CMP Associates Regulation Blog

Chart IV-1 of the Bank of Japan provides year-on-year percentage changes of the domestic and services Corporate Goods Price Index (CGPI) of Japan from 1970 to 2013. Percentage changes of inflation of services are not as sharp as for goods. Japan had the same sharp waves of inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states_2133.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html). Behavior of the CGPI of Japan in the 1970s mirrors the Great Inflation episode in the United States with waves of inflation rising to two digits. Both political pressures and errors abounded in the unhappy stagflation of the 1970s also known as the US Great Inflation (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). Inflation also collapsed in the beginning of the 1980s because of tight monetary policy in the US with focus on inflation instead of on the gap of actual relative to potential output. The areas in shade correspond to the dates of cyclical recessions. The salient event is the sharp rise of inflation of the domestic goods CGPI in 2008 during the global recession that was mostly the result of carry trades from fed funds rates collapsing to zero to long positions in commodity futures in an environment of relaxed financial risk appetite. The panic of toxic assets in banks to be withdrawn by the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009) drove unusual risk aversion with unwinding of carry trades of exposures in commodities and other risk financial assets. Carry trades returned once TARP was clarified as providing capital to financial institutions and stress tests verified the soundness of US banks. The return of carry trades explains the rise of CGPI inflation after mid-2009. Inflation of the CGPI fluctuated with zero interest rates in alternating episodes of risk aversion and risk appetite.

Chart IV-1, Japan, Domestic Corporate Goods Price and Services Index, Year-on-Year Percentage Change, 1970-2013

Notes: Blue: Domestic Corporate Goods Price Index All Commodities; Red: Corporate Price Services Index

Source: Bank of Japan

There is similar behavior of year-on-year percentage changes of the US producer price index from 1970 to 2013 in Chart IV-2 of the US Bureau of Labor Statistics as in Chart IV-1 with the domestic goods CGPI. The behavior of the CGPI of Japan in the 1970s is quite similar to that of the US PPI. The US producer price index increased together with the CGPI driven by the period of one percent fed funds rates from 2003 to 2004 inducing carry trades into commodity futures and other risk financial assets and the slow adjustment in increments of 25 basis points at every FOMC meeting from Jun 2004 to Jun 2006. There is also the same increase in inflation in 2008 during the global recession followed by collapse because of unwinding positions during risk aversion and new rise of inflation during risk appetite.

Chart IV-2, US, Producer Price Index Finished Goods, Year-on-Year Percentage Change, 1970-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Finer detail is provided by Chart IV-3 of the domestic CGPI from 2008 to 2013. The CGPI rose almost vertically in 2008 as the collapse of fed funds rates toward zero drove exposures in commodities and other risk financial assets because of risk appetite originating in the belief that the financial crisis was restricted to structured financial products and not to contracts negotiated in commodities and other exchanges. The panic with toxic assets in banks to be removed by TARP (Cochrane and Zingales 2009) caused unwinding carry trades in flight to US government obligations that drove down commodity prices and price indexes worldwide. Apparent resolution of the European debt crisis of 2010 drove risk appetite in 2011 with new carry trades from zero fed funds rates into commodity futures and other risk financial assets. Domestic CGPI inflation returned in waves with upward slopes during risk appetite and downward slopes during risk aversion. Yen devaluation promoted by monetary and fiscal policy translates imported inputs in higher domestic prices.

Chart IV-3, Japan, Domestic Corporate Goods Price Index, Monthly, 2008-2013

Source: Bank of Japan

There is similar behavior of the US producer price index from 2008 to 2013 in Chart IV-4 as in the domestic CGPI in Chart IV-3. A major difference is the strong long-term trend in the US producer price index with oscillations originating mostly in bouts of risk aversion such as the downward slope in the final segment in Chart IV-4 followed by increasing slope during periods of risk appetite. Carry trades from zero interest rates to commodity futures and other risk financial assets drive the upward trend of the US producer price index while oscillations originate in alternating episodes of risk aversion and risk appetite.

Chart IV-4, US, Producer Price Index Finished Goods, Monthly, 2008-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-5 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-5 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 107.1 in Sep 2013 for a gain of 13.9 percent relative to Jan 2012 and 2.1 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart IV-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 1.0 percent to 98.9 in Sep 2013 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan. The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 124.0 in Sep 2013 or gain of 9.6 percent relative to Apr 2012 and 32.6 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 113.0 in Sep 2013 or minus 5,4 percent relative to Apr 2012 and gain of 31.1 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 1.0 percent from Jun 2009 to Sep 2013 while the import corporate goods price index increased 31.1 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

Table IV-6 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Sep 2013. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Sep 2013, the export index on the contract currency basis decreased 0.3 percent and decreased 7.3 percent on the yen basis. For the entire period from Jan 2008 to Sep 2013, the import index increased 12.2 percent on the contract currency basis and increased 4.2 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-6, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

Month	Exports Contract Currency	Exports Yen	Imports Contract Currency	Imports Yen
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.8	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.0	107.4	111.6	122.9
2013/08	98.9	106.0	111.7	121.3
2013/09	98.9	107.1	113.0	124.0

Source: Bank of Japan

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2013. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (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). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Table IV-7 at http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states_2133.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2013

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1309.pdf

The producer price index of the US from 1970 to 2013 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1970-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-7. Petroleum and coal with weight of 5.7 percent increased 0.2 percent in Sep 2013 and increased 11.9 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, changed 0.0 percent in Sep 2013 and increased 0.1 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income. There are now inflation effects of the intentional policy of devaluing the yen.

Table IV-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Aug 2013	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.3	2.3
Food, Beverages, Tobacco, Feedstuffs	137.5	-0.1	1.4
Petroleum & Coal	57.4	0.2	11.9
Production Machinery	30.8	0.0	0.1
Electronic Components	31.0	-0.2	-1.6
Electric Power, Gas & Water	52.7	1.2	9.9
Iron & Steel	56.6	0.3	0.1
Chemicals	92.1	0.2	4.9
Transport Equipment	136.4	0.0	-1.2

Source: Bank of Japan http://www.boj.or.jp/en/

Percentage point contributions to change of the corporate goods price index (CGPI) in Sep 2013 are provided in Table IV-8 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.3 percent in Sep 2013, the energy shock is evident in the contribution of 0.08 percentage points by electric power, gas and water in new carry trades of exposures in commodity futures. The exports CGPI changed 0.0 percent on the basis of the contract currency with deduction of 0.06 percentage points by electric and electronic products. The imports CGPI increased 1.2 percent on the contract currency basis. Petroleum, coal and natural gas contributed 1.06 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table IV-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Sep 2013	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 0.3%
Electric Power, Gas & Water	0.08
Agriculture, Forestry & Fishery Products	0.04
Scrap & Waste	0.03
Nonferrous Metals	0.02
Chemicals & Related Products	0.02
Iron & Steel	0.02
Food, Beverages, Tobacco & Feedstuffs	-0.01
Electronic Components & Devices	-0.01
B. Export Price Index	Monthly Change: 0.0 % contract currency
Metals & Related Products	0.14
Chemicals & Related Products	0.05
Transportation Equipment	-0.06
Electric & Electronic Products	-0.06
C. Import Price Index	Monthly Change: 1.2 % contract currency basis
Petroleum, Coal & Natural Gas	1.06
Metals & Related Products	0.10
Chemicals & Related Products	0.06
Textiles	0.03
Foodstuffs & Feedstuffs	-0.10

Source: Bank of Japan

http://www.boj.or.jp/en/

https://www.destatis.de/EN/PressServices/Press/pr/2013/10/PE13_340_611.html

The estimate of consumer price inflation in Germany in Table IV-9 is 1.5 percent in 12 months ending in Sep 2013, 0.0 percent NSA (not seasonally adjusted) in Sep 2013 relative to Jul 2013 and 0.1 percent CSA (calendar and seasonally adjusted) in Sep 2013 relative to Sep 2013. There are waves of consumer price inflation in Germany similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html), as shown in Table IV-9. In the first wave, annual equivalent inflation was 3.0 percent in Feb-Apr 2011 NSA and 2.4 percent SA during risk appetite in carry trades from zero interest rates to commodity futures. In the second wave, annual equivalent consumer price inflation collapsed to 0.6 percent NSA and 3.0 percent SA in May-Jun 2011 because of risk aversion caused by European sovereign debt event. In the third wave, annual equivalent consumer price inflation was 1.7 percent NSA and 1.9 percent SA in Jul-Nov 2011 because of relaxed risk aversion. In the fourth wave, annual equivalent inflation was 0.6 percent NSA and 1.8 percent SA in Dec 2011 to Jan 2012. In the fifth wave, annual equivalent inflation rose to 4.5 percent NSA and 2.4 percent SA in Feb-Apr 2012 during another energy-commodity carry trade shock. In the sixth wave, annual equivalent inflation in May-Jun 2012 is minus 1.2 percent NSA and 0.6 percent SA. In the seventh wave, annual equivalent inflation NSA is 4.9 percent in Jul-Aug 2012 and 3.0 percent SA. In the eighth wave in Sep-Dec 2012, annual equivalent inflation is 1.5 percent NSA and 1.5 percent SA. In the ninth wave, annual equivalent inflation fell to minus 5.8 percent NSA in Jan 2013 and minus 1.2 percent SA. In the eleventh wave, annual equivalent inflation rose to 6.8 percent NSA in Feb-Mar 2013 and 1.2 percent CSA. In the twelfth wave, annual equivalent inflation in Apr fell to minus 5.8 percent NSA and 0.0 percent SA in reversal of carry trades into commodity futures. In the thirteenth wave, annual equivalent inflation returned at 4.1 percent in May-Jul 2013 NSA and 3.7 percent SA. In the fourteenth wave, annual equivalent inflation was nil NSA and 0.6 percent CSA in Aug-Sep 2013. Under unconventional monetary policy of zero interest rates and quantitative easing inflation becomes highly volatile during alternative shocks of risk aversion and risk appetite, preventing sound investment and consumption decisions.

Table IV-9, Germany, Consumer Price Index ∆%

	12-Month ∆%	Month ∆% NSA	Month ∆% CSA
Sep 2013	1.4	0.0	0.1
Aug	1.5	0.0	0.0
AE ∆% Aug-Sep		0.0	0.6
Jul	1.9	0.5	0.2
Jun	1.8	0.1	0.3
May	1.5	0.4	0.4
AE ∆% May-Jul		4.1	3.7
Apr	1.2	-0.5	0.0
AE ∆% Apr		-5.8	0.0
Mar	1.4	0.5	0.1
Feb	1.5	0.6	0.1
AE ∆% Feb-Mar		6.8	1.2
Jan	1.7	-0.5	-0.1
AE ∆% Jan		-5.8	-1.2
Dec 2012	2.0	0.3	0.2
Nov	1.9	0.1	0.1
Oct	2.0	0.0	0.1
Sep	2.0	0.1	0.1
AE ∆% Sep-Dec		1.5	1.5
Aug	2.2	0.4	0.3
Jul	1.9	0.4	0.2
AE ∆% Jul-Aug		4.9	3.0
Jun	1.7	-0.2	0.0
May	2.0	0.0	0.1
AE ∆% May-Jun		-1.2	0.6
Apr	2.0	-0.2	0.2
Mar	2.2	0.6	0.2
Feb	2.2	0.7	0.2
AE ∆% Feb-Apr		4.5	2.4
Jan	2.1	-0.1	0.3
Dec 2011	2.0	0.2	0.0
AE ∆% Dec-Jan		0.6	1.8
Nov	2.4	0.2	0.2
Oct	2.3	0.0	0.1
Sep	2.4	0.2	0.3
Aug	2.1	0.1	0.1
Jul	2.1	0.2	0.1
AE ∆% Jul-Nov		1.7	1.9
Jun	2.1	0.1	0.3
May	2.0	0.0	0.2
AE ∆% May-Jun		0.6	3.0
Apr	1.9	0.0	0.2
Mar	2.0	0.6	0.2
Feb	1.9	0.6	0.2
Jan	1.7	-0.2	0.2
AE ∆% Feb-Apr		3.0	2.4
Dec 2010	1.3	0.6	0.2
Nov	1.5	0.1	0.2
Oct	1.3	0.1	0.2
Sep	1.2	-0.1	0.1
Aug	1.0	0.1	0.1
Annual Average ∆%
2012	2.0
2011	2.1
2010	1.1
2009	0.4
2008	2.6
Dec 2009	0.8
Dec 2008	1.1
Dec 2007	3.2
Dec 2006	1.4
Dec 2005	1.4
Dec 2004	2.2
Dec 2003	1.1
Dec 2002	1.1
Dec 2001	1.6

AE: Annual Equivalent

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

Chart IV-9 of the Statistisches Bundesamt Deutschland, or federal statistical office of Germany, provides the unadjusted consumer price index of Germany from 2005 to 2013. There is evident acceleration in the form of sharper slope in the first months of 2011 and then a flattening in subsequent months with renewed strength in Dec 2011, decline in Jan 2012 and another upward spike from Feb to Apr 2012, new drop in May-Jun 2012 and increases in Jul and Aug 2012 relaxed in Sep-Nov 2012. Inflation returned in Dec 2012 and fell in Jan 2013, rebounding in Feb-Mar 2013. Inflation fell in Apr 2013 and rebounded in May 2013. Reversals of commodity exposures caused the decline in Apr 2013 followed by increases in May-Jul 2013. Inflation stabilized in Aug-Sep 2013. If risk aversion declines, new carry trades from zero interest rates to commodity futures could again result in higher inflation.

Chart IV-9, Germany, Consumer Price Index, Unadjusted, 2010=100

Source: Statistisches Bundesamt Deutschland

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

Chart IV-9A provides the consumer price index NSA of the US from 2005 to 2013. The salient similarity is the hump in 2008 caused by commodity carry trades driven by the movement to zero interest rates. Inflation communicated worldwide through carry trade from zero interest rates to exposures in commodity futures, creating instability in financial and economic decisions.

Chart IV-9A, US, Consumer Price Index, All Items, NSA, 2005-2013

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

Chart IV-10, of the Statistisches Bundesamt Deutschland, or Federal Statistical Agency of Germany, provides the unadjusted consumer price index and trend of Germany from 2009 to 2013. Chart IV-10 captures inflation waves with alternation of periods of positive and negative slopes resulting from zero interest rates with shocks of risk appetite and risk aversion. For example, the negative slope of decline of inflation by 0.2 percent in Jun 2012 and 0.0 percent in May 2012 follows an upward slope of price increases in Feb-Apr 2012 after decline of inflation by 0.1 percent in Jan 2012. The final segment shows another positive slope caused by inflation of 0.4 percent in Jul 2012, which is followed by 0.4 percent in Aug 2012 and flattening segment, as inflation remains almost unchanged with 0.1 percent in Sep and 0.0 percent in Oct 2012, increasing 0.1 percent in Nov 2012 and increasing 0.3 percent in Dec 2012. Inflation fell 0.5 percent in Jan 2013 and jumped 0.6 percent in Feb 2013 and 0.5 percent in Mar 2013. The final declining segment indicates the decline of 0.5 percent in Apr 2013 followed by the increases in May-Jul 2013. Inflation was nil in Aug-Sep 2013. The waves occur around an upward trend of prices, disproving the proposition of fear of deflation.

Chart IV-10, Germany, Consumer Price Index, Unadjusted and Trend, 2010=100

Source: Statistisches Bundesamt Deutschland

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

Table IV-10 provides the monthly and 12-month rate of inflation for segments of the consumer price index of Germany in Aug 2013. Inflation excluding energy decreased 0.1 percent in Sep 2013 and rose 1.7 percent in 12 months. Excluding household energy inflation was 0.0 percent in Sep 2013 and rose 1.3 percent in 12 months. Food prices decreased 0.4 percent in Sep 2013 and increased 4.7 percent in 12 months. There were differences in inflation of energy-related prices. Heating oil decreased 5.8 percent in 12 months and increased 3.2 percent in Sep. Motor fuels changed 0.0 percent in Sep and decreased 6.7 percent in 12 months.

Table IV-10, Germany, Consumer Price Index ∆%

Sep 2013	Weight	12- Month ∆%	Month ∆%
Total	1,000.00	1.4	0.0
Excluding heating oil and motor fuels	950.52	1.9	-0.1
Excluding household energy	931.81	1.3	0.0
Excluding Energy	893.44	1.7	-0.1
Total Goods	479.77	1.3	0.6
Nondurable Consumer Goods	307.89	1.9	0.2
Services	520.23	1.6	-0.6
Energy Components
Motor Fuels	38.37	-6.7	0.0
Household Energy	68.19	3.7	0.6
Heating Oil	11.11	-5.8	3.2
Food	90.52	4.7	-0.4

Source: Statistisches Bundesamt Deutschland https://www.destatis.de/EN/PressServices/Press/pr/2013/10/PE13_340_611.html

The first wave of commodity price increases in the first four months of Jan-Apr 2011 also influenced the surge of consumer price inflation in Italy shown in Table IV-11. Annual equivalent inflation in the first four months of 2011 from Jan to Apr was 4.9 percent. The crisis of confidence or risk aversion resulted in reversal of carry trades on commodity positions. Consumer price inflation in Italy was subdued in the second wave in Jun and May 2011 at 0.1 percent for annual equivalent 1.2 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased to 2.4 percent. In the fourth wave, annual equivalent inflation in Oct-Nov 2011 jumped again at 3.0 percent. Inflation returned in the fifth wave from Dec 2011 to Jan 2012 at annual equivalent 4.3 percent. In the sixth wave, annual equivalent inflation rose to 5.7 percent in Feb-Apr 2012. In the seventh wave, annual equivalent inflation was 1.2 percent in May-Jun 2012. In the eighth wave, annual equivalent inflation increased to 3.0 percent in Jul-Aug 2012. In the ninth wave, inflation collapsed to zero in Sep-Oct 2012 and was minus 0.8 percent in annual equivalent in Sep-Nov 2012. In the tenth wave, annual equivalent inflation in Dec 2012 to Aug 2013 was 2.0 percent. In the twelfth wave, annual equivalent inflation was minus 3.5 percent in Sep 2013 during reallocations of investment portfolios away from commodity futures. There are worldwide shocks to economies by intermittent waves of inflation originating in combination of zero interest rates and quantitative easing with alternation of risk appetite and risk aversion (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html).

Table IV-11, Italy, Consumer Price Index

	Month	12 Months
Sep 2013	-0.3	0.9
AE ∆% Sep	-3.5
Aug	0.4	1.2
Jul	0.1	1.2
Jun	0.3	1.2
May	0.0	1.1
Apr	0.0	1.1
Mar	0.2	1.6
Feb	0.1	1.9
Jan	0.2	2.2
Dec 2012	0.2	2.3
AE ∆% Dec 2012-Aug 2013	2.0
Nov 2012	-0.2	2.5
Oct	0.0	2.6
Sep	0.0	3.2
AE ∆% Sep-Nov	-0.8
Aug	0.4	3.2
Jul	0.1	3.1
AE ∆% Jul-Aug	3.0
June	0.2	3.3
May	0.0	3.2
AE ∆% May-Jun	1.2
Apr	0.5	3.3
Mar	0.5	3.3
Feb	0.4	3.3
AE ∆% Feb-Apr	5.7
Jan	0.3	3.2
Dec 2011	0.4	3.3
AE ∆% Dec-Jan	4.3
Nov	-0.1	3.3
Oct	0.6	3.4
AE ∆% Oct-Nov	3.0
Sep	0.0	3.0
Aug	0.3	2.8
Jul	0.3	2.7
AE ∆% Jul-Sep	2.4
Jun	0.1	2.7
May	0.1	2.6
AE ∆% May-Jun	1.2
Apr	0.5	2.6
Mar	0.4	2.5
Feb	0.3	2.4
Jan	0.4	2.1
AE ∆% Jan-Apr	4.9
Dec 2010	0.4	1.9
Annual
2012		3.0
2011		2.8
2010		1.5
2009		0.8
2008		3.3
2007		1.8
2006		2.1

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/100585

Consumer price inflation in Italy by segments in the estimate by ISTAT for Sep 2013 is provided in Table IV-13. Total consumer price inflation in Sep 2013 was minus 0.3 percent and 0.9 percent in 12 months. Inflation of goods was 0.2 percent in Sep 2013 and 0.4 percent in 12 months. Prices of durable goods fell 0.1 percent in Sep and decreased 0.9 percent in 12 months, as typical in most countries. Prices of energy increased 0.5 percent in Sep and decreased 2.5 percent in 12 months. Food prices decreased 0.1 percent in Sep and increased 2.1 percent in 12 months. Prices of services decreased 0.9 percent in Sep and rose 1.5 percent in 12 months. Transport prices, also influenced by commodity prices, decreased 5.0 percent in Sep and increased 3.2 percent in 12 months. Carry trades from zero interest rates to positions in commodity futures cause increases in commodity prices. Waves of inflation originate in periods when there is no risk aversion and commodity prices decline during periods of risk aversion and portfolio reallocations (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html).

Table IV-13, Italy, Consumer Price Index and Segments, Month and 12-Month ∆%

Sep 2013	Weights	Month ∆%	12-Month ∆%
General Index	1,000,000	-0.3	0.9
I Goods	559,402	0.2	0.4
Food	168,499	-0.1	2.1
Energy	94,758	0.5	-2.5
Durable	89,934	-0.1	-0.9
Nondurable	71,031	0.1	1.5
II Services	440,598	-0.9	1.5
Housing	71,158	0.1	2.1
Communications	20,227	-1.1	-5.0
Transport	81,266	-5.0	3.2

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/100585

Chart IV-11 of the Istituto Nazionale di Statistica shows moderation in 12-month percentage changes of the consumer price index of Italy with marginal increase followed by decline to 2.5 percent in Nov 2012, 2.3 percent in Dec 2012, 2.2 percent in Jan 2013, 1.9 percent in Feb 2013 and 1.6 percent in Mar 2013. Consumer prices increased 1.1 percent in the 12 months ending in Apr-May 2013 and 1.2 percent in Jun-Jul 2013. In Aug 2013, consumer prices increased 1.2 percent in 12 months. Consumer prices increased 0.9 percent in the 12 months ending in Sep 2013.

Chart, IV-11, Italy, Consumer Price Index, 12-Month Percentage Changes

Source: Istituto Nazionale di Statistica

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

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 2.9 percent in 2013 but accelerating to 3.6 percent in 2014, 4.0 percent in 2015 and 4.1 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,560 billion of world output of $72,216 billion, or 47.9 percent, but are projected to grow at much lower rates than world output, 2.1 percent on average from 2013 to 2016 in contrast with 3.6 percent for the world as a whole. While the world would grow 15.4 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 15.4 percent would add $11.1 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,960 billion 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 $27,221 billion, or 37.7 percent of world output. The EMDEs would grow cumulatively 21.9 percent or at the average yearly rate of 5.1 percent, contributing $6.0 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,221 billion of China in 2012. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,346 billion, or 19.9 percent of world output, which is equivalent to 41.5 percent of the combined output of the major advanced economies of the G7.

Table V-1, IMF World Economic Outlook Database Projections of Real GDP Growth

	GDP USD 2012	Real GDP ∆% 2013	Real GDP ∆% 2014	Real GDP ∆% 2015	Real GDP ∆% 2016
World	72,216	2.9	3.6	4.0	4.1
G7	34,560	1.2	2.0	2.5	2.6
Canada	1,821	1.6	2.2	2.4	2.5
France	2,614	0.2	1.0	1.5	1.7
DE	3,430	0.5	1.4	1.4	1.3
Italy	2,014	-1.8	0.7	1.1	1.4
Japan	5,960	1.9	1.2	1.1	1.2
UK	2,477	1.4	1.9	2.0	2.0
US	16,245	1.6	2.6	3.4	3.5
Euro Area	12,199	-0.4	1.0	1.4	1.5
DE	3,430	0.5	1.4	1.4	1.3
France	2,614	0.2	1.0	1.5	1.7
Italy	2,014	-1.8	0.7	1.1	1.4
POT	212	-1.8	0.8	1.5	1.8
Ireland	211	0.6	1.8	2.5	2.5
Greece	249	-4.2	0.6	2.9	3.7
Spain	1,324	-1.3	0.2	0.5	0.7
EMDE	27,221	4.5	5.1	5.3	5.4
Brazil	2,253	2.5	2.5	3.2	3.3
Russia	2,030	1.5	3.0	3.5	3.5
India	1,842	3.8	5.1	6.3	6.5
China	8,221	7.6	7.3	7.0	7.0

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/2013/02/weodata/index.aspx

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/02/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 V-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	7.3	7.3	7.0	6.6
Canada	7.3	7.2	7.1	7.0	6.9
France	10.3	11.0	11.1	10.9	10.5
DE	5.5	5.6	5.5	5.5	5.5
Italy	10.7	12.5	12.4	12.0	11.2
Japan	4.4	4.2	4.3	4.3	4.3
UK	8.0	7.7	7.5	7.3	7.0
US	8.1	7.6	7.4	6.9	6.4
Euro Area	11.4	12.3	12.2	12.0	11.5
DE	5.5	5.6	5.5	5.5	5.5
France	10.3	11.0	11.1	10.9	10.5
Italy	10.7	12.5	12.4	12.0	11.2
POT	15.7	17.4	17.7	17.3	16.8
Ireland	14.7	13.7	13.3	12.8	12.4
Greece	24.2	27.0	26.1	24.0	21.0
Spain	25.0	26.9	26.7	26.5	26.2
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	5.8	6.0	6.5	6.5
Russia	6.0	5.7	5.7	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/2013/02/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 1.2 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.6 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	-1.2
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	-0.6
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 increased 1.7 percent in the month of Aug 2013 and fell 5.4 percent in the 12 months ending in Aug 2013. Germany’s imports increased 0.4 percent in the month of Aug and decreased 2.2 percent in the 12 months ending in Aug. 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 decreased 1.4 percent in Aug 2013 while imports decreased 1.6 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	1.0 Aug CSA	-5.4 Aug	0.4 Aug CSA	-2.2 Aug
France Jul	-1.4	-5.2	-1.6	-6.9
Italy Jul	-2.3	3.0	0.4	-0.3
UK	0.4 Aug	1.6 Jun-Aug 13 /Jun-Aug 12	0.1 Aug	1.5 Jun-Aug 13/Jun-Aug 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 2.9 percent in 2013 to 5.4 percent in 2015 and 5.1 percent on average from 2013 to 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, USD Billions, USD/Barrel and ∆%

	2013	2014	2015	Average ∆% 2013-2018
World Trade Volume (Goods and Services)	2.9	4.9	5.4	5.1
Exports Goods & Services	3.0	5.1	5.4	5.1
Imports Goods & Services	2.8	4.7	5.4	5.0
Oil Price USD/Barrel	104.49	101.35	NA	NA
Value of World Exports Goods & Services $B	23,164	24,367	NA	NA
Value of World Exports Goods $B	18,709	19,632	NA	NA
Exports Goods & Services
EMDE	3.5	5.8	6.3	5.9
G7	2.3	4.6	4.4	4.4
Imports Goods & Services
EMDE	5.0	5.9	6.7	6.2
G7	1.3	3.9	4.2	4.0
Terms of Trade of Goods & Services
EMDE	-0.5	-0.4	-0.6	-0.5
G7	0.1	-0.1	0.1	0.1
Terms of Trade of Goods
EMDE	-0.6	-0.9	-0.9	-0.8
G7	-0.5	0.2	0.2	-0.007

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/2013/02/weodata/index.aspx

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, decreased to 53.5 in Sep from 55.1 in Aug, indicating expansion at a slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/eca40cba6d8541abb209be984d396e61). This index has remained above the contraction territory of 50.0 during 50 consecutive months and reached in IIIQ2013 the highest reading in a year and a half. The employment index decreased from 52.2 in Aug to 51.0 in Sep with input prices rising at a faster rate and new orders and output increasing at slower rates (http://www.markiteconomics.com/Survey/PressRelease.mvc/eca40cba6d8541abb209be984d396e61). Joe Lupton, Global Economist at JP Morgan, finds strength in growth in IIIQ2013 and possible rise to trend growth in the final quarter of 2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/eca40cba6d8541abb209be984d396e61). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was higher at 51.8 in Sep from 51.6 in Aug, which is the highest reading in 27 months and the ninth consecutive reading above 50 with three consecutive months of increase (http://www.markiteconomics.com/Survey/PressRelease.mvc/ce0dc08ba1fe4f468f9514b929f64aae). New export orders expanded at the fastest pace since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/ce0dc08ba1fe4f468f9514b929f64aae). The HSBC Brazil Composite Output Index, compiled by Markit, increased marginally from 49.7 in Aug to 50.7 in Sep, indicating moderate expansion in the first reading above 50 since Jun (http://www.markiteconomics.com/Survey/PressRelease.mvc/84c23fdc900f4fd89797fca3ef97c279). The HSBC Brazil Services Business Activity index, compiled by Markit increased marginally from 49.7 in Aug to 50.7 in Aug, indicating moderate improvement in business activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/84c23fdc900f4fd89797fca3ef97c279). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the reading of 50.2 in IIIQ2013 is the second weakest since the 2009 global recession (http://www.markiteconomics.com/Survey/PressRelease.mvc/84c23fdc900f4fd89797fca3ef97c279). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 49.4 in Aug to 49.9 in Sep with activity in standstill (http://www.markiteconomics.com/Survey/PressRelease.mvc/e7607447816649f58eae2b0a76f3dea6). Andre Loes, Chief Economist, Brazil at HSBC, finds mild stabilization of manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/e7607447816649f58eae2b0a76f3dea6).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 52.8 in Sep from 53.1 in Aug, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/77970ab4c59744eab5404ffa49d76d36). New export orders registered 49.1 in Sep down from 52.0 in Aug, indicating marginal contraction. Chris Williamson, Chief Economist at Markit, finds that the survey data are consistent with improvement in IIIQ2013 relative to IIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/77970ab4c59744eab5404ffa49d76d36). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 52.8 in Sep from 53.1 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/e32b050a3ef7439f9f5065117489c887). The index of new exports orders decreased from 52.0 in Aug to 49.0 in Sep while total new orders decreased from 55.7 in Aug to 53.2 in Sep. Chris Williamson, Chief Economist at Markit, finds that the index suggests standstill of manufacturing in the US (http://www.markiteconomics.com/Survey/PressRelease.mvc/e32b050a3ef7439f9f5065117489c887). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.5 percentage points from 55.7 in Aug to 56.2 in Sep, which indicates growth at a higher rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders decreased 2.7 percentage points from 63.2 in Aug to 60.5 in Sep. The index of exports decreased 3.5 percentage point from 55.5 in Aug to 52.0 in Sep, growing at a slower rate. The Non-Manufacturing ISM Report on Business^® PMI decreased 4.2 percentage points from 58.6 in Aug to 54.4 in Sep, indicating growth of business activity/production during 50 consecutive months, while the index of new orders decreased 0.9 percentage points from 60.5 in Aug to 59.6 in Sep (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-Sep 2013 11,786,536; Jan-Sep 2012 10,899,909. Sep 13 SAAR 15.28 million, Aug 13 SAAR 16.09 million, Sep 2012 SAAR 14.78 million Blog 10/6/13
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	Aug ∆% annual rate: Total 4.4; Revolving minus 1.2; Nonrevolving 8.0 Blog 10/13/13
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:

10/6/13 http://cmpassocregulationblog.blogspot.com/2013/10/collapse-of-united-states-dynamism-of.html

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

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

8/11/13 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

The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-1. The data are in seasonally adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-1) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-1) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Aug 2013, revolving credit was $849 billion, or 28.0 percent of total consumer credit of $3037 billion, and non-revolving credit was $2188 billion, or 72.0 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.0 percent in annual data and sharp decline of 7.6 percent in revolving credit. In IVQ 2012, total consumer credit grew at 6.5 percent with increase of revolving credit at 0.3 percent and increase of non-revolving credit at 9.1 percent. Growth continued in Aug 2013 with total credit at 5.4 percent, revolving at minus 1.2 percent and non-revolving at 8.0 percent.

Table VA-1, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars

	Total ∆%	REV ∆%	NRV ∆%	Total $B	REV $B	NREV $B
2013
Aug	5.4	-1.2	8.0	3037	849	2188
Jul	4.1	-2.6	6.8	3023	850	2173
Jun	5.8	-5.2	10.2	3013	852	2161
IIQ	5.9	1.2	7.7	3013	852	2161
IQ	6.2	1.5	8.1	2969	849	2120
2012
IVQ	6.5	0.3	9.1	2924	846	2078
IIIQ	4.8	0.4	6.7	2878	845	2033
IIQ	7.4	1.0	8.4	2843	844	1999
2012	6.1	0.4	8.7	2924	846	2078
2011	4.1	0.2	5.9	2757	842	1915
2010	-1.0	-7.6	2.7	2648	841	1807
2009	-3.9	-8.8	-1.0	2553	917	1636
2008	1.3	0.2	2.0	2651	1005	1646
2007	5.9	8.5	4.3	2529	1008	1521

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

Source: Board of Governors of the Federal Reserve System

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

Chart VA-1 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on 24-month personal loans at commercial banks, not seasonally adjusted, measured on the left axis. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.

Chart VA-1, US, Total Consumer Credit Owned and Securitized NSA and Financing Rate on 24-month Personal Loans at Commercial Banks NSA, Millions of Dollars and Percent, Feb 1972-Aug 2013

Source: Board of Governors of the Federal Reserve System

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

Chart VA-2 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on 24-month personal consumer loans at commercial banks, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012-2013 but with significant fluctuations.

Chart VA-2, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on 24-month Personal Loans at Commercial Banks NSA, Feb 1972-Aug 2013

Source: Board of Governors of the Federal Reserve System

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

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

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

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

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

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

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

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

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

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

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

Source: Policy Board, Bank of Japan

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

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index increasing from 51.9 in Aug to 53.2 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/138be09087a9442aa1e7ceac9421a614). 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/138be09087a9442aa1e7ceac9421a614). The Markit Business Activity Index of Services increased from 51.2 in Aug to 53.0 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/138be09087a9442aa1e7ceac9421a614). Claudia Tillbrooke, Economist at Markit and author of the report, finds growth in services for the eleventh consecutive month but weak growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/138be09087a9442aa1e7ceac9421a614). Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 52.2 in Aug to 52.5 in Sep, which is the highest level since Feb 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/eccbf11e68e444f6bae12df9a36ef2cb). New orders grew at the highest rate in 40 months. New export orders recovered from decline in Aug, growing at the highest rate in six months. Claudia Tillbrooke, Economist at Markit and author of the report, finds manufacturing conditions with output expanding in Sep at the fastest rate in thirty-six months (http://www.markiteconomics.com/Survey/PressRelease.mvc/eccbf11e68e444f6bae12df9a36ef2cb).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 ∆% 2.3 Blog 10/13/13
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	Aug Unemployed 2.71 million Change in unemployed since last year: minus 60 thousand Unemployment rate: 4.1 % Blog 10/6/13
All Industry Indices	Jul month SA ∆% 0.5 12-month NSA ∆% 1.7 Blog 9/22/13
Industrial Production	Aug SA month ∆%: -0.7 12-month NSA ∆% -0.2 Blog 10/6/13
Machine Orders	Total Aug ∆% 4.5 Private ∆%: 3.2 Aug ∆% Excluding Volatile Orders 5.4 Blog 10/13/13
Tertiary Index	Aug month SA ∆% 0.7 Aug 12 months NSA ∆% 0.8 Blog 10/13/13
Wholesale and Retail Sales	Aug 12 months: Total ∆%: 0.7 Wholesale ∆%: 0.6 Retail ∆%: 1.1 Blog 10/6/13
Family Income and Expenditure Survey	Aug 12-month ∆% total nominal consumption -0.5, real -1.6 Blog 10/6/13
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:

10/6/13 http://cmpassocregulationblog.blogspot.com/2013/10/collapse-of-united-states-dynamism-of.html

9/29/13 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

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

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

The tertiary activity index of Japan increased 0.7 percent SA in Aug 2013 and increased 0.8 percent NSA in the 12 months ending in Aug 2013, as shown in Table VB-1. The index is showing significant volatility with increases of 1.3 percent in Feb 2013, 1.2 percent in May 2013 and 0.7 percent in Aug 2013 but decreases in multiple months. The tertiary activity index fell 5.2 percent in 2009, growing 1.3 percent in 2010, 0.1 percent in 2011 and 1.4 percent in 2012.

Table VB-1, Japan, Tertiary Activity Index, ∆%

	Month ∆% SA	12 Months ∆% NSA
Aug 2013	0.7	0.8
Jul	-0.4	1.3
Jun	-0.7	0.5
May	1.2	1.7
Apr	-0.5	1.3
Mar	0.2	0.7
Feb	1.3	-1.6
Jan	-0.8	0.1
Dec 2012	0.2	-0.1
Nov	-0.1	1.0
Oct	0.2	1.3
Sep	0.0	0.1
Aug	0.2	0.6
Jul	-0.3	0.8
Jun	0.0	0.8
May	0.5	3.1
Apr	-0.2	2.4
Mar	-0.3	4.2
Feb	0.2	2.4
Jan	-0.8	0.3
Calendar Year
2012		1.4
2011		0.1
2010		1.3
2009		-5.2
2008		-1.0
2007		1.0
2006		1.8
2005		1.9
2004		1.8

Source: Japan, Ministry of Economy, Trade and Industry (METI)

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

Month and 12-month rates of growth of the tertiary activity index of Japan and components in Aug 2013 are provided in Table VB-2. Electricity, gas, heat supply and water decreased 0.2 percent in Aug 2013 and decreased 0.7 percent in the 12 months ending in Aug 2013. Wholesale and retail trade increased 1.0 percent in the month of Aug and decreased 3.1 percent in 12 months. Information and communications increased 1.0 percent in Aug and increased 2.5 percent in 12 months.

Table VB-2, Japan, Tertiary Index and Components, Month and 12-Month Percentage Changes ∆%

Aug 2013	Weight	Month ∆% SA	12 Months ∆% NSA
Tertiary Index	10,000.0	0.7	0.8
Electricity, Gas, Heat Supply & Water	372.9	-0.2	-0.7
Information & Communications	951.2	1.0	2.5
Wholesale & Retail Trade	2,641.2	1.0	-3.1
Finance & Insurance	971.1	-0.6	3.7
Real Estate & Goods Rental & Leasing	903.4	-0.4	-0.2
Scientific Research, Professional & Technical Services	551.3	2.4	6.6
Accommodations, Eating, Drinking	496.0	1.9	1.4
Living-Related, Personal, Amusement Services	552.7	1.9	4.4
Learning Support	116.9	-0.2	-1.3
Medical, Health Care, Welfare	921.1	0.4	2.2
Miscellaneous ex Government	626.7	0.1	-0.4

Source: Japan, Ministry of Economy, Trade and Industry (METI)

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

Japan’s total machinery orders seasonally adjusted in Table VB-3 rebounded in Aug 2013, increasing 4.5 percent seasonally adjusted. Private sector orders increased 3.2 percent and 5.4 percent excluding volatile orders. Orders from overseas increased 22.4 percent and manufacturing orders 0.8 percent.

Table VB-3, Japan, Machinery Orders, Month ∆%, SA

2013	Aug 13	Jul 13	Jun 13	May 13
Total	4.5	4.4	-14.3	12.0
Private Sector	3.2	3.4	-6.0	12.4
Excluding Volatile Orders	5.4	0.0	-2.7	10.5
Mfg	0.8	4.8	2.4	3.8
Non Mfg ex Volatile	6.2	0.0	-17.5	25.4
Government	-8.3	12.9	-28.2	44.8
From Overseas	22.4	1.4	-16.7	10.3
Through Agencies	2.4	-3.0	6.6	22.7

Note: Mfg: manufacturing

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

Chart VB-1, Japan, Machinery Orders

Source: Japan Economic and Social Research Institute, Cabinet Office

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

Table VB-4 provides values and percentage changes from a year earlier of Japan’s machinery orders without seasonal adjustment. Total orders of JPY 1,922,547 million in Aug 2013 are divided between JPY 799,971 million overseas orders, or 41.6 percent of the total, and domestic orders of JPY 1,035,719 million, or 53.9 percent of the total, with orders through agencies of JPY 86,866 million, or 4.5 percent of the total. Orders through agencies are not in Table VB-8 because of the minor value and appear only in the note to the table. Twelve-month percentages changes in Aug 2013 rebounded with increases of 25.9 percent for total orders, 17.1 percent for domestic orders and 10.3 percent for orders excluding volatile components. Overseas orders rose 41.8 percent in 12 months partly because of yen devaluation.

Table VB-4, Japan, Machinery Orders, 12 Months ∆% and Million Yen, Original Series

	Total	Overseas	Domestic	Private ex Volatile
Value Aug 2013	1,922,547	799,971	1,035,710	706,013
% Total	100.0	41.6	53.9	36.7
Value Aug 2012	1,527,021	564,081	884,182	639,907
% Total	100.0	36.9	57.9	41.9
12-month ∆%	25.9	41.8	17.1	10.3
Aug 2013	25.9	41.8	17.1	10.3
Jul 2013	5.3	4.4	6.9	6.5
Jun 2013	2.7	0.1	4.1	4.9
May 2013	18.1	17.1	20.8	16.5
Apr 2013	-4.3	6.7	-9.9	-1.1
Mar 2013	11.5	27.5	3.3	2.4
Feb 2013	-14.8	-21.0	-10.7	-11.3
Jan 2013	-24.8	-36.7	-11.8	-9.7
Dec 2012	-12.5	-24.1	-3.3	-3.4
Nov 2012	-8.6	-9.6	-8.5	0.3
Oct 2012	-6.9	-12.8	-2.6	1.2
Sep 2012	-7.8	-18.4	-1.8	-7.8
Aug 2012	-18.6	-31.1	-10.2	-6.1
Jul 2012	2.6	-1.9	3.2	1.7
Jun 2012	-10.9	-11.3	-12.4	-9.9
May 2012	-6.8	-7.0	-8.6	1.0
Apr 2012	7.5	-9.6	23.0	6.6
Mar 2012	8.1	-10.0	19.0	-1.1
Feb 2012	-9.3	-8.9	-11.2	8.9
Jan 2012	9.8	18.3	0.5	5.7
Dec 2011	0.8	12.6	-8.5	6.3
Nov 2011	11.0	8.0	13.5	12.5
Oct 2011	-6.8	-15.6	-1.0	1.5
Dec 2010	9.4	3.5	14.1	-0.6
Dec 2009	1.8	0.4	3.6	-1.9
Dec 2008	-23.3	-29.4	-17.4	-24.7
Dec 2007	1.3	9.8	-4.3	-6.4
Dec 2006	0.8	0.9	-0.1	0.1

Note: Total machinery orders = overseas + domestic demand + orders through agencies. Orders through agencies in Aug 2013 were JPY 86,866 million or 4.5 percent of the total and JPY 78,758 or 5.2 percent of the total in Aug 2012, and are not shown in the table. The data are the original numbers without any adjustments and differ from the seasonally adjusted data.

Source: Japan Economic and Social Research Institute, Cabinet Office

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

VC China. China estimates an index of nonmanufacturing purchasing managers on the basis of a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The index fell from 58.0 in Mar to 55.2 in May but climbed to 56.7 in Jun, which is lower than 58.0 in Mar and 57.3 in Feb but higher than in any other of the months in 2012. In Jul 2012 the index fell marginally to 55.6 and then to 56.3 in Aug and 53.7 in Sep but rebounded to 55.5 in Oct and 55.6 in Nov 2012. Improvement continued with 56.1 in Dec 2012 and 56.2 in Jan 2013, declining marginally to 54.5 in Feb 2013 and 55.6 in Mar 2013. The index fell to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013, rebounding to 54.1 in Jul 2013. The index eased to 53.9 in Aug 2013. The index increased to 55.4 in Sep 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Sep 2013	55.4	53.4	56.7	50.6	60.1
Aug	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

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 climbing to 55.4 in Sep 2013.

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

Source: National Bureau of Statistics of China

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 and 51.1 in Sep 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 and 52.8 in Sep 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 and fell to 49.1 in Sep 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Sep 2013	51.1	52.9	52.8	48.5	49.1	50.8
Aug	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

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 and 51.1 in Sep 2013.

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

Source: National Bureau of Statistics of China

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