-0.9	-1.4	-2.1
2007	1.0	1.3	1.2	0.1
2006	0.4	0.3	0.2	0.8
2005	0.8	1.3	1.0	1.3
2004	0.7	0.4	0.1	0.7
2003	0.5	1.3	1.3	1.3
2002	0.5	0.7	0.8	1.0
2001	0.8	0.7	0.5	0.1
2000	1.4	1.0	0.3	0.3
1999	0.3	0.0	1.9	1.3
1998	0.8	0.8	0.7	1.0

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2013/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.3 percent in IVQ2008, 6.8 percent in IQ2009, 6.3 percent in IIQ2009 and 5.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.0 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IQ2011, 0.8 percent in IIQ2011, 1.0 percent in IIIQ2011 and 1.1 percent in IVQ2011 but only 0.6 percent in IQ2012, change of 0.0 percent in IIQ2012 relative to IQ2011, growth of 0.1 percent in IIIQ2012 and 0.0 percent in IVQ2012. Growth increased to 0.3 percent in IQ2013 relative to a year earlier and 0.3 percent in IQ2013 relative to IVQ2012. GDP increased 0.7 percent in IIQ2013 relative to IQ2013 and 1.5 percent in IIQ2013 relative to IIQ2012. In IQ2012, GDP changed 0.0 percent and increased 0.6 percent relative to a year earlier. In IIQ2012, GDP fell 0.5 percent relative to IQ2012 and changed 0.0 percent relative to a year earlier. In IIIQ2012, GDP increased 0.7 percent and grew 0.1 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.2 percent and grew 0.0 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. In IIQ2013, GDP increased 0.7 percent and 1.5 percent relative to a year earlier.

Table VH-2, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2013	0.3	1.5
2012	0.6	0.0	0.1	0.0
2011	1.7	0.8	1.0	1.1
2010	0.5	2.0	2.4	1.8
2009	-6.8	-6.3	-5.0	-2.5
2008	2.8	0.6	-2.1	-4.3
2007	2.4	3.3	4.3	3.7
2006	4.0	3.0	2.3	1.8
2005	2.0	2.8	3.7	4.4
2004	4.7	3.7	2.5	1.9
2003	3.2	3.8	4.3	4.5
2002	1.8	1.9	2.3	3.2
2001	2.4	2.1	2.2	2.0
2000	4.7	5.7	4.1	3.0
1999	2.8	2.1	3.2	3.6
1998	4.0	3.5	3.4	3.4

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q2-2013/index.html

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 9.5 percent in 2009 and its most important component manufacturing fell 10.2 percent. Services fell 3.9 percent in 2009. Services grew in all years from 2010 to 2012 while manufacturing fell 1.7 percent in 2012.

Table VH-3, UK, Gross Value Added by Components, ∆% on Prior Year

	Total Production	MFG	CONST	SERVICES	Gross Value Added
2010 Weights	152	104	63	778	1000
1998	1.2	0.5	1.4	5.0	3.8
1999	1.2	0.5	1.3	3.8	3.1
2000	1.8	2.1	0.8	5.6	4.5
2001	-1.6	-1.7	1.8	3.0	1.8
2002	-1.4	-2.4	5.7	2.3	2.0
2003	-0.6	-0.5	4.9	5.2	4.1
2004	0.7	1.9	5.2	3.4	3.0
2005	-0.8	-0.2	-2.4	5.2	3.6
2006	0.2	1.8	0.7	3.4	2.7
2007	0.4	0.8	2.1	4.4	3.5
2008	-2.9	-2.8	-2.5	0.0	-0.6
2009	-9.5	-10.2	-13.3	-3.9	-5.4
2010	2.8	4.2	8.3	0.8	1.6
2011	-1.2	1.8	2.3	1.5	1.2
2012	-2.4	-1.7	-8.3	1.3	0.3

Source: UK Office for National Statistics

MGF: Manufacturing; CONST: Construction

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

Percentage changes of gross value added and components are in Table VH-4A. Gross value added increased 0.7 percent in IIQ2013 with growth of services of 0.6 percent and production of 0.6 while manufacturing expanded 0.7 percent.

Table VH-4A, UK, Gross Value Added by Components, ∆% on Previous Quarter

	Total Production	MFG	CONST	Services	Gross Value Added
2010 Weights	152	104	63	778	1000
2000 Q1	0.2	0.4	1.4	1.6	1.3
2000 Q2	0.2	0.2	-0.7	2.0	1.5
2000 Q3	-0.3	-0.2	-1.7	0.6	0.3
2000 Q4	0.3	1.0	1.0	0.1	0.2
2001 Q1	-0.5	-0.7	-0.4	1.5	0.8
2001 Q2	-1.1	-1.7	2.8	0.5	0.2
2001 Q3	-0.1	0.0	0.2	0.4	0.3
2001 Q4	-1.3	-1.6	1.1	0.3	0.0
2002 Q1	0.3	0.1	1.1	0.4	0.6
2002 Q2	-0.5	-1.3	1.1	0.8	0.6
2002 Q3	0.0	1.0	3.6	0.9	0.9
2002 Q4	-0.2	-1.5	1.1	1.3	1.0
2003 Q1	-0.7	-0.4	-2.3	1.4	0.8
2003 Q2	-0.2	0.4	3.0	1.5	1.3
2003 Q3	0.8	0.7	2.7	1.3	1.3
2003 Q4	0.5	0.8	2.5	1.4	1.3
2004 Q1	0.2	0.9	2.9	0.4	0.5
2004 Q2	0.6	0.5	-1.3	0.5	0.4
2004 Q3	-1.8	-1.4	-0.7	0.6	0.1
2004 Q4	0.7	1.3	-1.0	0.9	0.7
2005 Q1	-0.6	-0.9	0.3	1.5	1.0
2005 Q2	0.9	0.8	-0.4	1.7	1.4
2005 Q3	-1.3	-0.6	-1.8	1.7	0.9
2005 Q4	0.4	0.1	-0.4	1.7	1.4
2006 Q1	0.8	0.7	0.7	0.3	0.4
2006 Q2	-0.6	0.9	0.8	0.3	0.2
2006 Q3	0.0	0.4	0.5	0.3	0.3
2006 Q4	0.2	0.8	1.8	0.8	0.7
2007 Q1	0.2	-0.5	1.0	1.3	1.1
2007 Q2	0.2	0.2	-0.4	1.8	1.3
2007 Q3	-0.2	0.0	-1.4	1.8	1.2
2007 Q4	0.4	0.2	1.3	0.0	0.1
2008 Q1	-0.6	0.1	0.9	0.1	0.2
2008 Q2	-1.0	-1.5	-1.4	-0.5	-0.6
2008 Q3	-1.5	-1.6	-2.7	-1.3	-1.5
2008 Q4	-4.6	-4.9	-5.3	-1.5	-2.3
2009 Q1	-4.9	-5.8	-7.1	-1.6	-2.5
2009 Q2	-0.1	0.1	-1.9	-0.6	-0.6
2009 Q3	-0.9	-0.2	0.3	0.1	0.0
2009 Q4	0.7	1.3	1.0	0.2	0.3
2010 Q1	1.3	0.9	3.1	0.3	0.6
2010 Q2	1.7	2.0	5.9	0.4	1.0
2010 Q3	0.1	1.2	1.7	0.5	0.5
2010 Q4	0.7	0.8	-2.2	-0.3	-0.3
2011 Q1	-1.0	0.2	1.6	0.5	0.4
2011 Q2	-1.1	0.2	1.0	0.4	0.2
2011 Q3	-0.3	-0.4	-1.1	1.0	0.6
2011 Q4	-0.6	-0.4	-0.6	0.0	-0.1
2012 Q1	-0.5	-0.1	-4.0	0.3	0.0
2012 Q2	-1.1	-1.3	-4.5	-0.1	-0.5
2012 Q3	0.4	0.6	-1.8	1.0	0.8
2012 Q4	-2.2	-1.7	1.7	0.0	-0.2
2013 Q1	0.3	-0.2	-1.8	0.5	0.2
2013 Q2	0.6	0.7	1.4	0.6	0.7

Source: UK Office for National Statistics

MGF: Manufacturing; CONST: Construction

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

Growth rates of gross value added (GVA) and output components of gross value added in a quarter from the preceding quarter are in Table VH-4. Growth of GVA of 0.7 percent in IIQ2013 originated in growth of services of 0.6 percent and total production of 0.6 percent while manufacturing grew 0.7 percent and construction 1.4 percent. Growth of GVA of 0.2 percent in IQ2013 resulted from contraction of manufacturing by 0.2 percent with total production increasing 0.6 percent. Construction expanded 1.4 percent and services 0.6 percent. There is significant improvement away from the contraction of total production of 2.2 percent in IVQ2012 with manufacturing contracting 1.7 percent and services changing 0.0 percent.

VH-4, UK, Quarter on Quarter Growth of Value Added by Output Components, ∆% on Prior

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Agriculture	-1.5	-2.3	-0.5	0.3	-6.3	1.7
Total Production	-0.5	-1.1	0.4	-2.2	0.3	0.6
Manufacturing	-0.1	-1.3	0.6	-1.7	-0.2	0.7
Extraction	-2.5	-3.8	1.8	-10.3	3.2	1.4
Electricity, gas and air	0.1	4.7	-3.4	3.7	1.4	-2.4
Water & sewerage	-0.8	-1.1	0.6	0.1	-0.4	2.3
Construction	-4.0	-4.5	-1.8	1.7	-1.8	1.4
Total Services	0.3	-0.1	1.0	0.0	0.5	0.6
Distn, hotels & catering	0.2	0.1	1.8	-0.5	1.2	1.7
Transport, storage & comms	0.9	-1.3	-0.5	0.6	1.4	0.6
Business services & finance	0.0	-0.1	0.7	0.4	-0.1	0.6
Government & other	0.5	0.3	1.7	-0.6	0.4	0.0

Source: UK Office for National Statistics

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

Services contributed 0.4 percentage points to growth of GVA in IQ2013 and 0.5 percentage points in IIQ2013, as shown in Table VH-5. Business services and finance contributed 0.2 percentage points in IIQ2013. Manufacturing and production did not contribute to growth in IQ2013 and contributed 0.1 percentage points in IIQ2013.

Table VH-5, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Output Components, %

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Agriculture	0.0	0.0	0.0	0.0	0.0	0.0
Total Production	-0.1	-0.2	0.1	-0.3	0.0	0.1
Manufacturing	0.0	-0.1	0.1	-0.2	0.0	0.1
Extraction	0.0	-0.1	0.0	-0.2	0.1	0.0
Electricity, gas and air	0.0	0.1	0.0	0.0	0.0	0.0
Water & sewerage	0.0	0.0	0.0	0.0	0.0	0.0
Construction	-0.3	-0.3	-0.1	0.1	-0.1	0.1
Total Services	0.2	-0.1	0.8	0.0	0.4	0.5
Distn, hotels & catering	0.0	0.0	0.3	-0.1	0.2	0.2
Transport, storage & comms	0.1	-0.1	-0.1	0.1	0.2	0.1
Business services & finance	0.0	0.0	0.2	0.1	0.0	0.2
Government & other	0.1	0.1	0.4	-0.1	0.1	0.0

Source: UK Office for National Statistics

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

Table VH-6 provides UK growth of value added by output components in a quarter relative to the same quarter a year earlier for 2012 and 2013. Total production and manufacturing fell in all four quarters of 2012 and in the first two quarters of 2013 relative to the same quarter a year earlier. Total services supported the economy with growth in all quarters relative to a year earlier from IQ2012 to IIQ2013. Construction fell sharply in all four quarters of 2012 and in the first two quarters of 2013 relative to a year earlier.

Table VH-6, UK, Growth of Value Added by Output Components, ∆% on Same Quarter of Prior Year

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Agriculture	-1.7	-3.7	-4.0	-3.9	-8.7	-4.9
Total Production	-2.4	-2.4	-1.7	-3.3	-2.6	-0.8
Manufacturing	-0.7	-2.2	-1.3	-2.5	-2.6	-0.6
Extraction	-11.2	-7.8	-4.9	-14.3	-9.3	-4.3
Electricity, gas and air	-5.3	2.7	-3.3	5.0	6.4	-0.8
Water & sewerage	0.8	-0.8	0.9	-1.2	-0.8	2.5
Construction	-4.6	-9.8	-10.5	-8.4	-6.3	-0.5
Total Services	1.8	1.2	1.2	1.1	1.3	2.1
Distn, hotels & catering	0.5	0.0	1.5	1.5	2.6	4.3
Transport, storage & comms	2.4	0.4	-1.6	-0.4	0.0	2.0
Business services & finance	2.9	2.1	1.0	1.0	0.9	1.6
Government & other	0.8	1.1	2.6	1.8	1.7	1.5

Source: UK Office for National Statistics

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

Total production subtracted from growth of value added in all quarters of 2012 and the first two quarters of 2013 relative to a year earlier, as shown in Table VH-7. Total services added to growth of value added in all four quarters of 2012 and the first quarter of 2013 relative to a year earlier. Construction also deducted in all four quarters of 2012 and the first quarter of 2013 relative to a year earlier.

VH-7, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Output Components, %

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Agriculture	0.0	0.0	0.0	0.0	-0.1	0.0
Total Production	-0.4	-0.4	-0.2	-0.5	-0.4	-0.1
Manufacturing	-0.1	-0.2	-0.1	-0.3	-0.3	-0.1
Extraction	-0.2	-0.1	-0.1	-0.3	-0.2	-0.1
Electricity, gas and air	-0.1	0.0	0.0	0.1	0.1	0.0
Water & sewerage	0.0	0.0	0.0	0.0	0.0	0.0
Construction	-0.3	-0.6	-0.7	-0.5	-0.4	0.0
Total Services	1.3	0.9	0.9	0.9	1.1	1.6
Distn, hotels & catering	0.1	0.0	0.2	0.2	0.4	0.6
Transport, storage & comms	0.3	0.0	-0.2	-0.1	0.0	0.2
Business services & finance	0.9	0.6	0.3	0.3	0.3	0.5
Government & other	0.2	0.2	0.6	0.4	0.4	0.3

Source: UK Office for National Statistics

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

Quarter-on-quarter growth of value added by expenditure components is in Table VH-8. Household final consumption expenditure grew 0.3 percent in IQ2013 relative to IVQ2012 and 0.4 percent in IIQ2013 while central government consumption increased 0.1 percent in IQ2013 and 0.9 percent in IIQ2013. Gross capital formation decreased 0.3 percent in IIQ2013 and gross fixed capital formation (GFCF) increased 1.7 percent. Exports fell 0.1 percent in IQ2013 but grew 3.6 percent in IIQ2013 while imports fell 2.0 percent in IQ2013 and increased 2.5 percent in IIQ2013.

VH-8, UK, Quarter on Quarter Growth of Value Added by Expenditure Components, ∆% on Prior Quarter

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.3	0.3	0.3	0.5	0.3	0.4
NPISH final consumption expenditure	-4.8	7.2	-2.9	-3.3	6.0	-2.5
General government final consumption expenditure	2.7	-0.9	0.9	0.8	0.1	0.9
Gross capital formation	1.4	0.9	0.5	-2.5	-4.9	-0.3
- of which GFCF	4.1	-2.1	-1.6	-4.9	0.2	1.7
Exports	-1.7	-0.6	1.9	-1.9	-0.1	3.6
less Imports	0.4	1.6	0.6	-1.0	-2.0	2.5

Source: UK Office for National Statistics

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

Table VH-9 provides contributions to value added by expenditure components in a quarter relative to the prior quarter. In IQ2013, household final consumption expenditure contributed 0.2 percentage points to growth and 0.2 percentage points in IIQ2013. Net trade deducted 0.3 percentage points in IVQ2012 but added 0.6 percentage points in IQ2013 and 0.3 percentage points in IIQ2013. Gross fixed capital formation (GFCF) deducted 0.2 percentage points in IIIQ2012, 0.7 percentage points IVQ2012 and 0.0 percentage points in IQ2013, adding 0.2 percentage points in IIQ2013.

Table VH-9, UK, Contribution to Quarter on Prior Quarter of Growth of Value Added by Expenditure Components, %

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.2	0.2	0.2	0.3	0.2	0.2
NPISH final consumption expenditure	-0.1	0.2	-0.1	-0.1	0.1	-0.1
General government final consumption expenditure	0.6	-0.2	0.2	0.2	0.0	0.2
Gross capital formation	0.2	0.1	0.1	-0.4	-0.7	0.0
- of which GFCF	0.6	-0.3	-0.2	-0.7	0.0	0.2
Exports	-0.6	-0.2	0.6	-0.6	0.0	1.1
less Imports	0.1	0.5	0.2	-0.3	-0.6	0.8
Net trade	-0.7	-0.7	0.4	-0.3	0.6	0.3

Source: UK Office for National Statistics

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

Table VH-10 provides UK growth of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure grew 1.5 percent in IQ2013 relative to a year earlier and 1.6 percent in IIQ2013. Household final consumption grew 1.5 percent in IVQ2012 after growing 1.5 percent in IIIQ2012, 1.1 percent in IIQ2012 and 0.7 percent in IQ2012. General government final consumption expenditure increased 0.8 percent in IQ2013 and 2.7 percent in IIQ2013. Gross fixed capital formation (GFCF) fell 8.3 percent in IQ2013 and 4.8 percent in IIQ2013. Exports fell 0.8 percent in IQ2013 with imports decreasing 0.9 percent but exports increased 3.4 percent in IIQ2013 and imports grew 0.1 percent.

Table VH-10, UK, Growth of Value Added by Expenditure Components, ∆% on Same Quarter of Prior Year

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.7	1.1	1.5	1.5	1.5	1.6
NPISH final consumption expenditure	-3.2	-0.6	-0.8	-4.2	6.7	-3.0
General government final consumption expenditure	2.9	1.8	3.1	3.4	0.8	2.7
Gross capital formation	6.0	-3.4	-7.6	0.2	-6.0	-7.1
- of which GFCF	8.3	-0.4	-0.9	-4.7	-8.3	-4.8
Exports	-1.4	3.4	4.2	-2.4	-0.8	3.4
less Imports	1.8	4.1	3.7	1.5	-0.9	0.1

Source: UK Office for National Statistics

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

Table VH-11 provides contribution of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure contributed 0.9 percentage points from IIIQ2012 through IQ2013 and 1.0 percentage points in IIQ2013 while government final consumption expenditure contributed 0.8 percentage points in IVQ2012, 0.2 percentage points in IQ2013 and 0.6 percentage points in IIQ2013. Net trade added 1.0 percentage points in IIQ2013 and did not contribute in IQ2013.

VH-11, UK, Contribution to Growth on Same Quarter of Prior Year of Value Added by Expenditure Components, %

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.4	0.7	0.9	0.9	0.9	1.0
NPISH final consumption expenditure	-0.1	0.0	0.0	-0.1	0.2	-0.1
General government final consumption expenditure	0.6	0.4	0.7	0.8	0.2	0.6
Gross capital formation	0.8	-0.5	-1.2	0.0	-0.9	-1.1
- of which GFCF	1.2	-0.1	-0.1	-0.7	-1.2	-0.7
Exports	-0.5	1.0	1.3	-0.8	-0.3	1.1
less Imports	0.6	1.3	1.2	0.5	-0.3	0.0
Net trade	-1.0	-0.3	0.1	-1.3	0.0	1.0

Source: UK Office for National Statistics

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

Table VH-12 provides growth of value added by expenditure components in a year relative to the prior year. Household final consumption expenditure grew 1.2 percent in 2012 compared with decline of 0.5 percent in 2011. General government final consumption expenditure grew 2.8 percent in 2012 but grew 0.0 percent in 2011. Gross capital formation increased 0.9 percent in 2011 and fell 1.5 percent in 2011. GFCF fell 2.4 percent in 2011 but increased 0.5 percent in 2012. Exports grew 4.5 percent in 2011 and 0.9 percent in 2012.

Table VH-12, UK, Growth of Value Added by Expenditure Components, ∆% on Prior Year

Component	2011	2012
Household final consumption expenditure	-0.5	1.2
NPISH final consumption expenditure	2.0	-2.2
General government final consumption expenditure	0.0	2.8
Gross capital formation	0.9	-1.5
- of which GFCF	-2.4	0.5
Exports	4.5	0.9
less Imports	0.3	2.8

Source: UK Office for National Statistics

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

Contributions of value added by expenditure components in a year relative to the prior year are in Table VH-13. Household final consumption deducted 0.3 percentage points in 2011 but added 0.7 percentage points in 2012. Gross capital formation contributed 0.1 percentage points in 2011 and deducted 0.2 percentage points in 2012 but GFCF deducted 0.4 percentage points in 2011, adding 0.1 percentage points in 2012. Net trade added 1.2 percentage points in 2011 but deducted 0.6 percentage points in 2012.

VH-13, UK, Contribution to Growth on Prior Year of Value Added by Expenditure Components, %

Component	2011	2012
Household final consumption expenditure	-0.3	0.7
NPISH final consumption expenditure	0.1	-0.1
General government final consumption expenditure	0.0	0.6
Gross capital formation	0.1	-0.2
- of which GFCF	-0.4	0.1
Exports	1.3	0.3
less Imports	0.1	0.9
Net trade	1.2	-0.6

Source: UK Office for National Statistics

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

VI Valuation of Risk Financial Assets. 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

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