CMP Associates Regulation Blog: Increasing Interest Rate Risk, Steepening Yield Curve and Peaking Valuations of Risk Financial Assets, Mediocre and Decelerating United States Economic Growth, Stagnating Real Disposable Income, Financial Repression, World Economic Slowdown and Global Recession Risk: Part III

Increasing Interest Rate Risk, Steepening Yield Curve and Peaking Valuations of Risk Financial Assets, Mediocre and Decelerating United States Economic Growth, Stagnating Real Disposable Income, Financial Repression, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

Executive Summary

I Mediocre and Decelerating United States Economic Growth

IA Mediocre and Decelerating United States Economic Growth

IA1 Contracting Real Private Fixed Investment

IA2 Swelling Undistributed Corporate Profits

II Stagnating Real Disposable Income and Consumption Expenditures

IIA1 Stagnating Real Disposable Income and Consumption Expenditures

IIA2 Financial Repression

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/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 2.5 percent in SAAR, 0.6 percent relative to the prior quarter and 1.6 percent relative to IIQ2012 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-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: 0.6 SAAR: 2.5	1.6
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 contributed 0.00 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 0.0 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	Jul 12-month NSA ∆%: headline 1.4; ex food and energy ∆% 1.2 Blog 9/1/13
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 1.6 IQ2012 SAAR 3.7 IIQ2012 SAAR 1.2 IIIQ2012 SAAR 2.8 IVQ2012 SAAR 0.1 IQ2013 SAAR 1.1 IIQ2013 SAAR 2.5 Blog 9/1/13
Real Private Fixed Investment	SAAR IIQ2013 6.0 ∆% IVQ2007 to IIQ2013: minus 5.0% Blog 9/1/13
Personal Income and Consumption	Jul month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.1 Real Personal Consumption Expenditures (RPCE): 0.0 12-month Jul NSA ∆%: RDPI: 0.8; RPCE ∆%: 1.7 Blog 9/1/13
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	Jul New Orders SA ∆%: minus 7.3; ex transport ∆%: 0.0 Jan-Jul 13/Jan-Jul 12 New Orders NSA ∆%: 3.3; ex transport ∆% 2.5 Blog 9/1/13
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	Jun 2013/Jun 2012 ∆% NSA: 10 Cities 11.9; 20 Cities: 12.1 ∆% Jun SA: 10 Cities 1.1 ; 20 Cities: 0.9 Blog 9/1/13
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:

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

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

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

Manufacturers’ shipments of durable goods fell 0.3 percent in Jul 2013 0.1 percent in Jun 2013 and increased 1.3 percent in May 2013. New orders increased fell 7.3 percent in Jul after increasing 3.9 percent in Jun and 5.5 percent in May, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov 2012 after increase of orders for nondefense aircraft of 2642.2 percent in Sep 2012 after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul 2012 and 32.5 percent in Jun 2012. Nondefense aircraft new orders fell 52.3 percent in Jul 2013 after increasing 33.8 percent in Jun and 67.6 percent in May. New orders excluding transportation equipment fell 0.6 percent in Jul after increasing 0.1 percent in Jun 2013 and 1.3 percent in May. Capital goods new orders, indicating investment, fell 16.1 percent in Jul after increasing 9.1 percent in Jun and 13.7 percent in May. New orders of nondefense capital goods fell 15.4 percent in Jul after increasing 7.1 percent in Jun and 12.8 percent in May. Capital goods orders excluding more volatile aircraft fell 3.3 percent in Jul after increasing 1.3 percent in Jun and 2.1 percent in May.

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

	Jul 2013 ∆%	Jun 2013 ∆%	May 2013 ∆%
Total
S	-0.3	-0.1	1.3
NO	-7.3	3.9	5.5
Excluding Transport
S	-0.4	0.1	0.3
NO	-0.6	0.1	1.3
Excluding Defense
S	-0.1	-0.2	1.2
NO	-6.7	2.9	5.1
Machinery
S	-1.0	-1.7	1.6
NO	0.0	1.2	0.5
Computers & Electronic Products
S	-3.2	1.1	-1.2
NO	-3.6	-0.8	3.2
Computers
S	-22.6	2.8	-0.4
NO	-19.9	0.0	-1.2
Transport Equipment
S	-0.1	-0.6	3.8
NO	-19.4	11.7	15.1
Motor Vehicles
S	0.7	0.7	-1.5
NO	0.5	0.2	-0.9
Nondefense Aircraft
S	1.3	-4.8	29.7
NO	-52.3	33.8	67.6
Capital Goods
S	-1.9	-1.3	5.8
NO	-16.1	9.1	13.7
Nondefense Capital Goods
S	-1.4	-1.6	6.3
NO	-15.4	7.1	12.8
Capital Goods ex Aircraft
S	-1.5	-0.8	2.0
NO	-3.3	1.3	2.1

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

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

Chart VA-1 provides monthly changes in durable goods new orders. There is significant volatility in these data, preventing clear identification of trends.

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

Source: US Census Bureau

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

Additional perspective on manufacturers’ shipments and new orders of durable goods is in Table VA-2. Values are cumulative millions of dollars in Jan-Jul 2013 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of all manufacturing industries in Jan-Jul 2013 total $1582.6 billion and new orders total $1575.4 billion, growing respectively by 2.6 percent and 3.3 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 0.8 percent and new orders increased 2.5 percent. Excluding defense, shipments grew 2.8 percent and new orders grew 4.7 percent. Important information not in Table VA-2 is the large share of nondurable goods: with shipments of $3 trillion in 2012, growing by 2.0 percent, and new orders of $3 trillion, growing by 2.0 percent, in part driven by higher prices for food and energy. Durable goods were lower in value in 2012, with shipments of $2.7 trillion, growing by 7.0 percent, and new orders of $2.6 trillion, growing by 4.1 percent. Capital goods have relatively high value of $572.3 billion for shipments, growing 1.8 percent, and new orders $608.3 billion, growing 2.4 percent. Excluding aircraft, capital goods shipments reached $455.1 billion, growing by 1.1 percent, and new orders $475.8 billion, growing 3.8 percent. Data weakened significantly in 2013.

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

Jan-Jul 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/ 2012
Total	1,582,634	2.6	1,575,410	3.3
Excluding Transport	1,119,399	0.8	1,097,913	2.5
Excluding Defense	1,500,783	2.8	1,504,277	4.7
Machinery	240,376	3.9	245,481	5.8
Computers & Electronic Products	187,826	-4.8	144,885	-5.2
Computers & Related Products	14,849	-10.4	15,046	-8.7
Transport Equipment	463,235	7.2	477,497	5.2
Motor Vehicles	307,612	8.9	307,267	9.3
Nondefense Aircraft	74,193	8.8	99,838	13.5
Capital Goods	572,274	1.8	608,329	2.4
Nondefense Capital Goods	505,919	2.1	550,610	5.5
Capital Goods ex Aircraft	455,106	1.1	475,776	3.8

Note: Transport: transportation

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

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

Chart VA-2, US, Output of Durable Manufacturing, 1972-2013

Source: Board of Governors of the Federal Reserve System

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

Manufacturing jobs increased 6,000 in Jul 2013 relative to Jun 2013, seasonally adjusted (Section II and earlier http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 16,000 from Jul 2012 to Jul 2013 or at the average monthly rate of 1,333. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

Table VA-3 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.6 percent in IQ2013. Most of US national income is in the form of services. In Jul 2013, there were 135.664 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 115.081 million NSA in Jul 2013 accounted for 84.8 percent of total nonfarm jobs of 135.664 million, of which 12.045 million, or 10.5 percent of total private jobs and 8.9 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 96.093 million NSA in Jul 2013, or 70.8 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 10.9 percent in US national income in IQ2013, as shown in Table VA-3. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

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

	SAAR IQ2013	% Total	SAAR IIQ2013	% Total
National Income WCCA	14,354.5	100.0	14,480.5	100.0
Domestic Industries	14,117.1	98.3	14,223.1	98.2
Private Industries	12,432.9	86.6	12,542.6	86.6
Agriculture	226.4	1.6
Mining	247.6	1.7
Utilities	209.1	1.5
Construction	618.2	4.3
Manufacturing	1568.1	10.9
Durable Goods	878.8	6.1
Nondurable Goods	689.2	4.8
Wholesale Trade	870.0	6.1
Retail Trade	971.4	6.8
Transportation & WH	434.0	3.0
Information	496.0	3.5
Finance, Insurance, RE	2418.9	16.8
Professional, BS	1973.6	13.7
Education, Health Care	1423.7	9.9
Arts, Entertainment	569.7	4.0
Other Services	406.1	2.8
Government	1684.3	11.7	1680.5	11.6
Rest of the World	237.4	1.7	257.4	1.8

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

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

Table VA-4 shows the euphoria of prices during the housing boom and the subsequent decline. House prices rose 93.7 percent in the 10-city composite of the Case-Shiller home price index and 78.1 percent in the 20-city composite between Jun 2000 and Jun 2005. Prices rose around 100 percent from Jun 2000 to Jun 2006, increasing 109.9 percent for the 10-city composite and 93.3 percent for the 20-city composite. House prices rose 39.5 percent between Jun 2003 and Jun 2005 for the 10-city composite and 34.5 percent for the 20-city composite propelled by low fed funds rates of 1.0 percent between Jun 2003 and Jun 2004. Fed funds rates increased by 0.25 basis points at every meeting of the Federal Open Market Committee (FOMC) until Jun 2006, reaching 5.25 percent. Simultaneously, the suspension of auctions of the 30-year Treasury bond caused decline of yields of mortgage-backed securities with intended decrease in mortgage rates. Similarly, between Jun 2003 and Jun 2006, the 10-city index gained 109.9 percent and the 20-city index increased 93.3 percent. House prices have fallen from Jun 2006 to Jun 2013 by 23.4 percent for the 10-city composite and 22.7 percent for the 20-city composite. Measuring house prices is quite difficult because of the lack of homogeneity that is typical of standardized commodities. In the 12 months ending in Jun 2013, house prices increased 11.9 percent in the 10-city composite and increased 12.1 percent in the 20-city composite. Table VA-4 also shows that house prices increased 60.8 percent between Jun 2000 and Jun 2013 for the 10-city composite and increased 49.4 percent for the 20-city composite. House prices are close to the lowest level since peaks during the boom before the financial crisis and global recession. The 10-city composite fell 23.4 percent from the peak in Jun 2006 to Jun 2013 and the 20-city composite fell 22.7 percent from the peak in Jul 2006 to Jun 2013. The final part of Table VA-4 provides average annual percentage rates of growth of the house price indexes of Standard & Poor’s Case-Shiller. The average annual growth rate between Dec 1987 and Dec 2012 for the 10-city composite was 3.3 percent. Data for the 20-city composite are available only beginning in Jan 2000. House prices accelerated in the 1990s with the average rate of the 10-city composite of 5.0 percent between Dec 1992 and Dec 2000 while the average rate for the period Dec 1987 to Dec 2000 was 3.8 percent. Although the global recession affecting the US between IVQ2007 (Dec) and IIQ2009 (Jun) caused decline of house prices of slightly above 30 percent, the average annual growth rate of the 10-city composite between Dec 2000 and Dec 2012 was 2.8 percent while the rate of the 20-city composite was 2.3 percent.

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

	10-City Composite	20-City Composite
∆% Jun 2000 to Jun 2003	38.8	32.4
∆% Jun 2000 to Jun 2005	93.7	78.1
∆% Jun 2003 to Jun 2005	39.5	34.5
∆% Jun 2000 to Jun 2006	109.9	93.3
∆% Jun 2003 to Jun 2006	51.2	46.0
∆% Jun 2005 to Jun 2013	-17.0	-16.1
∆% Jun 2006 to Jun 2013	-23.4	-22.7
∆% Jun 2009 to Jun 2013	13.1	12.4
∆% Jun 2010 to Jun 2013	7.6	7.8
∆% Jun 2011 to Jun 2013	10.7	11.6
∆% Jun 2012 to Jun 2013	11.9	12.1
∆% Jun 2000 to Jun 2013	60.8	49.4
∆% Peak Jun 2006 Jun 2013	-23.4
∆% Peak Jul 2006 Jun 2013		-22.7
Average ∆% Dec 1987-Dec 2012	3.3	NA
Average ∆% Dec 1987-Dec 2000	3.8	NA
Average ∆% Dec 1992-Dec 2000	5.0	NA
Average ∆% Dec 2000-Dec 2012	2.8	2.3

Source: http://www.spindices.com/index-family/real-estate/sp-case-shiller

Monthly house prices increased sharply from Feb to Jun 2013 for both the 10- and 20-city composites. In Jun 2013, the seasonally adjusted 10-city composite increased 1.1 percent and the 20-city 0.9 percent while the 10-city not seasonally adjusted increased 2.2 percent and the 20-city 2.2 percent. House prices increased at high monthly percentage rates from Feb to Jun 2013. With the exception of Feb through Apr 2012, house prices seasonally adjusted declined in every month for both the 10-city and 20-city Case-Shiller composites from Dec 2010 to Jan 2012, as shown in Table VA-5. The most important seasonal factor in house prices is school changes for wealthier homeowners with more expensive houses. Without seasonal adjustment, house prices fell from Dec 2010 throughout Mar 2011 and then increased in every month from Apr to Aug 2011 but fell in every month from Sep 2011 to Feb 2012. The not seasonally adjusted index registers decline in Mar 2012 of 0.1 percent for the 10-city composite and is flat for the 20-city composite. House prices seasonally adjusted increased 0.5 percent in Mar and Apr 2012 for both the 10-city and 20-city indexes. Not seasonally adjusted house prices increased 1.4 percent in Apr 2012. Declining house prices cause multiple adverse effects of which two are quite evident. (1) There is a disincentive to buy houses in continuing price declines. (2) More mortgages could be losing fair market value relative to mortgage debt. Another possibility is a wealth effect that consumers restrain purchases because of the decline of their net worth in houses.

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

	10-City Composite SA	10-City Composite NSA	20-City Composite SA	20-City Composite NSA
Jun 2013	1.1	2.2	0.9	2.2
May	1.0	2.5	1.0	2.5
Apr	1.8	2.6	1.7	2.6
Mar	1.9	1.3	1.9	1.4
Feb	1.3	0.3	1.2	0.3
Jan	0.9	0.0	1.0	0.1
Dec 2012	0.9	0.2	0.9	0.2
Nov	0.6	-0.2	0.7	-0.1
Oct	0.7	-0.2	0.7	-0.1
Sep	0.4	0.3	0.6	0.3
Aug	0.4	0.8	0.4	0.8
Jul	0.2	1.5	0.3	1.6
Jun	1.0	2.1	1.0	2.3
May	0.8	2.2	0.9	2.4
Apr	0.6	1.4	0.6	1.4
Mar	0.5	-0.1	0.6	0.0
Feb	0.0	-0.9	0.1	-0.8
Jan	-0.3	-1.1	-0.1	-1.0
Dec 2011	-0.5	-1.2	-0.4	-1.2
Nov	-0.6	-1.4	-0.5	-1.3
Oct	-0.5	-1.3	-0.5	-1.3
Sep	-0.4	-0.6	-0.5	-0.7
Aug	-0.3	0.1	-0.4	0.1
Jul	-0.3	0.9	-0.2	1.0
Jun	-0.1	1.0	-0.1	1.2
May	-0.3	1.0	-0.3	1.0
Apr	-0.1	0.6	-0.2	0.6
Mar	-0.4	-1.0	-0.4	-1.0
Feb	-0.3	-1.3	-0.3	-1.2
Jan	-0.3	-1.1	-0.2	-1.1
Dec 2010	-0.2	-0.9	-0.2	-1.0

Source: http://www.spindices.com/index-family/real-estate/sp-case-shiller

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	Jul NSA ∆% 0.2; Jul 12 months NSA ∆% 0.7 Blog 9/1/13
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	Jul Unemployed 2.55 million Change in unemployed since last year: minus 330 thousand Unemployment rate: 3.9 % Blog 9/1/13
All Industry Indices	Jun month SA ∆% -0.6 12-month NSA ∆% 0.3 Blog 8/25/13
Industrial Production	Jul SA month ∆%: 3.2 12-month NSA ∆% 1.6 Blog 9/1/13
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	Jul 12 months: Total ∆%: 1.3 Wholesale ∆%: 2.1 Retail ∆%: -0.3 Blog 9/1/13
Family Income and Expenditure Survey	Jul 12-month ∆% total nominal consumption 1.0, real 0.1 Blog 9/1/13
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:

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

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

In Jul 2013, industrial production in Japan increased 3.2 percent and increased 1.6 percent in the 12 months ending in Jul 2013, as shown in Table VB-1. Decline of 3.1 percent in Jun interrupted four consecutive monthly increases from Feb through May 2013. Japan’s industrial production is strengthening 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, 1.9 percent in May 2013 and 3.2 percent in Jul 2013. Growth in 12 months improved from minus 10.1 percent in Feb 2013 to 1.6 percent in Jul 2013. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 15.6 percent in 2010. The annual average in calendar year 2011 fell 2.8 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011.

Table VB-1, Japan, Industrial Production ∆%

	∆% Month SA	∆% 12 Months NSA
Jul 2013	3.2	1.6
Jun	-3.1	-4.6
May	1.9	-1.1
Apr	0.9	-3.4
Mar	0.1	-7.2
Feb	0.9	-10.1
Jan	-0.6	-6.0
Dec 2012	1.4	-7.6
Nov	-1.0	-5.5
Oct	0.3	-4.7
Sep	-2.2	-7.6
Aug	-1.4	-4.1
Jul	-0.5	0.1
Jun	-0.8	-0.6
May	-1.8	7.6
Apr	-0.5	15.1
Mar	0.2	16.6
Calendar Year
2012		0.6
2011		-2.8
2010		15.6

Source: Japan, Ministry of Economy, Trade and Industry (METI) http://www.meti.go.jp/english/statistics/index.html

The employment report for Japan in Jul 2013 is in Table VB-2. The rate of unemployment seasonally adjusted decreased to 4.2 percent in Sep 2012 from 4.3 percent in Jul 2012 and remained at 4.2 percent in Oct 2012, declining to 4.1 percent in Nov 2012, increasing to 4.2 percent in Dec 2012, stabilizing at 4.2 percent in Jan 2013 and increasing to 4.3 percent in Feb 2013. The seasonally adjusted rate of unemployment fell to 4.1 percent in Apr and May 2013. The rate of unemployment not seasonally adjusted stood at 4.2 percent in Apr 2013 and 0.3 percentage points lower from a year earlier. The rate of unemployment fell to 3.9 percent in Jun 2013 seasonally and not seasonally adjusted. In Jul 2013, the rate of unemployment fell to 3.8 percent seasonally adjusted and remained at 3.9 percent not seasonally adjusted. The employment rate stood at 56.9 percent in Jul 2013 and increased 0.3 percentage points from a year earlier.

Table VB-2, Japan, Employment Report Apr 2013

Jul 2013 Unemployed	2.55 million
Change since last year	-330 thousand; ∆% –11.5
Unemployment rate	3.8% SA -0.1; NSA 3.9%, -0.5 from earlier year
Population ≥ 15 years	110.88 million
Change since last year	∆% -0.1
Labor Force	65.66 million
Change since last year	∆% 0.0
Employed	63.11 million
Change since last year	∆% 0.5
Labor force participation rate	59.2
Change since last year	0.0
Employment rate	56.9%
Change since last year	0.3

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

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2010 to 2013. The sharp decline in Sep 2011 was the best reading in 2011 but the rate increased in the final quarter of the year, declining in Feb 2012 and stabilizing in Mar 2012 but increasing to 4.6 percent in Apr 2012 and declining again to 4.4 percent in May 2012 and 4.3 percent in both Jun and Jul 2012 with further decline to 4.2 percent in Aug, Sep and Oct 2012, 4.1 percent in Nov 2012, 4.2 percent in Dec 2012, 4.2 percent in Jan 2013, 4.3 percent in Feb 2013 and 4.1 percent in Mar-May 2013. The rate of unemployment fell to 3.9 percent in Jun 2013 and 3.8 percent in Jul 2013.

Chart VB-1, Japan, Unemployment Rate

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

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

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

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

	Participation Rate	Employment Rate	Unemployment Rate
1953	70.0	68.6	1.9
1960	69.2	68.0	1.7
1965	85.7	64.9	1.2
1970	65.9	65.1	1.2
1975	63.0	61.9	1.9
1980	63.3	62.0	2.0
1985	63.0	61.4	2.6
1990	63.3	61.9	2.1
1991	63.8	62.4	2.1
1992	64.0	62.6	2.2
1993	63.8	62.2	2.5
1994	63.6	61.8	2.9
1995	63.4	61.4	3.2
1996	63.5	61.4	3.4
1997	63.7	61.5	3.4
1998	63.3	60.7	4.1
1999	62.9	59.9	4.7
2000	62.4	59.5	4.7
2001	62.0	58.9	5.0
2002	61.2	57.9	5.4
2003	60.8	57.6	5.3
2004	60.4	57.6	4.7
2005	60.4	57.7	4.4
2006	60.4	57.9	4.1
2007	60.4	58.1	3.9
2008	60.2	57.8	4.0
2009	59.9	56.9	5.1
2010	59.6	56.6	5.1
2011	59.3	56.5	4.6
2012	59.1	56.5	4.3

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

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months, which can be appreciated in Chart VB-2 below but followed by decline in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012 with recovery in Jul and Aug 2012, interrupted in Sep-Oct 2012 and new increases in Nov 2012, Jan 2013, Feb 2013, Mar 2013 and Apr 2013 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption decreased 1.6 percent in real terms in May 2013 and decreased 1.9 percent in nominal terms relative to a year earlier. Real consumption fell 0.4 percent in Jun 2013 and nominal consumption declined 0.1 percent. Consumption rebounded in Jul 2013 with increase of real consumption by 0.1 percent and nominal consumption by 1.0 percent. There are several segments of decreasing real consumption: housing falling 12.1 percent in nominal terms and 12.5 percent in real terms, transportation/communications falling 1.6 percent in real terms and increasing 1.0 percent in real terms, medical care falling 5.9 percent in nominal terms and 1.6 percent in real terms and education decreasing 8.4 percent in nominal terms and 8.9 percent in real terms. Fuel, light and water charges increased 5.7 percent in nominal terms and decreased 3.7 percent in real terms. Real household income increased 1.3 percent; real disposable income increased 0.4 percent; and real consumption expenditures decreased 1.6 percent.

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

Jul 2013	Nominal	Real
Households of Two or More Persons
Total Consumption	1.0	0.1
Excluding Housing, Vehicles & Remittance		1.5
Food	2.9	2.8
Housing	-12.5	-12.1
Fuel, Light & Water Charges	5.7	-0.7
Furniture & Household Utensils	8.2	10.3
Clothing & Footwear	-0.4	-1.2
Medical Care	-5.9	-5.3
Transport and Communications	1.0	-1.6
Education	-8.4	-8.9
Culture & Recreation	5.5	6.5
Other Consumption Expenditures	1.8	0.9*
Workers’ Households
Income	2.2	1.3
Disposable Income	1.3	0.4
Consumption Expenditures	-0.7	-1.6

*Real: nominal deflated by CPI excluding imputed rent

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute http://www.stat.go.jp/english/data/kakei/156.htm

Chart VB-2 of the Ministry of Internal Affairs and Communication provides year-on-year change of real consumption expenditures. There is marginal improvement in the final segment with wide oscillations.

Chart VB-2, Japan, Real Percentage Change of Consumption Year-on-Year

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

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

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. There is recovery in Jul 2013 with real consumption expenditures increasing 0.1 percent and nominal consumption expenditures increasing 1.0 percent. Real consumption expenditures decreased 0.4 percent in the 12 months ending in Jun 2013 and 0.1 percent in nominal terms. Declines in May and Jun 2013 interrupted growth from Jan to Apr 2013. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Real consumption fell 0.7 percent in the 12 months ending in Dec 2012 and nominal consumption fell 0.8 percent. Real consumption expenditures increased 2.4 percent in the 12 months ending in Jan 2013 and 2.1 percent in nominal terms. Nominal consumption increased 0.8 percent in Feb 2013 and nominal consumption increased 0.1 percent. Real consumption increased 5.2 percent in the 12 months ending in Mar 2013 and nominal consumption 4.1 percent. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 4.8 percent in IQ2012 with private consumption contributing 2.2 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations_3896.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 0.9 percent and contribution of 0.2 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.6 percent and personal consumption deducted 0.9 percentage points. Japan’s GDP grew at the SAAR of 1.0 percent in IVQ2012 with personal consumption contributing 1.2 percentage points. Japan’s GDP growth in IQ2013 was at 3.8 percent SAAR with highest contribution of 2.1 percentage points by personal consumption expenditures. In IIQ2013, Japan’s GDP grew at 2.6 percent SAAR with personal consumption expenditures contributing 1.9 percentage points.

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

	Nominal Consumption Expenditures ∆% Relative to a Year Earlier	Real Consumption Expenditures ∆% Relative to a Year Earlier
Jul 2013	1.0	0.1
Jun	-0.1	-0.4
May	-1.9	-1.6
Apr	0.8	1.5
Mar	4.1	5.2
Feb	0.1	0.8
Jan	2.1	2.4
Dec 2012	-0.8	-0.7
Nov	0.1	0.2
Oct	-0.5	-0.1
Sep	-1.2	-0.9
Aug	1.4	1.8
Jul	1.2	1.7
Jun	1.5	1.6
May	4.3	4.0
Apr	3.2	2.6
Mar	4.1	3.4
Feb	2.7	2.3
Jan	-2.1	-2.3
Dec 2011	0.3	0.5
Nov	-3.8	-3.2
Oct	-0.6	-0.4
Sep	-1.9	-1.9
Aug	-3.9	-4.1
Jul	-1.8	-2.1
Jun	-3.9	-3.5
May	-1.6	-1.2
Apr	-2.5	-2.0
Mar	-8.8	-8.2
Feb	-0.1	0.5
Jan	-0.9	-0.3
Dec 2010	-3.2	-3.3
Dec 2009	0.3	2.1

Source:

Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012, beginning of IIIQ2012 with recovery in IVQ2012, IQ2013 and IIQ2013. Table VB-6 provides Japan’s wholesale and retail sales. There is strong performance in May with growth of 0.8 percent for retail sales followed by 1.6 percent in Jun 2013. Retail sales fell 0.3 percent in Jul 2013. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through May 2012 but fell again by 1.3 percent in Jul 2012, increasing 1.3 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 0.9 percent in Nov 2012 and only 0.2 percent in Dec 2012 but contracting 1.1 percent in Jan 2013 and 2.2 percent in Feb 2013. In May 2013, retail sales increased 0.8 percent relative to a year earlier and 1.6 percent in Jun 2013 followed by decline of 0.3 percent in Jul 2013.

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

	Total	Wholesale	Retail
Jul 2013	1.3	2.1	-0.3
Jun	0.5	0.1	1.6
May	0.6	0.5	0.8
Apr	-0.1	-0.1	-0.2
Mar	-1.3	-1.8	-0.3
Feb	-1.6	-1.3	-2.2
Jan	-0.3	0.1	-1.1
Dec 2012	-1.7	-2.5	0.2
Nov	-0.9	-1.6	0.9
Oct	-1.6	-1.8	-1.2
Sep	-3.6	-5.1	0.4
Aug	-2.7	-4.4	1.3
Jul	-3.1	-4.0	-1.3
Jun	-2.6	-3.6	-0.2
May	2.7	2.6	3.0
Apr	1.8	0.4	5.0
Mar	3.2	0.9	9.3
Feb	-0.1	-1.3	3.1
Jan	-2.1	-3.8	1.6
Dec 2011	-0.8	-2.0	2.5
Nov	-2.3	-2.4	-2.2
Oct	1.1	0.8	1.9
Sep	0.3	0.8	-1.1
Aug	3.1	5.2	-2.6
Jul	2.3	3.0	0.6
Jun	3.1	3.8	1.2
May	1.3	2.3	-1.3
Apr	-2.6	-1.7	-4.8
Mar	-1.3	1.2	-8.3
Feb	5.3	7.2	0.1
Jan	3.3	4.6	0.1
Dec 2010	3.5	5.7	-2.1
Calendar Year
2012	-0.9	-2.0	1.8
2011	1.0	1.9	-1.0
2010	2.4	2.3	2.6
2009	-20.5	-25.6	-2.3
2008	1.2	1.5	0.3

Source: Japan, Ministry of Economy, Trade and Industry (METI) http://www.meti.go.jp/english/statistics/index.html

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

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jul 2013	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012 and sharper drop to 53.7 in Sep 2012, rebounding to 55.5 in Oct 2012, 55.6 in Nov 2012, 56.1 in Dec 2012 and 55.6 in Mar 2013. The index fell again to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013, rebounding to 54.1 in Jul 2013.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct, 50.6 in Nov-Dec 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013. The index increased to 50.8 in May 2013, falling to 50.1 in Jun 2013 and rebounding to 50.3 in Jul 2013. The index of new orders (NOI) fell from 54.5 in Apr 2012 to 49.0 in Jul and 48.7 in Aug, climbing above 50.0, 51.2 in Nov 2012-Dec 2012, 52.3 in Mar 2013 and 51.7 in Apr 2013. The index of new orders increased to 51.8 in May 2013, falling to 50.4 in Jun 2013 and 50.6 in Jul 2013. The index of employment also fell from 51.0 in Apr to 49.1 in Aug and further down to 48.7 in Nov 2012, 49.9 in Dec 2012, 49.8 in Mar 2013 and 49.0 in Apr 2013. The index of employment fell to 48.8 in May 2013 and 48.7 in Jun 2013, increasing to 49.1 in Jul 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Jul 2013	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. There is deceleration from 51.2 in Sep 2011 to marginal contraction at 49.0 in Nov 2011. Manufacturing activity recovered to 53.3 in Apr 2012 but then declined to 50.4 in May 2012 and 50.1 in Jun 2012, which is the lowest in a year with exception of contraction at 49.0 in Nov 2011. The index then fell to contraction at 49.2 in Aug 2012 and improved to 49.8 in Sep with movement to 50.2 in Oct 2012, 50.6 in Nov 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013 above the neutral zone of 50.0. The index increased to 50.8 in May 2013 and fell to 50.1 in Jun 2013, increasing to 50.3 in Jul 2013.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.6 percent, as shown in Table VC-GDP. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in IQ2013 and construction with the remaining 6.2 percent in the first three quarters of 2012. Tertiary industry accounts for 45.3 percent of cumulative GDP in IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-1 provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.2 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent and to 7.0 percent in IIQ2013.

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

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

Source: National Bureau of Statistics of China

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

Growth of China’s GDP in IIQ2013 relative to the same period in 2012 was 7.5 percent, as shown in Table VC-GDPA. Secondary industry accounts for 47.2 percent of GDP of which industry alone for 41.0 percent in cumulative IIQ2013 and construction with the remaining 7.5 percent in the first two quarters of 2013. Tertiary industry accounts for 45.3 percent of GDP in the cumulative to IIQ2013 and primary industry for 7.5 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013 and 7.5 percent in IIQ2013.

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

	IQ 2013	IIQ 2013
GDP	7.7	7.5
Primary Industry	3.4	3.0
Secondary Industry	7.8	7.6
Tertiary Industry	8.3	8.3
GDP ∆% Relative to a Prior Quarter	1.6	1.7
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ 2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.4	2.3	1.8	1.6	1.9	2.1	2.0
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

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

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

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/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

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.2 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.5 percent in 2011. EUROSTAT forecasts growth of GDP of the euro area of minus 0.6 percent in 2012 and minus 0.4 percent in 2013 but 1.2 percent in 2014.

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

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

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

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

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

	Euro Area	Germany	France	Italy	Spain
2014*	1.2	1.8	1.1	0.7	0.9
2013*	-0.4	0.4	-0.1	-1.3	-1.5
2012	-0.6	0.7	0.0*	-2.4	-1.6
2011	1.5	3.3	2.0	0.4	0.1
2010	2.0	4.0	1.7	1.7	-0.2
2009	-4.4	-5.1	-3.1	-5.5	-3.8
2008	0.4	1.1	-0.1	-1.2	0.9
2007	3.0	3.3	2.3	1.7	3.5
2006	3.2	3.7	2.5	2.2	4.1
2005	1.7	0.7	1.8	0.9	3.6
2004	2.2	1.2	2.5	1.7	3.3
2003	0.7	-0.4	0.9	0.0	3.1
2002	0.9	0.0	0.9	0.5	2.7
2001	2.0	1.5	1.8	1.9	3.7
2000	3.8	3.1	3.7	3.7	5.0
1999	2.9	1.9	3.3	1.5	4.7
1998	2.8	1.9	3.4	1.4	4.5
1997	2.6	1.7	2.2	1.9	3.9
1996	1.5	0.8	1.1	1.1	2.5

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, increased from 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	Jul 2013: 12.1% unemployment rate Jun 2013: 19.231 million unemployed Blog 9/1/13
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 95.2 Aug 2013 Consumer minus 15.6 Aug 2013 Blog 9/1/13
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

EUROSTAT estimates the rate of unemployment in the euro area at 12.1 percent in Jul 2013, as shown in Table VD-1. The number of unemployed in Jul 2013 was 19.231 million, which was 1.008 million higher than 18.223 million in Jul 2012. The rate of unemployment jumped from 11.5 percent in Jul 2012 to 12.1 percent in Jul 2013.

Table VD-1, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA

	Unemployment Rate %	Number Unemployed Millions
Jul 2013	12.1	19.231
Jun	12.1	19.246
May	12.1	19.281
Apr	12.1	19.225
Mar	12.1	19.157
Feb	12.0	19.135
Jan	12.0	19.104
Dec 2012	11.9	18.861
Nov	11.8	18.801
Oct	11.7	18.695
Sep	11.6	18.479
Aug	11.5	18.298
Jul	11.5	18.223
Jun	11.4	18.123
May	11.2	17.878
Apr	11.2	17.736
Mar	11.0	17.461
Feb	10.9	17.237
Jan	10.8	17.032
Dec 2011	10.7	16.922
Nov	10.6	16.818
Oct	10.4	16.528
Sep	10.4	16.349
Aug	10.2	16.095
Jul	10.1	15.948
Jun	10.0	15.726
May	9.9	15.664
Apr	9.9	15.514
Mar	9.9	15.582
Feb	9.9	15.606
Jan	10.0	15.691
Dec 2010	10.1	15.806

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

Table VD-2 shows the disparity in rates of unemployment in the euro area with 12.1 percent for the region as a whole and 19.231 million unemployed but 5.3 percent in Germany and 2.255 million unemployed. At the other extreme is Spain with rate of unemployment of 26.3 percent and 5.935 million unemployed. The rate of unemployment of the European Union in Jul 2013 is 10.9 percent with 26.371 million unemployed.

Table VD-2, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Jul 2013	Unemployment Rate %	Unemployed Millions
Euro Zone	12.1	19.231
Germany	5.3	2.255
France	11.0	3.259
Netherlands	7.0	0.626
Finland	7.9	0.212
Portugal	16.5	0.878
Ireland	13.8	0.297
Italy	12.0	3.076
Greece	NA	NA
Spain	26.3	5.935
Belgium	8.9	0.439
European Union	10.9	26.371

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

Chart VD-1 of EUROSTAT illustrates the wide difference in rates of unemployment in countries and regions.

Chart VD-1, Unemployment Rate in Various Countries and Regions

Source: EUROSTAT

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

The Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 followed by recovery but at a relatively low level (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). Table VD-3 provides the index increasing from 86.0 in Sep 2012 to 95.2 in Aug 2013. The index is above the minimum value of 70.0 reached in Mar 2009 but still below the average of 100.

Table VD-3, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-7.0	9.4	-13.3	-9.3	-18.1
Maximum	118.1 05-00	7.9 04-07	35.3 08-98	2.4 05-00	5.2 06-90	6.0 02-90
Minimum	70.0 03-09	-38.1 03-09	-26.1 03-09	-34.3 03-09	-24.9 01-93	-46.2 09-93
Aug 2013	95.2	-7.9	-5.3	-15.6	-10.7	-33.5
Jul	92.5	-10.6	-7.8	-17.4	-14.0	-32.6
Jun	91.3	-11.2	-9.6	-18.8	-14.6	-31.5
May	89.5	-13.0	-9.3	-21.8	-16.7	-33.0
Apr	88.6	-13.7	-11.1	-22.2	-18.4	-31.1
Mar	90.1	-12.2	-7.1	-23.5	-17.1	-29.9
Feb	90.5	-11.1	-8.5	-23.6	-16.1	-29.2
Jan	89.7	-13.3	-7.9	-23.9	-15.5	-28.1
Dec 2012	88.0	-13.8	-9.8	-26.3	-15.9	-33.0
Nov	86.9	-14.7	-11.5	-26.7	-14.8	-33.8
Oct	85.4	-17.8	-12.0	-25.5	-17.3	-31.3
Sep	86.0	-15.5	-12.5	-25.7	-18.4	-30.0

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

Source: European Commission Services http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 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	Jul Month ∆% -1.4 12-Month ∆% 2.3 Blog 9/1/13
Employment Report	Unemployment Rate SA Jul 5.4% Blog 9/1/13
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:

8/25/13 http://cmpassocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html

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

7/21/2013 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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-1. The number unemployed, not seasonally adjusted, decreased from 2.41 million in Jul 2012 to 2.28 million in Jul 2013, or -5.4 percent, while the unemployment rate decreased from 5.7 percent in Jul 2012 to 5.4 percent in Jul 2013. The number of persons in employment, not seasonally adjusted, increased from 39.79 million in Jul 2012 to 39.98 million in Jul 2013, or 0.5 percent, while the employment rate increased from 63.1 percent in Jul 2012 to 63.5 percent in Jul 2013. The number unemployed, seasonally adjusted, fell from 2.27 million in Jun 2013 to 2.26 million in Jul 2013, while the unemployment rate fell from 5.4 percent in Jun 2013 to 5.3 percent in Jul 2013. The number of persons in employment, seasonally adjusted, increased from 40.19 million in Jun 2013 to 40.20 million in Jul 2013, or 0.0 percent.

Table VE-1, Germany, Unemployment Labor Force Survey

	Jul 2013	Jun 2013	Jul 2012
NSA
Number Unemployed Millions	2.28 ∆% Jul 2013 /Jun 2013: -1.7 ∆% Jul 2013/Jul 2012: -5.4	2.32	2.41
% Rate Unemployed	5.4	5.5	5.7
Persons in Employment Millions	39.98 ∆% Jul 2013/Jun 2013: -0.5 ∆% Jul 2013/Jul 2012: 0.5	40.20	39.79
Employment Rate	63.5	63.9	63.1
SA
Number Unemployed Millions	2.26 ∆% Jul 2013/Jun 2013: -0.4 ∆% Jul 2013/Jul 2012: –1.7	2.27	2.30
% Rate Unemployed	5.3	5.4	5.4
Persons in Employment Millions	40.20 ∆% Jul 2013/Jun 2013: 0.0 ∆% Jul 2013/Jul 2012: 0.4	40.19	40.02

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_287_132.html

The unemployment rate in Germany as percent of the labor force in Table VE-2 stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012, 7.4 percent in Jan 2013, 7.3 in Feb 2013 and 7.1 percent in Apr 2013. The unemployment rate fell to 6.8 percent in May 2013 and 6.6 percent in Jun 2013 and rose to 6.8 percent in Jul-Aug 2013. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

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

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

Source: Statistisches Bundesamt Deutschland

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

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

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

Source: Statistisches Bundesamt Deutschland

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

Retail sales in Germany adjusted for inflation are provided in Table VE-3. There have been sharp fluctuations in monthly and 12 months percentage changes. In Jul 2013, retail sales fell 1.4 percent and increased 2.3 percent in 12 months. Retail sales increased 0.8 percent in May 2013 and increased 0.3 percent in 12 months. Retail sales rebounded in Jan 2013 with monthly increase of 3.0 percent and 2.6 percent in 12 months.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Jul 2013	2.3	-1.4
Jun	-2.4	-0.8
May	0.3	0.8
Apr	2.7	0.2
Mar	-3.0	-0.3
Feb	-3.0	-0.7
Jan	2.6	3.0
Dec 2012	-3.2	-1.9
Nov	0.5	1.2
Oct	1.4	-0.9
Sep	-3.1	-0.1
Aug	0.0	0.2
Jul	-0.8	-1.0
Jun	4.7	0.3
May	-0.5	0.3
Apr	-4.6	-0.6
Mar	4.4	0.9
Feb	2.5	0.9
Jan	2.0	-1.7
Dec 2011	0.8	0.8
Nov	0.9	-0.6
Oct	-0.4	0.4
Sep	1.2	0.2
Aug	3.4	-0.6
Jul	-2.4	0.5
Jun	-2.0	2.0
May	4.5	-1.6
Apr	4.8	0.9
Mar	-2.9	-2.7
Feb	3.0	1.4
Jan	3.3	0.8
Dec 2010	-0.2	0.3
Dec 2009	-2.2
Dec 2008	3.4
Dec 2007	-6.2
Dec 2006	1.3

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

Chart VE-2 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at constant prices from 2009 to 2013. There appear to be fluctuations without trend.

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

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

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at current prices from 2005 to 2013. There are also sharp fluctuations but without trend.

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

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

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

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from 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 Aug Mfg Business Climate 98 Blog 9/1/13

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

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

Table VF-1 shows the INSEE business climate indicator for manufacturing. The headline synthetic index decreased from 92 in Jan 2013 to 88 in Apr 2013 but rebounded to 92 in May 2013, 93 in Jun 2013, 95 in Jul 2013 and 98 in Aug 2013. The final row shows general production expectations deteriorating from minus 34 in Feb 2013 to minus 49 in Apr 2013 and improving to minus 46 in May 2013, minus 41 in Jun 2013 and minus 30 in Jul 2013. There is further improvement of general production expectations to minus 18 in Aug 2013. The indicator of demand and export order levels improved from minus 30 in Feb 2013 to minus 29 in May 2013 and minus 28 in Jun 2013, continuing improvement to minus 23 in Aug 2013.

Table VF-1, France, Manufacturing Business Climate Indicators of INSEE

Mfg 2013	Average since 1976	May 13	Jun 13	Jul 13	Aug 13
Synthetic Index	100	92	93	95	98
Past Activity	4	-4	-5	-1	5
Finished- Goods Inventory Level	13	11	9	10	12
Global Order Books	-18	-31	-29	-26	-23
Export Order Books	-13	-29	-28	-29	-23
Personal Production Expectations	5	-2	0	2	2
General Production Expectations	-9	-46	-41	-30	-18

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130829

Chart VF-1 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the business climate synthetic index of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012, marginally reversed in Nov 2012 with stability in Dec 2012 and decline in Jan 2013 but improvement in Feb 2013 and stability in Mar 2013, deteriorating in Apr 2013 and recovering in May-Aug 2013.

Chart VF-1, France, INSEE Industrial Business Climate Synthetic Index

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130829

Chart VF-2of the Institut National de la Statistique et des Études Économiques (INSEE) shows strong drops of the turning point indicator in the recessions of 1991, 2001 and 2008. There have been other drops of this index. The turning point indicator has fallen to levels in the direction of past contractions and after rebounding in Oct and Nov 2011 is showing declining trend in Jan 2012 with slight reversal in Feb followed by significant improvement in Mar and deterioration in Apr through Jul 2012 with new improvement in Aug 2012 followed by decline in Sep-Oct 2012 followed by rebound in Nov 2012 and stability in Dec 2012 to Jan-Mar 2013, deteriorating in Apr-May 2013. The index improved in Jun-Aug 2013.

Chart VF-2, INSEE Business Climate Manufacturing Turning Point Indicator

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130829

Chart VF-3 of the Institut National de la Statistique et des Études Économiques (INSEE) of France provides the composite climate indicator for French business. There is recovery in Jul-Aug 2013.

Chart VF-3, France, Composite Synthetic Index of Business Climate of INSEE

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=105&date=20130829

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	Aug month ∆%: 0.3 Aug 12-month ∆%: 1.1 Blog 9/1/13
Producer Price Index	Jul month ∆%: 0.1 Jul 12-month ∆%: -1.0 Blog 9/1/13
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	Jul 2013 Participation rate 63.6% Employment ratio 55.9% Unemployment rate 12.0% Blog 9/1/13
Industrial Production	Jun month ∆%: 0.3 12 months CA ∆%: -2.1 Blog 8/11/13
Retail Sales	Jun month ∆%: -0.2 Jun 12-month ∆%: -3.0 Blog 9/1/13
Business Confidence	Mfg Aug 92.9, Apr 88.2 Construction Aug 76.1, Apr 77.7 Blog 9/1/13
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

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

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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.2 percent in Dec 2006 to 12.0 percent in Jul 2013. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %
Jul 2013	63.6	55.9	12.0
Jun	63.6	55.8	12.1
May	63.7	55.8	12.2
Apr	63.5	55.8	12.0
Mar	63.8	56.0	11.9
Feb	63.8	56.1	11.8
Jan	63.7	56.0	11.9
Dec 2012	63.6	56.2	11.4
Nov	63.7	56.3	11.3
Oct	63.8	56.5	11.3
Sep	63.6	56.5	11.0
Aug	63.5	56.6	10.7
Jul	63.8	56.9	10.7
Jun	63.8	56.8	10.8
May	63.7	57.0	10.4
Apr	63.8	57.0	10.6
Mar	63.6	56.9	10.3
Feb	63.3	56.9	10.0
Jan	63.2	57.0	9.5
Dec 2011	63.0	57.0	9.5
Nov	62.6	56.7	9.3
Oct	62.6	57.0	8.8
Sep	62.4	56.8	8.9
Aug	62.5	57.1	8.5
Jul	62.2	57.0	8.3
Jun	62.0	57.0	8.0
May	62.0	57.0	8.1
Apr	61.7	56.9	7.8
Mar	62.1	57.2	7.9
Feb	61.8	56.8	7.9
Jan	61.9	56.9	8.0
Dec 2010	62.1	57.0	8.2
Dec 2009	62.3	57.1	8.3
Dec 2008	62.4	58.1	6.8
Dec 2007	63.1	59.0	6.5
Dec 2006	62.5	58.6	6.2
Dec 2005	62.6	57.8	7.5
Dec 2004	62.4	57.5	7.9

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98017

Table VG-2 provides more detail on the labor report for Italy in Jul 2012. The level of employment increased 1,000 from Jun to Jul 2013 and fell 433,000 from Jul 2012 to Jul 2013. Unemployment decreased 10,000 in Jul 2013 and increased 325,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 39.5 percent in Jul 2013 for ages 15 to 24 years.

Table VG-2, Italy, Labor Report, NSA

Jul 2013	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22.509	1	0.0	-433	-1.9
UNE	3.076	-10	-0.3	325	11.8
INA 15-64	14.374	-12	-0.1	36	0.3
EMP %	56.0		-0.1		-0.9
UNE %	12.0		0.1		1.5
Youth UNE % 15-24	39.5		0.4		4.3
INA % 15-64	36.4		0.0		0.2

Notes: EMP: Employed; UNE: Unemployed; INA 15-64: Inactive aged 15 to 64; EMP %: Employment Rate; UNE %: Unemployment Rate; Youth UNE % 15-24: Youth Unemployment Rate aged 15 to 24; INA % 15-64: Inactive Rate aged 15 to 64.

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98017

Chart VG-1 of the Istituto Nazionale di Statistica provides the rate of unemployment in Italy. The rate increase from 10.6 percent in Jul 2012 to 12.0 percent in Jul 2013.

Chart VG-1, Italy, Rate of Unemployment, %

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment dropped from slightly below 23 million in Jul 2012 to 22.509 million in Jul 2013.

Chart VG-2, Italy, Total Number of Employed Persons, Millions, SA

Source: Istituto Nazionale di Statistica

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

An important part of the analysis of Blanchard (2011WEOSep, 2012WEOApr) is the much more difficult adjustment of economies with need of fiscal consolidation in the presence of weak economic growth. Demand has significantly weakened throughout the advanced economies. There are many sound fundamentals in Italy such as high income and competitive companies. The restraints consist of low economic growth with high debt/GDP ratio. Table VG-3 provides growth of retail sales for Italy. Retail sales decreased 0.2 percent in Jun 2013 relative to May 2013, decreased 0.3 percent in Apr-Jun 2013 relative to Jan-Mar 2013, decreased 3.0 percent in Jun 2013 relative to Jun 2012 and decreased 3.0 percent cumulatively in Jan-Jun 2013 relative to Jan-Jun 2012. Food retail sales outperform non-food retail sales.

Table VG-3, Italy, Retail Sales ∆%

	Jun 2013/ May 2013 SA	Apr-Jun 13/ Jan-Mar 13 SA	Jun 2013/ Jun 2012 NSA	Jan-Jun 2013/ Jan-Jun 2012
Food	-0.2	-0.2	-2.9	-1.8
Non-food	-0.2	-0.3	-3.1	-3.5
Total	-0.2	-0.3	-3.0	-3.0

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/97883

Chart VG-3 provides 12-month percentage changes of retail sales at current prices. There is improvement in the final segment from Feb to May 2013 with sharper decline in Jun 2013.

Chart VG-3, Italy, Percentage Changes of Retail Sales in 12 Months

Source: Istituto Nazionale di Statistica

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

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Jun 2013 and annual rates for 2011 and 2012 in Table VG-4. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011 and 1.7 percent in 2012. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Percentage changes in 12 months have increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales decreased 0.2 percent in Jun 2013 and the decline in 12 months increased to minus 3.0 percent.

Table VG-4, Italy, Retail Sales Month and 12-Month ∆%

	Month ∆% SA	12-Month ∆% NSA
Jun 2013	-0.2	-3.0
May	0.1	-1.2
Apr	-0.1	-2.9
Mar	-0.3	-3.2
Feb	-0.1	-4.8
Jan	-0.4	-2.8
Dec 2012	-0.1	-3.4
Nov	0.0	-2.4
Oct	-0.8	-3.4
Sep	-0.1	-1.0
Aug	0.0	-0.4
Jul	-0.1	-3.1
Jun	-0.1	0.2
May	-0.1	-1.1
Apr	-1.1	-6.3
Mar	0.2	2.3
Feb	-0.4	0.7
Jan	1.0	-0.9
Dec 2011	-0.9	-3.2
Nov	-0.5	-1.5
Oct	0.7	-0.9
Sep	-0.3	-1.1
Aug	-0.4	0.1
July	0.0	-1.7
Jun	-0.4	-0.6
May	-0.5	-0.3
Apr	1.0	3.3
Mar	-0.3	-1.9
Feb	-0.3	0.1
Jan	-0.2	-0.5
Dec 2010	0.5	0.6
2012		-1.7
2011		-0.8

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/97883

Italy’s index of business confidence in manufacturing and construction is provided in Table VG-5. There has been improvement of manufacturing confidence below the historical average of 100 from 88.2 in Apr 2013 to 92.9 in Aug 2013. Order books deteriorated to minus 43 in May 2013 but improved to minus 32 in Aug 2013. There is oscillation in construction with the index moving from 77.7 in Apr 2013 to 81.1 in May 2013, falling to 76.1 in Aug 2013.

Table VG-5, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100

	Aug 2013	Jul 2013	Jun 2013	May 2013	Apr 2013
Mfg Confidence	92.9	91.8	90.6	88.9	88.2
Order Books	-32	-37	-38	-43	-45
Stocks Finished Products	1	0	1	1	-1
Production Expectation	-1	0	-2	-2	-4
Construction Confidence	76.1	76.5	71.1	81.1	77.7
Order Books	-52	-52	-56	-49	-52
Employment	-18	-20	-27	-13	-17

Mfg: manufacturing

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/97903

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