Mediocre and Decelerating United States Economic Growth, Stagnating Real Disposable Income, Destruction of Household Wealth for Inflation Adjusted Loss, United States Commercial Banks Assets and Liabilities, Housing Collapse, World Economic Slowdown and Global Recession Risk: Part IV

 

Mediocre and Decelerating United States Economic Growth, Stagnating Real Disposable Income, Destruction of Household Wealth for Inflation Adjusted Loss, United States Commercial Banks Assets and Liabilities, Housing Collapse, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

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

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

IB Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

IIA Destruction of Household Wealth for Inflation Adjusted Loss

IIB United States Housing Collapse

IIC United States Commercial Banks Assets and Liabilities

IIC1 Transmission of Monetary Policy

IIC2 Functions of Banks

IIC3 United States Commercial Banks Assets and Liabilities

IIC4 Theory and Reality of Economic History and Monetary Policy Based on Fear of Deflation

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

The revisions and enhancements of United States GDP and personal income accounts by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) also provide critical information in assessing indexes of prices of personal consumption. There are waves of inflation similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html) in inflation of personal consumption expenditures (PCE) in Table IV-5. These waves are in part determined by commodity price shocks originating in the carry trade from zero interest rates to positions in risk financial assets, in particular in commodity futures, which increase the prices of food and energy when there is relaxed risk aversion. Return of risk aversion causes collapse in prices. Resulting fluctuations of prices confuse risk/return decisions, inducing financial instability with adverse financial and economic consequences. The first wave is in Jan-Apr 2011 when headline PCE inflation increased at the average annual equivalent rate of 3.7 percent and PCE inflation excluding food and energy (PCEX) at 1.5 percent. The drivers of inflation were increases in food prices (PCEF) at the annual equivalent rate of 7.8 percent and of energy prices (PCEE) at 26.4 percent. This behavior will prevail under zero interest rates and relaxed risk aversion because of carry trades from zero interest rates to leveraged positions in commodity futures. The second wave occurred in May-Jun 2011 when risk aversion from the European sovereign risk crisis interrupted the carry trade. PCE prices increased 2.4 percent in annual equivalent and 2.4 percent excluding food and energy. The third wave is captured by the annual equivalent rates in Jul-Sep 2011 of headline PCE inflation of 2.4 percent with subdued PCE inflation excluding food and energy of 2.0 percent while PCE food rose at 6.2 percent and PCE energy increased at 6.2 percent. In the fourth wave in Oct-Dec 2011, increased risk aversion explains the fall of the annual equivalent rate of inflation to 0.8 for headline PCE inflation and 2.0 percent for PCEX excluding food and energy. PCEF of prices of food rose at the annual equivalent rate of 1.2 percent in Oct-Dec 2011 while PCEE of prices of energy fell at the annual equivalent rate of 10.7 percent. In the fifth wave in Jan-Mar 2012, headline PCE in annual equivalent was 2.4 percent and 2.4 percent excluding food and energy (PCEX). Energy prices of personal consumption (PCEE) increased at the annual equivalent rate of 15.8 percent because of the jump of 2.3 percent in Feb 2012 followed by 1.3 percent in Mar 2012. In the sixth wave, renewed risk aversion caused reversal of carry trades with headline PCE inflation at the annual equivalent rate of 0.0 percent in Apr-May 2012 while PCE inflation excluding food and energy increased at the annual equivalent rate of 1.2 percent. In the seventh wave, further shocks of risk aversion resulted in headline PCE annual equivalent inflation at 1.2 percent in Jun-Jul 2012 with core PCE excluding food and energy at 1.8 percent. In the eighth wave, temporarily relaxed risk aversion with zero interest rates resulted in central PCE inflation at 3.7 percent annual equivalent in Aug-Sep 2012 with PCEX excluding food and energy at 0.6 percent while PCEE energy jumped at 67.6 percent annual equivalent. The program of outright monetary transactions (OTM) of the European Central Bank induced relaxed risk aversion (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). In the ninth wave, prices collapsed with reversal of carry trade positions in a new episode of risk aversion with central PCE at annual equivalent 0.6 percent in Oct 2012 to Jan 2013 and PCEX at 1.8 percent while energy prices fell at minus 16.9 percent. In the tenth wave, central PCE increased at annual equivalent 4.9 percent in Feb 2013, PCEX at 1.2 percent and PCEE at 92.3 percent. In the eleventh wave, renewed risk aversion resulted in decline in annual equivalent of general PCE prices at 2.4 percent in Mar-Apr 2013 while PCEX increased at 0.6 percent and energy prices fell at 34.8 percent. In the twelfth wave, central PCE increased at 2.1 percent annual equivalent in May-Aug 2013 with PCEX increasing at 1.8 percent, food PCEF increasing at 1.2 percent and energy PCEE increasing at 11.9 percent with the jump of 3.4 percent in Jun 2013.

Table IV-5, US, Percentage Change from Prior Month of Prices of Personal Consumption Expenditures, Seasonally Adjusted Monthly ∆%

	PCE	PCEG	PCEG -D	PCES	PCEX	PCEF	PCEE
2013
Aug	0.1	0.0	-0.3	0.2	0.2	0.2	-0.2
Jul	0.1	0.1	-0.3	0.1	0.1	0.1	0.3
Jun	0.4	0.7	0.0	0.2	0.2	0.3	3.4
May	0.1	-0.1	-0.1	0.2	0.1	-0.2	0.3
∆% AE May-Aug	2.1	2.1	-2.1	2.1	1.8	1.2	11.9
Apr	-0.3	-0.9	-0.3	0.0	0.0	0.1	-4.4
Mar	-0.1	-0.6	-0.2	0.1	0.1	0.1	-2.6
∆% AE Mar-Apr	-2.4	-8.6	-3.0	0.6	0.6	1.2	-34.8
Feb	0.4	0.8	-0.1	0.2	0.1	0.2	5.6
∆% AE Feb	4.9	10.0	-1.2	2.4	1.2	2.4	92.3
Jan	0.1	-0.2	0.1	0.2	0.2	0.0	-1.8
2012
Dec	0.0	-0.3	-0.2	0.2	0.1	0.2	-0.9
Nov	-0.1	-0.7	-0.1	0.2	0.1	0.2	-3.5
Oct	0.2	0.1	-0.2	0.2	0.2	0.3	0.1
∆% AE Oct-Jan	0.6	-3.3	-1.2	2.4	1.8	2.1	-16.9
Sep	0.3	0.6	-0.2	0.1	0.1	-0.1	4.1
Aug	0.3	0.7	-0.2	0.1	0.0	0.1	4.7
∆% AE Aug-Sep	3.7	8.1	-2.4	1.2	0.6	0.0	67.6
Jul	0.0	-0.2	-0.3	0.1	0.1	0.0	-1.2
Jun	0.2	0.0	-0.1	0.3	0.2	0.2	-0.7
∆% AE Jun-Jul	1.2	-1.2	-2.4	2.4	1.8	1.2	-10.8
May	0.0	-0.5	0.0	0.2	0.1	0.0	-2.9
Apr	0.0	-0.3	-0.1	0.2	0.1	0.0	-1.9
∆% AE Apr- May	0.0	-4.7	-0.6	2.4	1.2	0.0	-25.3
Mar	0.2	0.3	-0.2	0.2	0.2	0.2	1.3
Feb	0.2	0.4	0.0	0.2	0.1	0.0	2.3
Jan	0.2	0.2	0.1	0.2	0.3	0.2	0.1
∆% AE Jan- Mar	2.4	3.7	-0.4	2.4	2.4	1.6	15.8
2011
Dec	0.1	-0.1	-0.2	0.2	0.1	0.2	-1.2
Nov	0.1	0.1	-0.2	0.2	0.2	-0.1	0.0
Oct	0.0	-0.2	0.0	0.1	0.1	0.2	-1.6
∆% AE Oct- Dec	0.8	-1.2	-1.6	2.0	2.0	1.2	-10.7
Sep	0.2	0.2	-0.4	0.2	0.1	0.5	1.3
Aug	0.2	0.3	-0.2	0.2	0.2	0.6	0.1
Jul	0.2	0.2	-0.1	0.2	0.2	0.4	0.1
∆% AE Jul-Sep	2.4	2.8	-2.8	2.4	2.0	6.2	6.2
Jun	0.1	0.1	0.2	0.1	0.2	0.2	-0.7
May	0.3	0.5	0.1	0.2	0.2	0.5	1.4
∆% AE May-Jun	2.4	3.7	1.8	1.8	2.4	4.3	4.2
Apr	0.3	0.5	0.3	0.2	0.2	0.4	1.8
Mar	0.4	0.8	-0.1	0.2	0.1	0.8	3.6
Feb	0.3	0.5	0.1	0.2	0.1	0.7	1.7
Jan	0.2	0.4	0.0	0.1	0.1	0.6	0.8
∆% AE Jan-Apr	3.7	6.8	0.9	2.1	1.5	7.8	26.4
2010
Dec	0.2	0.6	-0.3	0.1	0.0	0.1	4.1
Nov	0.2	0.2	-0.2	0.1	0.1	0.2	1.1
Oct	0.2	0.4	-0.2	0.1	0.1	0.1	3.1
Sep	0.1	0.2	-0.1	0.1	0.0	0.2	0.6
Aug	0.1	0.3	0.1	0.1	0.1	0.1	1.0
Jul	0.1	0.1	-0.3	0.1	0.1	0.1	1.2
Jun	0.1	-0.1	-0.4	0.1	0.1	-0.1	-0.5
May	0.0	-0.2	-0.2	0.2	0.1	0.1	-1.2
Apr	0.0	-0.3	-0.2	0.1	0.0	0.1	-0.8
Mar	0.1	-0.1	0.0	0.2	0.1	0.2	-0.5
Feb	0.0	-0.2	-0.3	0.1	0.1	0.1	-1.2
Jan	0.2	0.3	-0.1	0.1	0.1	0.1	1.7

Notes: percentage changes in price index relative to the same month a year earlier of PCE: personal consumption expenditures; PCEG: PCE goods; PCEG-D: PCE durable goods; PCES: PCE services; PCEX: PCE excluding food and energy; PCEF: PCE food; PCEE: PCE energy goods and services. AE: annual equivalent.

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

The charts of PCE inflation are also instructive. Chart IV-1 provides the monthly change of headline PCE price index. There is significant volatility in the monthly changes but excluding outliers fluctuations have been in a tight range between 1999 and 2013 around 0.2 percent per month.

Chart IV-1, US, Percentage Change of PCE Price Index from Prior Month, 1999-2013

Source: US Bureau of Economic Analysis

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

There is much less volatility in the PCE index excluding food and energy shown in Chart IV-2 with monthly percentage changes from 1999 to 2013. With the exception of 2001, there are no negative changes and again changes around 0.2 percent when excluding outliers.

Chart IV-2, US, Percentage Change of PCE Price Index Excluding Food and Energy from Prior Month, 1999-2013

Source: US Bureau of Economic Analysis

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

Fluctuations in the PCE index of food are much wider as shown in Chart IV-3 by monthly percentage changes from 1999 to 2013. There are also multiple negative changes and positive changes even exceeding 1.0 percent in three months.

Chart IV-3, US, Percentage Change of PCE Price Index Food from Prior Month, 1999-2013

Source: US Bureau of Economic Analysis

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

The band of fluctuation of the PCE price index of energy in Chart IV-4 is much wider. An interesting feature is the abundance of negative changes and large percentages.

Chart IV-4, US, Percentage Change of PCE Price Index Energy from Prior Month, 1999-2013

Source: US Bureau of Economic Analysis

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

Table IV-6 provides 12-month rates of PCE inflation from Jan 2012 to Aug 2013, annual inflation rates from 2000 to 2012 and average yearly rates of PCE inflation for various periods since 1929. Headline 12-month PCE inflation decreased from 2.5 percent in in the 12 months ending in Jan 2012 to 1.2 percent in the 12 months ending in Aug 2013. PCE inflation excluding food and energy (PCEX), used as indicator in monetary policy, decreased from 2.0 percent in the 12 months ending in Jan 2012 to 1.2 percent in the 12 months ending in Aug 2013, which is still below or at the tolerable maximum of 2.0-2.5 percent in monetary policy. The unintended effect of shocks of commodity prices from zero interest rates captured by PCE food prices (PCEF) and energy (PCEE) in the absence of risk aversion should be weighed in design and implementation of monetary policy. Annual PCE inflation in the second part of Table IV-6 shows significant fluctuations. Headline PCE inflation rose during the period of 1 percent interest rates from Jun 2003 to Jun 2005, reaching 2.9 percent in 2005. PCEE rose at very high two-digit rates after 2003. Headline PCE inflation increased 3.1 percent in 2008 while PCEE energy increased 14.3 percent in carry trades from zero interest rates to commodity derivatives during deep global recession. Flight away from risk financial assets to US government obligations fueled by proposals of TARP in Congress (Cochrane and Zingales 2009) caused decline of PCEE of 19.0 percent in 2009 and minus 0.1 percent in headline PCEE. There is no deflation in the US economy. Headline PCEE inflation increased at the average rate of 2.9 percent from 1929 to 2012, as shown in Table IV-6 using the revisions by the BEA. PCEE inflation was 6.8 percent on average during the Great Inflation episode from 1960 to 1981 (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). PCE inflation was 3.2 percent on average from 1947 to 2012 and 3.2 percent on average for PCEX. The long-term charts of PCEE and PCEX show almost identical behavior.

Table IV-6, US, Percentage Change in 12 Months of Prices of Personal Consumption Expenditures ∆%

	PCE	PCEG	PCEG -D	PCES	PCEX	PCEF	PCEE
2013
Aug	1.2	-0.4	-1.9	1.9	1.2	1.2	-0.2
Jul	1.3	0.3	-1.8	1.9	1.1	1.2	4.8
Jun	1.3	0.0	-1.8	1.9	1.2	1.0	3.2
May	1.0	-0.7	-1.9	1.9	1.2	1.0	-0.9
Apr	0.9	-1.1	-1.8	1.9	1.2	1.2	-4.1
Mar	1.2	-0.5	-1.7	2.1	1.4	1.1	-1.6
Feb	1.5	0.4	-1.7	2.1	1.5	1.2	2.4
Jan	1.4	0.0	-1.6	2.1	1.5	1.1	-0.8
2012
Dec	1.5	0.4	-1.6	2.1	1.6	1.3	1.1
Nov	1.6	0.5	-1.5	2.1	1.7	1.3	0.8
Oct	1.8	1.3	-1.6	2.1	1.8	1.0	4.4
Sep	1.7	1.0	-1.5	2.0	1.7	0.9	2.7
Aug	1.6	0.6	-1.7	2.1	1.7	1.5	-0.2
Jul	1.5	0.2	-1.6	2.2	1.9	2.0	-4.6
Jun	1.6	0.5	-1.4	2.2	1.9	2.4	-3.3
May	1.6	0.7	-1.1	2.1	1.9	2.4	-3.3
Apr	2.0	1.6	-1.2	2.1	1.9	2.9	1.5
Mar	2.3	2.5	-0.6	2.0	2.0	3.3	4.9
Feb	2.4	2.9	-0.6	2.2	2.0	3.9	7.3
Jan	2.5	3.0	-0.4	2.2	2.0	4.7	6.8
Annual ∆%
2012	1.8	1.3	-1.2	2.2	1.8	2.3	1.4
2011	2.4	3.6	-1.0	1.8	1.4	4.0	15.8
2010	1.7	1.6	-1.4	1.7	1.3	0.3	10.1
2009	-0.1	-2.3	-1.7	1.1	1.2	1.2	-19.0
2008	3.1	3.0	-1.9	3.1	2.1	5.6	14.3
2007	2.5	1.1	-2.0	3.2	2.2	3.9	6.0
2006	2.7	1.4	-1.6	3.4	2.2	3.1	11.3
2005	2.9	2.0	-1.0	3.3	2.2	1.7	17.3
2004	2.4	1.4	-1.9	3.0	1.9	3.1	11.3
2003	2.0	-0.1	-3.6	3.1	1.5	1.9	12.6
2002	1.3	-0.9	-2.5	2.6	1.7	1.5	-5.8
2001	1.9	-0.1	-2.0	3.1	1.8	2.9	2.5
2000	2.5	2.0	-1.8	2.8	1.7	2.3	18.3
Average ∆%
2000-2012	2.0	1.0	-19.8*	2.6	1.8	2.5	6.0
1929-2012	2.9	3.4	1.4	3.3	2.9	2.9	3.4
1947-2012	3.2	2.4	1.2	3.9	3.2	3.1	4.3
1960-1981	6.8	6.4	4.9	7.2	6.3	7.3	11.1

*Percentage change from 2000 to 2012.

Notes: percentage changes in price index relative to the same month a year earlier of PCE: personal consumption expenditures; PCEG: PCE goods; PCEG-D: PCE durable goods; PCES: PCE services; PCEX: PCE excluding food and energy; PCEF: PCE food; PCEE: PCE energy goods and services

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

The headline PCE index is shown in Chart IV-5 from 1999 to 2013. There is an evident upward trend with the carry-trade bump in 2008-2009 during the global recession.

Chart IV-5, US, Price Index of Personal Consumption Expenditures 1999-2013

Source: US Bureau of Economic Analysis

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

The consumer price index in Chart IV-6 mirrors the behavior of the PCE price index in Chart IV-5. There is the same upward trend with the carry-trade bump in 2008 during the global recession.

Chart IV-6, US, Consumer Price Index, NSA, 1999-2013

Source: US Bureau of Labor Statistics

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

Chart IV-6 provides the PCE price index excluding food and energy. There is milder upward trend with fewer oscillations.

Chart IV-7, US, Price Index of Personal Consumption Expenditures Excluding Food and Energy 1999-2013

Source: US Bureau of Economic Analysis

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

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

The core consumer price index, excluding food and energy, is shown in Chart IV-8. There is also an upward trend but with fluctuations.

Chart IV-8, US, Consumer Price Index Excluding Food and Energy, NSA, 1999-2012

Source: US Bureau of Labor Statistics

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

The PCE price index of food is shown in Chart IV-9. There is a more pronounced upward trend and sharper fluctuations.

Chart IV-9, US, Price Index of Personal Consumption Expenditures Food 1999-2013

Source: US Bureau of Economic Analysis

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

There is similar behavior in the consumer price index of food in Chart IV-10. There is an upward trend from 1999 to 2011 with a major bump in 2009 when commodity futures positions were unwound. Zero interest rates with bouts of risk aversion dominate the trend into 2011. Risk aversion softens the trend toward the end of 2011 and in 2012-2013.

Chart IV-10, US, Consumer Price Index, Food, NSA, 1999-2013

Source: US Bureau of Labor Statistics

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

The most pronounced trend of PCE price indexes is that of energy in Chart IV-11. It is impossible to explain the hump in 2008 in the middle of the global recession without the carry trade from zero interest rates to leveraged positions in commodity futures. Risk aversion after Sep 2008 caused flight to the safe haven of government obligations. The return of risk appetite with zero interest rates caused a first wave of carry trades with another upward trend interrupted by the first European sovereign risk crisis in Apr-Jul 2010. Zero interest rates with risk appetite caused another sharp upward trend of commodity prices interrupted by risk aversion from the second sovereign crisis. In the absence of risk aversion, carry trades from zero interest rates to positions in risk financial assets will continue to cause distortions such as commodity price trends and fluctuations.

Chart IV-11, US, Price Index of Personal Consumption Expenditures Energy Goods and Services 1999-2013

Source: US Bureau of Economic Analysis

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

Chart IV-12 provides the consumer price index of energy commodities. Unconventional monetary policy of zero or near zero interest rates causes upward trends in commodity prices reflected in (1) increase from 2003 to 2007; (2) sharp increase during the global contraction in 2008; (3) collapse from 2008 into 2009 as positions in commodity futures were unwound in a flight to government obligations; (4) new upward trend after 2010; and (5) episodes of decline during risk aversion shocks such as the more recent segment during the worsening European debt crisis in Nov and Dec of 2011 and with new strength of commodity prices in the beginning of 2012 followed by softness in another episode of risk aversion and increases during risk appetite.

Chart IV-12, US, Consumer Price Index, Energy, NSA, 1999-2013

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

Chart IV-13 of the US Energy Information Administration provides prices of the crude oil futures contract. Unconventional monetary policy of very low interest rates and quantitative easing with suspension of the 30-year bond to lower mortgage rates caused a sharp upward trend of oil prices. There is no explanation for the jump of oil prices to $149/barrel in 2008 during a sharp global recession other than carry trades from zero interest rates to commodity futures. The peak in Chart IV-13 is $145.18 on Jul 14, 2008, in the midst of deep global recession, falling to $33.87/barrel on Dec 19, 2008 (data from the US Energy Information Administration (http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D). Prices collapsed in the flight to government obligations caused by proposals for withdrawing “toxic assets” in the Troubled Asset Relief Program (TARP) as analyzed by Cochrane and Zingales (2009). Risk appetite with zero interest rates after stress tests of US banks resulted in another upward trend of commodity prices after 2009 with fluctuations during periods of risk aversion. All price indexes are affected by unconventional monetary policy.

Chart IV-13, US, Crude Oil Futures Contract

Source: US Energy Information Administration

ble IV-14 provides the annual PCE price index from the revised and enhanced dataset of the Bureau of Economic Analysis (BEA). The annual PCEE index increased at the average rate of 3.2 percent from 1929 to 2012. There is no support for fear of deflation.

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

Chart IV-14, US, Price Index of Personal Consumption Expenditures, Annual, 1929-2012

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

Chart IV-15 of the Bureau of Labor Statistics (BLS) provides the consumer price index from 1914 to 2012. There is long-term inflation and no evidence in support of fear of deflation.

Chart IV-15, US, Consumer Price Index, Annual, 1914-2012

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

Chart IV-16 provides the BEA annual index of PCE prices excluding food and energy. The average rate of increase from 1929 to 2012 is 3.2 percent.

Chart IV-16, US, Price Index of Personal Consumption Expenditures Excluding Food and Energy, Annual, 1929-2013

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

Chart IV-17 of the Bureau of Labor Statistics (BLS) provides the annual consumer price index excluding food and energy from 1957 to 2012. There is long-term, fluctuating inflation.

Chart IV-17, US, Consumer Price Index Excluding Food and Energy, Annual, 1957-2012

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

Unconventional monetary policy of zero interest rates and quantitative easing has been used in Japan and now also in the US. Table IV-7 provides the consumer price index of Japan, with inflation of 0.9 percent in 12 months ending in Aug 2013 and change of 0.3 percent NSA (not-seasonally-adjusted) in Aug 2013. Inflation of consumer prices in the first three months of 2012 annualizes at 0.0 percent NSA. Inflation in Mar-Aug 2013 not seasonally adjusted annualizes at 2.2 percent. There are negative percentage changes in most of the 12-month rates in 2011 with the exception of Jul and Aug both with 0.2 percent and stability in Sep. All 12-month rates of inflation in the first five months of 2013 are negative. Inflation in the 12 months ending in Jun 2013 was 0.2 percent and 0.7 percent in the 12 months ending in Jul 2013. Inflation increased to 0.9 percent in the 12 months ending in Aug 2013. There are ten years of deflation, three of zero inflation and only five of inflation in the annual rate of inflation from 1995 to 2012. This experience is entirely different from that of the US that shows long-term inflation. There is only one annual negative change of the CPI all items of the US in Table IV-5, minus 0.4 percent in 2009 but following 3.8 percent in 2008 because of carry trades from policy rates moving to zero in 2008 during a global contraction that were reversed because of risk aversion in late 2008 and early 2009, causing decreasing commodity prices. Both the US and Japan experienced high rates of inflation during the US Great Inflation of the 1970s (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). It is difficult to justify unconventional monetary policy because of risks of deflation similar to that experienced in Japan. Fear of deflation as had occurred during the Great Depression and in Japan was used as an argument for the first round of unconventional monetary policy with 1 percent interest rates from Jun 2003 to Jun 2004. The 1 percent interest rate combined with quantitative easing in the form of withdrawal of supply of 30-year securities by suspension of the auction of 30-year Treasury bonds with the intention of reducing mortgage rates. For fear of deflation, see Pelaez and Pelaez, International Financial Architecture (2005), 18-28, and Pelaez and Pelaez, The Global Recession Risk (2007), 83-95. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html 

Table IV-7, Japan, Consumer Price Index, All Items ∆%

	∆% Month  NSA	∆% 12-Month NSA
Aug 2013	0.3	0.9
Jul	0.2	0.7
Jun	0.0	0.2
May	0.1	-0.3
Apr	0.3	-0.7
Mar	0.2	-0.9
Feb	-0.2	-0.7
Jan	0.0	-0.3
Dec 2012	0.0	-0.1
Nov	-0.4	-0.2
Oct	0.0	-0.4
Sep	0.1	-0.3
Aug	0.1	-0.4
Jul	-0.3	-0.4
Jun	-0.5	-0.2
May	-0.3	0.2
Apr	0.1	0.4
Mar	0.5	0.5
Feb	0.2	0.3
Jan	0.2	0.1
Dec 2011	0.0	-0.2
Nov	-0.6	-0.5
Oct	0.1	-0.2
Sep	0.0	0.0
Aug	0.1	0.2
Jul	0.0	0.2
Jun	-0.2	-0.4
May	0.0	-0.4
Apr	0.1	-0.5
Mar	0.3	-0.5
Feb	0.0	-0.5
Jan	-0.1	-0.6
Dec 2010	–0.3	0.0
	CPI All Items USA	CPI All Items Japan
Annual
2012	2.1	0.0
2011	3.2	-0.3
2010	1.6	-0.7
2009	-0.4	-1.4
2008	3.8	1.4
2007	2.8	0.0
2006	3.2	0.3
2005	3.4	-0.3
2004	2.7	0.0
2003	2.3	-0.3
2002	1.6	-0.9
2001	2.8	-0.7
2000	3.4	-0.7
1999	2.2	-0.3
1998	1.6	0.6
1997	2.3	1.8
1996	3.0	0.1
1995	2.8	-0.1
1994	2.6	0.7
1993	3.0	1.3
1992	3.0	1.6
1991	4.2	3.3
1990	5.4	3.1
1989	4.8	2.3
1988	4.1	0.7
1987	3.6	0.1
1986	1.9	0.6
1985	3.6	2.0
1984	4.3	2.3
1983	3.2	1.9
1982	6.2	2.8
1981	10.3	4.9
1980	13.5	7.7
1979	11.3	3.7
1978	7.6	4.2
1977	6.5	8.1
1976	5.8	9.4
1975	9.1	11.7
1974	11.0	23.2
1973	6.2	11.7
1972	3.2	4.9
1971	4.4	6.3

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

http://www.stat.go.jp/english/data/cpi/index.htm

Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the consumer price index for all items and regions of Japan monthly from 1971 to 2013 with 2010=100, shown in Chart IV-18. There was inflation in Japan during the 1970s and 1980s similar to other countries and regions. The index shows stability after the 1990s with sporadic cases of deflation. Slower growth with sporadic inflation has been characterized as a “lost decade” in Japan (see Pelaez and Pelaez, The Global Recession Risk (2007), 82-115).

Chart IV-18, Japan, Consumer Price Index All Items, All Japan, Index 2010=100, Monthly, 1970-2013

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

http://www.stat.go.jp/english/data/cpi/index.htm

Chart IV-19 provides the US consumer price index NSA from 1914 to 2013. The dominating characteristic is the increase in slope during the Great Inflation from the middle of the 1960s through the 1970s. There is long-term inflation in the US and no evidence of deflation risks.

Chart IV-19, US, Consumer Price Index, All Items, NSA, 1914-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/

Chart IV-20 of the Statistics Bureau of the Ministry of Internal Affairs and Communications of Japan provides 12-month percentage changes of the consumer price index for all items and regions of Japan monthly from 1971 to 2013. Japan experienced the same inflation waves of the United States during the Great Inflation of the 1970s followed by similar low inflation after the inflation-control increase of interest rates in the early 1980s. Numerous cases of negative inflation or deflation are observed after the 1990s.

Chart IV-20, Japan, CPI All Items, All Japan, 12-Month ∆%, 1971-2013

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

http://www.stat.go.jp/english/data/cpi/index.htm

Chart IV-21 provides 12-month percentage changes of the US consumer price index from 1914 to 2013. There are actually three waves of inflation in the second half of the 1960s, in the mid 1970s and again in the late 1970s. Table IV-3 provides similar inflation waves in the economy of Japan with 11.8 percent in 1973, 23.1 percent in 1974 and 11.8 percent in 1975. The Great Inflation of the 1970s is analyzed in various comments of this blog (http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and in Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). Inflation rates then stabilized in the US in a range with only two episodes above 5 percent. There are isolated cases of deflation concentrated over extended periods only during the 1930s. There is no case in United States economic history for unconventional monetary policy because of fear of deflation. There are cases of long-term deflation without lost decades or depressions.

Delfim Netto (1958) partly reprinted in Pelaez (1973) conducted two classical nonparametric tests (Mann 1945, Wallis and Moore 1941; see Kendall and Stuart 1968) with coffee-price data in the period of free markets from 1857 to 1906 with the following conclusions (Pelaez, 1976a, 280):

“First, the null hypothesis of no trend was accepted with high confidence; secondly, the null hypothesis of no oscillation was rejected also with high confidence. Consequently, in the nineteenth century international prices of coffee fluctuated but without long-run trend. This statistical fact refutes the extreme argument of structural weakness of the coffee trade.”

The conventional theory that the terms of trade of Brazil deteriorated over the long term is without reality (Pelaez 1976a, 280-281):

“Moreover, physical exports of coffee by Brazil increased at the high average rate of 3.5 per cent per year. Brazil's exchange receipts from coffee-exporting in sterling increased at the average rate of 3.5 per cent per year and receipts in domestic currency at 4.5 per cent per year. Great Britain supplied nearly all the imports of the coffee economy. In the period of the free coffee market, British export prices declined at the rate of 0.5 per cent per year. Thus, the income terms of trade of the coffee economy improved at the relatively satisfactory average rate of 4.0 per cent per year. This is only a lower bound of the rate of improvement of the terms of trade. While the quality of coffee remained relatively constant, the quality of manufactured products improved significantly during the fifty-year period considered. The trade data and the non-parametric tests refute conclusively the long-run hypothesis. The valid historical fact is that the tropical export economy of Brazil experienced an opportunity of absorbing rapidly increasing quantities of manufactures from the "workshop" countries. Therefore, the coffee trade constituted a golden opportunity for modernization in nineteenth-century Brazil.”

Imlah (1958) provides decline of British export prices at 0.5 percent in the nineteenth century and there were no lost decades, depressions or unconventional monetary policies in the highly dynamic economy of England that provided the world’s growth impulse. The experience of the United Kingdom with deflation and economic growth is relevant and rich. Yearly percentage changes of the composite index of prices of the United Kingdom of O’Donoghue and Goulding (2004) provide strong evidence. There are 73 declines of inflation in the 145 years from 1751 to 1896. Prices declined in 50.3 percent of 145 years. Some price declines were quite sharp and many occurred over several years. O’Donoghue and Goulding (2004) also provide inflation data for the UK from 1929 to 1934. Deflation was much sharper in continuous years in earlier periods than during the Great Depression. The United Kingdom could not have led the world in modern economic growth if there were meaningful causality from deflation to depression.

Chart IV-21, US, Consumer Price Index, All Items, NSA, 12-Month Percentage Change 1914-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/

Chart IV-22 provides the US consumer price index excluding food and energy from 1957 (when it first becomes available) to 2013. There is long-term inflation in the US without episodes of deflation that would justify symmetric inflation targets to increase inflation from low levels.

Chart IV-22, US, Consumer Price Index Excluding Food and Energy, NSA, 1957-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/

Chart IV-23 provides 12-month percentage changes of the consumer price index excluding food and energy from 1958 (when it first becomes available) to 2013. There are three waves of inflation in the 1970s during the Great Inflation. There is no episode of deflation.

Chart IV-23, US, Consumer Price Index Excluding Food and Energy, 12-Month Percentage Change, NSA, 1958-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/cpi/

More detail on the consumer price index of Japan in Apr is in Table IV-8. Items rich in commodities, such as 6.0 percent in fuel, light and water charges in 12 months with increase of 0.5 percent in the month of Aug, have driven inflation in the 12 months ending in Aug 2013. Fiscal and monetary policies promoting devaluation of the yen are causing inflation in Japan. There is similar behavior in the preliminary estimate for Sep for the Ku Area of Tokyo with increase of 0.3 percent of fuel, light and water charges and increase of 4.6 percent in 12 months. There is 12-month increase of 3.1 percent of CPI transport and communications. The CPI excluding fresh food, which is the inflation indicator of the Bank of Japan, increased 0.8 percent in the 12 months ending in Aug 2013. There is mild deflation in the CPI excluding food, alcoholic beverages and energy with minus 0.1 percent in the 12 months ending in Aug 2013 and increase of 0.2 percent in Aug 2013. The CPI excluding imputed rent increased 0.4 percent in Aug 2013 and increased 1.1 percent in 12 months. The all-items CPI estimate for Sep 2013 of the Ku-Area of Tokyo shows increase of 0.2 percent in Sep 2013 and 0.5 percent in 12 months.

Table IV-8, Japan, Consumer Price Index, ∆%

2013	Aug 2013/Jul 2013 ∆%	Year ∆%
CPI All Items	0.3	0.9
CPI Excluding Fresh Food	0.3	0.8
CPI Excluding Food, Alcoholic Beverages and Energy	0.2	-0.1
CPI Goods	0.1	1.8
CPI Services	0.4	0.0
CPI Excluding Imputed Rent	0.4	1.1
CPI Fuel, Light, Water Charges	0.5	6.0
CPI Transport & Communications	1.0	3.1
CPI Ku-Area Tokyo All Items	0.2	0.5
Fuel, Light, Water Charges Ku Area Tokyo	0.3	4.6

Note: Ku-area Tokyo CPI data preliminary for Sep 2013

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

http://www.stat.go.jp/english/data/cpi/index.htm

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 IIQ2013 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 0.3 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.2 percent, which is much lower than 5.0 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 3.5 percent and increased 0.3 percent relative to a year earlier. Japan’s GDP grew 0.3 percent in IVQ2012 at the SAAR of 1.1 percent and increased 0.4 percent relative to a year earlier. Japan grew 1.0 percent in IQ2013 at the SAAR of 4.1 percent and 0.3 percent relative to a year earlier. Japan’s GDP increased 0.9 percent in IIQ2013 at the SAAR of 3.8 percent and increased 1.2 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 0.2 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 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 0.5 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 percent and decreased 1.0 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.5 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/2013/09/increasing-interest-rate-risk.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.html). 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 0.6 percent in IIIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP fell 0.3 percent in IVQ2012 relative to IIIQ2012 and fell 0.2 percent relative to a year earlier. UK GDP increased 0.4 percent in IQ2013 and 0.2 percent relative to a year earlier. UK GDP increased 0.7 percent in IIQ2013 and 1.3 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 2.4 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and 2.1 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 changed 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 0.1 percent and declined 0.5 percent relative to a year earlier. The GDP of France increased 0.5 percent in IIQ2013 and 0.4 percent relative to a year earlier

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.9        SAAR: 3.7	3.3
Japan	QOQ: 1.2 SAAR: 5.0	3.4
China	1.5	8.1
Euro Area	-0.1	-0.2
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: -0.3 SAAR: -1.2	3.8
China	2.1	7.6
Euro Area	-0.3	-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: –3.5	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	0.6	0.0
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	2.0
Japan	QOQ: 0.3 SAAR: 1.1	0.4
China	1.9	7.9
Euro Area	-0.5	-1.0
Germany	-0.5	0.0
France	-0.2	-0.3
Italy	-0.9	-2.8
United Kingdom	-0.3	-0.2
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.3 SAAR: 1.1	1.3
Japan	QOQ: 1.0 SAAR: 4.1	0.3
China	1.6	7.7
Euro Area	-0.2	-1.0
Germany	0.0	-1.6
France	-0.1	-0.5
Italy	-0.6	-2.4
UK	0.4	0.2
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.6 SAAR: 2.5	1.6
Japan	QOQ: 0.9 SAAR: 3.8	1.2
China	1.7	7.5
Euro Area	0.3	-0.5
Germany	0.7	0.9
France	0.5	0.4
Italy	-0.3	-2.1
UK	0.7	1.3

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/2013/08/interest-rate-risks-duration-dumping.html 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/2013/09/recovery-without-hiring-ten-million.html and earlier 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 Aug 2013, Japan’s exports grew 14.7 percent in 12 months while imports increased 16.0 percent. The second part of Table V-4 shows that net trade deducted 1.0 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.7 percentage points from GDP growth in IIIQ2012 and deducted 0.2 percentage points from GDP growth in IVQ2012. Net trade added 0.3 percentage points to GDP growth in IQ2012, 1.6 percentage points in IQ2013 and 0.7 percentage points in IIQ2013. In Aug 2013, China exports increased 7.2 percent relative to a year earlier and imports increased 7.1 percent. Germany’s exports decreased 1.1 percent in the month of Jul 2013 and changed 0.0 percent in the 12 months ending in Jul 2013 while imports increased 0.5 percent in the month of Jul and increased 0.9 percent in the 12 months ending in Jul. 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 0.8 percentage points from UK value added in IQ2012, deducted 0.6 percentage points in IIQ2012, added 0.4 percentage points in IIIQ2012 and subtracted 0.2 percentage points in IVQ2012. In IQ2013, net trade added 0.3 percentage points to UK’s growth of value added and contributed 0.0 percentage points in IIQ2013. France’s exports increased 1.3 percent in Jul 2013 while imports increased 2.7 percent and net trade added 0.10 percentage points to GDP growth in IIQ2012, 0.10 percentage points in IIIQ2012 and 0.2 percentage points in IVQ2012. Net trade deducted 0.2 percentage points from France’s GDP growth in IQ2013 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 from GDP growth in IIIQ2012 and added 0.68 percentage points in IVQ2012. Net trade deducted 0.28 percentage points from US GDP growth in IQ2013 and deducted 0.07 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 0.4 percent in Aug 2013 after changing 0.0 percent in Jul 2013 and increasing 0.1 percent in Jun 2013. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production advanced 0.4 percent in August after having been unchanged in July; the gains in August were broadly based. Following a decrease in July of 0.4 percent, which was steeper than previously reported, manufacturing production rose 0.7 percent in August. The output of mines moved up 0.3 percent, its fifth consecutive monthly increase, and the production of utilities fell 1.5 percent, its fifth consecutive monthly decrease. At 99.4 percent of its 2007 average, total industrial production in August was 2.7 percent above its year-earlier level. “

In the six months ending in Aug 2013, United States national industrial production accumulated increase of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than growth of 2.7 percent in the 12 months ending in Aug 2013. Excluding growth of 0.4 percent in Aug 2013, growth in the remaining five months from Mar 2012 to Jul 2013 accumulated to 0.2 percent or 0.5 percent annual equivalent. Industrial production stagnated in three of the past six months and fell in one. Business equipment accumulated growth of 0.4 percent in the six months from Mar to Aug 2013 at the annual equivalent rate of 0.8 percent, which is much lower than growth of 2.5 percent in the 12 months ending in Aug 2013. Growth of business equipment accumulated minus 0.5 percent from Mar to July 2013 at the annual equivalent rate of minus 1.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector increased 0.2 percentage point in August to 77.8 percent, a rate 0.6 percentage point above its level of a year earlier and 2.4 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating.

Manufacturing increased 0.7 percent in Aug 2013 after decreasing 0.4 percent in Jul 2013 and increasing 0.3 percent in Jul 2013 seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months ending in Aug 2013. Manufacturing grew cumulatively 0.2 percent in the six months ending in Jul 2013 or at the annual equivalent rate of 0.4 percent. Excluding the increase of 0.7 percent in Aug 2013, manufacturing accumulated growth of minus 0.5 percent from Mar 2013 to Jul 2013 or at the annual equivalent rate of minus 1.2 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	-0.6 Jul	1.6 Jan-Jul	1.6 Jul	-1.4 Jan-Jul
Japan		Aug 2013 14.7 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		Aug 2013 16.0 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		7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb		7.1 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb
Euro Area	1.7 12-M Jul	1.5 Jan-Jun	-3.5 12-M Jul	-4.1 Jan-Jun
Germany	-1.1 Jul CSA	0.0 Jul	0.5 Jul CSA	0.9 Jul
France Jul	1.3	-0.6	2.7	1.1
Italy Jul	-2.3	3.0	0.4	-0.3
UK	-4.6 Jul	1.1 May-Jul 13 /May-Jul 12	-0.4 Jul	0.7 May-Jul 13/May-Jul 12
Net Trade % Points GDP Growth	% Points
USA	IIQ2013 -0.07 IQ2013 -0.28 IVQ2012 +0.68 IIIQ2012 -0.03 IIQ2012 +0.10 IQ2012 +0.44
Japan	0.3 IQ2012 -1.0 IIQ2012 -2.7 IIIQ2012 -0.2 IVQ2012 1.6 IQ2013 0.7 IIQ2013
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	-0.8 IQ2012 -0.6 IIQ2012 +0.4 IIIQ2012 -0.2 IVQ2012 0.3 IQ2013 0.0 IIQ2013

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

The structure of exports and imports of Japan is in Table V-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 33.8 percent of Japan’s imports and increased 17.5 percent in the 12 months ending in Aug 2013 because of alternating carry trades into commodity futures in accordance with risk aversion. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 13.4 percent of Japan’s exports with increase of 13.5 percent in the 12 months ending in Aug 2013. Machinery contributes 19.1 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Electrical machinery contributes 18.3 percent of Japan’s exports with increase of 7.3 percent in the 12 months ending in Aug 2013. Exports of transport equipment with share of 21.2 percent in total exports increased 15.2 percent in the 12 months ending in Aug 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table V-5 shows increase of the major categories of motor vehicles of 21.0 percent: cars increased 23.4 percent with increase of 6.0 percent in the minor category of buses and trucks, increase of 12.2 percent for parts of motor vehicles, increase of 25.9 percent for motorcycles and decrease of 28.5 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

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

Aug 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,783,712	14.7	6,744,041	16.0
Asia	3,221,175	13.5	2,919,797	15.3
China	1,118,989	15.8	1,423,073	17.6
USA	1,069,528	20.6	574,187	14.0
Canada	71,661	14.8	93,246	16.2
Brazil	53,085	26.3	82,097	22.8
Mexico	69,563	1.5	32,992	22.2
Western Europe	588,220	21.3	685,872	9.9
Germany	150,838	19.9	209,602	20.2
France	48,700	32.0	81,964	-3.7
UK	90,388	25.4	50,242	4.0
Middle East	184,317	10.1	1,313,053	21.2
Australia	139,549	19.2	463,638	5.4

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

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from 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 55.2 in Aug from 54.0 in Jul, indicating expansion at a higher rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). This index has remained above the contraction territory of 50.0 during 49 consecutive months and reached in Aug 2013 the highest reading since Feb 2011. The employment index increased from 51.0 in Jul to 52.2 in Aug with input prices rising at a slower rate and new orders and output increasing at higher rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). David Hensley, Director of Global Economics at JP Morgan, finds growth through all sectors (http://www.markiteconomics.com/Survey/PressRelease.mvc/3dfe42c71a6748fe820a89f97aa15696). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was higher at 51.7 in Aug from 50.8 in Jul, which is the highest reading Jun 2011 and the eighth consecutive reading above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b34defd79f914b46b82892783a0205ec). David Hensley, Director of Global Economic Coordination at JP Morgan, finds support of acceleration of manufacturing output. The HSBC Brazil Composite Output Index, compiled by Markit, increased marginally from 49.6 in Jul to 49.7 in Aug, indicating moderate contraction in private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). The HSBC Brazil Services Business Activity index, compiled by Markit fell marginally from 50.3 in Jul to 49.7 in Aug, which is the first reading below 50.0 in 12 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the survey data suggest weaker economy and increasing costs of inputs at a higher rate than in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/ab0a590fd2d74b81992c35c544121896). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 48.5 in Jul to 49.4 in Aug with another decline in foreign business (http://www.markiteconomics.com/Survey/PressRelease.mvc/027b440eefc443ada76581bbbfe4ed7c). Andre Loes, Chief Economist, Brazil at HSBC, finds mild contraction of manufacturing at slower pace (http://www.markiteconomics.com/Survey/PressRelease.mvc/027b440eefc443ada76581bbbfe4ed7c).

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^™) decreased to 53.1 in Aug from 53.7 in Jul (http://www.markiteconomics.com/Survey/PressRelease.mvc/2d624187f3e9463196a640620bd19b4c). The index of new exports orders decreased from 52.5 in Jul to 52.0 in Aug while total new orders increased from 55.4 in Jul to 55.7 in Aug. Chris Williamson, Chief Economist at Markit, finds that the index suggests possible deceleration (http://www.markiteconomics.com/Survey/PressRelease.mvc/2d624187f3e9463196a640620bd19b4c). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.3 percentage points from 55.4 in Jul to 55.7 in Aug, which indicates growth at a higher rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 4.9 percentage points from 58.3 in Jul to 63.2 in Aug. The index of exports increased 2.0 percentage point from 53.5 in Jul to 55.5 in Aug, growing at a faster rate. The Non-Manufacturing ISM Report on Business^® PMI increased 2.6 percentage points from 56.0 in Jul to 58.6 in Aug, indicating growth of business activity/production during 49 consecutive months, while the index of new orders increased 2.8 percentage points from 57.7 in Jul to 60.5 in Aug (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	Aug 12 months NSA ∆%: 1.5; ex food and energy ∆%: 1.8 Aug month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 9/22/13
Producer Price Index	Aug 12-month NSA ∆%: 1.4; ex food and energy ∆% 1.1 Aug month SA ∆% = 0.3; ex food and energy ∆%: 0.0 Blog 9/15/13 9/22/13
PCE Inflation	Aug 12-month NSA ∆%: headline 1.2; ex food and energy ∆% 1.2 Blog 9/29/13
Employment Situation	Household Survey: Aug Unemployment Rate SA 7.3% Blog calculation People in Job Stress Jul: 28.3 million NSA, 17.4% of Labor Force Establishment Survey: Nov Nonfarm Jobs +169,000; Private +152,000 jobs created  Jul 12-month Average Hourly Earnings Inflation Adjusted ∆%: -0.7 Blog 9/8/13
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 Jul 2013 4.518 million lower by 1.037 million than 5555 million in Jul 2006 Blog 9/15/13
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 9/29/13
Real Private Fixed Investment	SAAR IIQ2013 6.5 ∆% IVQ2007 to IIQ2013: minus 4.9% Blog 9/29/13
Personal Income and Consumption	Aug month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 Real Personal Consumption Expenditures (RPCE): 0.2 12-month Aug NSA ∆%: RDPI: 1.6; RPCE ∆%: 2.0 Blog 9/29/13
Quarterly Services Report	IIQ13/IIQ12 SA ∆%: Information 4.1 Financial & Insurance 4.2 Blog 9/8/13
Employment Cost Index	Compensation Private IIQ2013 SA ∆%: 0.5 Jun 13 months ∆%: 1.9 Blog 8/11/13
Industrial Production	Aug month SA ∆%: 0.4 Aug 12 months SA ∆%: 2.7 Manufacturing Aug SA ∆% 0.7 Aug 12 months SA ∆% 2.6, NSA 2.5 Capacity Utilization: 77.6 Blog 9/22/13
Productivity and Costs	Nonfarm Business Productivity IIQ2013∆% SAAE 2.3; IIQ2013/IIQ2012 ∆% 0.3; Unit Labor Costs SAAE IIQ2013 ∆% 0.0; IIQ2013/IIQ2012 ∆%: 1.5 Blog 9/8/2013
New York Fed Manufacturing Index	General Business Conditions From Aug 8.24 to Sep 6.29 New Orders: From Aug 0.27 to Sep 2.35 Blog 9/22/13
Philadelphia Fed Business Outlook Index	General Index from Aug 9.3 to Sep 22.3 New Orders from Aug 5.3 to Sep 21.2 Blog 9/22/13
Manufacturing Shipments and Orders	New Orders SA Jul ∆% -2.4 Ex Transport 1.2 Jan-Jul NSA New Orders 1.9 Ex transport 1.4 Blog 9/8/13
Durable Goods	Aug New Orders SA ∆%: 0.1; ex transport ∆%: -0.1 Jan-Aug 13/Jan-Aug 12 New Orders NSA ∆%: 4.1; ex transport ∆% 2.9 Blog 9/29/13
Sales of New Motor Vehicles	Jan-Aug 2013 10,647,486; Jan-Aug 2012 9,711,044. Aug 13 SAAR 16.09 million, Jul 13 SAAR 15.80 million, Aug 2012 SAAR 14.49 million Blog 9/8/13
Sales of Merchant Wholesalers	Jan-Jul 2013/Jan-Jul 2012 NSA ∆%: Total 3.2; Durable Goods: 3.2; Nondurable Goods: 3.3 Blog 9/15/13
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jul 13/Jun 12 NSA ∆%: Sales Total Business 6.4; Manufacturers 3.6 Retailers 7.7; Merchant Wholesalers 8.4 Blog 9/15/13
Sales for Retail and Food Services	Jan-Aug 2013/Jan-Aug 2012 ∆%: Retail and Food Services 4.3; Retail ∆% 4.4 Blog 9/15/13
Value of Construction Put in Place	Jul SAAR month SA ∆%: 0.6 Jul 12-month NSA: 5.2 Jan-Jul 2013 ∆% 5.6 Blog 9/8/13
Case-Shiller Home Prices	Jul 2013/Jul 2012 ∆% NSA: 10 Cities 12.3; 20 Cities: 12.4 ∆% Jul SA: 1.9 Cities 1.1 ; 20 Cities: 1.8 Blog 9/29/13
FHFA House Price Index Purchases Only	Jul SA ∆% 1.0; 12 month NSA ∆%: 8.8 Blog 9/29/13
New House Sales	Aug 2013 month SAAR ∆%: 7.9 Jan-Aug 2013/Jan-Aug 2012 NSA ∆%: 20.4 Blog 9/29/13
Housing Starts and Permits	Aug Starts month SA ∆%: 0.9 ; Permits ∆%: -3.8 Jan-Aug 2013/Jan-Aug 2012 NSA ∆% Starts 22.6; Permits  ∆% 21.2 Blog 9/22/13
Trade Balance	Balance Jul SA -$39,147 million versus Jun -$34,543 million Exports Jul SA ∆%: -0.6 Imports Jul SA ∆%: 1.6 Goods Exports Jan-Jul 2013/2012 NSA ∆%: 1.6 Goods Imports Jan-Jul 2013/2012 NSA ∆%: -1.4 Blog 9/8/13
Export and Import Prices	Aug 12-month NSA ∆%: Imports -0.4; Exports -1.1 Blog 9/15/13
Consumer Credit	Jul ∆% annual rate: Total 4.4; Revolving minus 2.6; Nonrevolving 7.4 Blog 9/15/13
Net Foreign Purchases of Long-term Treasury Securities	Jul Net Foreign Purchases of Long-term US Securities: $33.1 billion Major Holders of Treasury Securities: China $1277 billion; Japan $1083 billion; Total Foreign US Treasury Holdings Jul $5590 billion Blog 9/22/13
Treasury Budget	Fiscal Year 2013/2012 ∆% Aug: Receipts 13.0; Outlays minus 3.7; Individual Income Taxes 15.8 Deficit Fiscal Year 2011 $1,296 billion Deficit Fiscal Year 2012 $1,087 billion Blog 9/15/2013
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt 11,281 B 70.1% GDP 2013 Deficit $642 B, Debt 12,036 B 72.5% GDP Blog 8/26/12 11/18/12 2/10/13 9/22/13
Commercial Banks Assets and Liabilities	Aug 2013 SAAR ∆%: Securities -11.0 Loans -2.6 Cash Assets 85.8 Deposits 1.8 Blog 9/29/13
Flow of Funds	IIQ2013 ∆ since 2007 Assets +6079.8 MM Real estate -$2325.1 MM Financial +7835.2 MM Net Worth +$6902.3 MM Blog 9/29/13
Current Account Balance of Payments	IIQ2013 -178,171 MM %GDP 2.4 Blog 9/22/13

Links to blog comments in Table USA:

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

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

8/11/13 http://cmpassocregulationblog.blogspot.com/2013/08/recovery-without-hiring-loss-of-full.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 increased 0.9 percent in Aug 2013, fell 0.1 percent in Jul 2013 and increased fell 0.1 percent in Jun 2013. New orders increased 0.1 percent in Aug after decreasing 8.1 percent in Jul and increasing 3.9 percent in Jun, 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 1.2 percent in Aug 2013 after decreasing 58.9 percent in Jul and increasing 33.8 percent in Jun. New orders excluding transportation equipment fell 0.1 percent in Aug after decreasing 0.5 percent in Jul 2013 and increasing 0.1 percent in Jun. Capital goods new orders, indicating investment, fell 0.8 percent in Aug after decreasing 18.1 percent in Jul and increasing 9.0 percent in Jun. New orders of nondefense capital goods fell 0.2 percent in Aug after decreasing 17.4 percent in Jul and increasing 6.9 percent in Jun. Capital goods orders excluding more volatile aircraft rose 1.5 percent in Aug after decreasing 3.3 percent in Jul and falling 1.1 percent in Jun.

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

	Aug 2013  ∆%	Jul 2013 ∆%	Jun 2013 ∆%
Total
S	0.9	-0.1	-0.1
NO	0.1	-8.1	3.9
Excluding Transport
S	0.7	-0.1	0.1
NO	-0.1	-0.5	0.1
Excluding Defense
S	0.7	0.2	-0.2
NO	0.5	-7.5	2.9
Machinery
S	0.4	-1.5	-2.0
NO	0.9	-0.5	0.9
Computers & Electronic Products
S	1.3	-1.1	1.1
NO	-3.4	-2.6	-0.8
Computers
S	11.0	-16.4	2.8
NO	7.8	-13.5	0.0
Transport Equipment
S	1.5	-0.2	-0.5
NO	0.7	-21.9	11.7
Motor Vehicles
S	1.9	0.4	0.7
NO	2.4	0.4	0.1
Nondefense Aircraft
S	-5.1	1.1	-4.7
NO	-1.2	-58.9	33.8
Capital Goods
S	1.3	-1.9	-1.4
NO	-0.8	-18.1	9.0
Nondefense Capital Goods
S	0.4	-1.4	-1.8
NO	-0.2	-17.4	6.9
Capital Goods ex Aircraft
S	1.3	-1.4	-1.0
NO	1.5	-3.3	1.1

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-Aug 2013 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of all manufacturing industries in Jan-Aug 2013 total $1820.9 billion and new orders total $1796.2 billion, growing respectively by 2.7 percent and 4.1 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 1.0 percent and new orders increased 2.9 percent. Excluding defense, shipments grew 2.9 percent and new orders grew 5.3 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 $655.3 billion for shipments, growing 2.0 percent, and new orders $685.1 billion, growing 3.9 percent. Excluding aircraft, capital goods shipments reached $520.1 billion, growing by 1.1 percent, and new orders $540.2 billion, growing 4.0 percent. Data weakened in 2013.

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

Jan-Aug 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/  2012
Total	1,820,864	2.7	1,796,227	4.1
Excluding Transport	1,285,532	1.0	1,254,762	2.9
Excluding Defense	1,726,707	2.9	1,718,427	5.3
Machinery	273,779	3.2	279,001	6.6
Computers & Electronic Products	214,843	-4.1	164,184	-4.7
Computers & Related Products	16,775	-9.8	16,929	-9.3
Transport Equipment	535,332	7.2	543,465	6.9
Motor Vehicles	356,227	8.8	355,762	9.2
Nondefense Aircraft	85,189	9.4	108,337	21.2
Capital Goods	655,268	2.0	685,053	3.9
Nondefense Capital Goods	578,842	2.1	620,400	6.6
Capital Goods ex Aircraft	520,138	1.1	540,157	4.0

Note: Transport: transportation

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

United States manufacturing output from 1919 to 2013 on a monthly basis is in Chart VA-2 of the Board of Governors of the Federal Reserve System. The second industrial revolution of Jensen (1993) is quite evident in the acceleration of the rate of growth of output given by the sharper slope in the 1980s and 1990s. Growth was robust after the shallow recession of 2001 but dropped sharply during the global recession after IVQ2007. Manufacturing output recovered sharply but has not reached earlier levels and is losing momentum at the margin.

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 614,000 in Aug 2013 relative to Jul 2013, seasonally adjusted (http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 15,000 from Aug 2012 to Aug 2013 or at the average monthly rate of 1,250. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. Industrial production increased 0.4 percent in Aug 2013 after changing 0.0 percent in Jul 2013 and increasing 0.1 percent in Jun 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 advanced 0.4 percent in August after having been unchanged in July; the gains in August were broadly based. Following a decrease in July of 0.4 percent, which was steeper than previously reported, manufacturing production rose 0.7 percent in August. The output of mines moved up 0.3 percent, its fifth consecutive monthly increase, and the production of utilities fell 1.5 percent, its fifth consecutive monthly decrease. At 99.4 percent of its 2007 average, total industrial production in August was 2.7 percent above its year-earlier level. “

In the six months ending in Aug 2013, United States national industrial production accumulated increase of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than growth of 2.7 percent in the 12 months ending in Aug 2013. Excluding growth of 0.4 percent in Aug 2013, growth in the remaining five months from Mar 2012 to Jul 2013 accumulated to 0.2 percent or 0.5 percent annual equivalent. Industrial production stagnated in three of the past six months and fell in one. Business equipment accumulated growth of 0.4 percent in the six months from Mar to Aug 2013 at the annual equivalent rate of 0.8 percent, which is much lower than growth of 2.5 percent in the 12 months ending in Aug 2013. Growth of business equipment accumulated minus 0.5 percent from Mar to July 2013 at the annual equivalent rate of minus 1.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector increased 0.2 percentage point in August to 77.8 percent, a rate 0.6 percentage point above its level of a year earlier and 2.4 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating.

Manufacturing increased 0.7 percent in Aug 2013 after decreasing 0.4 percent in Jul 2013 and increasing 0.3 percent in Jul 2013 seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months ending in Aug 2013, as shown in Table II-2. Manufacturing grew cumulatively 0.2 percent in the six months ending in Jul 2013 or at the annual equivalent rate of 0.4 percent. Excluding the increase of 0.7 percent in Aug 2013, manufacturing accumulated growth of minus 0.5 percent from Mar 2013 to Jul 2013 or at the annual equivalent rate of minus 1.2 percent.

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 IIQ2013. Most of US national income is in the form of services. In Aug 2013, there were 135.961 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 115.218 million NSA in Aug 2013 accounted for 84.7 percent of total nonfarm jobs of 135.961 million, of which 12.063 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 96.174 million NSA in Aug 2013, or 70.7 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 10.8 percent in US national income in IIQ2013, as shown in Table I-13. 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	14,471.3	100.0
Domestic Industries	14,117.1	98.3	14,224.4	98.3
Private Industries	12,432.9	86.6	12,544.3	86.7
Agriculture	226.4	1.6	220.3	1.5
Mining	247.6	1.7	252.6	1.7
Utilities	209.1	1.5	216.5	1.5
Construction	618.2	4.3	626.4	4.3
Manufacturing	1568.1	10.9	1561.1	10.8
Durable Goods	878.8	6.1	890.3	6.2
Nondurable Goods	689.2	4.8	670.1	4.6
Wholesale Trade	870.0	6.1	875.3	6.0
Retail Trade	971.4	6.8	994.5	6.9
Transportation & WH	434.0	3.0	437.7	3.0
Information	496.0	3.5	504.8	3.5
Finance, Insurance, RE	2418.9	16.8	2437.1	16.8
Professional, BS	1973.6	13.7	1998.1	13.8
Education, Health Care	1423.7	9.9	1439.4	9.9
Arts, Entertainment	569.7	4.0	575.0	4.0
Other Services	406.1	2.8	408.3	2.8
Government	1684.3	11.7	1680.1	11.6
Rest of the World	237.4	1.7	246.8	1.7

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

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

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/announcements/release_2013/k130711a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.5 and 3.0 percent, with the all items CPI less fresh food of 0.5 to 0.8 percent. The critical difference is forecast of the CPI excluding fresh food of 2.7 to 3.6 percent in 2014 and 1.6 to 2.9 percent in 2015. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

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

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

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

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

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

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

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

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

Figures in brackets are the median of forecasts of Policy Board members

Source: Policy Board, Bank of Japan

http://www.boj.or.jp/en/announcements/release_2013/k130711a.pdf

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index increasing from 50.7 in Jul to 51.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). 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 implementation of the sales tax (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). The Markit Business Activity Index of Services increased from 50.7 in Jul to 51.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). Claudia Tillbrooke, Economist at Markit and author of the report, finds mild acceleration of expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/0414d6252235491c8e40dc3548408355). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 50.7 in Jul to 52.2 in Aug, which is the highest in six months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fb6254251871456a9bd934997d444b25). New orders grew for a sixth consecutive month. New export orders fell slightly with weak external demand compensating for yen depreciation. Claudia Tillbrooke, Economist at Markit and author of the report, finds manufacturing output expanding output expanding in Aug at the fastest rate in thirty months (http://www.markiteconomics.com/Survey/PressRelease.mvc/fb6254251871456a9bd934997d444b25).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	Aug ∆% +0.3 12 months ∆% 2.4 Blog 9/15/13
Consumer Price Index	Aug NSA ∆% 0.3; Aug 12 months NSA ∆% 0.9 Blog 9/29/13
Real GDP Growth	IIQ2013 ∆%: 0.9 on IQ2013;  IIQ2013 SAAR 3.8; ∆% from quarter a year earlier: 1.2 % Blog 6/16/13 8/18/13 9/15/13
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	Jul month SA ∆% 0.5 12-month NSA ∆% 1.7 Blog 9/22/13
Industrial Production	Jul SA month ∆%: 3.2 12-month NSA ∆% 1.6 Blog 9/1/13
Machine Orders	Total Jul ∆% 4.4 Private ∆%: 3.4 Jul ∆% Excluding Volatile Orders 0.0 Blog 9/15/13
Tertiary Index	Jul month SA ∆% -0.4 Jul 12 months NSA ∆% 1.5 Blog 9/15/13
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 Aug 12 months ∆%: 14.7 Imports Aug 12 months ∆% 16.0 Blog 9/22/13

Links to blog comments in Table JPY:

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

8/18/13 http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.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. The index eased to 53.9 in Aug 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Aug 2013	53.9	50.9	57.1	51.2	62.9
Jul	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. The index stabilized at 53.9 in Aug 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 increased to 51.0 in Aug 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 new orders increased to 52.4 in Aug 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. The index of employment increased to 49.3 in Aug 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Aug 2013	51.0	52.6	52.4	48.0	49.3	50.4
Jul	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. The index increased to 51.0 in Aug 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 improvement in business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 49.5 in Jul to 51.8 in Aug, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds support of manufacturing combined with services (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Business Activity index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds the highest reading of services in five months (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased to 50.1 in Aug from 47.7 in Jul, indicating relatively unchanged manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/ddf3bd97162247348ab421d1f65527fb). New export orders decreased for the fifth consecutive month at slower pace than in the prior month. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds stabilizing conditions in manufacturing with marginal support of new orders and output (http://www.markiteconomics.com/Survey/PressRelease.mvc/ddf3bd97162247348ab421d1f65527fb). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Aug 12-month ∆%: minus 1.6 Aug month ∆%: 0.1 Blog 9/15/13
Consumer Price Index	Aug month ∆%: 0.5 Jul 12 months ∆%: 2.6 Blog 9/15/13
Value Added of Industry	Aug month ∆%: 0.93 Jan-Aug 2013/Jan-Aug 2012 ∆%: 9.5 Aug 12-Month ∆%: 10.4 Blog 9/15/13
GDP Growth Rate	Year IIQ2013 ∆%: 7.5 Quarter IIQ2013 AE ∆%: 7.0 Blog 7/21/13
Investment in Fixed Assets	Total Jan-Aug 2013 ∆%: 20.3 Real estate development: 19.3 Blog 9/15/13
Retail Sales	Aug month ∆%: 1.17 Aug 12 month ∆%: 13.4 Jan-Aug ∆%: 12.8 Blog 9/15/13
Trade Balance	Aug balance $28.52 billion Exports 12M ∆% 7.2 Imports 12M ∆% 7.1 Cumulative Aug: $154.23 billion Blog 9/15/13

Links to blog comments in Table CNY:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.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 50.5 in Jul to 51.5 in Aug in the second consecutive monthly expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). Chris Williamson, Chief Economist at Markit, finds growth in multiple sectors and regions (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). The Markit Eurozone Services Business Activity Index increased from 49.8 in Jul to 51.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/83eb8041afdc454d8510e3951cead070). The Markit Eurozone Manufacturing PMI^® increased to 51.4 in Aug from 50.3 in Jul, which is the highest reading since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a5b5d40ce4449c3ab581276d1057282). New orders increased at the fastest pace since May 2011 with strongest growth of new export demand in over two years in Italy, Spain and Austria. Chris Williamson, Chief Economist at Markit, finds recovery indications in Aug with companies enjoying the best conditions in two years and supported by growth of new export orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/2a5b5d40ce4449c3ab581276d1057282). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2013 ∆% 0.3; IIQ2013/IIQ2012 ∆% -0.5 Blog 9/8/13
Unemployment	Jul 2013: 12.1% unemployment rate Jun 2013: 19.231 million unemployed Blog 9/1/13
HICP	Aug month ∆%: 0.1 12 months Aug ∆%: 1.3 Blog 9/22/13
Producer Prices	Euro Zone industrial producer prices Jul ∆%: 0.3 Jul 12-month ∆%: 0.2 Blog 9/8/13
Industrial Production	Jul month ∆%: -1.5; Jun 12 months ∆%: -2.1 Blog 9/15/13
Retail Sales	Jul month ∆%: 0.1 Jul 12 months ∆%: minus 1.3 Blog 9/8/13
Confidence and Economic Sentiment Indicator	Sentiment 96.9 Sep 2013 Consumer minus 14.9 Sep 2013 Blog 9/29/13
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:

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

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

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 moving closer to the average (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). Table VD-1 provides the index increasing from 85.4 in Oct 2012 to 96.9 in Sep 2013. The index is above the minimum value of 70.0 reached in Mar 2009 but still below the average of 100.

Table VD-1, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-7.0	9.3	-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
Sep 2013	96.9	-6.7	-3.3	-14.9	-7.0	-28.8
Aug	95.3	-7.8	-5.2	-15.6	-10.6	-33.2
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

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

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 52.1 in Jul to 53.5 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). Tim Moore, Senior Economist at Markit and author of the report, finds support in rising performance in manufacturing and services for growth in Germany in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). The Germany Services Business Activity Index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/a16df9608164405a96a13d8a5ea4e657). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 50.7 in Jul to 51.8 in Aug, in movement away from contraction territory below 50.0 during two consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/1d5523e6508d4b4e8c958321b88f4009). New export orders increased for the first month since Feb. Tim Moore, Senior Economist at Markit and author of the report, finds the fastest growth in manufacturing output since mid-2011 supported by domestic and foreign demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/1d5523e6508d4b4e8c958321b88f4009).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	Aug month NSA ∆%: 0.0 Aug 12-month NSA ∆%: 1.5 Blog 9/15/13
Producer Price Index	Jul month ∆%: -0.1 CSA, 0.3 12-month NSA ∆%: 0.5 Blog 8/25/13
Industrial Production	MFG Jul month CSA ∆%: minus 2.1 12-month NSA: 0.9 Blog 9/8/13
Machine Orders	MFG Jun month ∆%: -2.7 Jun 12-month ∆%: 5.0 Blog 9/8/13
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 Jul 12-month NSA ∆%: 0.0 Imports Jul 12 months NSA ∆%: 0.9 Exports Jul month CSA ∆%: minus 1.1; Imports Jul month SA 0.5 Blog 9/8/13

Links to blog comments in Table DE:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

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

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

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, decreased marginally from 49.1 in Jul to 48.8 in Aug, indicating contraction of private sector activity in 17 consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds stabilization with services compensating for weakness in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). The Markit France Services Activity index increased from 48.6 in Jul to 48.9 in Aug for the highest reading in 12 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/67c7f4b845e0420b8bb05949c3e960f6). The Markit France Manufacturing Purchasing Managers’ Index^® changed to 49.7 in Aug from 49.7 in Jul, for the highest reading in eighteen consecutive months below the neutral level of 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/53d288d425be43c8b709684c67030d84). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stabilization in French manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/53d288d425be43c8b709684c67030d84). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Aug month ∆% 0.5 12 months ∆%: 0.9 9/15/13
PPI	Jul month ∆%: 0.7 Jul 12 months ∆%: 0.3 Blog 9/8/13
GDP Growth	IIQ2013/IQ2013 ∆%: 0.5 IIQ2013/IIQ2012 ∆%: 0.4 Blog 3/31/13 5/19/12 6/30/13 9/29/13
Industrial Production	Jul ∆%: Manufacturing minus 0.7 12-Month ∆%: Manufacturing minus 2.5 Blog 9/15/13
Consumer Spending	Manufactured Goods Aug ∆%: -0.3 Aug 12-Month Manufactured Goods ∆%: -0.1 Blog 9/29/13
Employment	Unemployment Rate: IIQ2013 10.5% Blog 9/8/13
Trade Balance	Jul Exports ∆%: month 1.3, 12 months -0.6 Jul Imports ∆%: month 2.7, 12 months 1.1 Blog 9/8/13
Confidence Indicators	Historical averages 100 Sep Mfg Business Climate 97 Blog 9/29/13

Links to blog comments in Table FR:

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

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

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

Growth of GDP in a quarter relative to the prior quarter is provided for France in Table VF-1. GDP fell 0.2 percent in IVQ201 and fell 0.1 percent in IQ2013, rebounding with growth of 0.5 percent in IIQ2013. The French economy grew 0.2 percent in IVQ2011, stagnating in IQ2012, contracting 0.3 percent in IIQ2011 and growing 0.2 percent in IIIQ2012. In the four quarters of 2012 and the first quarter of 2013, France’s GDP contracted in three quarter for combined decline of 0.4 percent. Growth in the ten quarters of expansion from IIIQ2009 to IVQ2011 accumulated 4.2 percent at the annual equivalent rate of 1.6 percent. Recovery has been much weaker than the cumulative 2.6 percent in the four quarters of 2006. Weak recoveries in advanced economies have prevented full utilization of labor, capital and productive resources.

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130927

Growth rates of France’s real GDP in a quarter relative to the same quarter a year earlier are shown in Table VF-2. France has not recovered the rates of growth in excess of 2 percent prior to the global recession. GDP fell 4.3 percent in IQ2009, 3.7 percent in IIQ2009, 3.2 percent in IIIQ2009 and 1.0 percent in IVQ2009. Growth in IVQ2011 relative to IVQ2010 was 1.5 percent and GDP growth declined to 0.4 percent in IQ2012, 0.1 percent in IIQ2012 relative to the same quarter a year earlier, 0.0 percent in IIIQ2012 relative to a year earlier and minus 0.3 percent in IVQ2012 relative to a year earlier. Growth in 2013 relative to a year earlier was minus 0.5 percent. France’s GDP increased 0.4 percent in IIQ2013 relative to a year earlier.

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

	IQ	IIQ	IIIQ	IVQ
2013	-0.5	0.4
2012	0.4	0.1	0.0	-0.3
2011	2.8	2.1	1.8	1.5
2010	1.0	1.6	2.1	1.9
2009	-4.3	-3.7	-3.2	-1.0
2008	1.6	0.4	-0.4	-2.3
2007	2.6	2.1	2.4	1.8
2006	2.3	3.2	2.6	2.7
2005	2.1	1.6	1.9	1.8
2004	1.9	2.6	2.4	2.4
2003	0.8	0.3	0.8	1.6
2002	0.6	1.0	0.9	1.2
2001	2.7	2.1	1.9	0.6
2000	4.4	4.2	3.6	3.3
1999	2.9	2.8	3.2	3.7

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130927

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130927

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

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

∆% from Prior Period	IIIQ 2012	IVQ 2012	IQ 2013	IIQ 2013	2012	2013 OVHG
GDP	0.2	-0.2	-0.1	0.5	0.0	0.1
Imports	0.0	-1.1	0.1	1.7	-0.9	0.6
Household Consump.	0.1	0.1	-0.1	0.4	-0.4	0.2
Govt. Consump.	0.4	0.4	0.3	0.7	1.4	1.4
GFCF	-0.6	-0.8	-1.0	-0.4	-1.2	-2.2
Exports	0.4	-0.5	-0.5	2.0	2.5	0.8
% Point Contribs.
Internal Demand ex Inventory Changes	0.1	0.0	-0.2	0.3	-0.1	0.1
Inventory Changes	0.0	-0.3	0.2	0.2	-0.8	0.0
Net Foreign Trade	0.1	0.2	-0.2	0.0	1.0	0.1

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

Source:  Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130927

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=28&date=20130927

The monthly report of household expenditures in consumption goods for France is in Table VF-4. Total consumption decreased 0.4 percent in Aug 2013 after increasing 0.4 percent in Jul 2013 and decreasing 0.8 percent in Jun 2013. Consumption of manufactured products decreased 0.3 percent in Aug 2013 after increasing 0.6 percent in Jul 2013 and decreasing 0.5 percent in May 2013. Total consumption decreased 0.1 percent in Aug 2013 relative to Aug 2012 and consumption of manufactured goods decreased 0.1 percent in Aug 2013 relative to Aug 2012. Internal demand is weak throughout most advanced economies.

Table VF-4, France, Household Expenditures in Consumption Goods, Month ∆% Chained Billion Euros Trading-Days SA

	Total	Food	Eng. Goods	Energy	Mfg Goods
Aug 2013	-0.4	-0.7	0.1	-1.0	-0.3
Aug 2013/Aug 2012	-0.1	-0.9	-0.3	2.1	-0.1
Jul	0.4	0.7	0.2	0.2	0.6
Jun	-0.8	-0.5	0.6	-4.5	-0.5
May	0.7	1.5	-0.1	1.0	0.9
Apr	-0.7	-3.4	1.2	0.4	-0.5
Mar	1.3	2.7	-0.9	3.7	1.1
Feb	-0.3	-0.7	-0.8	1.8	-0.7
Jan	-0.5	0.7	-2.2	1.5	-1.1
Dec 2012	0.1	0.2	1.5	-3.8	0.6
Nov	0.1	-0.5	-0.3	2.2	-0.2
Oct	-0.1	-0.6	0.2	0.3	0.1
Sep	0.1	-0.2	0.2	0.5	0.0
Aug	-0.5	0.2	-0.5	-2.1	-0.6
Jul	0.1	-0.3	0.5	-0.3	0.1
Jun	0.5	1.2	-0.4	1.3	0.5
May	0.1	-0.4	1.7	-2.8	0.9
Apr	0.2	-0.1	-2.9	9.2	-1.5
Mar	-3.0	-2.0	1.0	-13.8	-0.9
Feb	2.8	1.8	-0.2	12.4	1.2
Jan	-0.2	0.9	-1.6	1.4	-0.5
Dec 2011	-0.2	-0.8	0.4	-0.6	-0.3
Nov	-0.2	0.2	0.0	-2.0	-0.2
Oct	-0.1	-0.7	0.4	-0.6	-0.1
Sep	-0.3	0.4	0.0	-3.0	-0.3
Aug	0.9	0.5	0.7	2.6	1.1
Jul	-0.2	-0.1	-0.4	0.3	-0.2
Jun	0.2	-0.4	0.2	1.6	0.3
May	0.3	-0.6	-0.3	4.1	-0.6
Apr	-2.1	0.5	-2.6	-6.2	-1.5
Mar	-0.7	-0.4	-0.9	-1.0	-0.9
Feb	0.8	0.8	1.8	-1.9	1.4
Jan	-1.3	-0.8	-0.2	-5.2	-0.6
Dec 2010	0.9	0.4	0.4	3.6	0.5

Eng. Goods: Engineered Goods

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20130927

Chart VF-3 of the Institut National de la Statistique et des Études Économiques of France provides consumption of manufactured goods in France in volumes of chained 2005 billion euro from Jan 1980 to Aug 2013. Consumption of manufactured goods increased above the level before the global recession but shows declining trend in recent months.

Char VF-3, France, Consumption of Manufactured Goods, Volume Chained 2005 Billion Euro and Converted Euro, Jan 1980 to Aug 2013

Adjusted and Quarterly ∆%

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20130927

Chart VF-4 of Institut National de la Statistique et des Études Économiques of France provides growth of total consumption in France. Internal demand is not supporting overall economic growth. There is downward trend of monthly consumption with fluctuations and stability in the final segment followed by another drop in Jan-Feb 2013 and increase in Mar 2013 but renewed decrease in Apr 2013. Consumption rose again in May 2013 and fell in Jun 2013. Consumption increased in Jul 2013 and fell in Aug 2013.

Chart VF-4, France, Total Consumption of Goods, Billions of Euros Trading and Seasonally Adjusted and Quarterly ∆%

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20130927

Table VF-5 shows the INSEE business climate indicator for manufacturing. The headline composite indicator 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 index fell marginally to 97 in Sep 2013, approaching the long-term average of 100 since 1976. 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 and to minus 10 in Sep 2013, which is close to the long-term average of minus 10. 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 22 in Aug-Sep 2013.

Table VF-5, France, Manufacturing Business Climate Indicators of INSEE

Mfg 2013	Average since 1976	Jun 13	Jul 13	Aug 13	Sep 13
Composite Indicator	100	93	95	98	97
Past Activity	4	-5	1	4	-10
Finished- Goods Inventory Level	13	9	10	12	12
Global Order Books	-18	-29	-26	-22	-27
Export Order Books	-13	-28	-29	-22	-22
Personal Production Expectations	5	0	2	3	13
General Production Expectations	-9	-41	-30	-18	-10

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130925

Chart VF-5 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the manufacturing business climate indicator 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. The manufacturing composite indicator 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. The composite indicator of manufacturing eased slightly in Sep 2013, close to the long-term average of 100.

Chart VF-5, France, INSEE Industrial Business Climate Composite Indicator

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20130925

Chart VF-6 of 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. There is 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-Sep 2013.

Chart VF-6, 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=20130925

Chart VF-7 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-Sep 2013.

Chart VF-7, France, Composite Indicator 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=20130925

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. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIQ2013 than in IQ2013 and the final three quarters of 2012.

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

	GDP	Imports	Consumption	GFCF	Exports
2013
IIQ2013	-2.1	-4.6	-2.4	-5.9	0.2
IQ	-2.4	-5.0	-2.7	-7.1	-0.4
2012
IVQ	-2.8	-6.8	-4.3	-7.9	1.7
IIIQ	-2.6	-8.1	-4.3	-8.1	2.5
IIQ	-2.4	-7.5	-3.8	-8.3	2.5
IQ	-1.7	-8.9	-3.3	-7.6	2.1
2011
IVQ	-0.5	-6.9	-1.8	-3.2	3.1
IIIQ	0.3	0.1	-0.7	-2.1	5.6
IIQ	0.9	3.1	0.6	-0.7	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/98480

The Markit/ADACI Business Activity Index increased from 48.7 in Jul to 48.8 in Aug, indicating marginal contraction of output of Italy’s for 27 consecutive months of decline since Jun 2011 with contraction at moderate rhythm (http://www.markiteconomics.com/Survey/PressRelease.mvc/c06756e0924443d4a8d4891b62748cb9). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index consistent with stagnation in IIIQ2013 but with possible improvement depending on services performance in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/c06756e0924443d4a8d4891b62748cb9). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 50.4 in Jul to 51.3 in Aug, with the Aug reading at the highest level in 27 month and the second consecutive reading above 50.0 (http://www.markiteconomics.com/Survey/PressRelease.mvc/30ee8ab53c0b4bdb87c1469e5152fe40). Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds that manufacturing has been improving by obtaining foreign orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/30ee8ab53c0b4bdb87c1469e5152fe40). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Aug month ∆%: 0.4 Aug 12-month ∆%: 1.2 Blog 9/15/13
Producer Price Index	Jul month ∆%: 0.1 Jul 12-month ∆%: -1.0 Blog 9/1/13
GDP Growth	IIQ2013/IQ2013 SA ∆%: minus 0.3 IIQ2013/IIQ2012 NSA ∆%: minus 2.1 Blog 3/17/13 6/16/13 8/11/13 9/15/13
Labor Report	Jul 2013 Participation rate 63.6% Employment ratio 55.9% Unemployment rate 12.0% Blog 9/1/13
Industrial Production	Jul month ∆%: -1.1 12 months CA ∆%: -4.3 Blog 9/15/13
Retail Sales	Jul month ∆%: -0.3 Jul 12-month ∆%: -0.9 Blog 9/29/13
Business Confidence	Mfg Sep 96.6, May 89.1 Construction Sep 78.6, May 81.2 Blog 9/29/13
Trade Balance	Balance Jul SA €2115 million versus Jun €2981 Exports Jul month SA ∆%: -2.3; Imports Jul month ∆%: 0.4 Exports 12 months Jul NSA ∆%: 3.0 Imports 12 months NSA ∆%: -0.3 Blog 9/22/13

Links to blog comments in Table IT:

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/1/13 http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html

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

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-1 provides growth of retail sales for Italy. Retail sales decreased 0.3 percent in Jul 2013 relative to Jun 2013, decreased 0.2 percent in May-Jul 2013 relative to Feb-Apr 2013, decreased 0.9 percent in Jul 2013 relative to Jul 2012 and decreased 2.6 percent cumulatively in Jan-Jul 2013 relative to Jan-Jul 2012. Food retail sales outperform non-food retail sales.

Table VG-1, Italy, Retail Sales ∆%

	Jul 2013/  Jun 2013 SA	May-Jul 13/   Feb-Apr 13 SA	Jul 2013/ Jul 2012 NSA	Jan-Jul 2013/ Jan-Jul 2012
Food	-0.1	0.0	0.2	-1.6
Non-food	-0.3	-0.4	-1.6	-3.3
Total	-0.3	-0.2	-0.9	-2.6

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/99450

Chart VG-1 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 and recovery in Jul 2013.

Chart VG-1, 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-Jul 2013 and annual rates for 2011 and 2012 in Table VG-2. 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 0.3 percent in Jul 2013 and the decline in 12 months decreased to minus 0.9 percent.

Table VG-2, Italy, Retail Sales Month and 12-Month ∆%

	Month ∆% SA	12-Month ∆% NSA
Jul 2013	-0.3	-0.9
Jun	-0.2	-3.0
May	0.1	-1.2
Apr	0.0	-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	0.1	-0.4
Jul	-0.2	-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/99450

Italy’s index of business confidence in manufacturing and construction is provided in Table VG-3. There has been improvement of manufacturing confidence below the historical average of 100 from 89.1 in May 2013 to 96.6 in Sep 2013. Order books deteriorated to minus 42 in May 2013 but improved to minus 28 in Sep 2013. There is oscillation in construction with the index moving from 81.2 in May 2013 to 71.4 in Jun 2013, recovering to 78.6 in Sep 2013.

Table VG-3, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100

	Sep  2013	Aug      2013	Jul       2013	Jun 2013	May 2013
Mfg Confidence	96.6	93.4	92.2	90.8	89.1
Order Books	-28	-32	-36	-38	-42
Stocks Finished Products	-1	0	0	1	1
Production Expectation	3	-1	1	-1	-1
Construction Confidence	78.6	76.4	76.8	71.4	81.2
Order Books	-49	-52	-51	-56	-49
Employment	-16	-18	-20	-27	-13

Mfg: manufacturing

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/99486

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 5.2 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.7 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.1 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 3.1 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 relative to 2007.

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

	∆% on Prior Year
1998	3.6
1999	2.9
2000	4.4
2001	2.2
2002	2.3
2003	3.9
2004	3.2
2005	3.2
2006	2.8
2007	3.4
2008	-0.8
2009	-5.2
2010	1.7
2011	1.1
2012	0.1
Average Growth Rates ∆% per Year
1948-2012	2.6
1950-1959	2.7
1960-1969	3.3
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/quarterly-national-accounts/q2-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® increased from60.2 in Jul to 60.5 in Aug, indicating increase in activity in every month since the beginning of 2013 and at the fastest rate since Dec 2006 with highest reading for new orders since May 1997 (http://www.markiteconomics.com/Survey/PressRelease.mvc/291fe2a94ee040bcb216d84676428f92). Paul Smith, Senior Economist at Markit, finds continuing improvement in the UK’s economy with possible higher growth of GDP in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/291fe2a94ee040bcb216d84676428f92). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased from 54.8 in Jul to 57.2 in Aug, which is the highest reading in 36 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/89b62348c597490698dae25b0324e7a7). Respondents indicated stronger foreign demand. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing could grow at around 1 percent in IIIQ2013, exceeding growth of -0.7 percent in IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/89b62348c597490698dae25b0324e7a7). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Aug month ∆%: 0.4 Aug 12-month ∆%: 2.7 Blog 9/22/13
Output/Input Prices	Output Prices: Aug 12-month NSA ∆%: 1.6; excluding food, petroleum ∆%: 1.0 Input Prices: Aug 12-month NSA ∆%: 2.8 Excluding ∆%: 3.1 Blog 9/22/13
GDP Growth	IIQ2013 prior quarter ∆% 0.7; year earlier same quarter ∆%: 1.3 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13
Industrial Production	Jul 2013/Jul 2012 ∆%: Production Industries minus 1.6; Manufacturing minus 0.7 Blog 9/8/13
Retail Sales	Aug month ∆%: -0.9 Aug 12-month ∆%: 2.1 Blog 9/22/13
Labor Market	May-Jul Unemployment Rate: 7.7%; Claimant Count 4.2%; Earnings Growth 1.1% Blog 9/15/13
Trade Balance	Balance Jul minus ₤3085 million Exports Jul ∆%: -4.6; May-Jul ∆%: 1.1 Imports Jul ∆%: minus 0.4 May-Jul ∆%: 0.7 Blog 9/8/13

Links to blog comments in Table UK:

9/22/13 http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html

9/15/13 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html

9/8/13 http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html

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

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

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

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

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

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

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

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

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

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

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

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.3 percent in IVQ2008, 6.8 percent in IQ2009, 6.3 percent in IIQ2009 and 5.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.0 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IQ2011, 0.8 percent in IIQ2011, 1.0 percent in IIIQ2011 and 1.1 percent in IVQ2011 but only 0.6 percent in IQ2012, change of 0.0 percent in IIQ2012 relative to IQ2011, change of 0.0 percent in IIIQ2012 and -0.2 percent in IVQ2012. Growth increased to 0.2 percent in IQ2013 relative to a year earlier and 0.4 percent in IQ2013 relative to IVQ2012. GDP increased 0.7 percent in IIQ2013 relative to IQ2013 and 1.3 percent in IIQ2013 relative to IIQ2012. In IQ2012, GDP changed 0.0 percent and increased 0.6 percent relative to a year earlier. In IIQ2012, GDP fell 0.5 percent relative to IQ2012 and changed 0.0 percent relative to a year earlier. In IIIQ2012, GDP increased 0.6 percent and changed 0.0 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.3 percent and fell 0.2 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. In IIQ2013, GDP increased 0.7 percent and 1.3 percent relative to a year earlier.

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

	IQ	IIQ	IIIQ	IV
2013	0.2	1.3
2012	0.6	0.0	0.0	-0.2
2011	1.7	0.8	1.0	1.1
2010	0.5	2.0	2.4	1.8
2009	-6.8	-6.3	-5.0	-2.5
2008	2.8	0.6	-2.1	-4.3
2007	2.4	3.3	4.3	3.7
2006	4.0	3.0	2.3	1.8
2005	2.0	2.8	3.7	4.4
2004	4.7	3.7	2.5	1.9
2003	3.2	3.8	4.3	4.5
2002	1.8	1.9	2.3	3.2
2001	2.4	2.1	2.2	2.0
2000	4.7	5.7	4.1	3.0
1999	2.8	2.1	3.2	3.6
1998	4.0	3.5	3.4	3.4

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

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

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

	Total Production	MFG	CONST	SERVICES	Gross Value Added
2010 Weights	152	104	63	778	1000
1998	1.2	0.5	1.4	5.0	3.8
1999	1.2	0.5	1.3	3.8	3.1
2000	1.8	2.1	0.8	5.6	4.5
2001	-1.6	-1.7	1.8	3.0	1.8
2002	-1.4	-2.4	5.7	2.3	2.0
2003	-0.6	-0.5	4.9	5.2	4.1
2004	0.7	1.9	5.2	3.4	3.0
2005	-0.8	-0.2	-2.4	5.2	3.6
2006	0.2	1.8	0.7	3.4	2.7
2007	0.4	0.8	2.1	4.4	3.5
2008	-2.9	-2.8	-2.5	0.0	-0.6
2009	-9.5	-10.2	-13.3	-3.9	-5.4
2010	2.8	4.2	8.3	0.8	1.6
2011	-1.2	1.8	2.3	1.5	1.2
2012	-2.5	-1.7	-7.9	1.2	0.2

MGF: Manufacturing; CONST: Construction

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Percentage changes of gross value added and components are in Table VH-4A. Gross value added increased 0.6 percent in IIQ2013 with growth of services of 0.6 percent and production of 0.8 while manufacturing expanded 0.9 percent.

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

	Total Production	MFG	CONST	Services	Gross Value Added
2010 Weights	152	104	63	778	1000
2000 Q1	0.2	0.4	1.4	1.6	1.3
2000 Q2	0.2	0.2	-0.7	2.0	1.5
2000 Q3	-0.3	-0.2	-1.7	0.6	0.3
2000 Q4	0.3	1.0	1.0	0.1	0.2
2001 Q1	-0.5	-0.7	-0.4	1.5	0.8
2001 Q2	-1.1	-1.7	2.8	0.5	0.2
2001 Q3	-0.1	0.0	0.2	0.4	0.3
2001 Q4	-1.3	-1.6	1.1	0.3	0.0
2002 Q1	0.3	0.1	1.1	0.4	0.6
2002 Q2	-0.5	-1.3	1.1	0.8	0.6
2002 Q3	0.0	1.0	3.6	0.9	0.9
2002 Q4	-0.2	-1.5	1.1	1.3	1.0
2003 Q1	-0.7	-0.4	-2.3	1.4	0.8
2003 Q2	-0.2	0.4	3.0	1.5	1.3
2003 Q3	0.8	0.7	2.7	1.3	1.3
2003 Q4	0.5	0.8	2.5	1.4	1.3
2004 Q1	0.2	0.9	2.9	0.4	0.5
2004 Q2	0.6	0.5	-1.3	0.5	0.4
2004 Q3	-1.8	-1.4	-0.7	0.6	0.1
2004 Q4	0.7	1.3	-1.0	0.9	0.7
2005 Q1	-0.6	-0.9	0.3	1.5	1.0
2005 Q2	0.9	0.8	-0.4	1.7	1.4
2005 Q3	-1.3	-0.6	-1.8	1.7	0.9
2005 Q4	0.4	0.1	-0.4	1.7	1.4
2006 Q1	0.8	0.7	0.7	0.3	0.4
2006 Q2	-0.6	0.9	0.8	0.3	0.2
2006 Q3	0.0	0.4	0.5	0.3	0.3
2006 Q4	0.2	0.8	1.8	0.8	0.7
2007 Q1	0.2	-0.5	1.0	1.3	1.1
2007 Q2	0.2	0.2	-0.4	1.8	1.3
2007 Q3	-0.2	0.0	-1.4	1.8	1.2
2007 Q4	0.4	0.2	1.3	0.0	0.1
2008 Q1	-0.6	0.1	0.9	0.1	0.2
2008 Q2	-1.0	-1.5	-1.4	-0.5	-0.6
2008 Q3	-1.5	-1.6	-2.7	-1.3	-1.5
2008 Q4	-4.6	-4.9	-5.3	-1.5	-2.3
2009 Q1	-4.9	-5.8	-7.1	-1.6	-2.5
2009 Q2	-0.1	0.1	-1.9	-0.6	-0.6
2009 Q3	-0.9	-0.2	0.3	0.1	0.0
2009 Q4	0.7	1.3	1.0	0.2	0.3
2010 Q1	1.3	0.9	3.1	0.3	0.6
2010 Q2	1.7	2.0	5.9	0.4	1.0
2010 Q3	0.1	1.2	1.7	0.5	0.5
2010 Q4	0.7	0.8	-2.2	-0.3	-0.3
2011 Q1	-1.0	0.2	1.6	0.5	0.4
2011 Q2	-1.1	0.2	1.0	0.4	0.2
2011 Q3	-0.3	-0.4	-1.1	1.0	0.6
2011 Q4	-0.6	-0.4	-0.6	0.0	-0.1
2012 Q1	-0.5	0.0	-4.1	0.2	0.0
2012 Q2	-1.1	-1.4	-3.8	-0.1	-0.4
2012 Q3	0.1	0.4	-1.9	0.9	0.6
2012 Q4	-2.0	-1.6	1.8	-0.1	-0.3
2013 Q1	0.5	0.0	-1.3	0.6	0.4
2013 Q2	0.8	0.9	1.9	0.6	0.6

Source: UK Office for National Statistics

MGF: Manufacturing; CONST: Construction

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Growth rates of gross value added (GVA) and output components of gross value added in a quarter from the preceding quarter are in Table VH-4. Growth of GVA of 0.6 percent in IIQ2013 originated in growth of services of 0.6 percent and total production of 0.8 percent while manufacturing grew 0.9 percent and construction 1.9 percent. Growth of GVA of 0.4 percent in IQ2013 resulted from change of manufacturing by 0.0 percent with total production increasing 0.5 percent. Construction fell 1.3 percent and services grew 0.6 percent. There is significant improvement away from the contraction of total production of 2.0 percent in IVQ2012 with manufacturing contracting 1.6 percent and services falling 0.1 percent.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
GVA	0.0	-0.4	0.6	-0.3	0.4	0.6
Agriculture	-1.8	-2.2	-0.4	0.4	-5.1	2.0
Total Production	-0.5	-1.1	0.1	-2.0	0.5	0.8
Manufacturing	0.0	-1.4	0.4	-1.6	0.0	0.9
Extraction	-3.0	-2.8	0.3	-9.4	3.9	1.5
Electricity, gas and air	-0.3	5.3	-3.1	3.3	1.4	-2.1
Water & sewerage	-0.7	-1.5	0.5	0.1	-0.7	2.0
Construction	-4.1	-3.8	-1.9	1.8	-1.3	1.9
Total Services	0.2	-0.1	0.9	-0.1	0.6	0.6
Distn, hotels & catering	0.3	-0.1	1.7	-0.6	1.3	1.8
Transport, storage & comms	0.8	-1.3	-0.4	0.4	1.7	0.2
Business services & finance	-0.1	0.1	0.8	0.4	0.1	0.7
Government & other	0.4	0.1	1.3	-0.7	0.5	0.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

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

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

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Table VH-6 provides UK growth of value added by output components in a quarter relative to the same quarter a year earlier for 2012 and 2013. Total production and manufacturing fell in all four quarters of 2012 and in the first two quarters of 2013 relative to the same quarter a year earlier. Total services supported the economy with growth in all quarters relative to a year earlier from IQ2012 to IIQ2013. Construction fell sharply in all four quarters of 2012 and in the first quarter of 2013 relative to a year earlier with growth of 0.5 percent in IIQ2013.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
GVA	0.8	0.1	0.1	-0.1	0.2	1.3
Agriculture	-2.0	-3.9	-4.1	-3.9	-7.2	-3.3
Total Production	-2.4	-2.4	-2.0	-3.4	-2.5	-0.7
Manufacturing	-0.6	-2.2	-1.5	-2.6	-2.7	-0.4
Extraction	-11.7	-7.4	-5.9	-14.3	-8.2	-4.1
Electricity, gas and air	-5.7	2.8	-2.9	5.1	6.9	-0.7
Water & sewerage	0.9	-1.1	0.5	-1.5	-1.5	2.0
Construction	-4.6	-9.2	-9.9	-7.8	-5.2	0.5
Total Services	1.7	1.1	1.1	0.9	1.3	2.1
Distn, hotels & catering	0.6	-0.1	1.4	1.3	2.2	4.2
Transport, storage & comms	2.4	0.3	-1.6	-0.6	0.2	1.8
Business services & finance	2.7	2.2	1.2	1.2	1.4	1.9
Government & other	0.7	0.8	2.0	1.1	1.2	1.0

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Total production subtracted from growth of value added in all quarters of 2012 and the first two quarters of 2013 relative to a year earlier, as shown in Table VH-7. Total services added to growth of value added in all four quarters of 2012 and the first two quarters of 2013 relative to a year earlier. Construction also deducted in all four quarters of 2012 and the first quarter of 2013 relative to a year earlier with neutral contribution in IIQ2013.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Agriculture	0.0	0.0	0.0	0.0	-0.1	0.0
Total Production	-0.4	-0.3	-0.3	-0.5	-0.4	-0.1
Manufacturing	-0.1	-0.2	-0.2	-0.3	-0.3	0.0
Extraction	-0.2	-0.1	-0.1	-0.3	-0.1	-0.1
Electricity, gas and air	-0.1	0.0	0.0	0.1	0.1	0.0
Water & sewerage	0.0	0.0	0.0	0.0	0.0	0.0
Construction	-0.3	-0.6	-0.6	-0.5	-0.3	0.0
Total Services	1.3	0.8	0.8	0.8	1.0	1.7
Distn, hotels & catering	0.1	0.0	0.2	0.2	0.3	0.6
Transport, storage & comms	0.3	0.0	-0.2	-0.1	0.0	0.2
Business services & finance	0.9	0.7	0.4	0.4	0.5	0.6
Government & other	0.2	0.2	0.4	0.2	0.3	0.2

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Quarter-on-quarter growth of value added by expenditure components is in Table VH-8. Household final consumption expenditure grew 0.6 percent in IQ2013 relative to IVQ2012 and 0.3 percent in IIQ2013 while general government consumption decreased 0.2 percent in IQ2013 and increased 0.5 percent in IIQ2013. Gross capital formation increased 1.9 percent in IIQ2013 and gross fixed capital formation (GFCF) increased 0.8 percent. Exports increased 0.1 percent in IQ2013 but grew 3.0 percent in IIQ2013 while imports fell 0.8 percent in IQ2013 and decreased 2.9 percent in IIQ2013.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.4	0.2	0.2	0.7	0.6	0.3
NPISH final consumption expenditure	-1.3	5.9	-2.2	-3.4	-0.2	0.7
General government final consumption expenditure	2.4	-1.4	0.2	0.3	-0.2	0.5
Gross capital formation	1.4	1.6	0.9	-3.6	-1.9	1.9
- of which GFCF	3.6	-0.8	-2.4	-3.8	0.1	0.8
- of which Business investment	6.6	-2.4	-1.0	-6.6	1.7	-2.7
Exports	-1.8	-0.4	2.0	-1.7	0.1	3.0
less Imports	0.6	1.4	0.8	-0.9	-0.8	2.9

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Table VH-9 provides contributions to value added by expenditure components in a quarter relative to the prior quarter. In IQ2013, household final consumption expenditure contributed 0.4 percentage points to growth and 0.2 percentage points in IIQ2013. Net trade deducted 0.3 percentage points in IVQ2012 but added 0.3 percentage points in IQ2013 and 0.0 percentage points in IIQ2013. Gross fixed capital formation (GFCF) deducted 0.4 percentage points in IIIQ2012, 0.6 percentage points IVQ2012 and 0.0 percentage points in IQ2013, adding 0.1 percentage points in IIQ2013.

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

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Table VH-10 provides UK growth of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure grew 1.7 percent in IQ2013 relative to a year earlier and 1.8 percent in IIQ2013. Household final consumption grew 1.5 percent in IVQ2012 after growing 1.4 percent in IIIQ2012, 1.1 percent in IIQ2012 and 0.7 percent in IQ2012. General government final consumption expenditure decreased 1.1 percent in IQ2013 and grew 0.8 percent in IIQ2013. Gross fixed capital formation (GFCF) fell 6.8 percent in IQ2013 and 5.3 percent in IIQ2013. Exports fell 0.1 percent in IQ2013 with imports increasing 0.5 percent but exports increased 3.3 percent in IIQ2013 and imports grew 1.9 percent.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.7	1.1	1.4	1.5	1.7	1.8
NPISH final consumption expenditure	0.3	1.8	2.2	-1.3	-0.2	-5.1
General government final consumption expenditure	2.6	1.0	1.7	1.5	-1.1	0.8
Gross capital formation	6.0	-2.7	-6.6	0.2	-3.1	-2.9
- of which GFCF	7.8	0.5	-0.9	-3.5	-6.8	-5.3
- of which Business investment	14.1	-0.8	1.8	-3.7	-8.2	-8.5
Exports	-1.5	3.5	4.5	-2.0	-0.1	3.3
less Imports	2.0	4.3	4.1	1.9	0.5	1.9

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Table VH-11 provides contribution of value added by expenditure components in a quarter relative to the same quarter a year earlier. Household final consumption expenditure contributed 0.8 percentage points in IIIQ2012 and 0.9 percentage points in IVQ2013. In IQ2013, household final consumption added 1.1 percentage points and 1.1 percentage points in IIQ2013. General government final consumption expenditure contributed 0.3 percentage points in IVQ2012, deducting 0.2 percentage points in IQ2013 and adding 0.2 percentage points in IIQ2013. Net trade added 0.4 percentage points in IIQ2013 and deducted 0.2 percentage points in IQ2013.

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

Component	2012 Q1	2012 Q2	2012 Q3	2012 Q4	2013 Q1	2013 Q2
Household final consumption expenditure	0.4	0.7	0.8	0.9	1.1	1.1
NPISH final consumption expenditure	0.0	0.0	0.1	0.0	0.0	-0.1
General government final consumption expenditure	0.6	0.2	0.4	0.3	-0.2	0.2
Gross capital formation	0.8	-0.4	-1.1	0.0	-0.5	-0.4
- of which GFCF	1.1	0.1	-0.1	-0.5	-1.0	-0.8
- of which Business investment	1.1	-0.1	0.1	-0.3	-0.7	-0.7
Exports	-0.5	1.0	1.4	-0.6	0.0	1.0
less Imports	0.7	1.4	1.3	0.6	0.2	0.6
Net trade	-1.1	-0.3	0.1	-1.3	-0.2	0.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

Table VH-12 provides growth of value added by expenditure components in a year relative to the prior year. Household final consumption expenditure grew 1.2 percent in 2012 compared with decline of 0.5 percent in 2011. General government final consumption expenditure grew 1.7 percent in 2012 but changed 0.0 percent in 2011. Gross capital formation increased 0.9 percent in 2011 and fell 1.0 percent in 2012. GFCF fell 2.4 percent in 2011 but increased 0.9 percent in 2012. Exports grew 4.5 percent in 2011 and 1.0 percent in 2012.

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

Component	2011	2012
Household final consumption expenditure	-0.5	1.2
NPISH final consumption expenditure	2.0	0.8
General government final consumption expenditure	0.0	1.7
Gross capital formation	0.9	-1.0
- of which GFCF	-2.4	0.9
- of which Business investment	-1.3	2.6
Exports	4.5	1.0
less Imports	0.3	3.1

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

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

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

Component	2011	2012
Household final consumption expenditure	-0.3	0.7
NPISH final consumption expenditure	0.1	0.0
General government final consumption expenditure	0.0	0.4
Gross capital formation	0.1	-0.2
- of which GFCF	-0.4	0.1
- of which Business investment	-0.1	0.2
Exports	1.3	0.3
less Imports	0.1	1.0
Net trade	1.2	-0.7

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q2-2013/index.html

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