Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages, Recovery without Hiring, Youth and Middle-Aged Unemployment, United States International Trade, Global Financial and Economic Risk, World Economic Slowdown and Global Recession Risk: Part IV

 

Twenty Eight Million Unemployed or Underemployed, Stagnating Real Wages, Recovery without Hiring, Youth and Middle-Aged Unemployment, United States International Trade, Global Financial and Economic Risk, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

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

Executive Summary

I Twenty Eight Million Unemployed or Underemployed

IIA1 Summary of the Employment Situation

IIA2 Number of People in Job Stress

IIA3 Long-term and Cyclical Comparison of Employment

IIA4 Job Creation

IB Stagnating Real Wages

IC Recovery without Hiring

IC1 Hiring Collapse

IC2 Labor Underutilization

IC3 Ten Million Fewer Full-time Job

IC4 Youth and Middle-Age Unemployment

II United States International Trade

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2013/02/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 2.2 percent in IIQ2012, which annualizes to 9.1 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 1.5 percent, which annualizes at 6.1 percent and 7.7 percent relative to a year earlier. In IIQ2013, China grew at 1.9 percent, which annualizes at 7.8 percent and 7.5 percent relative to a year earlier. China grew at 2.2 percent in IIIQ2013, which annualizes at 9.1 percent and 7.8 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. In IIIQ2013, UK GDP increased 0.8 percent and 1.5 percent relative to a year earlier. Italy has experienced decline of GDP in eight consecutive quarters from IIIQ2011 to IIQ2013. Italy’s GDP fell 1.0 percent in IQ2012 and declined 1.7 percent relative to IQ2011. Italy’s GDP fell 0.6 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.3 percent and declined 2.6 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.8 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.6 percent and fell 2.4 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	1.4	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	2.2	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	1.5	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	1.9	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
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
China	2.2	7.8
UK	0.8	1.5

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

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

There is evidence of deceleration of growth of world trade and even contraction in recent data. Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.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 Sep 2013, Japan’s exports grew 11.5 percent in 12 months while imports increased 16.5 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 Sep 2013, China exports decreased 0.3 percent relative to a year earlier and imports increased 7.4 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		Sep 2013 11.5 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		Sep 2013 16.5 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		-0.3 Sep 7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb		7.4 Sep 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb
Euro Area	-5.4 12-M Aug	0.9 Jan-Aug	-7.2 12-M Aug	-4.0 Jan-Aug
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 Aug	1.7	-4.4	1.1	-9.8
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 geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for Sep 2013. The share of Asia in Japan’s trade is more than one-half for 53.3 percent of exports and 45.7 percent of imports. Within Asia, exports to China are 17.8 percent of total exports and imports from China 24.4 percent of total imports. While exports to China increased 11.4 percent in the 12 months ending in Sep 2013, imports from China increased 30.9 percent. The largest export market for Japan in Sep 2013 is the US with share of 18.6 percent of total exports, which is almost equal to that of China, and share of imports from the US of 8.3 percent in total imports. Western Europe has share of 10.9 percent in Japan’s exports and of 10.4 percent in imports. Rates of growth of exports of Japan in Sep 2013 are relatively high for several countries and regions with growth of 18.8 percent for exports to the US, 12.7 percent for exports to Mexico, 17.5 percent for exports to Brazil and 22.7 percent for exports to Australia. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Sep 2013 are positive for all trading partners. Imports from Asia increased 21.7 percent in the 12 months ending in Sep 2013 while imports from China increased 30.9 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

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

Sep 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,972,129	11.5	6,904,278	16.5
Asia	3,183,116	8.2	3,157,135	21.7
China	1,062,421	11.4	1,682,383	30.9
USA	1,109,374	18.8	576,257	13.8
Canada	68,143	3.9	88,208	14.6
Brazil	49,002	17.5	81,227	4.9
Mexico	82,218	12.7	33,372	18.0
Western Europe	650,039	11.1	719,934	25.3
Germany	172,124	19.5	214,574	38.7
France	55,054	25.5	106,984	34.6
UK	91,845	-9.9	56,436	29.5
Middle East	219,353	21.2	1,259,004	1.3
Australia	148,527	22.7	423,281	9.4

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 51.1 in Oct from 52.8 in Sep, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/b09c5d2286464631a1b040b8d7370dfc). New export orders registered 50.7 in Oct up from 49.0 in Aug, indicating marginal expansion. Chris Williamson, Chief Economist at Markit, finds that manufacturing output declined for the first time since Sep 2009 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b09c5d2286464631a1b040b8d7370dfc). 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: Sep Unemployment Rate SA 7.2% Blog calculation People in Job Stress Sep: 28.1 million NSA, 17.3% of Labor Force Establishment Survey: Nov Nonfarm Jobs +148,000; Private +126,000 jobs created  Aug 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.7 Blog 10/27/13
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 Aug 2013 4.482 million lower by 0.905 million than 5387 million in Aug 2005 Blog 10/27/13
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 Sep 6.29 to Oct 1.52 New Orders: From Sep 2.35 to Oct 7.75 Blog 10/20/13
Philadelphia Fed Business Outlook Index	General Index from Sep 22.3 to Oct 19.8 New Orders from Sep 21.2 to Oct 27.5 Blog 10/20/13
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	Sep New Orders SA ∆%: 3.7; ex transport ∆%: -0.1 Jan-Sep 13/Jan-Sep 12 New Orders NSA ∆%: 4.6; ex transport ∆% 3.2 Blog 10/27/13
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-Aug 2013/Jan-Aug 2012 NSA ∆%: Total 3.2; Durable Goods: 3.1; Nondurable Goods: 3.2 Blog 10/27/13
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	Aug SAAR month SA ∆%: 0.6 Aug 12-month NSA: 6.5 Jan-Aug 2013 ∆% 5.9 Blog 10/27/13
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	Aug SA ∆% 0.3; 12 month NSA ∆%: 8.5 Blog 10/27/13
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 Aug SA -$38,803 million versus Jul -$39,642 million Exports Aug SA ∆%: -0.1 Imports Aug SA ∆%: 0.0 Goods Exports Jan-Aug 2013/2012 NSA ∆%: 1.8 Goods Imports Jan-Aug 2013/2012 NSA ∆%: -1.3 Blog 10/27/13
Export and Import Prices	Sep 12-month NSA ∆%: Imports -1.0; Exports -1.6 Blog 10/27/13
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	Aug Net Foreign Purchases of Long-term US Securities: -$8.9 billion Major Holders of Treasury Securities: China $1268 billion; Japan $1149 billion; Total Foreign US Treasury Holdings Jul $5589 billion Blog 10/27/13
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:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

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

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

Manufacturers’ shipments of durable goods increased 0.2 percent in Sep 2013 and 0.8 percent in Aug 2013, falling 0.1 percent in Jul 2013. New orders increased 3.7 percent in Sep 2013 and 0.2 percent in Aug 2013 after decreasing 8.1 percent in Jul 2013, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov 2012 after increase of orders for nondefense aircraft of 2642.2 percent in Sep 2012 after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul 2012 and 32.5 percent in Jun 2012. Nondefense aircraft new orders increased 57.5 percent in Sep 2013 and 5.4 percent in Aug 2013, falling 58.9 percent in Jul 2013. New orders excluding transportation equipment fell 0.1 percent in Sep 2013, 0.4 percent in Aug 2013 and 0.5 percent in Jul 2013. Capital goods new orders, indicating investment increased 7.5 percent in Sep 2013 but fell 0.9 percent in Aug after decreasing 18.2 percent in Jul. New orders of nondefense capital goods increased 6.9 percent in Sep 2013, after falling 0.6 percent in Aug 2013 and 17.5 percent in Jul 2013. Capital goods orders excluding more volatile aircraft fell 1.1 percent in Sep 2013, increased 0.4 percent in Aug 2013 and fell 3.5 percent in Jul 2013.

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

	Sep 2013 ∆%	Aug 2013  ∆%	Jul 2013 ∆%
Total
S	0.2	0.8	-0.1
NO	3.7	0.2	-8.1
Excluding Transport
S	0.3	0.5	0.0
NO	-0.1	-0.4	-0.5
Excluding Defense
S	0.4	0.5	0.2
NO	3.2	0.6	-7.5
Machinery
S	0.4	0.6	-1.6
NO	-1.8	1.1	-0.6
Computers & Electronic Products
S	0.8	1.4	-1.1
NO	0.6	-5.4	-2.8
Computers
S	3.8	10.7	-15.7
NO	7.1	5.8	-12.8
Transport Equipment
S	0.0	1.6	-0.2
NO	12.3	1.7	-21.9
Motor Vehicles
S	0.1	1.8	0.4
NO	-0.3	2.1	0.4
Nondefense Aircraft
S	4.3	-5.0	1.1
NO	57.5	5.4	-58.9
Capital Goods
S	-0.3	1.3	-1.9
NO	7.5	-0.9	-18.2
Nondefense Capital Goods
S	0.4	0.2	-1.4
NO	6.9	-0.6	-17.5
Capital Goods ex Aircraft
S	-0.2	1.1	-1.4
NO	-1.1	0.4	-3.5

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

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

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

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

Source: US Census Bureau

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

Additional perspective on manufacturers’ shipments and new orders of durable goods is in Table VA-2. Values are cumulative millions of dollars in Jan-Sep 2013 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of all manufacturing industries in Jan-Sep 2013 total $2061.3 billion and new orders total $2039.5 billion, growing respectively by 3.0 percent and 4.6 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 1.0 percent and new orders increased 2.9 percent. Excluding defense, shipments grew 1.3 percent and new orders grew 3.2 percent. Important information not in Table VA-2 is the large share of nondurable goods: with shipments of $3 trillion in 2012, growing by 2.0 percent, and new orders of $3 trillion, growing by 2.0 percent, in part driven by higher prices for food and energy. Durable goods were lower in value in 2012, with shipments of $2.7 trillion, growing by 7.0 percent, and new orders of $2.6 trillion, growing by 4.1 percent. Capital goods have relatively high value of $743.9 billion for shipments, growing 2.0 percent, and new orders $780.8 billion, growing 4.5 percent. Excluding aircraft, capital goods shipments reached $589.1 billion, growing by 1.4 percent, and new orders $608.6 billion, growing 4.3 percent. Data weakened in 2013.

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

Jan-Sep 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/  2012
Total	2,061,315	3.0	2,039,534	4.6
Excluding Transport	1,453,139	1.3	1,414,122	3.2
Excluding Defense	1,953,668	3.2	1,945,924	5.8
Machinery	308,423	3.3	313,488	7.4
Computers & Electronic Products	245,507	-3.5	187,877	-4.5
Computers & Related Products	20,079	-8.2	20,187	-8.2
Transport Equipment	608,176	7.4	625,412	7.9
Motor Vehicles	402,741	9.4	402,076	9.7
Nondefense Aircraft	98,100	8.8	129,647	22.5
Capital Goods	743,879	2.0	780,828	4.5
Nondefense Capital Goods	656,737	2.2	705,147	7.1
Capital Goods ex Aircraft	589,127	1.4	608,643	4.3

Note: Transport: transportation

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

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

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

Source: Board of Governors of the Federal Reserve System

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

Manufacturing jobs increased 2,000 in Sep 2013 relative to Aug 2013, seasonally adjusted (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 15,000 from Sep 2012 to Sep 2013 or at the average monthly rate of 1,250. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. Industrial production increased 0.4 percent in Aug 2013 after changing 0.0 percent in Jul 2013 and increasing 0.1 percent in Jun 2013, as shown in Table II-1, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

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

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

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

Table I-3 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.7 percent in IIQ2013. Most of US national income is in the form of services. In Sep 2013, there were 135.600 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 114.829 million NSA in Sep 2013 accounted for 84.1 percent of total nonfarm jobs of 136,600 million, of which 12.035 million, or 10.5 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 95.841 million NSA in Sep 2013, or 70.2 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 10.8 percent in US national income in IIQ2013, as shown in Table I-3. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

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

	SAAR IQ2013	% Total	SAAR IIQ2013	% Total
National Income WCCA	14,354.5	100.0	14,471.3	100.0
Domestic Industries	14,117.1	98.3	14,224.4	98.3
Private Industries	12,432.9	86.6	12,544.3	86.7
Agriculture	226.4	1.6	220.3	1.5
Mining	247.6	1.7	252.6	1.7
Utilities	209.1	1.5	216.5	1.5
Construction	618.2	4.3	626.4	4.3
Manufacturing	1568.1	10.9	1561.1	10.8
Durable Goods	878.8	6.1	890.3	6.2
Nondurable Goods	689.2	4.8	670.1	4.6
Wholesale Trade	870.0	6.1	875.3	6.0
Retail Trade	971.4	6.8	994.5	6.9
Transportation & WH	434.0	3.0	437.7	3.0
Information	496.0	3.5	504.8	3.5
Finance, Insurance, RE	2418.9	16.8	2437.1	16.8
Professional, BS	1973.6	13.7	1998.1	13.8
Education, Health Care	1423.7	9.9	1439.4	9.9
Arts, Entertainment	569.7	4.0	575.0	4.0
Other Services	406.1	2.8	408.3	2.8
Government	1684.3	11.7	1680.1	11.6
Rest of the World	237.4	1.7	246.8	1.7

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

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

Sales and inventories of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-4 for Jan-Aug 2013 NSA and percentage changes from the prior month SA and for Jan-Aug 2013 relative to Jan-Aug 2012. These data are volatile, aggregating diverse categories of durable and nondurable goods without adjustment for price changes. Total sales for the US rose 3.2 percent in Jan-Aug 2013 relative to Jan-Aug 2012 and increased 0.6 percent in Aug 2013 relative to Jul 2013. The value of total sales is quite high at $3372.4 billion, approaching five trillion dollars in a year. Value in the breakdown is useful in identifying relative importance of individual categories. Sales of durable goods in Jan-Aug 2013 reached $1546.4 billion, over two trillion dollars for a year, increasing 0.6 percent in Aug 2013 relative to Jul 2013 and increasing 3.1 percent in Jan-Aug 2013 relative to Jan-Aug 2012. Sales of automotive products reached $267.6 billion in Jan-Aug 2013, decreasing 0.9 percent in the month and increasing 2.4 percent relative to a year earlier. There is strong performance of 9.1 percent in machinery but lower of 4.1 percent in electrical products. Sales of nondurable goods rose 3.2 percent over a year earlier. The influence of commodity prices returned as suggested by decrease of 2.5 percent in Aug 2013 and increase of 6.1 percent in Jan-Aug 2013 relative to a year earlier in farm products with increase of 1.5 percent in petroleum products in Aug 2013 and increase of 1.5 percent relative to a year earlier. The final three columns in Table VA-3 provide the value of inventories and percentage changes from the prior month and relative to the same month a year earlier. US total inventories of wholesalers increased 0.5 percent in Aug 2013 and increased 3.1 percent relative to a year earlier. Inventories of durable goods of $311.2 billion are 62.8 percent of total inventories of $495.8 billion and rose 5.2 percent relative to a year earlier. Automotive inventories increased 2.0 percent relative to a year earlier. Machinery inventories of $89.0 billion rose 7.3 percent relative to a year earlier. Inventories of nondurable goods of $184.6 billion are 37.2 percent of the total and decreased 0.3 percent relative to a year earlier. Inventories of farm products decreased 5.9 percent in Aug relative to Jul and decreased 35.5 percent relative to a year earlier. Inventories of petroleum products increased 2.8 percent in Aug and increased 6.5 percent relative to a year earlier.

Table VA-4, US, Sales and Inventories of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, Month ∆%

2013	Sales $ Billions Jan-Aug 2013 NSA	Sales Aug ∆% SA	Sales∆% Jan-Aug 2013 from Jan-Aug 2012  NSA	INV $ Billions Aug 2013 NSA	INV Aug ∆% SA	INV  ∆% Aug 2013 from Aug 2012 NSA
US Total	3372.4	0.6	3.2	495.8	0.5	3.1
Durable	1546.4	0.9	3.1	311.2	0.6	5.2
Automotive	267.6	-0.9	2.4	47.9	2.4	2.0
Prof. Equip.	312.3	2.0	1.8	38.0	0.4	6.0
Computer Equipment	181.0	3.1	1.1	16.6	-1.1	7.0
Electrical	242.3	-0.7	4.1	38.7	1.1	6.7
Machinery	273.3	2.7	9.1	89.0	0.1	7.3
Not Durable	1826.1	0.3	3.2	184.6	0.5	-0.3
Drugs	279.6	1.2	3.9	37.7	2.4	6.3
Apparel	96.1	-1.2	-0.5	23.9	0.2	4.9
Groceries	391.8	0.9	4.1	33.4	0.8	7.2
Farm Products	157.7	-2.5	6.1	13.5	-5.9	-35.5
Petroleum	495.7	1.5	1.5	22.4	2.8	6.5

Note: INV: inventories

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Chart VA-3 of the US Census Bureau provides wholesale trade NSA from Jan 1992 to Aug 2013. The jagged curve of wholesale trade sales without adjustment shows strong seasonal variations. There is a strong long-term trend interrupted by sharp drop during the global recession. Growth resumed along a stronger upward trend and the level in Dec 2012 surpasses the peak before the global recession with stability in the final segment.

Chart VA-3, US, Wholesale Trade Sales, Monthly, NSA, Jan 1992-Aug 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-4 of the US Census Bureau provides US wholesale trade sales with seasonal adjustment from Jan 1992 to Aug 2013. The elimination of seasonality permits enhanced comparison of adjacent sales. The final segment identifies another drop followed by increase to a higher level with stability.

Chart VA-4, US, Wholesale Trade Sales, Monthly, SA, Jan 1992-Aug 2013, Millions of Dollars

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventory/sales ratios of merchant wholesalers except manufacturers’ sales branches and offices are shown in Table VA-5. The total for the US has remained almost without change at 1.17 in Aug 2013, 1.17 in Jul 2013 and 1.21 in Aug 2012. Inventory/sales ratios are higher in durable goods industries but remain relatively stable with 1.58 in Aug 2013, 1.58 in Jul 2013 and 1.58 in Aug 2012. Computer equipment operates with low inventory/sales ratios of 0.67 in Aug 2013, 0.70 in Jul 2013 and 0.68 in Aug 2012 because of the capacity to fill orders on demand. As expected because of perishable nature, nondurable inventory/sales ratios are quite low with 0.83 in Aug 2013 and 0.83 in Jul 2013, which are close to 0.89 in Aug 2012. There are exceptions such as 1.87 in Aug 2013 in apparel that is close to 1.85 in Jul 2013 and higher than 1.75 in Aug 2012.

Table VA-5, Inventory/Sales Ratios of Merchant Wholesalers except Manufacturers’ Sales Branches and Offices, % SA

	Aug 2013	Jul 2013	Aug 2012
US Total	1.17	1.17	1.21
Durable	1.58	1.58	1.58
Automotive	1.51	1.47	1.45
Prof. Equip.	0.92	0.93	0.92
Comp. Equip.	0.67	0.70	0.68
Electrical	1.22	1.20	1.21
Machinery	2.51	2.58	2.70
Not Durable	0.83	0.83	0.89
Drugs	1.04	1.03	1.09
Apparel	1.87	1.85	1.75
Groceries	0.68	0.68	0.67
Farm Products	0.92	0.95	1.41
Petroleum	0.37	0.36	0.38

Source: US Census Bureau http://www.census.gov/wholesale/index.html

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars SA are provided in Chart VA-5 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a sharper slope than before the global recession with recent downward turn.

Chart VA-5, US, Inventories of Merchant Wholesalers, Millions of Dollars, NSA, Jan 1992-Aug 2013

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Inventories of merchant wholesalers except manufacturers’ sales branches in millions of dollars SA are provided in Chart VA-6 of the US Census Bureau. There is evident acceleration in inventory building in the final segment at a sharper slope than before the global recession with recent downward turn.

Chart VA-6, US, Inventories of Merchant Wholesalers, Millions of Dollars, SA, Jan 1992-Aug 2013

Source: US Census Bureau

http://www.census.gov/wholesale/index.html

Chart VA-7 provides the chart of the US Census Bureau with inventories/sales ratios of merchant wholesalers from 2004 to 2013 seasonally adjusted. Inventory/sales ratios rise during contractions as merchants are caught with increasing inventories because of weak sales and fall during expansions as merchants attempt to fill sales with existing stocks. There is an increase in the inventory/sales ratio in 2012 but not yet significantly higher with declining trend in the final segment followed by an increase and new decline.

Chart VA-7, US, Monthly Inventories/Sales Ratios of Merchant Wholesalers, SA, 2004-2013

Source: US Census Bureau

http://www2.census.gov/wholesale/img/mwtsbrf.jpg

Construction spending at seasonally adjusted annualized rate (SAAR) reached $915.1 billion in Aug 2013, which was higher by 0.6 percent than in the prior month of Jul 2013, as shown in Table VA-6. Residential investment, with $346.5 billion accounting for 37.9 percent of total value of construction, increased 1.3 percent in Aug and nonresidential investment, with $568.6 billion accounting for 62.1 percent of the total, increased 0.2 percent. Public construction increased 0.4 percent while private construction increased 0.7 percent. Data in Table VA-6 show that nonresidential construction at $568.6 billion is much higher in value than residential construction at $346.5 billion while total private construction at $640.5 billion is much higher than public construction at $274.5 billion, all in SAAR. Residential and nonresidential construction contributed positively to growth of GDP in the US in all quarters in 2012. Nonresidential investment deducted 0.57 percentage points from GDP growth in IQ2013 while residential construction added 0.34 percentage points. Nonresidential construction added 0.56 percentage points to GDP growth in IIQ2013 with residential construction adding 0.40 percentage points. In 2012, residential construction added 0.32 percentage points to GDP growth and added 0.01 percentage points in 2011. Nonresidential construction added 0.85 percentage points to GDP growth in 2012 and 0.84 percentage points in 2011 (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states_29.html).

Table VA-6, Construction Put in Place in the United States Seasonally Adjusted Annual Rate Million Dollars and Month and 12-Month ∆%  

	Aug 2013   SAAR  $ Millions	Month ∆%	12-Month ∆%
Total	915,052	0.6	7.1
Residential	346,459	1.3	18.3
Nonresidential	568,593	0.2	1.3
Total Private	640,508	0.7	11.5
Private Residential	340,214	1.2	18.7
New Single Family	171,779	1.6	28.2
New Multi-Family	32,241	3.2	37.5
Private Nonresidential	300,294	0.1	4.3
Total Public	274,544	0.4	-1.8
Public Residential	6,244	4.3	0.5
Public Nonresidential	268,299	0.3	-1.9

SAAR: seasonally adjusted annual rate; B: billions

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Further information on construction spending is provided in Table VA-7. The original monthly estimates not-seasonally adjusted (NSA) and their 12-month rates of change are provided in the first two columns while the SAARs and their monthly changes are provided in the final two columns. There has been improvement in construction in the US. There are only four declines in the monthly rate from Dec 2011 to Aug 2013. Growth in 12 months fell from 12.0 percent in Nov 2012 to 6.5 percent in Aug 2013.

Table VA-7, US, Value and Percentage Change in Value of Construction Put in Place, Dollars Millions and ∆%

	Value NSA Month $ Millions	12-Month ∆% NSA	Value SAAR $ Millions	Month ∆% SA*
Aug 2013	87,009	6.5	915,052	0.6
Jul	83,731	6.1	909,412	1.4
Jun	81,722	4.9	897,113	0.1
May	77,327	7.0	896,134	2.0
Apr	70,535	6.5	878,396	1.1
Mar	64,036	5.3	869,164	-0.1
Feb	58,395	4.3	869,909	0.8
Jan	59,143	6.2	863,136	-2.3
Dec 2012	68,136	9.5	883,550	0.1
Nov	77091	12.0	882,685	2.3
Oct	81,520	9.8	863,065	-1.2
Sep	80,812	7.2	873,259	2.2
Aug	81,712	6.0	854,048	-0.3
Jul	78,897	9.4	856,348	0.1
Jun	77,876	6.9	855,779	1.3
May	72,240	9.8	844,709	1.4
Apr	66,223	7.8	833,243	0.8
Mar	60,796	7.5	826,641	0.4
Feb	55,981	10.8	823,331	0.7
Jan	55,671	9.3	817,616	0.0
Dec 2011	62,242	3.4	817,569	1.0

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The sharp contraction of the value of construction in the US is revealed by Table VA-8. Construction spending in Jan-Aug 2013, not seasonally adjusted, reached $581.9 billion, which is higher by 5.9 percent than $549.4 billion in the same period in 2012. The depth of the contraction is shown by the decline of construction spending from $794.0 billion in Jan-Aug 2006 to only $581.9 billion in the same period in 2013, or decline by minus 26.7 percent. The comparable decline from Jan-Aug 2005 to Jan-Aug 2013 is minus 21.4 percent. Construction spending in Jan-Aug 2013 decreased by 1.6 percent relative to the same period in 2003. Construction spending is lower by 4.2 percent in Jan-Aug 2013 relative to the same period in 2009. Construction has been weaker than the economy as a whole.

Table VA-8, US, Value of Construction Put in Place in the United States, Not Seasonally Adjusted, $ Millions and ∆%

Jan-Aug 2013 $ MM	581,899
Jan-Aug 2012	549,395
∆% to 2013	5.9
Jan-Aug 2011 $ MM	500,139
∆% to 2013	16.3
Jan-Aug 2010 $ MM	527,344
∆% to 2013	10.3
Jan-Aug 2009 $MM	607,520
∆% to 2013	-4.2
Jan-Aug 2006 $ MM	794,039
∆% to 2013	-26.7
Jan-Aug 2005 $ MM	739,877
∆% to 2013	-21.4
Jan-Aug 2003 $ MM	591,213
∆% to 2013	-1.6

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-8, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-8 of the US Census Bureau provides value of construction spending in the US not seasonally adjusted from 2002 to 2013. There are wide oscillations requiring seasonal adjustment to compare adjacent data. There was sharp decline during the global recession followed in recent periods by a stationary series that may be moving upward again.

Chart VA-8, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Monthly construction spending in the US in Jan-Jul not seasonally adjusted is shown in Table VA-9 for the years between 2002 and 2013. The value of $87.0 billion in Aug 2013 is higher by 6.5 percent than $81.7 billion in Aug 2012. Construction fell by 21.2 percent from the peak of $110.4 billion in Aug 2006 to $87.0 billion in Aug 2013. The data are not adjusted for inflation or changes in quality.

Table VA-9, US, Value of Construction Spending Not Seasonally Adjusted, Millions of Dollars

Year	Mar	Apr	May	Jun	Jul	Aug
2002	63,782	69,504	73,384	77,182	78,863	79,460
2003	64,506	69,638	74,473	80,377	82,971	85,191
2004	73,238	78,354	83,736	89,932	93,614	96,164
2005	81,345	85,485	92,959	99,632	103,158	106,706
2006	92,855	95,324	102,495	107,607	108,423	110,434
2007	88,905	93,375	100,534	105,399	107,090	110,430
2008	82,779	87,743	92,781	96,338	98,483	99,786
2009	71,624	75,187	76,808	81,429	83,379	84,368
2010	60,228	66,422	68,906	74,035	73,077	75,834
2011	56,536	61,454	65,814	72,850	72,113	77,104
2012	60,796	66,223	72,240	77,876	78,897	81,712
2013	64,036	70,535	77,327	81,722	83,731	87,009

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-9 of the US Census Bureau shows SAARs of construction spending for the US since 1993. Construction spending surged in nearly vertical slope after the stimulus of 2003 combining near zero interest rates and subsequent slow adjustment in 17 doses of increases by 25 basis points between Jun 2004 and Jun 2006 together with other housing subsidies. Construction spending collapsed after subprime mortgages defaulted with the fed funds rate increasing from 1.00 percent in Jun 2004 to 5.25 percent in Jun 2006. Subprime mortgages were programmed for refinancing in two years after increases in homeowner equity in the assumption that fed funds rates would remain low forever or increase in small increments (Gorton 2009EFM see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Price declines of houses or even uncertainty prevented refinancing of subprime mortgages that defaulted, causing the financial crisis that eventually triggered the global recession. Chart VA-10 shows a trend of increase in the final segment but it is difficult to assess if it will be sustained.

Chart VA-9, US, Construction Expenditures SAAR 1993-2013

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr050.html

Construction spending at SAARs in the four months May-Aug is shown in Table VA-10 for the years between 2002 and 2013. There is a peak in 2005 to 2007 with subsequent collapse of SAARs and rebound in 2012-2013.

Table VA-10, US, Value of Construction Spending SAAR Millions of Dollars

Year	May	Jun	Jul	Aug
2002	850,935	846,777	847,129	839,008
2003	866,814	880,865	891,264	901,839
2004	974,158	983,072	1,006,119	1,013,724
2005	1,078,586	1,089,505	1,109,691	1,119,782
2006	1,180,059	1,172,932	1,165,093	1,158,193
2007	1,168,195	1,166,892	1,154,018	1,160,593
2008	1,091,008	1,074,637	1,066,919	1,057,459
2009	911,241	901,987	899,601	889,643
2010	816,318	816,302	788,524	791,653
2011	773,764	797,080	789,297	801,196
2012	844,709	855,779	856,348	854,048
2013	896,134	897,113	909,412	915,052

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-10 of the US Census Bureau provides SAARs of value of construction from 2002 to 2013. There is clear acceleration after 2003 when fed funds rates were fixed at 1.0 percent from Jun 2003 until Jun 2004. Construction peaked in 2005-2006, stabilizing in 2007 at a lower level and then collapsed in a nearly vertical drop until 2011 with increases into 2012 and marginal drop in Jan 2013 followed by increase in Feb 2013 and decline in Mar 2013 followed by continuing increase in Apr-May 2013. Construction stabilized in Jun 2013 and increased in Jul-Aug 2013.

Chart VA-10, US, Construction Expenditures SAAR 2002-2013

Source: US Census Bureau

http://www.census.gov/construction/c30/c30index.html

Chart VA-11 of the US Census Bureau provides monthly residential construction in the US not seasonally adjusted from 2002 to 2013. There was steep increase until 2006 followed by sharp contraction. The series stabilized at the bottom and increased in the final segment.

Chart VA-11, US, Residential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

Chart VA-12 of the US Census Bureau provides monthly nonresidential construction in the US not seasonally adjusted. There is similar acceleration until 2006 followed by milder contraction than for residential construction. The final segment is stationary.

Chart VA-12, US, Nonresidential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

http://www.census.gov/construction/c30/c30index.html

Annual available data for the value of construction put in place in the US between 1993 and 2012 are provided in Table VA-17. Data from 1993 to 2001 are available for public and private construction with breakdown in residential and nonresidential only for private construction. Data beginning in 2002 provide aggregate residential and nonresidential values. Total construction value put in place in the US increased 76.5 percent between 1993 and 2012 but most of the growth, 65.3 percent, was concentrated in 1993 to 2000 with increase of 6.8 percent between 2000 and 2012. Total value of construction increased 1.1 percent between 2002 and 2012 with value of nonresidential construction increasing 27.9 percent while value of residential construction fell 28.7 percent. Value of total construction fell 22.4 percent between 2005 and 2012, with value of residential construction declining 53.6 percent while value of nonresidential construction rose 17.2 percent. Value of total construction fell 26.6 percent between 2006 and 2012, with value of nonresidential construction increasing 4.2 percent while value of residential construction fell 53.8 percent. In 2002, nonresidential construction had a share of 52.6 percent in total construction while the share of residential construction was 47.4 percent. In 2012, the share of nonresidential construction in total value rose to 66.6 percent while that of residential construction fell to 33.4 percent.

Table VA-11, Annual Value of Construction Put in Place 1993-2012, Millions of Dollars and ∆% 

	Total	Private Nonresidential	Private Residential
1993	485,548	150,006	208,180
1994	531,892	160,438	241,033
1995	548,666	180,534	228,121
1996	599,693	195,523	257,495
1997	631,853	213,720	264,696
1998	688,515	237,394	296,343
1999	744,551	249,167	326,302
2000	802,756	275,293	346,138
2001	840,249	273,922	364,414
	Total	Total Nonresidential	Total Residential
2002	847,874	445,914	401,960
2003	891,497	440,246	451,251
2004	991,356	452,948	538,408
2005	1,104,136	486,629	617,507
2006	1,167,222	547,408	619,814
2007	1,152,351	651,883	500,468
2008	1,067,564	709,818	357,746
2009	903,201	649,273	253,928
2010	804,561	555,449	249,112
2011	788,014	535,357	252,657
2012	856,953	570,429	286,524
∆% 1993-2012	76.5
∆% 1993-2000	65.3
∆% 2000-2012	6.8
∆% 2002-2012	1.1	27.9	-28.7
∆% 2005-2012	-22.4	17.2	-53.6
∆% 2006-2012	-26.6	4.2	-53.8

Source: US Census Bureau http://www.census.gov/construction/c30/c30index.html

The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, provides the FHFA House Price Index (HPI) that “is calculated using home sales price information from Fannie Mae and Freddie Mac-acquired mortgages” (http://fhfa.gov/webfiles/24216/q22012hpi.pdf 1). Table IIA2-1 provides the FHFA HPI for purchases only, which shows behavior similar to that of the Case-Shiller index but with lower magnitudes. House prices catapulted from 2000 to 2003, 2005 and 2006. From IIQ2000 to IIQ2006, the index for the US as a whole rose 59.5 percent, with 75.1 percent for New England, 79.1 percent for Middle Atlantic, 73.7 percent for South Atlantic but only by 31.6 percent for East South Central. Prices fell relative to 2013 for all years from 2005 and from 2006 with exception of 0.7 percent for Middle Atlantic from 2005. Prices for the US increased 7.3 percent in IIQ2013 relative to IIQ2012 and 11.0 percent from IIQ2011 to IIQ2013. From IIQ2000 to IIQ2013, prices rose for the US and the four regions in Table IIA2-1.

Table IIA2-1, US, FHFA House Price Index Purchases Only NSA ∆%

	United States	New England	Middle Atlantic	South Atlantic	East South Central
IIQ2000 to IIQ2003	22.9	40.7	34.0	24.3	9.9
1IQ2000 to 1IQ2005	48.7	71.9	66.4	57.4	21.9
IIQ2000 to IIQ2006	59.5	75.1	79.1	73.7	31.6
IIQ2005 t0 IIQ2013	-3.4	-9.9	0.7	-7.7	8.6
IIQ2006 to IIQ2013	-10.0	-11.6	-6.5	-16.4	0.6
IIQ2007 to IIQ2013	-11.1	-10.2	-8.1	-18.0	-3.9
IIQ2011 to IIQ2013	11.0	3.3	2.4	12.4	7.3
IIQ2012 to IIQ2013	7.3	3.9	2.6	7.5	3.5
IIQ2000 to IIQ2013	43.6	54.8	67.5	45.3	32.4

Source: Federal Housing Finance Agency http://fhfa.gov/Default.aspx?Page=14

Data of the FHFA HPI for the remaining US regions are in Table IIA2-2. Behavior is not very different from that in Table IIA2-1 with the exception of East North Central. House prices in the Pacific region doubled between 2000 and 2006. Although prices of houses declined sharply from 2005 and 2006 to 2013 with exception of South Central, there was still appreciation relative to 2000.

Table IIA2-2, US, FHFA House Price Index Purchases Only NSA ∆%

	West South Central	West North Central	East North Central	Mountain	Pacific
IIQ2000 to IIQ2003	12.0	18.1	14.6	17.4	40.7
IIQ2000 to IIQ2005	22.4	31.8	25.2	50.7	104.7
IIQ2000 to IIQ2006	31.2	37.1	27.9	69.9	125.0
IIQ2005 to IIQ2013	22.8	1.6	-9.2	-4.3	-19.0
IIQ2006 to IIQ2013	14.5	-2.3	-11.2	-15.1	-26.4
IIQ2007 to IIQ2013	8.7	-3.9	-10.4	-17.7	-24.3
IIQ2011 to IIQ2013	10.1	8.3	8.1	21.1	21.1
IIQ2012 to IIQ2013	5.9	4.6	5.0	12.5	16.3
IIQ2000 to  IIQ2013	50.3	33.9	13.6	44.2	65.7

Source: Federal Housing Finance Agency http://fhfa.gov/Default.aspx?Page=14

Chart IIA2-1 of the Federal Housing Finance Agency shows the Housing Price Index four-quarter price change from IIQ2003 to IIQ2013. House prices appreciated sharply from 1998 to 2005 and then fell rapidly. Recovery began already after IIQ2008 but there was another decline after IIIQ2010. The rate of decline improved in the second half of 2011 and into 2012 with movement into positive territory in IIQ2012, IIIQ2012, IVQ2012, IQ2013 and IIQ2013.

Chart IIA2-1, US, Federal Housing Finance Agency House Price Index Four Quarter Price Change

Source: Federal Housing Finance Agency

http://fhfa.gov/Default.aspx?Page=14

Monthly and 12-month percentage changes of the FHFA House Price Index are in Table IIA2-3. Percentage monthly increases of the FHFA index were positive from Apr to Jul 2011 with exception of declines in May and Aug 2011 while 12 months percentage changes improved steadily from more or equal to minus 6 percent in Mar to May 2011 to minus 4.4 percent in Jun 2011. The FHFA house price index fell 0.7 percent in Oct 2011 and fell 3.1 percent in the 12 months ending in Oct. There was significant recovery in Nov 2012 with increase in the house price index of 0.5 percent and reduction of the 12-month rate of decline to 2.2 percent. The house price index rose 0.4 percent in Dec 2011 and the 12-month percentage change improved to minus 1.2 percent. There was further improvement with revised decline of 0.3 percent in Jan 2012 and decline of the 12-month percentage change to minus 1.0 percent. The index improved to positive change of 0.5 percent in Feb 2012 and increase of 0.4 percent in the 12 months ending in Feb 2012. There was strong improvement in Mar 2012 with gain in prices of 0.9 percent and 2.3 percent in 12 months. The house price index of FHFA increased 0.8 percent in Apr 2012 and 3.0 percent in 12 months and improvement continued with increase of 0.6 percent in May 2012 and 3.8 percent in the 12 months ending in May 2012. Improvement consolidated with increase of 0.5 percent in Jun 2012 and 3.9 percent in 12 months. In Jul 2012, the house price index increased 0.1 percent and 3.8 percent in 12 months. Strong increase of 0.5 percent in Aug 2012 pulled the 12-month change to 4.5 percent. There was another increase of 0.6 percent in Oct and 5.6 percent in 12 months followed by increase of 0.5 percent in Nov 2012 and 5.6 percent in 12 months. The FHFA house price index increased 0.6 percent in Jan 2013 and 6.6 percent in 12 months. Improvement continued with increase of 0.5 percent in Apr 2013 and 7.3 percent in 12 months. In May 2013, the house price indexed increased 0.9 percent and 7.6 percent in 12 months. The FHFA house price index increased 0.7 percent in Jun 2013 and 7.9 percent in 12 months. In Jul 2013, the FHFA house price index increased 0.8 percent and 8.7 percent in 12 months. Improvement continued with increase of 0.3 percent in Aug 2013 and 8.5 percent in 12 months.

Table IIA2-3, US, FHFA House Price Index Purchases Only SA. Month and NSA 12-Month ∆%

	Month ∆% SA	12 Month ∆% NSA
Aug 2013	0.3	8.5
Jul	0.8	8.7
Jun	0.7	7.9
May	0.9	7.6
Apr	0.5	7.3
Mar	1.4	7.6
Feb	0.9	7.0
Jan	0.6	6.6
Dec 2012	0.5	5.7
Nov	0.5	5.6
Oct	0.6	5.6
Sep	0.3	4.3
Aug	0.5	4.5
Jul	0.1	3.8
Jun	0.5	3.9
May	0.6	3.8
Apr	0.8	3.0
Mar	0.9	2.3
Feb	0.5	0.4
Jan	-0.3	-1.0
Dec 2011	0.4	-1.2
Nov 2011	0.5	-2.2
Oct 2011	-0.7	-3.1
Sep 2011	0.4	-2.4
Aug 2011	-0.2	-3.7
Jul 2011	0.3	-3.5
Jun 2011	0.4	-4.4
May 2011	-0.1	-5.9
Apr 2011	0.2	-5.8
Mar 2011	-0.9	-6.0
Feb 2011	-1.0	-5.1
Jan 2011	-0.5	-4.6
Dec 2010		-3.9
Dec 2009		-2.0
Dec 2008		-9.9
Dec 2007		-3.1
Dec 2006		2.5
Dec 2005		9.8
Dec 2004		10.2
Dec 2003		8.0
Dec 2002		7.8
Dec 2001		6.7
Dec 2000		7.2
Dec 1999		6.2
Dec 1998		5.9
Dec 1997		3.4
Dec 1996		2.8
Dec 1995		3.0
Dec 1994		2.6
Dec 1993		3.1
Dec 1992		2.4

Source: Federal Housing Finance Agency http://fhfa.gov/Default.aspx?Page=14

The bottom part of Table IIA2-3 provides 12-month percentage changes of the FHFA house price index since 1992 when data become available for 1991. Table IIA2-4 provides percentage changes and average rates of percent change per year for various periods. Between 1992 and 2012, the FHFA house price index increased 84.6 percent at the yearly average rate of 3.1 percent. In the period 1992-2000, the FHFA house price index increased 39.4 percent at the average yearly rate of 4.2 percent. The rate of price increase accelerated to 7.5 percent in the period 2000-2003 and to 8.5 percent in 2000-2005 and 7.5 percent in 2000-2006. At the margin, the average rate jumped to 10.0 percent in 2003-2005 and 7.5 percent in 2003-2006. House prices measured by the FHFA house price index declined 14.2 percent between 2006 and 2012 and 12.0 percent between 2005 and 2012.

Table IIA2-4, US, FHFA House Price Index, Percentage Change and Average Rate of Percentage Change per Year, Selected Dates 1992-2012

Dec	∆%	Average ∆% per Year
1992-2012	84.6	3.1
1992-2000	39.4	4.2
2000-2003	24.3	7.5
2000-2005	50.4	8.5
2003-2005	21.0	10.0
2005-2012	-12.0	NA
2000-2006	54.2	7.5
2003-2006	24.1	7.5
2006-2012	-14.2	NA

Source: Source: Federal Housing Finance Agency http://fhfa.gov/Default.aspx?Page=14

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

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

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

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

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

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

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

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

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

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

Source: Policy Board, Bank of Japan

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

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index 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	Sep NSA ∆% 0.3; Sep 12 months NSA ∆% 1.1 Blog 10/27/13
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	Aug month SA ∆% 0.3 12-month NSA ∆% 0.9 Blog 10/27/13
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 Sep 12 months ∆%: 11.5 Imports Sep 12 months ∆% 16.5 Blog 10/27/13

Links to blog comments in Table JPY:

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

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

9/15/13 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 indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 0.9 percent in IIQ2013 (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html), industry increased 1.5 percent, the tertiary sector increased 0.7 percent, government decreased 0.5 percent and construction increased 4.7 percent. The report shows that the all industry index increased 1.0 percent in IIQ2013. Industry added 0.25 percentage points to growth of the all industry index and the tertiary index added 0.47 percentage points. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.3 percent (Table VB-1 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html), when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 2.0 percent in IQ2011 and 0.9 percent in IIQ2011. GDP was flat in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Tables VB-1 and VB-4 http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2013
IIQ2013	4.7	1.5	0.7	-0.5	1.0	0.9
Cont to IIQ % Change	0.22	0.25	0.47	-0.06
IQ2013	-0.5	0.6	0.2	0.1	0.0	1.0
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	0.3
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.9
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.3
IQ	2.0	1.6	0.0	0.2	0.1	1.2

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

Source: http://www.meti.go.jp/english/statistics/index.html http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html

There are more details in Table VB-2. In Aug 2013, the all industry activity index increased 0.3 percent with industry decreasing 0.9 percent and services increasing 0.7 percent while construction changed 0.0 percent and government decreased 0.4 percent. Industry deducted 0.15 percentage points and services added 0.46 percentage points while construction added 0.00 percentage points and government deducted 0.05 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.4 percent in Mar 2013, 0.1 percent in Apr 2013 and 1.1 percent in May 2013. After decline of 0.8 percent in Jun 2013, the all industry index rose 0.4 percent in Jul 2013 and 0.3 percent in Aug 2013. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.1 percent in Mar 2013, 0.9 percent in Apr 2013 and 1.9 percent in May 2013. After decline of 3.0 percent in Jun 2003, industry grew 3.4 percent in Jul 2013 and declined 0.9 percent in Aug 2013. The highest risk to Japan is if weakening world growth would affect Japanese exports.

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

	CON	IND	TERT	GOVT	ALL IND
Aug 2013	0.0	-0.9	0.7	-0.4	0.3
Cont to Aug % Change	0.00	-0.15	0.46	-0.05
Jul	0.7	3.4	-0.4	-0.5	0.4
Jun	3.9	-3.0	-0.7	0.1	-0.8
May	5.2	1.9	1.2	-0.1	1.1
Apr	-0.1	0.9	-0.5	0.2	0.1
Mar	0.6	0.1	0.2	-0.9	0.4
Feb	-1.3	0.9	1.3	-0.2	0.4
Jan	-1.4	-0.7	-0.8	0.6	-0.7
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index increased 0.5 percent in IIQ2013 relative to a year earlier and GDP increased 1.2 percent relative to a year earlier (Table VB-4http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html). Industry decreased 3.1 percent relative to a year earlier while the tertiary sector increased 1.2 percent, adding combined 0.26 percentage points to growth of the all industry activity index of 0.5 percent while construction added 0.36 percentage points and government deducted 0.04 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 1.2 percent in 2012 and real GDP increased 2.0 percent. Industry increased 0.1 percent, adding 0.02 percentage points, while the tertiary sector increased 1.4 percent, adding 0.93 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2012	3.2	0.1	1.4	0.3	1.2	2.0
Cont to 2012 % Change	0.14	0.02	0.93	0.04
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.6
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2013
IIQ	8.8	-3.1	1.2	-0.3	0.5	1.2
Cont to IIQ % Change	0.36	-0.55	0.81	-0.04
IQ2013	5.4	-7.8	-0.2	0.7	-1.2	0.3
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	0.4
IIIQ	3.1	-4.2	0.5	0.4	-0.2	0.3
IIQ	4.9	5.5	2.1	0.6	2.6	3.8
IQ	-1.1	6.2	2.4	0.3	2.6	3.4

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

Source: http://www.meti.go.jp/english/statistics/index.html http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million_1166.html

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index increased 0.9 percent in Aug 2013 relative to Aug 2012. Industry decreased 0.5 percent in Aug 2013 relative to a year earlier, subtracting 0.08 percentage points to growth of the all industry activity index. The tertiary sector increased 0.8 percent, adding 0.54 percentage points. Construction added 0.59 percentage points to the index and government deducted 0.07 percentage points.

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

	CON	IND	TERT	GOVT	ALL IND
Aug 2013	13.0	-0.5	0.8	-0.6	0.9
Cont to Jul % Change	0.59	-0.08	0.54	-0.07
Jul	13.2	1.8	1.3	-1.5	1.5
Jun	11.2	-4.6	0.5	0.3	0.0
May	8.9	-1.0	1.7	-0.4	1.2
Apr	6.3	-3.4	1.3	-0.9	0.4
Mar	5.4	-7.1	0.7	0.1	-0.7
Feb	4.3	-10.1	-1.6	1.9	-2.4
Jan	6.8	-6.1	0.1	-0.1	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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

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

The structure of exports and imports of Japan is in Table VB-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 30.8 percent of Japan’s imports and decreased 1.0 percent in the 12 months ending in Sep 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 12.5 percent of Japan’s exports with increase of 7.2 percent in the 12 months ending in Sep 2013. Machinery contributes 18.5 percent of Japan’s exports with increase of 7.7 percent in the 12 months ending in Sep 2013. Electrical machinery contributes 18.0 percent of Japan’s exports with increase of 5.3 percent in the 12 months ending in Sep 2013. Exports of transport equipment with share of 24.1 percent in total exports increased 19.1 percent in the 12 months ending in Sep 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-5 shows increase of the major categories of motor vehicles of 29.9 percent: cars increased 34.0 percent with increase of 11.8 percent in the minor category of buses and trucks, increase of 6.5 percent for parts of motor vehicles, increase of 20.7 percent for motorcycles and decrease of 18.1 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

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

Sep 2013	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	5,972,129	100.0	11.5	11.5
Foodstuffs	35,957	0.7	35.3	0.2
Raw Materials	92,784	0.6	20.6	0.1
Mineral Fuels	178,529	3.0	72.8	1.4
Chemicals	610,219	10.2	15.9	1.6
Manufactured Goods	744,260	12.5	7.2	0.9
Machinery	1,107,592	18.5	7.7	1.5
Electrical Machinery	1,075,009	18.0	5.3	1.0
Transport Equipment	1,436,947	24.1	19.1	4.3
Motor Vehicles	956,869	16.0	29.9	4.1
Cars	818,709	13.7	34.0	3.9
Buses & Trucks	123,570	2.1	11.8	0.2
Parts of Motor Vehicles	296,725	5.0	6.5	0.3
Motorcycles	20,970	0.4	20.7	0.1
Ships	107,157	1.8	-18.1	-0.4
Other	691,873	11.6	3.9	0.5
Imports	6,904,278	100.0	16.5	16.5
Foodstuffs	497,866	7.2	10.9	0.8
Raw Materials	454,067	6.6	35.5	2.0
Mineral Fuels	2,127,218	30.8	-1.0	-0.4
Chemicals	549,250	8.0	12.0	1.0
Manufactured Goods	535,104	7.8	22.2	1.6
Machinery	509,199	7.4	37.9	2.4
Electrical Machinery	1,033,975	15.0	46.6	5.5
Transport Equipment	248,510	3.6	27.1	0.9
Other	949,088	13.7	19.4	2.6

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

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

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

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

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for Sep 2013. The share of Asia in Japan’s trade is more than one-half for 53.3 percent of exports and 45.7 percent of imports. Within Asia, exports to China are 17.8 percent of total exports and imports from China 24.4 percent of total imports. While exports to China increased 11.4 percent in the 12 months ending in Sep 2013, imports from China increased 30.9 percent. The largest export market for Japan in Sep 2013 is the US with share of 18.6 percent of total exports, which is almost equal to that of China, and share of imports from the US of 8.3 percent in total imports. Western Europe has share of 10.9 percent in Japan’s exports and of 10.4 percent in imports. Rates of growth of exports of Japan in Sep 2013 are relatively high for several countries and regions with growth of 18.8 percent for exports to the US, 12.7 percent for exports to Mexico, 17.5 percent for exports to Brazil and 22.7 percent for exports to Australia. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Sep 2013 are positive for all trading partners. Imports from Asia increased 21.7 percent in the 12 months ending in Sep 2013 while imports from China increased 30.9 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

Table VB-7, Japan, Value and 12-Month Percentage Changes of Exports and Imports by Regions and Countries, ∆% and Millions of Yen

Sep 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,972,129	11.5	6,904,278	16.5
Asia	3,183,116	8.2	3,157,135	21.7
China	1,062,421	11.4	1,682,383	30.9
USA	1,109,374	18.8	576,257	13.8
Canada	68,143	3.9	88,208	14.6
Brazil	49,002	17.5	81,227	4.9
Mexico	82,218	12.7	33,372	18.0
Western Europe	650,039	11.1	719,934	25.3
Germany	172,124	19.5	214,574	38.7
France	55,054	25.5	106,984	34.6
UK	91,845	-9.9	56,436	29.5
Middle East	219,353	21.2	1,259,004	1.3
Australia	148,527	22.7	423,281	9.4

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

Table VB-8 provides the trade balance of Japan by countries and regions in Sep 2013. The significantly large deficits of JPY 1,039,651 million with the Middle East, JPY 619,962 million with China, JPY 274,574 million with Australia and JPY 69,895 million with Western Europe do not compensate surpluses of JPY 25,981 million with Asia and JPY 533,117 million with the US

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

Sep 2013	Millions of Yen
Total	-932,149
Asia	25,981
China	-619,962
USA	533,117
Canada	-20,065
Brazil	-32,225
Mexico	48,846
Western Europe	-69,895
Germany	-42,450
France	-51,930
UK	35,409
Middle East	-1,039,651
Australia	-274,754

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-9 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008, IIIQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.4 percent in IIIQ2011. Net trade added 1.6 percentage points to GDP growth in IQ2013 and 0.7 percentage points in IIQ2013. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-9, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart VB-1 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart VB-1 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 VB-1, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart VB-1A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 1.0 percent to 98.9 in Sep 2013 relative to Jun 2009.

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

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart VB-2 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 VB-2, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart VB-2A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 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 VB-2A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

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

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

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

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

Chart VB-3 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 VB-3, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2013

Source: Bank of Japan

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

The producer price index of the US from 1970 to 2013 in Chart VB-4 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 VB-4, 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 VB-11. 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 VB-11, 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 VB-12 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 VB-12, 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/statistics/pi/cgpi_release/cgpi1309.pdf

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

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

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. There was slowing of the general index in Apr 2012 after the increase in Jan-Mar 2012 and further decline to 55.2 in May 2012 but increase to 56.7 in Jun 2012 with marginal decline to 55.6 in Jul 2012 and 56.3 in Aug 2012 and sharper drop to 53.7 in Sep 2012, rebounding to 55.5 in Oct 2012, 55.6 in Nov 2012, 56.1 in Dec 2012 and 55.6 in Mar 2013. The index fell again to 54.5 in Apr 2013, 54.3 in May 2013 and 53.9 in Jun 2013, rebounding to 54.1 in Jul 2013. The index stabilized at 53.9 in Aug 2013 climbing to 55.4 in Sep 2013.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr and declined to 50.1 in Jul and to the contraction zone at 49.2 in Aug and 49.8 in Sep, climbing above 50.0 to 50.2 in Oct, 50.6 in Nov-Dec 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013. The index increased to 50.8 in May 2013, falling to 50.1 in Jun 2013 and rebounding to 50.3 in Jul 2013. The index increased to 51.0 in Aug 2013 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

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. There is deceleration from 51.2 in Sep 2011 to marginal contraction at 49.0 in Nov 2011. Manufacturing activity recovered to 53.3 in Apr 2012 but then declined to 50.4 in May 2012 and 50.1 in Jun 2012, which is the lowest in a year with exception of contraction at 49.0 in Nov 2011. The index then fell to contraction at 49.2 in Aug 2012 and improved to 49.8 in Sep with movement to 50.2 in Oct 2012, 50.6 in Nov 2012, 50.9 in Mar 2013 and 50.6 in Apr 2013 above the neutral zone of 50.0. The index increased to 50.8 in May 2013 and fell to 50.1 in Jun 2013, increasing to 50.3 in Jul 2013. The index increased to 51.0 in Aug 2013 and 51.1 in Sep 2013.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IIIQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDP. Secondary industry accounts for 45.3 percent of GDP in IIIQ2013. In IIQ2013, industry alone accounts for 38.5 percent in IIQ2013 and construction with the remaining 6.8 percent in the first three quarters of 2012. Tertiary industry accounts for 45.5 percent of cumulative GDP in IIIQ2013 and primary industry for 9.2 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-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.8 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 9.1 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.1 percent and to 7.8 percent in IIQ2013, rebounding to 9.1 percent in IIIQ2013.

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

Cumulative GDP IIIQ2013	Value Current CNY Billion	2013 Year-on-Year Constant Prices ∆%
GDP	38,676.2	7.7
Primary Industry	3,566.9	3.4
Farming	3,566.9	3.4
Secondary Industry	17,511.8	7.8
Industry	14,900.0	7.6
Construction	2,611.8	9.7
Tertiary Industry	17,597.5	8.4
Transport, Storage, Post	21,449.9	7.2
Wholesale, Retail Trades	3,056.7	10.4
Hotel & Catering Services	772.7	5.1
Financial Intermediation	2,623.8	10.4
Real Estate	2,454.6	7.3
Other	6,094.8	7.6
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IIIQ2013	2.2	9.1
IIQ2013	1.9	7.8
IQ2013	1.5	6.1
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.2	9.1
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.6	10.8
IQ2011	2.3	9.5

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

Growth of China’s GDP in IIIQ2013 relative to the same period in 2012 was 7.8 percent, as shown in Table VC-GDPA. Secondary industry accounts for 45.3 percent of GDP of which industry alone for 38.5 percent in cumulative IIIQ2013 and construction with the remaining 6.8 percent in the first three quarters of 2013. Tertiary industry accounts for 45.5 percent of GDP in the cumulative to IIIQ2013 and primary industry for 9.2 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013, 7.5 percent in IIQ2013 and 7.8 percent in IIIQ2013.

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

	IQ 2013	IIQ 2013	IIIQ 2013
GDP	7.7	7.5	7.8
Primary Industry	3.4	3.0	3.4
Secondary Industry	7.8	7.6	7.8
Tertiary Industry	8.3	8.3	8.4
GDP ∆% Relative to a Prior Quarter	1.5	1.9	2.2
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.6	2.2	1.8	1.4	2.2	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

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

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

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

The HSBC Flash China Manufacturing Purchasing Managers’ Index^™ (PMI^™) compiled by Markit (http://www.markiteconomics.com/Survey/PressRelease.mvc/6c331e2e4a1e420e84c67a8d51b349f6) is moving at faster pace. The overall Flash HSBC China Manufacturing PMI^™ increased from 50.2 in Sep to 50.9 in Sep, which is moderately above the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index increased from 50.2 in Sep to 51.0 in Sep, moving into moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the flash manufacturing index moved to the highest reading in seven months with potential for recovery of growth in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/6c331e2e4a1e420e84c67a8d51b349f6). The HSBC China Services PMI^™, compiled by Markit, shows marginal improvement in business activity in China with the HSBC Composite Output, combining manufacturing and services, increasing from 49.5 in Jul to 51.8 in Aug, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds support of manufacturing combined with services (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Business Activity index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds the highest reading of services in five months (http://www.markiteconomics.com/Survey/PressRelease.mvc/43566e4eb02640ce8511830afb369003). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased marginally to 50.2 in Sep from 50.1 in Aug, indicating relatively unchanged manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/f7be0e1a864c49839fe62885cd4ad72f). New export orders posted the first increase in six months. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds stabilizing conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/f7be0e1a864c49839fe62885cd4ad72f). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Sep 12-month ∆%: minus 1.3 Sep month ∆%: 0.2 Blog 10/20/13
Consumer Price Index	Sep month ∆%: 0.8 Sep 12 months ∆%: 3.1 Blog 10/20/13
Value Added of Industry	Sep month ∆%: 0.72 Jan-Sep 2013/Jan-Sep 2012 ∆%: 9.6 Sep 12-Month ∆%: 10.2 Blog 10/27/13
GDP Growth Rate	Year IIIQ2013 ∆%: 7.8 Quarter IIQ2013 AE ∆%: 9.1 Blog 10/27/13
Investment in Fixed Assets	Total Jan-Sep 2013 ∆%: 20.2 Real estate development: 19.7 Blog 10/27/13
Retail Sales	Sep month ∆%: 1.24 Sep 12 month ∆%: 13.3 Jan-Sep ∆%: 12.9 Blog 10/27/13
Trade Balance	Sep balance $15.20 billion Exports 12M ∆% -0.3 Imports 12M ∆% 7.4 Cumulative Sep: $169.41 billion Blog 10/20/13

Links to blog comments in Table CNY:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

Cumulative growth of China’s GDP in IIIQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-1. Secondary industry accounts for 45.3 percent of GDP in IIIQ2013. In IIQ2013, industry alone accounts for 38.5 percent in IIQ2013 and construction with the remaining 6.8 percent in the first three quarters of 2012. Tertiary industry accounts for 45.5 percent of cumulative GDP in IIIQ2013 and primary industry for 9.2 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 10.8 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 9.1 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.1 percent and to 7.8 percent in IIQ2013, rebounding to 9.1 percent in IIIQ2013.

Table VC-1, China, Quarterly Growth of GDP, Current CNY 100 Million and Inflation Adjusted ∆%

Cumulative GDP IIIQ2013	Value Current CNY Billion	2013 Year-on-Year Constant Prices ∆%
GDP	38,676.2	7.7
Primary Industry	3,566.9	3.4
Farming	3,566.9	3.4
Secondary Industry	17,511.8	7.8
Industry	14,900.0	7.6
Construction	2,611.8	9.7
Tertiary Industry	17,597.5	8.4
Transport, Storage, Post	21,449.9	7.2
Wholesale, Retail Trades	3,056.7	10.4
Hotel & Catering Services	772.7	5.1
Financial Intermediation	2,623.8	10.4
Real Estate	2,454.6	7.3
Other	6,094.8	7.6
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IIIQ2013	2.2	9.1
IIQ2013	1.9	7.8
IQ2013	1.5	6.1
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.2	9.1
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.6	10.8
IQ2011	2.3	9.5

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

Growth of China’s GDP in IIIQ2013 relative to the same period in 2012 was 7.8 percent, as shown in Table VC-2. Secondary industry accounts for 45.3 percent of GDP of which industry alone for 38.5 percent in cumulative IIIQ2013 and construction with the remaining 6.8 percent in the first three quarters of 2013. Tertiary industry accounts for 45.5 percent of GDP in the cumulative to IIIQ2013 and primary industry for 9.2 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013, 7.5 percent in IIQ2013 and 7.8 percent in IIIQ2013.

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

	IQ 2013	IIQ 2013	IIIQ 2013
GDP	7.7	7.5	7.8
Primary Industry	3.4	3.0	3.4
Secondary Industry	7.8	7.6	7.8
Tertiary Industry	8.3	8.3	8.4
GDP ∆% Relative to a Prior Quarter	1.5	1.9	2.2
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.6	2.2	1.8	1.4	2.2	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

Cumulative and 12-months rates of value added of industry in China are provided in Table VC-3. Value added in total industry increased 9.6 in Jan-Sep 2013 relative to a year earlier and 10.2 percent in 12 months. Value added in total industry in Jan-Aug 2013 increased 9.5 percent relative to a year earlier. Heavy industry (manufacturing) had been the driver of growth with a cumulative rate of 10.0 percent relative to a year earlier in Jan-Mar 2012 that declined to 10.5 percent in Jan-Apr 2012 relative to the same period a year earlier and further down to 10.1 percent in Jan-Jun 2012, 9.9 percent in Jan-Jul 2012, 9.8 percent in Jan-Aug 2012, 9.7 percent in Jan-Sep 2012, 9.7 percent in Jan-Oct 2012, 9.8 percent in Jan-Nov 2012, 9.9 percent in Jan-Dec 2012, 10.2 percent in Jan-Feb 2013, 9.8 percent in Jan-Mar 2013, 9.7 percent in Jan-Apr 2013, 9.7 percent in Jan-May 2013, 10.0 percent in Jan-Jun 2013, 10.1 percent in Jan-Jul 2013 and 10.2 percent in Jan-Aug 2013. The rate for heavy industry increased marginally to 10.3 percent in Jan-Sep 2013. Light industry (mining and quarrying) grew 6.7 percent in Jan-Sep 2013 relative to a year earlier. Growth of total industry decelerated from cumulative 14.4 percent in Jan-Mar 2011 to 9.6 percent in Jan-Sep 2013.

Table VC-3, China, Growth Rate of Value Added of Industry ∆%

	Industry	Light Industry	Heavy Industry	State Owned	Joint-Stock
2013
Jan-Sep	9.6	6.7	10.3	6.3	11.0
12M Sep	10.2	4.9	11.1	7.8	11.1
Jan-Aug	9.5	6.9	10.2	6.1	11.0
12M Aug	10.4	5.8	10.9	9.5	11.7
Jan-Jul	9.4	7.1	10.1	5.6	10.9
12M Jun	9.7	5.5	10.5	8.1	11.1
Jan-Jun	9.3	7.3	10.0	5.2	10.9
12M Jun	8.9	5.8	9.6	6.3	10.5
Jan-May	9.4	8.5	9.7	4.9	11.0
12M May	9.2	8.0	9.8	4.4	10.7
Jan-Apr	9.4	8.6	9.7	4.9	11.1
12 M Apr	9.3	8.5	9.6	4.3	10.9
Jan-Mar	9.5	8.7	9.8	5.2	11.3
12 M Mar	8.9	8.2	9.1	4.3	11.0
Jan-Feb	9.9	9.1	10.2	5.8	11.4
2012
Jan-Dec 2012	10.0	10.1	9.9	6.4	11.8
12 M Dec	10.3	9.6	10.6	8.0	12.1
Jan-Nov	10.0	10.2	9.8	6.3	11.8
12 M Nov	10.1	9.2	10.5	7.2	11.8
Jan-Oct	10.0	10.3	9.7	6.4	11.8
12 M Oct	9.6	9.1	9.7	7.0	11.7
Jan-Sep	10.0	10.4	9.7	6.3	11.8
12 M  Sep	9.2	9.0	9.3	6.3	11.0
Jan-Aug	10.1	10.5	9.8	6.3	15.4
12 M Aug	8.9	8.6	9.0	5.3	14.3
Jan-Jul	10.3	10.8	9.9	6.6	12.1
12 M Jul	9.2	10.1	8.8	4.8	10.9
Jan-Jun	10.5	11.1	10.1	7.0	12.4
12 M Jun	9.5	9.0	9.6	6.5	11.5
Jan-May	10.7	11.5	10.3	6.7	12.4
12 M May	9.6	9.1	9.8	6.6	11.0
Jan-Apr	11.0	12.3	10.5	6.6	12.9
12 M Apr	9.3	10.3	8.9	4.3	10.7
Jan-Mar	11.6	13.2	11.0	7.2	13.8
12 M Mar	11.9	13.9	11.2	8.0	13.7
Jan-Feb	11.4	12.7	10.9	7.3	13.9
2011
Jan-Dec	13.9	13.0	14.3	9.9	15.8
12 M Dec	12.8	12.6	13.0	9.2	14.7
Jan-Nov	14.0	13.0	14.4	9.9	16.0
12 M Nov	12.4	12.4	12.4	7.8	14.4
Jan-Oct	14.1	13.0	14.5	10.1	9.1
12 M Oct	13.2	12.1	13.7	8.9	15.1
Jan-Sep	14.2	13.1	14.6	10.4	16.1
12 M Sep	13.8	12.8	14.3	9.9	16.0
Jan-Aug	14.2	13.1	14.6	10.4	16.1
12 M Aug	13.5	13.4	13.5	9.4	15.5
Jan-Jul	14.3
12 M Jul	14.0	12.8	14.5	9.5
Jan-Jun	14.3	13.1	14.7	10.7	19.7
12 M Jun	15.1	13.9	15.6	10.7	20.8
Jan-May	14.0	12.9	14.4	10.7	19.3
12 M May	13.3	12.9	13.5	8.9	18.7
Jan-Apr	14.2	12.9	14.7	11.2	19.5
12 M Apr	13.4	11.9	14.0	10.4	18.0
Jan-Mar	14.4	13.1	14.9	11.4	19.8
12 M Mar	14.8	12.8	15.6	12.9	19.2
12 M Feb	14.9	13.1	15.6	10.5	21.7
Jan-Feb	14.1	13.3	14.4	10.6	20.3

*After Jun 2013 Heavy Industry is Manufacturing and Light Industry is Mining and Quarrying

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

Chart VC-1 provides 12-month percentage changes of value added of industry in 2012 and from Jan to Jul 2013. Growth rates of value added of industry in the first five months of 2010 were higher than in 2011 as would be expected in an earlier phase of recovery from the global recession. Growth rates have converged in the second half of 2011 to lower percentages with further decline into 2012 to single digit percentage changes, 10.3 percent in Dec 2012, 8.9 percent in Mar 2013 and 9.3 percent in Apr 2013. The growth rate eased to 9.2 percent in May 2013 and 8.9 percent in Jun 2013, rebounding to 9.7 percent in Jul 2013. The rate of growth increased to 10.4 percent in Aug 2013 and fell marginally to 10.2 percent in Sep 2013.

Chart VC-1, China, Growth Rate of Total Value Added of Industry, 12-Month ∆%

Source: National Bureau of Statistics of China

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

Yearly rates of growth for the past 12 months and cumulative relative to the earlier year of various segments of industrial production in China are provided in Table VC-4. Rates from Jan to Dec 2011 relative to the same period a year earlier fluctuated but remained mostly above 10 percent with the exception of motor vehicles and crude oil. There is deceleration in Jan-Dec 2012 of percentage change with no segment showing growth exceeding 10 percent with exception of 12-month growth of 13.5 percent for pig iron and 16.7 percent for nonferrous metals. In Jan-Sep 2013, many segments grew at rates exceeding or around 10 percent with exception of electricity at 6.8 percent, crude oil at 4.2 percent and pig iron at 6.9 percent. Electricity fell from growth of 16.2 percent in the 12 months ending in Jun 2011 to 0.0 percent in the 12 months ending in Jun 2012, rebounding to 4.8 percent in Aug 2012 but declining to 1.5 percent in Sep 2012, increasing to 3.9 percent in Oct 2012, 7.9 percent in Nov 2012 and 7.6 percent in Dec 2012. Electricity grew 6.8 percent in Jan-Jul 2013 relative to a year earlier and increased 8.2 percent in the 12 months ending in Sep 2013.

Table VC-4, China, Industrial Production Operation ∆%

	Elec- tricity	Pig Iron	Cement	Crude Oil	Non- ferrous Metals	Autos
2013
Jan-Sep	6.8	6.9	8.9	4.2	9.8	15.3
12M Sep	8.2	11.2	6.4	-1.2	10.1	17.5
Jan-Aug	6.4	6.6	9.2	4.7	9.7	15.1
12M Aug	13.4	11.1	8.2	5.5	5.7	14.8
Jan-Jul	5.2	6.0	9.6	4.5	10.3	15.1
12 M Jul	8.1	5.0	9.1	7.1	9.8	15.4
Jan-Jun	4.4	5.7	9.7	4.1	10.0	15.2
12 M Jun	6.0	2.9	8.8	10.8	6.7	13.5
Jan-May	4.0	10.8	8.9	2.9	10.9	15.4
12 M May	4.1	11.3	8.5	2.4	7.5	15.7
Jan-Apr	3.8	10.5	8.4	3.2	11.4	15.4
12 M Apr	6.2	8.1	8.7	2.5	10.3	18.3
Jan-Mar	2.9	12.3	8.2	4.3	10.6	13.5
12 M Mar	2.1	9.2	6.9	5.5	9.9	12.4
Jan-Feb	3.4	14.2	10.8	3.0	13.5	12.4
2012
Jan-Dec	4.7	7.7	7.4	3.7	9.3	6.3
12 M Dec	7.6	13.5	5.4	8.4	16.7	5.3
Jan-Nov	4.4	7.2	7.5	3.2	8.4	6.5
12 M Nov	7.9	16.5	9.4	9.1	15.2	3.9
Jan-Oct	3.9	6.3	6.7	2.6	7.7	6.9
12 M Oct	6.4	11.7	11.5	6.7	14.0	3.8
Jan-Sep	3.6	5.7	6.7	2.2	7.1	7.3
12 M Sep	1.5	4.9	12.0	7.0	7.1	6.3
Jan-Aug	3.8	-0.5	8.7	2.5	13.8	10.4
12 M Aug	4.8	2.6	5.9	-0.4	13.8	9.7
Jan-Jul	3.8	6.1	5.3	1.6	6.7	7.4
12M Jul	2.1	6.5	6.1	1.1	4.1	12.3
Jan-Jun	3.7	6.1	5.5	1.7	6.7	6.7
12 M Jun	0.0	6.7	6.5	-0.6	5.8	13.8
Jan-May	4.7	6.3	5.0	2.2	5.1	6.2
12 M May	2.7	6.3	4.3	0.7	6.6	18.5
Jan-Apr	5.0	6.2	5.5	2.9	4.6	3.1
12 M Apr	0.7	7.9	4.9	-0.3	2.3	10.7
Jan-Mar	7.1	6.5	7.3	3.1	5.8	0.0
12 M Mar	7.2	10.2	7.9	2.0	3.3	5.1
Jan-Feb	7.1	4.6	4.8	4.0	8.4	-1.8
2011
Jan-Dec	12.0	8.4	16.1	4.9	10.6	3.0
12 M Dec	9.7	3.7	7.0	4.0	13.2	-6.5
Jan-Nov	12.0	13.1	17.2	5.3	10.2	3.9
12 M Nov	8.5	7.8	11.2	3.2	8.2	-1.3
Jan-Oct	12.3	13.7	18.0	5.4	10.4	5.2
12 M Oct	9.3	13.4	16.5	-0.9	3.7	1.3
Jan-Sep	12.7	13.9	18.1	6.0	11.2	5.5
12 M Sep	11.5	18.8	15.7	1.5	13.9	2.5
Jan-Aug	13.0	13.1	18.4	6.6		4.7
12 M Aug	10.0	12.9	12.8	4.5	15.6	9.5
Jan-Jul	13.3	13.0	19.2	6.9	9.9	4.0
12 M Jul	13.2	14.9	16.8	5.9	9.8	-1.3
12 M Jun	16.2	14.8	19.9	-0.7	9.8	3.6
12 M May	12.1	10.6	19.2	6.0	14.2	-1.9
12 M Apr	11.7	8.3	22.4	6.8	6.1	-1.6
12 M Mar	14.8	13.7	29.8	8.0	11.6	9.9
12 M Feb	11.7	14.5	9.1	10.9	14.4	10.3
12 M Jan	5.1	3.5	16.4	12.2	1.4	23.9
12 M Dec 2010	5.6	4.6	17.3	10.3	-1.9	27.6

M: month

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

Monthly growth rates of industrial production in China are provided in Table VC-5. Monthly rates have fluctuated around 1 percent. Jan and Feb 2012 are somewhat weaker but there was improvement to 1.25 percent in Mar 2012. The rate of 0.33 percent in Apr 2012 is the lowest in the monthly series from Feb 2011 to Sep 2013. Monthly sales growth remained below 1 percent in all the eighteen months from Jan 2012 to Aug 2013 with the exception of Mar 2012. Value added in industry increased 0.72 percent in Sep 2013.

Table VC-5, China, Industrial Production Operation, Month ∆%

2011	Month ∆%
Feb	0.93
Mar	0.99
Apr	1.32
May	0.79
Jun	1.30
Jul	0.82
Aug	0.85
Sep	0.95
Oct	0.71
Nov	0.68
Dec	0.94
Jan 2012	0.50
Feb	0.61
Mar	1.25
Apr	0.33
May	0.89
Jun	0.83
Jul	0.59
Aug	0.61
Sep	0.89
Oct	0.79
Nov	0.82
Dec	0.84
Jan 2013	0.62
Feb	0.83
Mar	0.71
Apr	0.93
May	0.69
Jun	0.74
Jul	0.88
Aug	0.92
Sep	0.72

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

Table VC-6 provides cumulative growth of investment in fixed assets in China in 2011 relative to 2010, Jan-Dec 2012 and Jan-Sep 2013 relative to a year earlier. Total fixed investment had grown at a high rate fluctuating around 25 percent and fixed investment in real estate development has grown at rates in excess of 30 percent but rates have declined significantly to still quite high percentages. In Jan-Sep 2013, investment in fixed assets in China grew 20.2 percent relative to a year earlier and 19.7 percent in real estate development. There was slight deceleration in the final two months of 2011 that continued into Jan-Sep 2013.

Table VC-6, China, Investment in Fixed Assets ∆% Relative to a Year Earlier

	Total	State	Real Estate Development
Jan-Sep 2013	20.2	17.6	19.7
Jan-Aug	20.3	NA	19.3
Jan-Jul	20.1	17.5	20.5
Jan-Jun	20.1	17.5	20.3
Jan-May	20.4	17.7	20.6
Jan-Apr	20.6	18.1	21.1
Jan-Mar	20.9	18.7	20.2
Jan-Feb	21.2	16.9	22.8
Jan-Dec 2012	20.6	14.7	16.2
Jan-Nov	20.7	14.5	16.7
Jan-Oct	20.7	14.2	15.4
Jan-Sep	20.5	13.6	15.4
Jan-Aug	20.2	12.9	15.6
Jan-Jul	20.4	12.6	15.4
Jan-Jun	20.4	13.8	16.6
Jan-May	20.1	10.0	18.5
Jan-Apr	20.2	9.5	18.7
Jan-Mar	20.9	9.0	23.5
Jan-Feb	21.5	8.8	27.8
Jan-Dec 2011	23.8	11.1	27.9
Jan-Nov	24.5	11.7	29.9
Jan-Oct	24.9	12.4	31.1
Jan-Sep	24.9	12.7	32.0
Jan-Aug	25.0	12.1	33.2
Jan-Jul	25.4	13.6	33.6
Jan-Jun	25.6	14.6	32.9
Jan-May	25.8	14.9	34.6
Jan-Apr	25.4	16.6	34.3
Jan-Mar	25.0	17.0	34.1
Jan-Feb	24.9	15.6	35.2

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

Chart VC-2 provides cumulative fixed asset investment in China relative to a year earlier in all months from 2012 to 2013. Growth rose to 25.8 percent in Jan-May 2011 and then fell back to 24.9 percent in Sep and Oct 2011, declining further to 24.5 percent in Nov and 23.8 percent in Dec 2011 with deeper drop in Jan-Feb 2012 to 21.5 percent, 20.9 percent in Jan-Mar, 20.2 percent in Jan-Apr 2012, 20.1 percent in Jan-Apr 2012, 20.4 percent in both Jan-Jun 2012 and Jan-Jul 2012, 20.2 percent in Jan-Aug 2012, 20.5 percent in Jan-Sep 2012, 20.7 percent in Jan-Oct 2012, 20.7 percent in Jan-Nov 2012, 20.6 percent in Jan-Dec 2012, 21.2 percent in Jan-Feb 2013, 20.9 percent in Jan-Mar 2013, 20.6 in Jan-Apr 2013 and 20.4 percent in Jan0May 2013. The rate eased to 20.1 percent in Jan-Jun 2013, Jan-Jul 2013 and Jan-Aug 2013. The rate increased to 20.3 percent in Jan-Sep 2013. Rates in 2013 and 2012 have fallen from higher gains in 2011.

Chart VC-2, China, Investment in Fixed Assets, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

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

Monetary policy has been used in China in the form of increases in interest rates and required reserves of banks to moderate real estate investment. These policies have been reversed because of lower inflation and weakening economic growth. Chart VC-3 shows decline of fluctuating cumulative growth rates of investment in real estate development relative to a year earlier from 35.2 percent in Jan-Feb 2011 to 31.1 percent in Jan-Oct 2011, 29.9 percent in Jan-Nov 2011, 27.9 percent in Jan-Dec 2011, 27.8 percent in Jan-Feb 2012 and sharper decline to 23.5 percent in Jan-Mar 2012, 18.7 percent in Jan-Apr 2012 and 18.5 percent in Jan-May 2012. The trend of decline continued with 16.6 percent in Jan-Jun 2012, 15.4 percent in Jan-Jul 2012, 15.6 percent in Jan-Aug 2012, 15.4 percent in Jan-Sep 2012, 16.7 percent in Jan-Oct 2012, 16.7 percent in Jan-Nov 2012, 16.2 percent in Jan-Dec 2012, 22.8 percent in Jan-Feb 2013, 20.2 percent in Jan-Mar 2013, 21.1 percent in Jan-Apr 2013 and 20.6 percent in Jan-May 2013. The rate eased to 20.3 percent in Jan-Jun 2013, increasing to 22.8 percent in Jan-Jul 2013. The rate fell to 19.3 percent in Jan-Aug 2013 and increased marginally to 19.7 percent in Jan-Sep 2013.

Chart VC-3, China, Investment in Real Estate Development, ∆% Cumulative over Year Earlier

Source: National Bureau of Statistics of China

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

Growth rates of retail sales in 12 months and cumulative relative to a year earlier are in Table VC-7. There is decline of growth rates to cumulative 14.7 percent in Feb 2012, 14.8 percent in Mar, 14.7 percent in Apr, 14.5 percent in May, 14.4 percent in Jun, 14.2 percent in Jul, 14.1 percent in Aug to Oct 2012, 14.2 percent in Nov 2012 and 14.3 percent in Dec 2012. Percentage growth rates have declined in Jan-Dec 2012 relative to earlier months in 2011. The rate of retail sales growth was even lower at 12.3 percent in Feb 2013 with influence from the celebration of the New Year followed by 12.4 percent in Mar 2013 and 12.5 percent in Apr 2013. The rate of retail growth was 12.9 percent in the 12 months ending in May 2013 and 12.6 percent in Jan-May relative to a year earlier. Growth strengthened with 13.3 percent in the 12 months ending in Jun 2013 and 12.7 percent in the cumulative to Jun 2013 relative to a year earlier. Growth continued with 13.2 in 12 months in Jul 2013 and 12.8 percent in the cumulative Jan-Jul 2013 relative to a year earlier. The rate stabilized in Aug 2013 at 13.4 percent in 12 months and 12.8 percent cumulative relative to a year earlier. Stabilization continued with 13.3 percent in the 12 months ending in Sep 2013 and 12.9 percent in the cumulative relative to a year earlier.

Table VC-7, China, Retail Sales 12-Month ∆% and Cumulative ∆% Relative to Year Earlier

	12-Month ∆%	Cumulative ∆%/ Cumulative Year Earlier
2013
Sep	13.3	12.9
Aug	13.4	12.8
Jul	13.2	12.8
Jun	13.3	12.7
May	12.9	12.6
Apr	12.8	12.5
Mar	12.6	12.4
Feb	12.3	12.3
2012
Dec	15.2	14.3
Nov	14.9	14.2
Oct	14.5	14.1
Sep	14.2	14.1
Aug	13.2	14.1
Jul	13.1	14.2
Jun	13.7	14.4
May	13.8	14.5
Apr	14.1	14.7
Mar	15.2	14.8
Feb	14.7	14.7
Jan
2011
Dec	18.1	17.1
Nov	17.3	17.0
Oct	17.2	17.0
Sep	17.7	17.0
Aug	17.0	16.9
Jul	17.2	16.8
Jun	17.7	16.8
May	16.9	16.6
Apr	17.1	16.5
Mar	17.4	17.4
Feb	11.6	15.8
Jan	19.9	19.9

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

Chart VC-4 of the National Bureau of Statistics of China provides 12-month rates of growth of retail sales from 2012 to 2013. There is again a drop into 2013 with the lowest percentages in Chart VC-4 followed by moderate increases.

Chart VC-4, China, Total Retail Sales of Consumer Goods 12-Month ∆%

Source: National Bureau of Statistics of China

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

Table VC-8 provides monthly percentage changes of retail sales in China. Although the rate of 0.19 percent in Jan 2012 is the lowest in Table VC-7, the rate of 1.36 percent in Sep 2012 is relatively high and 1.30 percent in Dec 2012 is closer to rates in 2011. Sales are lower in Jan-Feb 2013 because of the New Year celebrations, rebounding in Mar-Sep 2013.

Table VC-8, China, Retail Sales, Month ∆%

2011	Month ∆%
Feb	1.35
Mar	1.26
Apr	1.30
May	1.39
Jun	1.49
Jul	1.57
Aug	1.50
Sep	1.33
Oct	1.36
Nov	1.26
Dec	1.41
2012
Jan	0.19
Feb	0.99
Mar	1.21
Apr	0.93
May	1.11
Jun	1.12
Jul	1.03
Aug	1.11
Sep	1.32
Oct	1.16
Nov	1.21
Dec	1.25
Jan 2013	0.19
Feb	0.97
Mar	1.30
Apr	1.26
May	1.18
Jun	1.23
Jul	1.25
Aug	1.13
Sep	1.24

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

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.3 percent in 2006 and 3.0 percent in 2007. The global recession had strong impact with growth of only 0.4 percent in 2008 and decline of 4.4 percent in 2009. Recovery was at lower growth rates of 2.0 percent in 2010 and 1.6 percent in 2011. EUROSTAT estimates growth of GDP of the euro area of minus 0.7 percent in 2012 and minus 0.4 percent in 2013 but 1.2 percent in 2014.

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	NA	2.9
2000	2.2	9.4	3.8
2001	2.4	8.3	2.0
2002	2.3	8.6	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.1	1.7
2006	2.2	8.4	3.3
2007	2.1	7.6	3.0
2008	3.3	7.6	0.4
2009	0.3	9.6	-4.4
2010	1.6	10.1	2.0
2011	2.7	10.2	1.6
2012*	2.5	11.4	-0.7
2013*			-0.4
2014*			1.2

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

The GDP of the euro area in 2012 in current US dollars in the dataset of the World Economic Outlook (WEO) of the International Monetary Fund (IMF) is $12,199.1 billion or 16.9 percent of world GDP of $72,216.4 billion (http://www.imf.org/external/pubs/ft/weo/2012/02/weodata/index.aspx). The sum of the GDP of France $2613.9 billion with the GDP of Germany of $3429.5 billion, Italy of $2014.1 billion and Spain $1323.5 billion is $9381.0 billion or 76.9 percent of total euro area GDP and 13.0 percent of World GDP. The four largest economies account for slightly more than three quarters of economic activity of the euro area. Table VD-EUR1 is constructed with the dataset of EUROSTAT, providing growth rates of the euro area as a whole and of the largest four economies of Germany, France, Italy and Spain annually from 1996 to 2011 with the estimate of 2012 and forecasts for 2013 and 2014 by EUROSTAT. The impact of the global recession on the overall euro area economy and on the four largest economies was quite strong. There was sharp contraction in 2009 and growth rates have not rebounded to earlier growth with exception of Germany in 2010 and 2011.

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

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

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

The Flash Eurozone PMI Composite Output Index of the Markit Flash Eurozone PMI^®, combining activity in manufacturing and services, decreased from 52.2 in Sep to 51.5 in Oct, which is a two month low after a high in 27 months in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a90c155c5334ae9a0285122636dcadd). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with growth of GDP of 0.2 percent based on the first month of IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a90c155c5334ae9a0285122636dcadd). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 51.5 in Aug to 52.2 in Aug in the third consecutive monthly expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/3b716a4e0c704f48bb0f305a9f4720a3). Chris Williamson, Chief Economist at Markit, finds growth in IIIQ2013 at the rate of about 0.2 percent with strong increase in Spain’s exports (http://www.markiteconomics.com/Survey/PressRelease.mvc/3b716a4e0c704f48bb0f305a9f4720a3). The Markit Eurozone Services Business Activity Index increased from 50.7 in Aug to 52.2 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/3b716a4e0c704f48bb0f305a9f4720a3). The Markit Eurozone Manufacturing PMI^® decreased to 51.1 in Sep from 51.4 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/07bfd9a03db44521b2f336a8ee269f97). New orders increased with strength in new export business in all members except Greece. Chris Williamson, Chief Economist at Markit, finds recovery indications with strength in export business but with the PMI index lower than in Aug and only slightly above 50 (http://www.markiteconomics.com/Survey/PressRelease.mvc/07bfd9a03db44521b2f336a8ee269f97). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIQ2013 ∆% 0.3; IIQ2013/IIQ2012 ∆% -0.6 Blog 10/13/13
Unemployment	Aug 2013: 12.0 % unemployment rate Aug 2013: 19.178 million unemployed Blog 10/6/13
HICP	Sep month ∆%: 0.5 12 months Sep ∆%: 1.1 Blog 10/20/13
Producer Prices	Euro Zone industrial producer prices Aug ∆%: 0.0 Aug 12-month ∆%: -0.8 Blog 10/6/13
Industrial Production	Aug month ∆%: 1.0; Aug 12 months ∆%: -2.1 Blog 10/20/13
Retail Sales	Aug month ∆%: 0.7 Aug 12 months ∆%: minus 0.3 Blog 10/6/13
Confidence and Economic Sentiment Indicator	Sentiment 96.9 Sep 2013 Consumer minus 14.9 Sep 2013 Blog 9/29/13
Trade	Jan-Aug 2013/Jan-Aug 2012 Exports ∆%: 0.9 Imports ∆%: -4.0 Aug 2013 12-month Exports ∆% -5.4 Imports ∆% -7.2 Blog 10/20/13

Links to blog comments in Table EUR:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

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

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.htm

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.0 percent in 2010, 3.3 percent in 2011 and 0.7 percent in 2012.

The Federal Statistical Agency of Germany analyzes the fall and recovery of the German economy (http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/EN/Content/Statistics/VolkswirtschaftlicheGesamtrechnungen/Inlandsprodukt/Aktuell,templateId=renderPrint.psml):

“The German economy again grew strongly in 2011. The price-adjusted gross domestic product (GDP) increased by 3.0% compared with the previous year. Accordingly, the catching-up process of the German economy continued during the second year after the economic crisis. In the course of 2011, the price-adjusted GDP again exceeded its pre-crisis level. The economic recovery occurred mainly in the first half of 2011. In 2009, Germany experienced the most serious post-war recession, when GDP suffered a historic decline of 5.1%. The year 2010 was characterised by a rapid economic recovery (+3.7%).”

Table VE-DE, Germany, GDP Year ∆%

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2012	0.7	0.9
2011	3.3	3.4
2010	4.0	3.8
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.8
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5

Source: Statistisches Bundesamt Deutschland (Destatis) https://www.destatis.de/EN/PressServices/Press/pr/2013/08/PE13_278_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, decreased from 53.2 in Sep to 52.6 in Oct for the lowest reading in three months. The index of manufacturing output reached 53.3 in Oct, which is a two-month high, while the index of services decreased to 52.3 for a three-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/ea870691dbeb4b3d9169092f34426260). New work volumes increased marginally. Tim Moore, Senior Economist at Markit, finds stronger manufacturing than services with potential for continuing growth of private sector activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/ea870691dbeb4b3d9169092f34426260). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, decreased from 53.5 in Aug to 53.2 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/698fb1e693064b62b64668bd5ee9f605). Tim Moore, Senior Economist at Markit and author of the report, finds strengthening services in Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/698fb1e693064b62b64668bd5ee9f605). The Germany Services Business Activity Index increased from 51.3 in Jul to 52.8 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/698fb1e693064b62b64668bd5ee9f605). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 51.8 in Aug to 51.1 in Sep, in movement away from contraction territory below 50.0 during three consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/ed3b0e0776c54cc0b5a86ea9e3897bd8). New export orders increased for the second consecutive month. Tim Moore, Senior Economist at Markit and author of the report, finds growth in the third quarter even with slowing in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/ed3b0e0776c54cc0b5a86ea9e3897bd8).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIQ2013 0.7 ∆%; II/Q2013/IIQ2012 ∆% 0.9 2012/2011: 0.7% GDP ∆% 1992-2012 Blog 8/26/12 5/27/12 11/25/12 2/24/13 5/19/13 5/26/13 8/18/13 8/25/13
Consumer Price Index	Aug month NSA ∆%: 0.0 Aug 12-month NSA ∆%: 1.5 Blog 10/13/13
Producer Price Index	Sep month ∆%: 0.0 CSA, 0.3 12-month NSA ∆%: -0.5 Blog 10/27/13
Industrial Production	MFG Aug month CSA ∆%: 2.1 12-month NSA: -3.1 Blog 10/13/13
Machine Orders	MFG Aug month ∆%: -0.3 Aug 12-month ∆%: 0.1 Blog 10/13/13
Retail Sales	Aug Month ∆% 0.5 12-Month ∆% 0.3 Blog 10/6/13
Employment Report	Unemployment Rate SA Jul 5.0% Blog 10/6/13
Trade Balance	Exports Aug 12-month NSA ∆%: -5.4 Imports Aug 12 months NSA ∆%: -2.2 Exports Aug month CSA ∆%: 1.0; Imports Aug month SA 0.4 Blog 10/13/13

Links to blog comments in Table DE:

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

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

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

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

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

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

VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.2 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.0 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. The growth rate from 2000 to 2012 is 1.0 percent. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.

Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012

Period	Average ∆%
1949-2012	3.2
2000-2012	1.0
2000-2011	1.1
2000-2007	1.7
1990-1999	1.9
1980-1989	2.5
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

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

The Markit Flash France Composite Output Index decreased from 50.5 in Sep to 50.1 in Oct for a two-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/c25fae531a1243b69ab9266c67f205f6). Jack Kennedy, Senior Economist at Markit and author of the report, finds that the data are somewhat encouraging for the beginning of the final quarter of the year (http://www.markiteconomics.com/Survey/PressRelease.mvc/c25fae531a1243b69ab9266c67f205f6). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased marginally from 48.8 in Aug to 50.5 in Sep, indicating moderate expansion and the highest reading in 20 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/288f64300c114a9eb900c9b69575bb3f). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds stabilization of the economy of France (http://www.markiteconomics.com/Survey/PressRelease.mvc/288f64300c114a9eb900c9b69575bb3f). The Markit France Services Activity index increased from 48.9 in Aug to 51.0 in Sep for the highest reading in 20 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/288f64300c114a9eb900c9b69575bb3f). The Markit France Manufacturing Purchasing Managers’ Index^® increased marginally to 49.8 in Sep from 49.7 in Aug, with output decreasing but new orders increasing for the first time since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/bcabcc955bfa461a83ed327ac0259fad). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stabilization in French manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/bcabcc955bfa461a83ed327ac0259fad). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Sep month ∆% -0.2 12 months ∆%: 0.9 10/20/13
PPI	Aug month ∆%: 0.3 Aug 12 months ∆%: -0.4 Blog 10/6/13
GDP Growth	IIQ2013/IQ2013 ∆%: 0.5 IIQ2013/IIQ2012 ∆%: 0.4 Blog 3/31/13 5/19/12 6/30/13 9/29/13
Industrial Production	Aug ∆%: Manufacturing minus 0.3 12-Month ∆%: Manufacturing minus 3.8 Blog 10/13/13
Consumer Spending	Manufactured Goods Aug ∆%: -0.3 Aug 12-Month Manufactured Goods ∆%: -0.1 Blog 9/29/13
Employment	Unemployment Rate: IIQ2013 10.5% Blog 9/8/13
Trade Balance	Jul Exports ∆%: month 1.3, 12 months -0.6 Jul Imports ∆%: month 2.7, 12 months 1.1 Blog 9/8/13
Confidence Indicators	Historical averages 100 Sep Mfg Business Climate 98 Blog 10/27/13

Links to blog comments in Table FR:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

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

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

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

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

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

Table VF-5 shows the INSEE business climate indicator for manufacturing. The headline composite indicator decreased from 92 in Jan 2013 to 88 in Apr 2013 but rebounded to 92 in May 2013, 93 in Jun 2013, 95 in Jul 2013 and 98 in Aug 2013. The index fell marginally to 97 in Sep 2013 and increased to 98 in Oct 13, approaching the long-term average of 100 since 1976. The final row shows general production expectations deteriorating from minus 34 in Feb 2013 to minus 49 in Apr 2013 and improving to minus 46 in May 2013, minus 41 in Jun 2013 and minus 30 in Jul 2013. There is further improvement of general production expectations to minus 18 in Aug 2013, to minus 10 in Sep 2013 and to minus 0.5 in Oct 2013, which is close to the long-term average of minus 10. The indicator of demand and export order levels improved from minus 30 in Feb 2013 to minus 29 in May 2013 and minus 28 in Jun 2013, continuing improvement to minus 22 in Aug. There is further improvement to minus 21 in Sep 2013 and minus 20 in Oct 2013.

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

Mfg 2013	Average since 1976	Jul 13	Aug 13	Sep 13	Oct 13
Composite Indicator	100	95	98	97	98
Past Activity	4	1	4	-11	-2
Finished- Goods Inventory Level	13	10	12	12	10
Global Order Books	-18	-26	-22	-26	-24
Export Order Books	-13	-29	-22	-21	-20
Personal Production Expectations	5	2	3	13	9
General Production Expectations	-9	-30	-18	-10	-5

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20131023

Chart VF-2 of the Institut National de la Statistique et des Études Économiques (INSEE) provides the history of the manufacturing business climate indicator of INSEE since 1992. The index fell during the contractions of 1991, 2001 and 2008. After rapid recovery beginning in 2009 the synthetic index shows declining trend in 2011 with upward reversal in 2012 interrupted in Apr through Jul 2012 and a marginal upward move in Aug-Sep 2012 but new decline in Oct 2012. The manufacturing composite indicator marginally reversed in Nov 2012 with stability in Dec 2012 and decline in Jan 2013 but improvement in Feb 2013 and stability in Mar 2013, deteriorating in Apr 2013 and recovering in May-Aug 2013. The composite indicator of manufacturing eased slightly in Sep 2013 and improved marginally in Oct 2013, close to the long-term average of 100.

Chart VF-1, France, INSEE Industrial Business Climate Composite Indicator

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20131023

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=11&date=20131023

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

Chart VF-3, France, Composite Indicator of Business Climate of INSEE

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=105&date=20131023

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.5 percent in IVQ2011 to minus 2.8 percent in IVQ2012, minus 2.4 percent in IQ2013 and minus 2.0 percent in IIQ2013. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIQ2013 than in IQ2013 and the final three quarters of 2012.

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

	GDP	Imports	Consumption	GFCF	Exports
2013
IIQ2013	-2.1	-4.6	-2.4	-5.9	0.2
IQ	-2.4	-5.0	-2.7	-7.1	-0.4
2012
IVQ	-2.8	-6.8	-4.3	-7.9	1.7
IIIQ	-2.6	-8.1	-4.3	-8.1	2.5
IIQ	-2.4	-7.5	-3.8	-8.3	2.5
IQ	-1.7	-8.9	-3.3	-7.6	2.1
2011
IVQ	-0.5	-6.9	-1.8	-3.2	3.1
IIIQ	0.3	0.1	-0.7	-2.1	5.6
IIQ	0.9	3.1	0.6	-0.7	7.0
IQ	1.3	8.8	0.9	0.6	10.9
2010
IVQ	2.0	15.3	1.1	0.8	13.2
IIIQ	1.8	13.2	1.3	2.4	12.0
IIQ	1.9	13.5	0.8	1.1	12.0
IQ	1.1	7.2	0.8	-2.0	7.3
2009
IVQ	-3.4	-6.4	0.2	-7.8	-9.3
IIIQ	-4.9	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.5	-13.6	-21.4
IQ	-7.0	-17.2	-1.7	-12.6	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/98480

The Markit/ADACI Business Activity Index increased from 48.8 in Aug to 52.7 in Sep, which is the highest level since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a4f969bd13b6414a86982c1b01aad043). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index suggesting stabilizing economy with some potential for the first increase in GDP in over two years (http://www.markiteconomics.com/Survey/PressRelease.mvc/a4f969bd13b6414a86982c1b01aad043). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 51.3 in Aug to 50.8 in Sep for the third consecutive reading above 50.0 with strong increase in foreign orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/bacb95f5e70f409d90a9a8413e08515a). Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds that manufacturing above 50 for three consecutive months implies positive contribution to IIIQ2013 growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/bacb95f5e70f409d90a9a8413e08515a). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Sep month ∆%: -0.3 Aug 12-month ∆%: 0.9 Blog 10/13/13
Producer Price Index	Aug month ∆%: 0.2 Aug 12-month ∆%: -2.3 Blog 10/6/13
GDP Growth	IIQ2013/IQ2013 SA ∆%: minus 0.3 IIQ2013/IIQ2012 NSA ∆%: minus 2.1 Blog 3/17/13 6/16/13 8/11/13 9/15/13
Labor Report	Aug 2013 Participation rate 63.7% Employment ratio 55.8% Unemployment rate 12.2% Blog 10/6/13
Industrial Production	Aug month ∆%: -0.3 12 months CA ∆%: -4.6 Blog 10/13/13
Retail Sales	Aug month ∆%: 0.0 Aug 12-month ∆%: 0.2 Blog 10/27/13
Business Confidence	Mfg Sep 96.6, May 89.1 Construction Sep 78.6, May 81.2 Blog 9/29/13
Trade Balance	Balance Aug SA €2477 million versus Jul €2260 Exports Aug month SA ∆%: 1.7; Imports Aug month ∆%: 1.1 Exports 12 months Aug NSA ∆%: -4.4 Imports 12 months NSA ∆%: -9.8 Blog 10/20/13

Links to blog comments in Table IT:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

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

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

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

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

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

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

An important part of the analysis of Blanchard (2011WEOSep, 2012WEOApr) is the much more difficult adjustment of economies with need of fiscal consolidation in the presence of weak economic growth. Demand has significantly weakened throughout the advanced economies. There are many sound fundamentals in Italy such as high income and competitive companies. The restraints consist of low economic growth with high debt/GDP ratio. Table VG-1 provides growth of retail sales for Italy. Retail sales changed 0.0 percent in Aug 2013 relative to Jul 2013, decreased 0.2 percent in Jun-Aug 2013 relative to Mar-May 2013, increased 0.2 percent in Aug 2013 relative to Aug 2012 and decreased 2.2 percent cumulatively in Jan-Aug 2013 relative to Jan-Aug 2012. Food retail sales outperform non-food retail sales.

Table VG-1, Italy, Retail Sales ∆%

	Aug 2013/  Jul 2013 SA	Jun-Aug 13/   Mar-May 13 SA	Aug 2013/ Aug 2012 NSA	Jan-Aug 2013/ Jan-Aug 2012
Food	0.0	0.0	1.0	-1.2
Non-food	-0.1	-0.3	-0.4	-3.0
Total	0.0	-0.2	0.2	-2.2

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/102044

Chart VG-1 provides 12-month percentage changes of retail sales at current prices. There is improvement in the final segment from Feb to May 2013 with sharper decline in Jun 2013 and recovery in Jul 2013.

Chart VG-1, Italy, Percentage Changes of Retail Sales in 12 Months

Source: Istituto Nazionale di Statistica

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

A longer perspective of retail sales in Italy is provided by monthly and 12-month percentage changes in 2011, Jan-Dec 2012, Jan-Aug 2013 and annual rates for 2011 and 2012 in Table VG-2. Retail sales did not decline very sharply during the global recession but fell 0.8 percent in 2011 and 1.7 percent in 2012. There is an evident declining trend in 2011 with few monthly increases and similar weakness in 2012 with multiple monthly declines. Negative percentage changes in 12 months have increased to more than 3 percent with decrease of 3.2 percent in the 12 months ending in Mar 2013 and decrease of 3.0 percent in the 12 months ending in Jun 2013. Retail sales changed 0.0 percent in Aug 2013 and the decline in 12 months improved to 0.2 percent.

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

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/102044

VH United Kingdom. Annual data in Table VH-UK show the strong impact of the global recession in the UK with decline of GDP of 5.2 percent in 2009 after dropping 0.8 percent in 2008. Recovery of 1.7 percent in 2010 is relatively low in comparison with annual growth rates in 2007 and earlier years. Growth was only 1.1 percent in 2011 and 0.1 percent in 2012. The bottom part of Table VH-UK provides average growth rates of UK GDP since 1948. The UK economy grew at 2.6 percent per year on average between 1948 and 2012, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.1 percent. Growth in the current cyclical expansion has been only at 1.0 percent as advanced economies struggle with weak internal demand and world trade. GDP in 2012 was lower by 3.1 percent relative to 2007.

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

	∆% on Prior Year
1998	3.6
1999	2.9
2000	4.4
2001	2.2
2002	2.3
2003	3.9
2004	3.2
2005	3.2
2006	2.8
2007	3.4
2008	-0.8
2009	-5.2
2010	1.7
2011	1.1
2012	0.1
Average Growth Rates ∆% per Year
1948-2012	2.6
1950-1959	2.7
1960-1969	3.3
1970-1979	2.5
1980-1989	3.2
1990-1999	2.9
2000-2007	3.0
2007-2012*	-3.1
2000-2012	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased marginally from 60.5 in Aug to 60.3 in Sep, indicating increase in activity in every month since the beginning of 2013 with the highest quarterly average since IIQ1997 http://www.markiteconomics.com/Survey/PressRelease.mvc/b668420fbbc0481898a1c701a1b55cfc). Chris Williamson, Chief Economist at Markit, finds continuing improvement in the UK’s economy with possible higher growth of GDP in IIIQ2013 at the quarterly rate of 1.2 percent, which would be the highest since the period before the 2007 financial crisis (http://www.markiteconomics.com/Survey/PressRelease.mvc/b668420fbbc0481898a1c701a1b55cfc). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased marginally to 56.7 in Sep from 57.1 in Aug, which was the highest reading in 36 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/010b50c61df54276b9d87c8bf7c7dcd3). Respondents indicated moderate increase in foreign demand. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing could grow at around 1.0 to 1.5 percent in IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/010b50c61df54276b9d87c8bf7c7dcd3). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Sep month ∆%: 0.4 Sep 12-month ∆%: 2.7 Blog 10/20/13
Output/Input Prices	Output Prices: Sep 12-month NSA ∆%: 1.2; excluding food, petroleum ∆%: 0.7 Input Prices: Sep 12-month NSA ∆%: 1.1 Excluding ∆%: 1.7 Blog 10/20/13
GDP Growth	IIIQ2013 prior quarter ∆% 0.8; year earlier same quarter ∆%: 1.5 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13
Industrial Production	Aug 2013/Aug 2012 ∆%: Production Industries minus 1.5; Manufacturing minus 0.2 Blog 10/13/13
Retail Sales	Sep month ∆%: 0.6 Sep 12-month ∆%: 2.2 Blog 10/20/13
Labor Market	Jun-Aug Unemployment Rate: 7.7%; Claimant Count 4.0%; Earnings Growth 0.7% Blog 10/20/13
Trade Balance	Balance SA Aug minus ₤3320 million Exports Aug ∆%: 0.4; Jun-Aug ∆%: 1.6 Imports Aug ∆%: 0.1 Jun-Aug ∆%: 1.5 Blog 10/13/13

Links to blog comments in Table UK:

10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html

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

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

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

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

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

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

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

The UK Office for National Statistics provides important analysis of the relation of GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html

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

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--january-gdp-update/sum-jan13.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--february-labour-market-update/sum-2012-q4---february-labour-update.html). The UK economy grew 0.8 percent in IIIQ2013 but output is still 2.5 percent below the level before the global recession in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html). Chart VH-1 of the UK Office for National Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) shows weakening output but relatively faster increases in employment and hours worked. Output growth and labor market improvement are converging.

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/index.html

Table VH-1 of the UK Office for national Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) provides total weekly hours, output and employment quarterly from 2008 to 2013. Improving output has been accompanied recently by improvements in hours worked and employment.

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

			Index, Q1 2008 =100
	Total weekly hours, Aged 16 +	GDP, CVM	Employment, Aged 16 +
	YBUS	ABMI	MGRZ
2008 Q1	100.0	100.0	100.0
Q2	98.9	99.1	100.1
Q3	98.9	97.6	99.6
Q4	98.3	95.6	99.4
2009 Q1	96.7	93.2	98.9
Q2	96.3	92.8	98.0
Q3	95.8	92.8	97.9
Q4	95.9	93.2	98.0
2010 Q1	95.7	93.7	97.7
Q2	96.5	94.6	98.2
Q3	97.0	95.0	98.9
Q4	97.4	94.8	98.7
2011 Q1	97.5	95.3	99.1
Q2	96.3	95.4	99.1
Q3	97.1	95.9	98.5
Q4	97.3	95.8	98.8
2012 Q1	98.0	95.8	99.3
Q2	98.5	95.4	99.9
Q3	99.6	95.9	100.3
Q4	99.9	95.7	100.9
2013 Q1	100.2	96.0	100.7
Q2	100.5	96.7	101.0
Q3		97.4

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html

The new data, additions and revisions are analyzed here. Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the first estimate for IIIQ2013 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html). GDP grew 0.8 percent in IIIQ2013 relative to IIQ2013. Growth of 0.6 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IIQ2013 is lower by 2.5 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/stb-gdp-preliminary-estimate--q3-2013.html). The UK Office for National Statistics estimates the contraction of 7.2 percent from peak to trough (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/stb-gdp-preliminary-estimate--q3-2013.html), which is roughly equal at 7.1 percent to compounding the quarterly rates in Table VH-2 from IIQ2008 to IIQ2009.

Table VH-2, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%

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

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.3 percent in IVQ2008, 6.8 percent in IQ2009, 6.3 percent in IIQ2009 and 5.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.0 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IQ2011, 0.8 percent in IIQ2011, 1.0 percent in IIIQ2011 and 1.1 percent in IVQ2011 but only 0.6 percent in IQ2012, change of 0.0 percent in IIQ2012 relative to IQ2011, change of 0.0 percent in IIIQ2012 and -0.2 percent in IVQ2012. Growth increased to 0.2 percent in IQ2013 relative to a year earlier and 0.4 percent in IQ2013 relative to IVQ2012. GDP increased 0.7 percent in IIQ2013 relative to IQ2013 and 1.3 percent in IIQ2013 relative to IIQ2012. GDP increased 0.8 percent in IIIQ2013 and 1.5 percent relative to a year earlier. In IQ2012, GDP changed 0.0 percent and increased 0.6 percent relative to a year earlier. In IIQ2012, GDP fell 0.5 percent relative to IQ2012 and changed 0.0 percent relative to a year earlier. In IIIQ2012, GDP increased 0.6 percent and changed 0.0 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.3 percent and fell 0.2 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. In IIQ2013, GDP increased 0.7 percent and 1.3 percent relative to a year earlier. GDP increased 0.8 percent in IIIQ2013 and 1.5 percent relative to a year earlier.

Table VH-3, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2013	0.2	1.3	1.5
2012	0.6	0.0	0.0	-0.2
2011	1.7	0.8	1.0	1.1
2010	0.5	2.0	2.4	1.8
2009	-6.8	-6.3	-5.0	-2.5
2008	2.8	0.6	-2.1	-4.3
2007	2.4	3.3	4.3	3.7
2006	4.0	3.0	2.3	1.8
2005	2.0	2.8	3.7	4.4
2004	4.7	3.7	2.5	1.9
2003	3.2	3.8	4.3	4.5
2002	1.8	1.9	2.3	3.2
2001	2.4	2.1	2.2	2.0
2000	4.7	5.7	4.1	3.0
1999	2.8	2.1	3.2	3.6
1998	4.0	3.5	3.4	3.4

Source: UK Office for National Statistics http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html

Table VH-4 provides annual percentage changes of gross value added and key components. Production fell 9.5 percent in 2009 and its most important component manufacturing fell 10.2 percent. Services fell 3.9 percent in 2009. Services grew in all years from 2010 to 2012 while manufacturing fell 1.7 percent in 2012.

Table VH-4, UK, Gross Value Added by Components, ∆% on Prior Year

	Total Production	MFG	CONST	SERVICES	GDP	GROSS VALUE ADDED
2010 Weights	152	104	63	778	1000	981
2008	-2.9	-2.8	-2.5	0.0	-0.8	-0.5
2009	-9.5	-10.2	-13.3	-3.9	-5.2	-5.4
2010	2.8	4.2	8.3	0.8	1.7	1.8
2011	-1.2	1.8	2.3	1.5	1.1	1.6
2012	-2.5	-1.7	-7.9	1.2	0.1	0.4

MGF: Manufacturing; CONST: Construction

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html

Percentage changes of gross value added and components are in Table VH-4A. Gross value added increased 0.8 percent in IIIQ2013 with growth of services of 0.7 percent and production of 0.5 while manufacturing expanded 0.9 percent. The UK Office for National Statistics estimates that services contributed 0.57 percentage points to GDP growth in IIIQ2013. The production industries contributed 0.06 percentage points and construction contributed 0.15 percentage points. Agriculture contributed 0.01 percentage points. GDP increased 0.79 percentage points. Manufacturing increased 0.9 percent in both IQ2013 and IIQ2013 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html).

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

		IOP	MFG	CONST	SERV	GDP	GVA
2010 Weights		152	104	63	778	1000	981
2010	Q1	1.3	0.9	3.1	0.3	0.5	0.6
	Q2	1.7	2.0	5.9	0.4	1.0	1.0
	Q3	0.1	1.2	1.7	0.5	0.4	0.6
	Q4	0.7	0.8	-2.2	-0.3	-0.2	-0.2
2011	Q1	-1.0	0.2	1.6	0.5	0.5	0.5
	Q2	-1.1	0.2	1.0	0.4	0.1	0.4
	Q3	-0.3	-0.4	-1.1	1.0	0.6	0.7
	Q4	-0.6	-0.4	-0.6	-	-0.1	-
2012	Q1	-0.5	-	-4.1	0.2	-	0.1
	Q2	-1.1	-1.4	-3.8	-0.1	-0.5	-0.4
	Q3	0.1	0.4	-1.9	0.9	0.6	0.6
	Q4	-2.0	-1.6	1.8	-0.1	-0.3	-0.2
2013	Q1	0.5	-	-1.3	0.6	0.4	0.3
	Q2	0.8	0.9	1.9	0.6	0.7	0.6
	Q3	0.5	0.9	2.5	0.7	0.8	0.8

IOP: Index of Production; MGF: Manufacturing; CONST: Construction; SERV: Services; GDP: Gross Domestic Product; GVA: Gross Value Added

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/index.html

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