Global Financial Risk, Mediocre United States Economic Growth, Stagnating Real Disposable Income, Twenty Nine Million Unemployed/Underemployed, Stagnating Real Wages, World Economic Slowdown and Global Recession Risk
Carlos M. Pelaez
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013
Executive Summary
I Mediocre and Decelerating United States Economic Growth
IA Mediocre and Decelerating United States Economic Growth
IA1 Contracting Real Private Fixed Investment
IA2 Swelling Undistributed Corporate Profits
IB Stagnating Real Disposable Income and Consumption Expenditures
IB1 Stagnating Real Disposable Income and Consumption Expenditures
IB2 Financial Repression
II Twenty Nine 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
IIB Stagnating Real Wages
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
IV Global Inflation. There is inflation everywhere in the world economy, with slow growth and persistently high unemployment in advanced economies. Table IV-1, updated with every blog comment, provides the latest annual data for GDP, consumer price index (CPI) inflation, producer price index (PPI) inflation and unemployment (UNE) for the advanced economies, China and the highly indebted European countries with sovereign risk issues. The table now includes the Netherlands and Finland that with Germany make up the set of northern countries in the euro zone that hold key votes in the enhancement of the mechanism for solution of sovereign risk issues (Peter Spiegel and Quentin Peel, “Europe: Northern Exposures,” Financial Times, Mar 9, 2011 http://www.ft.com/intl/cms/s/0/55eaf350-4a8b-11e0-82ab-00144feab49a.html#axzz1gAlaswcW). Newly available data on inflation is considered below in this section. Data in Table IV-1 for the euro zone and its members are updated from information provided by Eurostat but individual country information is provided in this section as soon as available, following Table IV-1. Data for other countries in Table IV-1 are also updated with reports from their statistical agencies. Economic data for major regions and countries is considered in Section V World Economic Slowdown following with individual country and regional data tables.
Table IV-1, GDP Growth, Inflation and Unemployment in Selected Countries, Percentage Annual Rates
| GDP | CPI | PPI | UNE | |
| US | 1.6 | 1.2 | 0.3 | 7.3 |
| Japan | 1.2 | 1.1 | 2.3 | 3.9 |
| China | 7.8 | 3.1 | -1.3 | |
| UK | 1.5 | 2.7* CPIH 2.5 | 1.2 output | 7.7 |
| Euro Zone | -0.6 | 1.1 | -0.9 | 12.2 |
| Germany | 0.5 | 1.6 | -0.4 | 5.2 |
| France | 0.4 | 1.0 | -0.4 | 11.1 |
| Nether-lands | -1.9 | 2.4 | -2.7 | 7.0 |
| Finland | -1.1 | 1.8 | 0.3 | 8.1 |
| Belgium | 0.0 | 1.0 | -0.9 | 8.9 |
| Portugal | -2.1 | 0.3 | -1.5 | 16.3 |
| Ireland | -1.1 | 0.0 | 2.1 | 13.6 |
| Italy | -2.2 | 0.9 | -2.2 | 12.5 |
| Greece | NA | -1.0 | -1.4 | NA |
| Spain | -1.6 | 0.5 | 0.1 | 26.6 |
Notes: GDP: rate of growth of GDP; CPI: change in consumer price inflation; PPI: producer price inflation; UNE: rate of unemployment; all rates relative to year earlier
*Office for National Statistics http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/september-2013/index.html **Core
Source: EUROSTAT http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/; country statistical sources http://www.census.gov/aboutus/stat_int.html
Table IV-1 shows the simultaneous occurrence of low growth, inflation and unemployment in advanced economies. The US grew at 1.6 percent in IIIQ2013 relative to IIIQ2012 (Section I, Table 8 in http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). Japan’s GDP grew 0.9 percent in IIQ2013 relative to IQ2013 and 1.2 percent relative to a year earlier. Japan’s grew at the seasonally adjusted annual rate (SAAR) of 3.8 percent in IIQQ2013 (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_3896.html). The UK grew at 0.8 percent in IIIQ2013 relative to IIQ2013 and GDP increased 1.5 percent in IIIQ2013 relative to IIIQ2012 (http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). The Euro Zone grew at 0.3 percent in IIQ2013 and minus 0.6 percent in IIQ2013 relative to IIQ2012 (http://cmpassocregulationblog.blogspot.com/2013/10/imf-view-collapse-of-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). These are stagnating or “growth recession” rates, which are positive or about nil growth rates with some contractions that are insufficient to recover employment. The rates of unemployment are quite high: 7.3 percent in the US but 17.7 percent for unemployment/underemployment or job stress of 28.9 million (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html), 3.9 percent for Japan (http://cmpassocregulationblog.blogspot.com/2013/10/collapse-of-united-states-dynamism-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html), 7.7 percent for the UK with high rates of unemployment for young people (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html). Twelve-month rates of inflation have been quite high, even when some are moderating at the margin: 1.2 percent in the US, 1.1 percent for Japan, 3.1 percent for China, 1.1 percent for the Euro Zone and 2.7 percent for the UK. Stagflation is still an unknown event but the risk is sufficiently high to be worthy of consideration (see http://cmpassocregulationblog.blogspot.com/2011/06/risk-aversion-and-stagflation.html). The analysis of stagflation also permits the identification of important policy issues in solving vulnerabilities that have high impact on global financial risks. Six key interrelated vulnerabilities in the world economy have been causing global financial turbulence. (1) Sovereign risk issues in Europe resulting from countries in need of fiscal consolidation and enhancement of their sovereign risk ratings (see Section III and earlier http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html). (2) The tradeoff of growth and inflation in China now with change in growth strategy to domestic consumption instead of investment and political developments in a decennial transition. (3) Slow growth by repression of savings with de facto interest rate controls (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html), weak hiring with the loss of 10 million full-time jobs (http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html) and continuing job stress of 24 to 30 million people in the US and stagnant wages in a fractured job market (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html). (4) The timing, dose, impact and instruments of normalizing monetary and fiscal policies (see http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html http://cmpassocregulationblog.blogspot.com/2012/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2011/08/united-states-gdp-growth-standstill.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html http://cmpassocregulationblog.blogspot.com/2011/03/global-financial-risks-and-fed.html http://cmpassocregulationblog.blogspot.com/2011/02/policy-inflation-growth-unemployment.html) in advanced and emerging economies. (5) The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 had repercussions throughout the world economy. Japan has share of about 9 percent in world output, role as entry point for business in Asia, key supplier of advanced components and other inputs as well as major role in finance and multiple economic activities (http://professional.wsj.com/article/SB10001424052748704461304576216950927404360.html?mod=WSJ_business_AsiaNewsBucket&mg=reno-wsj); and (6) geopolitical events in the Middle East.
In the effort to increase transparency, the Federal Open Market Committee (FOMC) provides both economic projections of its participants and views on future paths of the policy rate that in the US is the federal funds rate or interest on interbank lending of reserves deposited at Federal Reserve Banks. These policies and views are discussed initially followed with appropriate analysis.
Charles Evans, President of the Federal Reserve Bank of Chicago, proposed an “economic state-contingent policy” or “7/3” approach (Evans 2012 Aug 27):
“I think the best way to provide forward guidance is by tying our policy actions to explicit measures of economic performance. There are many ways of doing this, including setting a target for the level of nominal GDP. But recognizing the difficult nature of that policy approach, I have a more modest proposal: I think the Fed should make it clear that the federal funds rate will not be increased until the unemployment rate falls below 7 percent. Knowing that rates would stay low until significant progress is made in reducing unemployment would reassure markets and the public that the Fed would not prematurely reduce its accommodation.
Based on the work I have seen, I do not expect that such policy would lead to a major problem with inflation. But I recognize that there is a chance that the models and other analysis supporting this approach could be wrong. Accordingly, I believe that the commitment to low rates should be dropped if the outlook for inflation over the medium term rises above 3 percent.
The economic conditionality in this 7/3 threshold policy would clarify our forward policy intentions greatly and provide a more meaningful guide on how long the federal funds rate will remain low. In addition, I would indicate that clear and steady progress toward stronger growth is essential.”
Evans (2012Nov27) modified the “7/3” approach to a “6.5/2.5” approach:
“I have reassessed my previous 7/3 proposal. I now think a threshold of 6-1/2 percent for the unemployment rate and an inflation safeguard of 2-1/2 percent, measured in terms of the outlook for total PCE (Personal Consumption Expenditures Price Index) inflation over the next two to three years, would be appropriate.”
The Federal Open Market Committee (FOMC) decided at its meeting on Dec 12, 2012 to implement the “6.5/2.5” approach (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm):
“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
Another rising risk is division within the Federal Open Market Committee (FOMC) on risks and benefits of current policies as expressed in the minutes of the meeting held on Jan 29-30, 2013 (http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20130130.pdf 13):
“However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases. Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behavior that could undermine financial stability. Several participants noted that a very large portfolio of long-duration assets would, under certain circumstances, expose the Federal Reserve to significant capital losses when these holdings were unwound, but others pointed to offsetting factors and one noted that losses would not impede the effective operation of monetary policy.”
Jon Hilsenrath, writing on “Fed maps exit from stimulus,” on May 11, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887324744104578475273101471896.html?mod=WSJ_hp_LEFTWhatsNewsCollection), analyzes the development of strategy for unwinding quantitative easing and how it can create uncertainty in financial markets. Jon Hilsenrath and Victoria McGrane, writing on “Fed slip over how long to keep cash spigot open,” published on Feb 20, 2013 in the Wall street Journal (http://professional.wsj.com/article/SB10001424127887323511804578298121033876536.html), analyze the minutes of the Fed, comments by members of the FOMC and data showing increase in holdings of riskier debt by investors, record issuance of junk bonds, mortgage securities and corporate loans. Jon Hilsenrath, writing on “Jobs upturn isn’t enough to satisfy Fed,” on Mar 8, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324582804578348293647760204.html), finds that much stronger labor market conditions are required for the Fed to end quantitative easing. Unconventional monetary policy with zero interest rates and quantitative easing is quite difficult to unwind because of the adverse effects of raising interest rates on valuations of risk financial assets and home prices, including the very own valuation of the securities held outright in the Fed balance sheet. Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash.
Unconventional monetary policy will remain in perpetuity, or QE→∞, changing to a “growth mandate.” There are two reasons explaining unconventional monetary policy of QE→∞: insufficiency of job creation to reduce unemployment/underemployment at current rates of job creation; and growth of GDP at around 1.8 percent, which is well below 3.0 percent estimated by Lucas (2011May) from 1870 to 2010. Unconventional monetary policy interprets the dual mandate of low inflation and maximum employment as mainly a “growth mandate” of forcing economic growth in the US at a rate that generates full employment. A hurdle to this “growth mandate” is that US economic growth has been at only 2.3 percent on average in the cyclical expansion in the 17 quarters from IIIQ2009 to IIIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf
http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf) and the first estimate of GDP for IIIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). As a result, there are 28.9 million unemployed or underemployed in the United States for an effective unemployment rate of 17.7 percent (Section II and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html).
Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.
First, total nonfarm payroll employment seasonally adjusted (SA) increased 204,000 in Oct 2013 and private payroll employment rose 212,000. The average number of nonfarm jobs created in Jan-Oct 2012 was 172,700 while the average number of nonfarm jobs created in Jan-Sep 2013 was 186,300, or increase by 7.9 percent. The average number of private jobs created in the US in Jan-Oct 2012 was 178,900 while the average in Jan-Sep 2013 was 187,500, or increase by 4.8 percent. The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the ten months from Jan to Oct 2013 was 186,300, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 28.9 million unemployed or underemployed. The difference between the average increase of 186,300 new private nonfarm jobs per month in the US from Jan to Oct 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 73,133 monthly new jobs net of absorption of new entrants in the labor force. There are 28.9 million in job stress in the US currently. Creation of 73,133 new jobs per month net of absorption of new entrants in the labor force would require 396 months to provide jobs for the unemployed and underemployed (28.942 million divided by 73,133) or 33 years (396 divided by 12). The civilian labor force of the US in Oct 2013 not seasonally adjusted stood at 155.918 million with 10.773 million unemployed or effectively 18.959 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them for effective labor force of 163.104 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 1.1 years (1 million divided by product of 73.133 by 12, which is 877,596). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.746 million (0.05 times labor force of 154.918 million) for new net job creation of 3.027 million (10.773 million unemployed minus 7.746 million unemployed at rate of 5 percent) that at the current rate would take 3.4 years (3.027 million divided by 0.877596). Under the calculation in this blog, there are 18.959 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 163.104 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 10.164 million jobs net of labor force growth that at the current rate would take 12.3 years (18.959 million minus 0.05(163.104 million) = 10.804 million divided by 0.877596, using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in Oct 2013 was 144.144 million (NSA) or 3.171 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population increased from 231.958 million in Jul 2007 to 246.381 million in Oct 2013 or by 14.423 million. The number employed fell 2.2 percent from Jul 2007 to Oct 2013 while population increased 6.2 percent. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. The United States economy has grown at the average yearly rate of 3 percent per year and 2 percent per year in per capita terms from 1870 to 2010, as measured by Lucas (2011May). An important characteristic of the economic cycle in the US has been rapid growth in the initial phase of expansion after recessions. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design.
Second, there are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf
http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf) and the first estimate of GDP for IIIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). As a result, there are 28.9 million unemployed or underemployed in the United States for an effective unemployment rate of 17.7 percent (Section II and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html).
The economy of the US can be summarized in growth of economic activity or GDP as decelerating from mediocre growth of 2.5 percent on an annual basis in 2010 to 1.8 percent in 2011 to 2.8 percent in 2012. The following calculations show that actual growth is around 2.0 to 2.2 percent per year. This rate is well below 3 percent per year in trend from 1870 to 2010, which the economy of the US always attained for entire cycles in expansions after events such as wars and recessions (Lucas 2011May).
Revisions and enhancements of United States GDP and personal income accounts by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_2nd.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0713.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0813.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf) provide important information on long-term growth and cyclical behavior. Table Summary provides relevant data.
- Long-term. US GDP grew at the average yearly rate of 3.3 percent from 1929 to 2012 and at 3.2 percent from 1947 to 2012. There were periodic contractions or recessions in this period but the economy grew at faster rates in the subsequent expansions, maintaining long-term economic growth at trend.
- Cycles. The combined contraction of GDP in the two almost consecutive recessions in the early 1980s is 4.7 percent. The contraction of US GDP from IVQ2007 to IIQ2009 during the global recession was 4.3 percent. The critical difference in the expansion is growth at average 7.8 percent in annual equivalent in the first four quarters of recovery from IQ1983 to IVQ1983. The average rate of growth of GDP in four cyclical expansions in the postwar period is 7.7 percent. In contrast, the rate of growth in the first four quarters from IIIQ2009 to IIQ2010 was only 2.7 percent. Average annual equivalent growth in the expansion from IQ1983 to IQ1986 was 5.7 percent. In contrast, average annual equivalent growth in the expansion from IIIQ2009 to IIIQ2013 was only 2.3 percent. The US appears to have lost its dynamism of income growth and employment creation.
Table Summary, Long-term and Cyclical Growth of GDP, Real Disposable Income and Real Disposable Income per Capita
| GDP | ||
| Long-Term | ||
| 1929-2012 | 3.3 | |
| 1947-2012 | 3.2 | |
| Cyclical Contractions ∆% | ||
| IQ1980 to IIIQ1980, IIIQ1981 to IVQ1982 | -4.7 | |
| IVQ2007 to IIQ2009 | -4.3 | |
| Cyclical Expansions Average Annual Equivalent ∆% | ||
| IQ1983 to IQ1986 IQ1983-IIIQ1986 IQ1983-IQ1986 IQ1983-IQ1987 | 5.7 5.4 5.2 5.0 | |
| First Four Quarters IQ1983 to IVQ1983 | 7.8 | |
| IIIQ2009 to IIIQ2013 | 2.3 | |
| First Four Quarters IIIQ2009 to IIQ2010 | 2.7 | |
| Real Disposable Income | Real Disposable Income per Capita | |
| Long-Term | ||
| 1929-2012 | 3.2 | 2.0 |
| 1947-1999 | 3.7 | 2.3 |
| Whole Cycles | ||
| 1980-1989 | 3.5 | 2.6 |
| 2006-2012 | 1.4 | 0.6 |
Source: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0813.pdf
http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf
The revisions and enhancements of United States GDP and personal income accounts by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_2nd.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0713.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0813.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp3q13_adv.pdf) also provide critical information in assessing the current rhythm of US economic growth. The economy appears to be moving at a pace from 2.0 to 2.2 percent per year. Table Summary GDP provides the data.
1. Average Annual Growth in the Past Six Quarters. GDP growth in the four quarters of 2012 and the first three quarters of 2013 accumulated to 3.6 percent. This growth is equivalent to 2.0 percent per year, obtained by dividing GDP in IIIQ2013 of $15,790.1 by GDP in IVQ2011 of $15,242.1 and compounding by 4/7: {[($15,790.1/$15,242.1)4/6 -1]100 = 2.0.
2. Average Annual Growth in the First Three Quarters of 2013. GDP growth in the first three quarters of 2013 accumulated to 1.6 percent that is equivalent to 2.2 percent in a year. This is obtained by dividing GDP in IIIQ2013 of $15,790.1 by GDP in IVQ2012 of $15,539.6 and compounding by 4/3: {[($15,790.1/$15,539.6)4/3 -1]100 = 2.2%}. The US economy grew 1.6 percent in IIIQ2013 relative to the same quarter a year earlier in IIIQ2012. Another important revelation of the revisions and enhancements is that GDP was flat in IVQ2012, which is just at the borderline of contraction.
Table Summary GDP, US, Real GDP and Percentage Change Relative to IVQ2007 and Prior Quarter, Billions Chained 2005 Dollars and ∆%
| Real GDP, Billions Chained 2005 Dollars | ∆% Relative to IVQ2007 | ∆% Relative to Prior Quarter | ∆% | |
| IVQ2007 | 14,996.1 | NA | NA | 1.9 |
| IVQ2011 | 15,242.1 | 1.6 | 1.2 | 2.0 |
| IQ2012 | 15,381.6 | 2.6 | 0.9 | 3.3 |
| IIQ2012 | 15,427.7 | 2.9 | 0.3 | 2.8 |
| IIIQ2012 | 15,534.0 | 3.6 | 0.7 | 3.1 |
| IVQ2012 | 15,539.6 | 3.6 | 0.0 | 2.0 |
| IQ2013 | 15,583.9 | 3.9 | 0.3 | 1.3 |
| IIQ2013 | 15,679.7 | 4.6 | 0.6 | 1.6 |
| Cumulative ∆% IQ2012 to IIQ2013 | 2.9 | 2.8 | ||
| Annual Equivalent ∆% | 1.9 | 1.9 |
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.pdf
In fact, it is evident to the public that this policy will be abandoned if inflation costs rise. There is concern of the production and employment costs of controlling future inflation. Even if there is no inflation, QE→∞ cannot be abandoned because of the fear of rising interest rates. The economy would operate in an inferior allocation of resources and suboptimal growth path, or interior point of the production possibilities frontier where the optimum of productive efficiency and wellbeing is attained, because of the distortion of risk/return decisions caused by perpetual financial repression. Not even a second-best allocation is feasible with the shocks to efficiency of financial repression in perpetuity.
The statement of the FOMC at the conclusion of its meeting on Dec 12, 2012, revealed policy intentions (http://www.federalreserve.gov/newsevents/press/monetary/20121212a.htm) practically unchanged in the statement at the conclusion of its meeting on Jan 30, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130130a.htm) and at its meeting on Oct 30, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20131030a.htm):
“Press Release
Release Date: October 30, 2013
For immediate release
Information received since the Federal Open Market Committee met in September generally suggests that economic activity has continued to expand at a moderate pace. Indicators of labor market conditions have shown some further improvement, but the unemployment rate remains elevated. Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months. Fiscal policy is restraining economic growth. Apart from fluctuations due to changes in energy prices, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.
Taking into account the extent of federal fiscal retrenchment over the past year, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In judging when to moderate the pace of asset purchases, the Committee will, at its coming meetings, assess whether incoming information continues to support the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective. Asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's economic outlook as well as its assessment of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Charles L. Evans; Jerome H. Powell; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.”
There are several important issues in this statement.
- Mandate. The FOMC pursues a policy of attaining its “dual mandate” of (http://www.federalreserve.gov/aboutthefed/mission.htm):
“Conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates”
- Open-ended Quantitative Easing or QE∞. Earlier programs are continued with an additional open-ended $85 billion of bond purchases per month: “However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.”
- Advance Guidance on “6 ¼ 2 ½ “Rule. Policy will be accommodative even after the economy recovers satisfactorily: “To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”
- Monitoring and Policy Focus on Jobs. The FOMC reconsiders its policy continuously in accordance with available information: “In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
- No Present Course of Asset Purchases. Market participants focused on slightly different wording about asset purchases: “In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
- Growth. “The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.”
Current focus is on tapering quantitative easing by the Federal Open Market Committee (FOMC). There is sharp distinction between the two measures of unconventional monetary policy: (1) fixing of the overnight rate of fed funds at 0 to ¼ percent; and (2) outright purchase of Treasury and agency securities and mortgage-backed securities for the balance sheet of the Federal Reserve. Market are overreacting to the so-called “paring” of outright purchases of $85 billion of securities per month for the balance sheet of the Fed. What is truly important is the fixing of the overnight fed funds at 0 to ¼ percent for which there is no end in sight as evident in the FOMC statement for Oct 30, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20131030a.htm):
“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent.” (emphasis added).
There is a critical phrase in the statement of Sep 19, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130918a.htm): “but mortgage rates have risen further.” Did the increase of mortgage rates influence the decision of the FOMC not to taper? Is FOMC “communication” and “guidance” successful?
In delivering the biannual report on monetary policy (Board of Governors 2013Jul17), Chairman Bernanke (2013Jul17) advised Congress that:
“Instead, we are providing additional policy accommodation through two distinct yet complementary policy tools. The first tool is expanding the Federal Reserve's portfolio of longer-term Treasury securities and agency mortgage-backed securities (MBS); we are currently purchasing $40 billion per month in agency MBS and $45 billion per month in Treasuries. We are using asset purchases and the resulting expansion of the Federal Reserve's balance sheet primarily to increase the near-term momentum of the economy, with the specific goal of achieving a substantial improvement in the outlook for the labor market in a context of price stability. We have made some progress toward this goal, and, with inflation subdued, we intend to continue our purchases until a substantial improvement in the labor market outlook has been realized. We are relying on near-zero short-term interest rates, together with our forward guidance that rates will continue to be exceptionally low--our second tool--to help maintain a high degree of monetary accommodation for an extended period after asset purchases end, even as the economic recovery strengthens and unemployment declines toward more-normal levels. In appropriate combination, these two tools can provide the high level of policy accommodation needed to promote a stronger economic recovery with price stability.
The Committee's decisions regarding the asset purchase program (and the overall stance of monetary policy) depend on our assessment of the economic outlook and of the cumulative progress toward our objectives. Of course, economic forecasts must be revised when new information arrives and are thus necessarily provisional.”
Friedman (1953) argues there are three lags in effects of monetary policy: (1) between the need for action and recognition of the need; (2) the recognition of the need and taking of actions; and (3) taking of action and actual effects. Friedman (1953) finds that the combination of these lags with insufficient knowledge of the current and future behavior of the economy causes discretionary economic policy to increase instability of the economy or standard deviations of real income σy and prices σp. Policy attempts to circumvent the lags by policy impulses based on forecasts. We are all naïve about forecasting. Data are available with lags and revised to maintain high standards of estimation. Policy simulation models estimate economic relations with structures prevailing before simulations of policy impulses such that parameters change as discovered by Lucas (1977). Economic agents adjust their behavior in ways that cause opposite results from those intended by optimal control policy as discovered by Kydland and Prescott (1977). Advance guidance attempts to circumvent expectations by economic agents that could reverse policy impulses but is of dubious effectiveness. There is strong case for using rules instead of discretionary authorities in monetary policy (http://cmpassocregulationblog.blogspot.com/search?q=rules+versus+authorities).
The key policy is maintaining fed funds rate between 0 and ¼ percent. An increase in fed funds rates could cause flight out of risk financial markets worldwide. There is no exit from this policy without major financial market repercussions. Indefinite financial repression induces carry trades with high leverage, risks and illiquidity.
Unconventional monetary policy drives wide swings in allocations of positions into risk financial assets that generate instability instead of intended pursuit of prosperity without inflation. There is insufficient knowledge and imperfect tools to maintain the gap of actual relative to potential output constantly at zero while restraining inflation in an open interval of (1.99, 2.0). Symmetric targets appear to have been abandoned in favor of a self-imposed single jobs mandate of easing monetary policy even with the economy growing at or close to potential output that is actually a target of growth forecast. The impact on the overall economy and the financial system of errors of policy are magnified by large-scale policy doses of trillions of dollars of quantitative easing and zero interest rates. The US economy has been experiencing financial repression as a result of negative real rates of interest during nearly a decade and programmed in monetary policy statements until 2015 or, for practical purposes, forever. The essential calculus of risk/return in capital budgeting and financial allocations has been distorted. If economic perspectives are doomed until 2015 such as to warrant zero interest rates and open-ended bond-buying by “printing” digital bank reserves (http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html; see Shultz et al 2012), rational investors and consumers will not invest and consume until just before interest rates are likely to increase. Monetary policy statements on intentions of zero interest rates for another three years or now virtually forever discourage investment and consumption or aggregate demand that can increase economic growth and generate more hiring and opportunities to increase wages and salaries. The doom scenario used to justify monetary policy accentuates adverse expectations on discounted future cash flows of potential economic projects that can revive the economy and create jobs. If it were possible to project the future with the central tendency of the monetary policy scenario and monetary policy tools do exist to reverse this adversity, why the tools have not worked before and even prevented the financial crisis? If there is such thing as “monetary policy science”, why it has such poor record and current inability to reverse production and employment adversity? There is no excuse of arguing that additional fiscal measures are needed because they were deployed simultaneously with similar ineffectiveness.
In remarkable anticipation in 2005, Professor Raghuram G. Rajan (2005) warned of low liquidity and high risks of central bank policy rates approaching the zero bound (Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 218-9). Professor Rajan excelled in a distinguished career as an academic economist in finance and was chief economist of the International Monetary Fund (IMF). Shefali Anand and Jon Hilsenrath, writing on Oct 13, 2013, on “India’s central banker lobbies Fed,” published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702304330904579133530766149484?KEYWORDS=Rajan), interviewed Raghuram G Rajan, who is the current Governor of the Reserve Bank of India, which is India’s central bank (http://www.rbi.org.in/scripts/AboutusDisplay.aspx). In this interview, Rajan argues that central banks should avoid unintended consequences on emerging market economies of inflows and outflows of capital triggered by monetary policy. Portfolio reallocations induced by combination of zero interest rates and risk events stimulate carry trades that generate wide swings in world capital flows.
Professor Ronald I. McKinnon (2013Oct27), writing on “Tapering without tears—how to end QE3,” on Oct 27, 2013, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702304799404579153693500945608?KEYWORDS=Ronald+I+McKinnon), finds that the major central banks of the world have fallen into a “near-zero-interest-rate trap.” World economic conditions are weak such that exist from the zero interest rate trap could have adverse effects on production, investment and employment. The maintenance of interest rates near zero creates long-term near stagnation. The proposal of Professor McKinnon is credible, coordinated increase of policy interest rates toward 2 percent. Professor John B. Taylor at Stanford University, writing on “Economic failures cause political polarization,” on Oct 28, 2013, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303442004579121010753999086?KEYWORDS=John+B+Taylor), analyzes that excessive risks induced by near zero interest rates in 2003-2004 caused the financial crash. Monetary policy continued in similar paths during and after the global recession with resulting political polarization worldwide.
Table IV-2 provides economic projections of governors of the Board of Governors of the Federal Reserve and regional presidents of Federal Reserve Banks released at the meeting of Sep 18, 2013. The Fed releases the data with careful explanations (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf). Columns “∆% GDP,” “∆% PCE Inflation” and “∆% Core PCE Inflation” are changes “from the fourth quarter of the previous year to the fourth quarter of the year indicated.” The GDP report for IIIQ2013 is analyzed in Section I (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html) and the PCE inflation data from the report on personal income and outlays in Section IV (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). The Bureau of Economic Analysis (BEA) provides the estimate of IIQ2013 GDP released on Aug Sep 26 with revisions since 1929 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). The BEA provides the first estimate of IIIQ2013 GDP released on Nov 8, 2013 (Section I). PCE inflation is the index of personal consumption expenditures (PCE) of the report of the Bureau of Economic Analysis (BEA) on “Personal Income and Outlays” (http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm), which is analyzed in Section IV (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). The report on “Personal Income and Outlays” the report for Sep 2013 was released on Nov 8, 2013 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). PCE core inflation consists of PCE inflation excluding food and energy. Column “UNEMP %” is the rate of unemployment measured as the average civilian unemployment rate in the fourth quarter of the year. The Bureau of Labor Statistics (BLS) provides the Employment Situation Report with the civilian unemployment rate in the first Friday of every month, which is analyzed in this blog. The report for Jul 2013 was released on Aug 2 and analyzed in this blog and the report for Aug 2013 was released on Sep 6, 2013 (http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html
and earlier http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html). The report for Sep 2013 was released on Oct 22, 2013 (http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html). The report for Oct 2013 was released on Nov 8, 2013 (Section II). “Longer term projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy” (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20121212.pdf).
It is instructive to focus on 2013 and 2014 because 2015, 2016 and longer term are too far away, and there is not much information even on what will happen in 2013-2014 and beyond. The central tendency should provide reasonable approximation of the view of the majority of members of the FOMC but the second block of numbers provides the range of projections by FOMC participants. The first row for each year shows the projection introduced after the meeting of Sep 18, 2013 and the second row “PR” the projection of the Jun 19, 2013 meeting. There are three major changes in the view.
1. Growth “∆% GDP.” The FOMC has reduced the forecast of GDP growth in 2013 from 2.3 to 2.6 percent at the meeting in Jun 2013 to 2.0 to 2.3 percent at the meeting on Sep 18, 2013. The FOMC decreased GDP growth in 2014 from 3.0 to 3.5 percent at the meeting in Jun 2013 to 2.9 to 3.1 percent at the meeting in Sep 2013.
2. Rate of Unemployment “UNEM%.” The FOMC reduced the forecast of the rate of unemployment from 7.2 to 7.3 percent at the meeting on Jun 19, 2013 to 7.1 to 7.3 percent at the meeting on Sep 18, 2013. The projection for 2014 decreased to the range of 6.4 to 6.8 in Sep 2013 from 6.5 to 6.8 in Jun 2013. Projections of the rate of unemployment are moving closer to the desire 6.5 percent or lower with 5.9 to 6.2 percent in 2015 after the meeting on Sep 18, 2013.
3. Inflation “∆% PCE Inflation.” The FOMC changed the forecast of personal consumption expenditures (PCE) inflation from 0.8 to 1.2 percent at the meeting on Jun 19, 2012 to 1.1 to 1.2 percent at the meeting on Sep 18, 2013. There are no projections exceeding 2.0 percent in the central tendency but some in the range reach 2.3 percent in 2015 and 2015. The longer run projection is at 2.0 percent.
4. Core Inflation “∆% Core PCE Inflation.” Core inflation is PCE inflation excluding food and energy. There is again not much of a difference of the projection, changing from 1.2 to 1.3 percent at the meeting on Jun 19, 2013 to 1.2 to 1.3 percent at the meeting Sep 13, 2013. In 2014, there is minor change in the projection from 1.5 to 1.8 percent in Jun 19, 2013 to 1.5 to 1.7 percent in Sep 18, 2013. The rate of change of the core PCE is below 2.0 percent in the central tendency with 2.3 percent at the top of the range in 2015 and 2016.
Table IV-2, US, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents in FOMC, Mar 2013 and Jun 19, 2013
| ∆% GDP | UNEM % | ∆% PCE Inflation | ∆% Core PCE Inflation | |
| Central | ||||
| 2013 | 2.0 to 2.3 | 7.1 to 7.3 | 1.1 to 1.2 | 1.2 to 1.3 1.2 to 1.3 |
| 2014 | 2.9 to 3.1 | 6.4 to 6.8 | 1.3 to 1.8 | 1.5 to 1.7 |
| 2015 Jun PR | 3.0 to 3.5 2.9 to 3.6 | 5.9 to 6.2 5.8 to 6.2 | 1.6 to 2.0 1.7 to 2.0 | 1.7 to 2.0 1.7 to 2.0 |
| 2016 Jun PR | 2.5 to 3.3 NA | 5.4 to 5.9 NA | 1.7 to 2.0 NA | 1.9 to 2.0 NA |
| Longer Run Jun PR | 2.2 to 2.5 2.3 to 2.5 | 5.2 to 5.8 5.2 to 6.0 | 2.0 2.0 | |
| Range | ||||
| 2013 | 1.8 to 2.4 | 6.9 to 7.3 | 1.0 to 1.3 | 1.2 to 1.4 |
| 2014 | 2.2 to 3.3 | 6.2 to 6.9 | 1.2 to 2.0 | 1.4 to 2.0 |
| 2015 Jun PR | 2.2 to 3.7 2.3 to 3.8 | 5.3 to 6.3 5.7 to 6.4 | 1.4 to 2.3 1.6 to 2.3 | 1.6 to 2.3 1.7 to 2.3 |
| 2016 Jun PR | 2.2 to 3.5 NA | 5.2 to 6.0 NA | 1.5 to 2.3 NA | 1.7 to 2.3 NA |
| Longer Run Jun PR | 2.1 to 2.5 2.0 to 3.0 | 5.2 to 6.0 5.0 to 6.0 | 2.0 2.0 |
Notes: UEM: unemployment; PR: Projection
Source: Board of Governors of the Federal Reserve System, FOMC
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130918.pdf
Another important decision at the FOMC meeting on Jan 25, 2012, is formal specification of the goal of inflation of 2 percent per year but without specific goal for unemployment (http://www.federalreserve.gov/newsevents/press/monetary/20120125c.htm):
“Following careful deliberations at its recent meetings, the Federal Open Market Committee (FOMC) has reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy. The Committee intends to reaffirm these principles and to make adjustments as appropriate at its annual organizational meeting each January.
The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.
Inflation, employment, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Moreover, monetary policy actions tend to influence economic activity and prices with a lag. Therefore, the Committee's policy decisions reflect its longer-run goals, its medium-term outlook, and its assessments of the balance of risks, including risks to the financial system that could impede the attainment of the Committee's goals.
The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances.
The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee's policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. Information about Committee participants' estimates of the longer-run normal rates of output growth and unemployment is published four times per year in the FOMC's Summary of Economic Projections. For example, in the most recent projections, FOMC participants' estimates of the longer-run normal rate of unemployment had a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January but substantially higher than the corresponding interval several years earlier.
In setting monetary policy, the Committee seeks to mitigate deviations of inflation from its longer-run goal and deviations of employment from the Committee's assessments of its maximum level. These objectives are generally complementary. However, under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them, taking into account the magnitude of the deviations and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with its mandate. ”
The probable intention of this specific inflation goal is to “anchor” inflationary expectations. Massive doses of monetary policy of promoting growth to reduce unemployment could conflict with inflation control. Economic agents could incorporate inflationary expectations in their decisions. As a result, the rate of unemployment could remain the same but with much higher rate of inflation (see Kydland and Prescott 1977 and Barro and Gordon 1983; 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 See Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 99-116). Strong commitment to maintaining inflation at 2 percent could control expectations of inflation.
The FOMC continues its efforts of increasing transparency that can improve the credibility of its firmness in implementing its dual mandate. Table IV-3 provides the views by participants of the FOMC of the levels at which they expect the fed funds rate in 2013, 2014, 2015, 2016 and the in the longer term. Table IV-3 is inferred from a chart provided by the FOMC with the number of participants expecting the target of fed funds rate (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf). There are 17 participants expecting the rate to remain at 0 to ¼ percent in 2013. The rate would still remain at 0 to ¼ percent in 2014 for 13 participants with three expecting the rate to be in the range of 0.5 to 1.0 percent and one participant expecting rates at 1.0 to 1.5 percent. This table is consistent with the guidance statement of the FOMC that rates will remain at low levels. For 2015, eight participants expect rates to be below or at 1.0 percent while six expect rates from 1.0 to 1.5 percent and three expecting rates in excess of 2.0 percent. For 2016, nine participants expect rates between 1.0 and 2.0 percent, four between 2.0 and 3.0 percent and three between 3.0 and 4.4 percent. In the long term, all 17 participants expect the fed funds rate in the range of 3.0 to 4.5 percent.
Table IV-3, US, Views of Target Federal Funds Rate at Year-End of Federal Reserve Board
Members and Federal Reserve Bank Presidents Participating in FOMC, Jun 19, 2013
| 0 to 0.25 | 0.5 to 1.0 | 1.0 to 1.5 | 1.0 to 2.0 | 2.0 to 3.0 | 3.0 to 4.5 | |
| 2013 | 17 | |||||
| 2014 | 13 | 3 | 1 | |||
| 2015 | 8 | 6 | 3 | |||
| 2016 | 1 | 9 | 4 | 3 | ||
| Longer Run | 17 |
Source: Board of Governors of the Federal Reserve System, FOMC
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130918.pdf
Additional information is provided in Table IV-4 with the number of participants expecting increasing interest rates in the years from 2013 to 2016. It is evident from Table IV-4 that the prevailing view of the FOMC is for interest rates to continue at low levels in future years. This view is consistent with the economic projections of low economic growth, relatively high unemployment and subdued inflation provided in Table IV-2. The FOMC states that rates will continue to be low even after return of the economy to potential growth.
Table IV-4, US, Views of Appropriate Year of Increasing Target Federal Funds Rate of Federal
Reserve Board Members and Federal Reserve Bank Presidents Participating in FOMC, June 19, 2013
| Appropriate Year of Increasing Target Fed Funds Rate | Number of Participants |
| 2014 | 3 |
| 2015 | 12 |
| 2016 | 2 |
Source: Board of Governors of the Federal Reserve System, FOMC
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130918.pdf
The revisions and enhancements of United States GDP and personal income accounts by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) also provide critical information in assessing indexes of prices of personal consumption. There are waves of inflation similar to those worldwide (http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html) in inflation of personal consumption expenditures (PCE) in Table IV-5. These waves are in part determined by commodity price shocks originating in the carry trade from zero interest rates to positions in risk financial assets, in particular in commodity futures, which increase the prices of food and energy when there is relaxed risk aversion. Return of risk aversion causes collapse in prices. Resulting fluctuations of prices confuse risk/return decisions, inducing financial instability with adverse financial and economic consequences. The first wave is in Jan-Apr 2011 when headline PCE inflation increased at the average annual equivalent rate of 3.7 percent and PCE inflation excluding food and energy (PCEX) at 1.5 percent. The drivers of inflation were increases in food prices (PCEF) at the annual equivalent rate of 7.8 percent and of energy prices (PCEE) at 26.4 percent. This behavior will prevail under zero interest rates and relaxed risk aversion because of carry trades from zero interest rates to leveraged positions in commodity futures. The second wave occurred in May-Jun 2011 when risk aversion from the European sovereign risk crisis interrupted the carry trade. PCE prices increased 2.4 percent in annual equivalent and 2.4 percent excluding food and energy. The third wave is captured by the annual equivalent rates in Jul-Sep 2011 of headline PCE inflation of 2.4 percent with subdued PCE inflation excluding food and energy of 2.0 percent while PCE food rose at 6.2 percent and PCE energy increased at 6.2 percent. In the fourth wave in Oct-Dec 2011, increased risk aversion explains the fall of the annual equivalent rate of inflation to 0.8 percent for headline PCE inflation and 2.0 percent for PCEX excluding food and energy. PCEF of prices of food rose at the annual equivalent rate of 1.2 percent in Oct-Dec 2011 while PCEE of prices of energy fell at the annual equivalent rate of 10.7 percent. In the fifth wave in Jan-Mar 2012, headline PCE in annual equivalent was 2.4 percent and 2.4 percent excluding food and energy (PCEX). Energy prices of personal consumption (PCEE) increased at the annual equivalent rate of 15.8 percent because of the jump of 2.3 percent in Feb 2012 followed by 1.3 percent in Mar 2012. In the sixth wave, renewed risk aversion caused reversal of carry trades with headline PCE inflation at the annual equivalent rate of 0.0 percent in Apr-May 2012 while PCE inflation excluding food and energy increased at the annual equivalent rate of 1.2 percent. In the seventh wave, further shocks of risk aversion resulted in headline PCE annual equivalent inflation at 1.2 percent in Jun-Jul 2012 with core PCE excluding food and energy at 1.8 percent. In the eighth wave, temporarily relaxed risk aversion with zero interest rates resulted in central PCE inflation at 3.7 percent annual equivalent in Aug-Sep 2012 with PCEX excluding food and energy at 0.6 percent while PCEE energy jumped at 67.6 percent annual equivalent. The program of outright monetary transactions (OTM) of the European Central Bank induced relaxed risk aversion (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). In the ninth wave, prices collapsed with reversal of carry trade positions in a new episode of risk aversion with central PCE at annual equivalent 0.6 percent in Oct 2012 to Jan 2013 and PCEX at 1.8 percent while energy prices fell at minus 16.9 percent. In the tenth wave, central PCE increased at annual equivalent 4.9 percent in Feb 2013, PCEX at 1.2 percent and PCEE at 92.3 percent. In the eleventh wave, renewed risk aversion resulted in decline in annual equivalent of general PCE prices at 2.4 percent in Mar-Apr 2013 while PCEX increased at 0.6 percent and energy prices fell at 34.8 percent. In the twelfth wave, central PCE increased at 1.9 percent annual equivalent in May-Sep 2013 with PCEX increasing at 1.4 percent, food PCEF increasing at 0.7 percent and energy PCEE increasing at 11.5 percent with the jump of 3.4 percent in Jun 2013.
Table IV-5, US, Percentage Change from Prior Month of Prices of Personal Consumption Expenditures, Seasonally Adjusted Monthly ∆%
| PCE | PCEG | PCEG | PCES | PCEX | PCEF | PCEE | |
| 2013 | |||||||
| Sep | 0.1 | 0.0 | 0.0 | 0.1 | 0.1 | -0.1 | 0.8 |
| Aug | 0.1 | 0.0 | -0.3 | 0.2 | 0.1 | 0.2 | -0.2 |
| Jul | 0.1 | 0.1 | -0.3 | 0.1 | 0.1 | 0.1 | 0.3 |
| Jun | 0.4 | 0.7 | 0.0 | 0.2 | 0.2 | 0.3 | 3.4 |
| May | 0.1 | -0.1 | -0.1 | 0.2 | 0.1 | -0.2 | 0.3 |
| ∆% AE May-Aug | 1.9 | 1.7 | -1.7 | 1.9 | 1.4 | 0.7 | 11.5 |
| Apr | -0.3 | -0.9 | -0.3 | 0.0 | 0.0 | 0.1 | -4.4 |
| Mar | -0.1 | -0.6 | -0.2 | 0.1 | 0.1 | 0.1 | -2.6 |
| ∆% AE Mar-Apr | -2.4 | -8.6 | -3.0 | 0.6 | 0.6 | 1.2 | -34.8 |
| Feb | 0.4 | 0.8 | -0.1 | 0.2 | 0.1 | 0.2 | 5.6 |
| ∆% AE Feb | 4.9 | 10.0 | -1.2 | 2.4 | 1.2 | 2.4 | 92.3 |
| Jan | 0.1 | -0.2 | 0.1 | 0.2 | 0.2 | 0.0 | -1.8 |
| 2012 | |||||||
| Dec | 0.0 | -0.3 | -0.2 | 0.2 | 0.1 | 0.2 | -0.9 |
| Nov | -0.1 | -0.7 | -0.1 | 0.2 | 0.1 | 0.2 | -3.5 |
| Oct | 0.2 | 0.1 | -0.2 | 0.2 | 0.2 | 0.3 | 0.1 |
| ∆% AE Oct-Jan | 0.6 | -3.3 | -1.2 | 2.4 | 1.8 | 2.1 | -16.9 |
| Sep | 0.3 | 0.6 | -0.2 | 0.1 | 0.1 | -0.1 | 4.1 |
| Aug | 0.3 | 0.7 | -0.2 | 0.1 | 0.0 | 0.1 | 4.7 |
| ∆% AE Aug-Sep | 3.7 | 8.1 | -2.4 | 1.2 | 0.6 | 0.0 | 67.6 |
| Jul | 0.0 | -0.2 | -0.3 | 0.1 | 0.1 | 0.0 | -1.2 |
| Jun | 0.2 | 0.0 | -0.1 | 0.3 | 0.2 | 0.2 | -0.7 |
| ∆% AE Jun-Jul | 1.2 | -1.2 | -2.4 | 2.4 | 1.8 | 1.2 | -10.8 |
| May | 0.0 | -0.5 | 0.0 | 0.2 | 0.1 | 0.0 | -2.9 |
| Apr | 0.0 | -0.3 | -0.1 | 0.2 | 0.1 | 0.0 | -1.9 |
| ∆% AE Apr- May | 0.0 | -4.7 | -0.6 | 2.4 | 1.2 | 0.0 | -25.3 |
| Mar | 0.2 | 0.3 | -0.2 | 0.2 | 0.2 | 0.2 | 1.3 |
| Feb | 0.2 | 0.4 | 0.0 | 0.2 | 0.1 | 0.0 | 2.3 |
| Jan | 0.2 | 0.2 | 0.1 | 0.2 | 0.3 | 0.2 | 0.1 |
| ∆% AE Jan- Mar | 2.4 | 3.7 | -0.4 | 2.4 | 2.4 | 1.6 | 15.8 |
| 2011 | |||||||
| Dec | 0.1 | -0.1 | -0.2 | 0.2 | 0.1 | 0.2 | -1.2 |
| Nov | 0.1 | 0.1 | -0.2 | 0.2 | 0.2 | -0.1 | 0.0 |
| Oct | 0.0 | -0.2 | 0.0 | 0.1 | 0.1 | 0.2 | -1.6 |
| ∆% AE Oct- Dec | 0.8 | -1.2 | -1.6 | 2.0 | 2.0 | 1.2 | -10.7 |
| Sep | 0.2 | 0.2 | -0.4 | 0.2 | 0.1 | 0.5 | 1.3 |
| Aug | 0.2 | 0.3 | -0.2 | 0.2 | 0.2 | 0.6 | 0.1 |
| Jul | 0.2 | 0.2 | -0.1 | 0.2 | 0.2 | 0.4 | 0.1 |
| ∆% AE Jul-Sep | 2.4 | 2.8 | -2.8 | 2.4 | 2.0 | 6.2 | 6.2 |
| Jun | 0.1 | 0.1 | 0.2 | 0.1 | 0.2 | 0.2 | -0.7 |
| May | 0.3 | 0.5 | 0.1 | 0.2 | 0.2 | 0.5 | 1.4 |
| ∆% AE May-Jun | 2.4 | 3.7 | 1.8 | 1.8 | 2.4 | 4.3 | 4.2 |
| Apr | 0.3 | 0.5 | 0.3 | 0.2 | 0.2 | 0.4 | 1.8 |
| Mar | 0.4 | 0.8 | -0.1 | 0.2 | 0.1 | 0.8 | 3.6 |
| Feb | 0.3 | 0.5 | 0.1 | 0.2 | 0.1 | 0.7 | 1.7 |
| Jan | 0.2 | 0.4 | 0.0 | 0.1 | 0.1 | 0.6 | 0.8 |
| ∆% AE Jan-Apr | 3.7 | 6.8 | 0.9 | 2.1 | 1.5 | 7.8 | 26.4 |
| 2010 | |||||||
| Dec | 0.2 | 0.6 | -0.3 | 0.1 | 0.0 | 0.1 | 4.1 |
| Nov | 0.2 | 0.2 | -0.2 | 0.1 | 0.1 | 0.2 | 1.1 |
| Oct | 0.2 | 0.4 | -0.2 | 0.1 | 0.1 | 0.1 | 3.1 |
| Sep | 0.1 | 0.2 | -0.1 | 0.1 | 0.0 | 0.2 | 0.6 |
| Aug | 0.1 | 0.3 | 0.1 | 0.1 | 0.1 | 0.1 | 1.0 |
| Jul | 0.1 | 0.1 | -0.3 | 0.1 | 0.1 | 0.1 | 1.2 |
| Jun | 0.1 | -0.1 | -0.4 | 0.1 | 0.1 | -0.1 | -0.5 |
| May | 0.0 | -0.2 | -0.2 | 0.2 | 0.1 | 0.1 | -1.2 |
| Apr | 0.0 | -0.3 | -0.2 | 0.1 | 0.0 | 0.1 | -0.8 |
| Mar | 0.1 | -0.1 | 0.0 | 0.2 | 0.1 | 0.2 | -0.5 |
| Feb | 0.0 | -0.2 | -0.3 | 0.1 | 0.1 | 0.1 | -1.2 |
| Jan | 0.2 | 0.3 | -0.1 | 0.1 | 0.1 | 0.1 | 1.7 |
Notes: percentage changes in price index relative to the same month a year earlier of PCE: personal consumption expenditures; PCEG: PCE goods; PCEG-D: PCE durable goods; PCES: PCE services; PCEX: PCE excluding food and energy; PCEF: PCE food; PCEE: PCE energy goods and services. AE: annual equivalent.
Source: US Bureau of Economic Analysis http://bea.gov/iTable/index_nipa.cfm
The charts of PCE inflation are also instructive. Chart IV-1 provides the monthly change of headline PCE price index. There is significant volatility in the monthly changes but excluding outliers fluctuations have been in a tight range between 1999 and 2013 around 0.2 percent per month.
Chart IV-1, US, Percentage Change of PCE Price Index from Prior Month, 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
There is much less volatility in the PCE index excluding food and energy shown in Chart IV-2 with monthly percentage changes from 1999 to 2013. With the exception of 2001, there are no negative changes and again changes around 0.2 percent when excluding outliers.
Chart IV-2, US, Percentage Change of PCE Price Index Excluding Food and Energy from Prior Month, 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
Fluctuations in the PCE index of food are much wider as shown in Chart IV-3 by monthly percentage changes from 1999 to 2013. There are also multiple negative changes and positive changes even exceeding 1.0 percent in three months.
Chart IV-3, US, Percentage Change of PCE Price Index Food from Prior Month, 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
The band of fluctuation of the PCE price index of energy in Chart IV-4 is much wider. An interesting feature is the abundance of negative changes and large percentages.
Chart IV-4, US, Percentage Change of PCE Price Index Energy from Prior Month, 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
Table IV-6 provides 12-month rates of PCE inflation from Jan 2012 to Sep 2013, annual inflation rates from 2000 to 2012 and average yearly rates of PCE inflation for various periods since 1929. Headline 12-month PCE inflation decreased from 2.5 percent in in the 12 months ending in Jan 2012 to 0.9 percent in the 12 months ending in Sep 2013. PCE inflation excluding food and energy (PCEX), used as indicator in monetary policy, decreased from 2.0 percent in the 12 months ending in Jan 2012 to 1.2 percent in the 12 months ending in Sep 2013, which is still below or at the tolerable maximum of 2.0-2.5 percent in monetary policy. The unintended effect of shocks of commodity prices from zero interest rates captured by PCE food prices (PCEF) and energy (PCEE) in the absence of risk aversion should be weighed in design and implementation of monetary policy. Annual PCE inflation in the second part of Table IV-6 shows significant fluctuations. Headline PCE inflation rose during the period of 1 percent interest rates from Jun 2003 to Jun 2005, reaching 2.9 percent in 2005. PCEE rose at very high two-digit rates after 2003. Headline PCE inflation increased 3.1 percent in 2008 while PCEE energy increased 14.3 percent in carry trades from zero interest rates to commodity derivatives during deep global recession. Flight away from risk financial assets to US government obligations fueled by proposals of TARP in Congress (Cochrane and Zingales 2009) caused decline of PCEE of 19.0 percent in 2009 and minus 0.1 percent in headline PCEE. There is no deflation in the US economy. Headline PCEE inflation increased at the average rate of 2.9 percent from 1929 to 2012, as shown in Table IV-6 using the revisions by the BEA. PCEE inflation was 6.8 percent on average during the Great Inflation episode from 1960 to 1981 (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). PCE inflation was 3.2 percent on average from 1947 to 2012 and 3.2 percent on average for PCEX. The long-term charts of PCEE and PCEX show almost identical behavior.
Table IV-6, US, Percentage Change in 12 Months of Prices of Personal Consumption Expenditures ∆%
| PCE | PCEG | PCEG | PCES | PCEX | PCEF | PCEE | |
| 2013 | |||||||
| Sep | 0.9 | -1.0 | -1.8 | 1.9 | 1.2 | 1.2 | -3.3 |
| Aug | 1.1 | -0.4 | -2.0 | 1.9 | 1.2 | 1.2 | -0.1 |
| Jul | 1.3 | 0.3 | -1.8 | 1.9 | 1.1 | 1.2 | 4.8 |
| Jun | 1.3 | 0.0 | -1.8 | 1.9 | 1.2 | 1.0 | 3.2 |
| May | 1.0 | -0.7 | -1.9 | 1.9 | 1.2 | 1.0 | -0.9 |
| Apr | 0.9 | -1.1 | -1.8 | 1.9 | 1.2 | 1.2 | -4.1 |
| Mar | 1.2 | -0.5 | -1.7 | 2.1 | 1.4 | 1.1 | -1.6 |
| Feb | 1.5 | 0.4 | -1.7 | 2.1 | 1.5 | 1.2 | 2.4 |
| Jan | 1.4 | 0.0 | -1.6 | 2.1 | 1.5 | 1.1 | -0.8 |
| 2012 | |||||||
| Dec | 1.5 | 0.4 | -1.6 | 2.1 | 1.6 | 1.3 | 1.1 |
| Nov | 1.6 | 0.5 | -1.5 | 2.1 | 1.7 | 1.3 | 0.8 |
| Oct | 1.8 | 1.3 | -1.6 | 2.1 | 1.8 | 1.0 | 4.4 |
| Sep | 1.7 | 1.0 | -1.5 | 2.0 | 1.7 | 0.9 | 2.7 |
| Aug | 1.6 | 0.6 | -1.7 | 2.1 | 1.7 | 1.5 | -0.2 |
| Jul | 1.5 | 0.2 | -1.6 | 2.2 | 1.9 | 2.0 | -4.6 |
| Jun | 1.6 | 0.5 | -1.4 | 2.2 | 1.9 | 2.4 | -3.3 |
| May | 1.6 | 0.7 | -1.1 | 2.1 | 1.9 | 2.4 | -3.3 |
| Apr | 2.0 | 1.6 | -1.2 | 2.1 | 1.9 | 2.9 | 1.5 |
| Mar | 2.3 | 2.5 | -0.6 | 2.0 | 2.0 | 3.3 | 4.9 |
| Feb | 2.4 | 2.9 | -0.6 | 2.2 | 2.0 | 3.9 | 7.3 |
| Jan | 2.5 | 3.0 | -0.4 | 2.2 | 2.0 | 4.7 | 6.8 |
| Annual ∆% | |||||||
| 2012 | 1.8 | 1.3 | -1.2 | 2.2 | 1.8 | 2.3 | 1.4 |
| 2011 | 2.4 | 3.6 | -1.0 | 1.8 | 1.4 | 4.0 | 15.8 |
| 2010 | 1.7 | 1.6 | -1.4 | 1.7 | 1.3 | 0.3 | 10.1 |
| 2009 | -0.1 | -2.3 | -1.7 | 1.1 | 1.2 | 1.2 | -19.0 |
| 2008 | 3.1 | 3.0 | -1.9 | 3.1 | 2.1 | 5.6 | 14.3 |
| 2007 | 2.5 | 1.1 | -2.0 | 3.2 | 2.2 | 3.9 | 6.0 |
| 2006 | 2.7 | 1.4 | -1.6 | 3.4 | 2.2 | 3.1 | 11.3 |
| 2005 | 2.9 | 2.0 | -1.0 | 3.3 | 2.2 | 1.7 | 17.3 |
| 2004 | 2.4 | 1.4 | -1.9 | 3.0 | 1.9 | 3.1 | 11.3 |
| 2003 | 2.0 | -0.1 | -3.6 | 3.1 | 1.5 | 1.9 | 12.6 |
| 2002 | 1.3 | -0.9 | -2.5 | 2.6 | 1.7 | 1.5 | -5.8 |
| 2001 | 1.9 | -0.1 | -2.0 | 3.1 | 1.8 | 2.9 | 2.5 |
| 2000 | 2.5 | 2.0 | -1.8 | 2.8 | 1.7 | 2.3 | 18.3 |
| Average ∆% | |||||||
| 2000-2012 | 2.0 | 1.0 | -19.8* | 2.6 | 1.8 | 2.5 | 6.0 |
| 1929-2012 | 2.9 | 3.4 | 1.4 | 3.3 | 2.9 | 2.9 | 3.4 |
| 1947-2012 | 3.2 | 2.4 | 1.2 | 3.9 | 3.2 | 3.1 | 4.3 |
| 1960-1981 | 6.8 | 6.4 | 4.9 | 7.2 | 6.3 | 7.3 | 11.1 |
*Percentage change from 2000 to 2012.
Notes: percentage changes in price index relative to the same month a year earlier of PCE: personal consumption expenditures; PCEG: PCE goods; PCEG-D: PCE durable goods; PCES: PCE services; PCEX: PCE excluding food and energy; PCEF: PCE food; PCEE: PCE energy goods and services
Source: US Bureau of Economic Analysis http://bea.gov/iTable/index_nipa.cfm
The headline PCE index is shown in Chart IV-5 from 1999 to 2013. There is an evident upward trend with the carry-trade bump in 2008-2009 during the global recession.
Chart IV-5, US, Price Index of Personal Consumption Expenditures 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
The consumer price index in Chart IV-6 mirrors the behavior of the PCE price index in Chart IV-6. There is the same upward trend with the carry-trade bump in 2008 during the global recession.
Chart IV-6, US, Consumer Price Index, NSA, 1999-2013
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
Chart IV-7 provides the PCE price index excluding food and energy. There is milder upward trend with fewer oscillations.
Chart IV-7, US, Price Index of Personal Consumption Expenditures Excluding Food and Energy 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
The core consumer price index, excluding food and energy, is shown in Chart IV-8. There is also an upward trend but with fluctuations.
Chart IV-8, US, Consumer Price Index Excluding Food and Energy, NSA, 1999-2012
Source: US Bureau of Labor Statistics
http://www.bls.gov/cpi/data.htm
The PCE price index of food is shown in Chart IV-9. There is a more pronounced upward trend and sharper fluctuations.
Chart IV-9, US, Price Index of Personal Consumption Expenditures Food 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
There is similar behavior in the consumer price index of food in Chart IV-10. There is an upward trend from 1999 to 2011 with a major bump in 2009 when commodity futures positions were unwound. Zero interest rates with bouts of risk aversion dominate the trend into 2011. Risk aversion softens the trend toward the end of 2011 and in 2012-2013.
Chart IV-10, US, Consumer Price Index, Food, NSA, 1999-2013
Source: US Bureau of Labor Statistics
http://www.bea.gov/iTable/index_nipa.cfm
The most pronounced trend of PCE price indexes is that of energy in Chart IV-11. It is impossible to explain the hump in 2008 in the middle of the global recession without the carry trade from zero interest rates to leveraged positions in commodity futures. Risk aversion after Sep 2008 caused flight to the safe haven of government obligations. The return of risk appetite with zero interest rates caused a first wave of carry trades with another upward trend interrupted by the first European sovereign risk crisis in Apr-Jul 2010. Zero interest rates with risk appetite caused another sharp upward trend of commodity prices interrupted by risk aversion from the second sovereign crisis. In the absence of risk aversion, carry trades from zero interest rates to positions in risk financial assets will continue to cause distortions such as commodity price trends and fluctuations.
Chart IV-11, US, Price Index of Personal Consumption Expenditures Energy Goods and Services 1999-2013
Source: US Bureau of Economic Analysis
http://www.bea.gov/iTable/index_nipa.cfm
Chart IV-12 provides the consumer price index of energy commodities. Unconventional monetary policy of zero or near zero interest rates causes upward trends in commodity prices reflected in (1) increase from 2003 to 2007; (2) sharp increase during the global contraction in 2008; (3) collapse from 2008 into 2009 as positions in commodity futures were unwound in a flight to government obligations; (4) new upward trend after 2010; and (5) episodes of decline during risk aversion shocks such as the more recent segment during the worsening European debt crisis in Nov and Dec of 2011 and with new strength of commodity prices in the beginning of 2012 followed by softness in another episode of risk aversion and increases during risk appetite.
Chart IV-12, US, Consumer Price Index, Energy, NSA, 1999-2013
Source: US Bureau of Labor Statistics http://www.bls.gov/cpi/data.htm
Chart IV-13 of the US Energy Information Administration provides prices of the crude oil futures contract. Unconventional monetary policy of very low interest rates and quantitative easing with suspension of the 30-year bond to lower mortgage rates caused a sharp upward trend of oil prices. There is no explanation for the jump of oil prices to $149/barrel in 2008 during a sharp global recession other than carry trades from zero interest rates to commodity futures. The peak in Chart IV-13 is $145.18 on Jul 14, 2008, in the midst of deep global recession, falling to $33.87/barrel on Dec 19, 2008 (data from the US Energy Information Administration (http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D). Prices collapsed in the flight to government obligations caused by proposals for withdrawing “toxic assets” in the Troubled Asset Relief Program (TARP) as analyzed by Cochrane and Zingales (2009). Risk appetite with zero interest rates after stress tests of US banks resulted in another upward trend of commodity prices after 2009 with fluctuations during periods of risk aversion. All price indexes are affected by unconventional monetary policy.
Chart IV-13, US, Crude Oil Futures Contract
Source: US Energy Information Administration
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D
Table IV-14 provides the annual PCE price index from the revised and enhanced dataset of the Bureau of Economic Analysis (BEA). The annual PCEE index increased at the average rate of 3.2 percent from 1929 to 2012. There is no support for fear of deflation.
Chart IV-14, US, Price Index of Personal Consumption Expenditures, Annual, 1929-2012
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
Chart IV-14, US, Price Index of Personal Consumption Expenditures, Annual, 1929-2012
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
Chart IV-15 of the Bureau of Labor Statistics (BLS) provides the consumer price index from 1914 to 2012. There is long-term inflation and no evidence in support of fear of deflation.
Chart IV-15, US, Consumer Price Index, Annual, 1914-2012
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
Chart IV-16 provides the BEA annual index of PCE prices excluding food and energy. The average rate of increase from 1929 to 2012 is 3.2 percent.
Chart IV-16, US, Price Index of Personal Consumption Expenditures Excluding Food and Energy, Annual, 1929-2013
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
Chart IV-17 of the Bureau of Labor Statistics (BLS) provides the annual consumer price index excluding food and energy from 1957 to 2012. There is long-term, fluctuating inflation.
Chart IV-17, US, Consumer Price Index Excluding Food and Energy, Annual, 1957-2012
Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm
The producer price index of the euro zone decreased in three consecutive months, 0.3 percent in Mar, 0.6 percent in Apr and 0.3 percent in May, remaining unchanged in Jun 2013. The producer price index increased 0.2 percent in Jul 2013 and was unchanged in Aug 2013, increasing 0.1 percent in Sep 2013, as shown in Table IV-7. Energy inflation has oscillated with the shocks of risk aversion that cause unwinding of carry trade positions from zero interest rates to commodity futures. Energy prices fell 0.8 percent in Dec 2012 but increased 0.3 percent in Feb 2013 and 0.9 percent in Jan 2013. Energy prices fell 0.8 percent in Dec 2012, 0.5 percent in Nov 2012 and fell 0.4 percent in Oct 2012 after -0.1 percent in Sep 2012, increased 2.4 percent in Aug, and 1.4 percent in Jul 2012 or at the annual equivalent rate of 16.2 percent in the quarter Jul-Sep 2012 and at 25.3 percent in Jul-Aug 2012. Energy prices increased 5.2 percent cumulatively in Jan-Mar 2012 or at the annual equivalent rate of 22.5 percent. Energy prices increased 0.7 percent in Jul 2013, 0.2 percent in Aug 2013 and 0.5 percent in Sep 2013. During periods of relaxed risk aversion, carry trades from zero interest rates to commodity exposures drive high inflation waves. Portfolio reallocations created exposures in equities while reversing exposures in commodities. Prices of capital goods have barely moved. Prices of durable consumer goods have been subdued in 2013. Purchasing managers’ indexes worldwide reflect increasing prices of inputs for business while sales prices are stagnant or declining, squeezing economic activity (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html). Unconventional monetary policy causes uncertainty in business decisions with shocks of declining net revenue margins during worldwide inflation waves (http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html).
Table IV-7, Euro Area, Industrial Producer Prices Month ∆%
| Sep 2013 | Aug 2013 | Jul 2013 | Jun 2013 | May 2013 | Apr 2013 | |
| Industry ex | 0.1 | 0.0 | 0.2 | 0.0 | -0.3 | -0.6 |
| Industry ex | -0.1 | 0.1 | 0.0 | 0.0 | -0.1 | -0.1 |
| Intermediate | -0.1 | -0.1 | -0.2 | -0.3 | -0.3 | -0.4 |
| Energy | 0.5 | 0.2 | 0.7 | 0.0 | -0.9 | -1.5 |
| Capital Goods | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.1 |
| Durable Consumer Goods | 0.1 | 0.0 | 0.0 | 0.0 | 0.1 | 0.1 |
| Nondurable Consumer Goods | 0.0 | 0.2 | 0.2 | 0.2 | 0.1 | -0.1 |
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
Twelve-month percentage changes of industrial prices in the euro zone have moderated significantly, as shown in Table IV-8. The 12-month percentage change of industrial prices excluding construction fell from 4.4 percent in Dec 2011 to minus 0.3 percent in Apr 2013 and minus 0.3 percent in May 2013. The 12-month percentage change of industrial producer prices increased 0.2 percent in Jun 2013 but was flat in Jul 2013 and fell 0.8 percent in Aug 2013. Industrial producer prices in the euro area fell 0.9 percent in the 12 months ending in Sep 2013. Energy prices increased 9.7 percent in Dec 2011 and Jan 2011 but the rate fell to 4.5 percent in the 12 months ending in Jul 2012, increasing to 7.5 percent in Aug 2012 and 6.4 percent in Sep 2012. Energy prices fell 5.2 percent in the 12 months ending in Oct 2012, 3.9 percent in Nov 2012, 3.6 percent in Dec 2012, 2.2 percent in Jan 2013 and 1.6 percent in Feb 2013. Energy prices fell 0.6 in the 12 months ending in Mar 2013, minus 2.3 percent in Apr 2013, minus 2.2 percent in May 2013 and minus 0.9 percent in Jun 2013. The 12-month percentage change of energy prices was minus 1.3 percent in Jul 2013 and minus 3.3 percent in Aug 2013. Energy prices fell 2.7 percent in the 12 months ending in Sep 2013. There is major vulnerability in producer price inflation that can return together with long positions in commodity futures with carry trades from zero interest during relaxation of risk aversion. Business net revenue or prices of goods sold less costs of inputs suffer wide oscillation preventing sound calculation of risk/returns and capital budgeting (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html).
Table IV-8 Euro Area, Industrial Producer Prices 12-Month ∆%
| Sep 2013 | Aug | Jul 2013 | Jun 2013 | May 2013 | Apr 2013 | |
| Industry ex | -0.9 | -0.8 | 0.0 | 0.2 | -0.3 | -0.3 |
| Industry ex | -0.1 | 0.3 | 0.6 | 0.6 | 0.5 | 0.6 |
| Intermediate | -1.5 | -1.0 | -0.5 | -0.5 | -0.6 | -0.3 |
| Energy | -2.7 | -3.3 | -1.3 | -0.9 | -2.2 | -2.3 |
| Capital Goods | 0.6 | 0.5 | 0.6 | 0.5 | 0.6 | 0.6 |
| Durable Consumer Goods | 0.8 | 0.6 | 0.7 | 0.8 | 0.8 | 0.8 |
| Nondurable Consumer Goods | 1.6 | 2.0 | 2.2 | 2.2 | 2.1 | 1.9 |
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
Industrial producer prices in the euro area are following similar inflation waves as in the rest of the world (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html), as shown in Table IV-9. In the first wave in Jan-Apr 2011, annual equivalent producer price inflation was 11.3 percent driven by carry trades from zero interest rates into commodity futures. In the second wave in May-Jun 2011, annual equivalent inflation of producer prices declined to 0.0 percent. In the third wave in Jul-Sep 2011, annual equivalent inflation increased at 2.4 percent. In the fourth wave in Oct-Dec 2011, risk aversion originating in the European sovereign debt crisis interrupted commodity carry trades, resulting in annual equivalent inflation of only 0.4 percent. In the fifth wave in Jan-Mar 2012, annual equivalent inflation jumped to 7.9 percent with a high annual equivalent rate of 8.7 percent in Jan-Feb 2012. In the sixth wave, risk aversion from the European sovereign debt event caused reversal of commodity carry trades with equivalent annual inflation of minus 2.4 percent in Apr-Jun 2012. In the seventh wave, annual equivalent inflation jumped to 6.8 percent in Jul-Aug 2012 while energy prices driven by carry trades increased at the annual equivalent rate of 25.3 percent. In the eighth wave, annual equivalent inflation retreated to 0.6 percent in Sep-Oct 2012. In the ninth wave, annual equivalent inflation was minus 2.4 percent in Nov-Dec 2012. In the tenth wave, annual equivalent inflation was 2.4 percent in Jan-Feb 2013. In the eleventh wave, annual equivalent inflation was minus 3.5 percent in Mar-Jun 2013. In the twelfth wave, annual equivalent inflation was 1.2 percent in Jul-Aug 2013. The bottom part of Table IV-7 provides 12-month percentage changes from 1999 to 2012. The final row of Table IV-7 provides the average annual rate of producer-price inflation in the euro area at 2.5 percent in Dec from 1999 to 2012.
Table IV-9, Euro Area, Industrial Producer Prices Excluding Construction, Month and 12-Month ∆%
| Month ∆% | 12-Month ∆% | |
| Sep 2013 | 0.1 | -0.9 |
| Aug | 0.0 | -0.8 |
| Jul | 0.2 | 0.0 |
| AE ∆% Jul-Sep | 1.2 | |
| Jun | 0.0 | 0.2 |
| May | -0.3 | -0.3 |
| Apr | -0.6 | -0.3 |
| Mar | -0.3 | 0.5 |
| AE ∆% Mar-Jun | -3.5 | |
| Feb | 0.1 | 1.3 |
| Jan | 0.3 | 1.7 |
| AE ∆% Jan-Feb | 2.4 | |
| Dec 2012 | -0.2 | 2.2 |
| Nov | -0.2 | 2.3 |
| AE ∆% Nov-Dec | -2.4 | |
| Oct | 0.0 | 2.6 |
| Sep | 0.1 | 2.8 |
| AE ∆% Sep-Oct | 0.6 | |
| Aug | 0.8 | 2.9 |
| Jul | 0.3 | 2.0 |
| AE ∆% Jul-Aug | 6.8 | |
| Jun | -0.5 | 2.1 |
| May | -0.3 | 2.7 |
| Apr | 0.2 | 2.9 |
| AE ∆% Apr-Jun | -2.4 | |
| Mar | 0.5 | 3.6 |
| Feb | 0.6 | 3.9 |
| Jan | 0.8 | 4.0 |
| AE ∆% Jan-Mar | 7.9 | |
| Dec 2011 | -0.2 | 4.4 |
| Nov | 0.2 | 5.4 |
| Oct | 0.1 | 5.5 |
| AE ∆% Oct-Dec | 0.4 | |
| Sep | 0.2 | 5.6 |
| Aug | -0.1 | 5.7 |
| Jul | 0.5 | 5.8 |
| AE ∆% Jul-Sep | 2.4 | |
| Jun | 0.0 | 5.5 |
| May | -0.6 | 5.9 |
| AE ∆% May-Jun | 0.0 | |
| Apr | 0.9 | 6.4 |
| Mar | 0.8 | 6.3 |
| Feb | 0.7 | 6.1 |
| Jan | 1.2 | 5.4 |
| AE ∆% Jan-Apr | 11.3 | |
| Dec 2012 | 2.2 | |
| Dec 2011 | 4.4 | |
| Dec 2010 | 5.1 | |
| Dec 2009 | -3.0 | |
| Dec 2008 | 1.5 | |
| Dec 2007 | 4.4 | |
| Dec 2006 | 3.8 | |
| Dec 2005 | 4.5 | |
| Dec 2004 | 3.7 | |
| Dec 2003 | 1.0 | |
| Dec 2002 | 1.5 | |
| Dec 2001 | -0.5 | |
| Dec 2000 | 4.7 | |
| Dec 1999 | 2.6 | |
| Average ∆% 1999-2012 | 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
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 ∆% | Real GDP ∆% | Real GDP ∆% | Real GDP ∆% | |
| 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. There are preliminary estimates for some countries for IIIQ2013. 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. US GDP grew at 2.8 percent in SAAR in IIIQ2013, 0.7 percent relative to the prior quarter and 1.6 percent relative to the same quarter a year earlier (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.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 | 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 | 3.1 |
| Japan | QOQ: –0.9 | 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 | 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 | 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 | |
| USA | QOQ: 0.7 | 1.6 |
| 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 increased 0.6 percent in September following a gain of 0.4 percent in August. For the third quarter as a whole, industrial production rose at an annual rate of 2.3 percent. Manufacturing output edged up 0.1 percent in September following a gain of 0.5 percent in August, and increased at an annual rate of 1.2 percent for the third quarter. Production at mines moved up 0.2 percent in September and advanced at an annual rate of 12.9 percent for the third quarter. The output of utilities rose 4.4 percent in September following declines in each of the previous five months. The level of the index for total industrial production in September was equal to its 2007 average and was 3.2 percent above its year-earlier level.“
In the six months ending in Sep 2013, United States national industrial production accumulated increase of 0.9 percent at the annual equivalent rate of 1.8 percent, which is much lower than growth of 3.2 percent in the 12 months ending in Sep 2013. Excluding growth of 0.6 percent in Sep 2013, growth in the remaining five months from Apr 2012 to Aug 2013 accumulated to 0.3 percent or 0.6 percent annual equivalent. Industrial production stagnated in one of the past six months and fell in two. Business equipment accumulated growth of 1.3 percent in the six months from Apr to Sep 2013 at the annual equivalent rate of 2.6 percent, which is much lower than growth of 3.7 percent in the 12 months ending in Aug 2013. Growth of business equipment accumulated 0.1 percent from Apr to Aug 2013 at the annual equivalent rate of minus 0.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry moved up 0.4 percentage point to 78.3 percent, a rate 1.9 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating.
Manufacturing increased 0.1 percent in Sep 2013 after increasing 0.5 percent in Aug 2013 and decreasing 0.4 percent in Jul 2013 seasonally adjusted, increasing 2.4 percent not seasonally adjusted in 12 months ending in Sep 2013, as shown in Table II-2. Manufacturing grew cumulatively 0.6 percent in the six months ending in Sep 2013 or at the annual equivalent rate of 1.2 percent. Excluding the increase of 0.5 percent in Aug 2013, manufacturing accumulated growth of 0.1 percent from Apr 2013 to Aug 2013 or at the annual equivalent rate of 0.2 percent. Table II-2 provides a longer perspective of manufacturing in the US. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 into more recent months as shown by 12 months rates of growth. Growth rates appeared to be increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.2 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession but the pace of manufacturing fell steadily in the past six months with some weakness at the margin. Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased 16.8 percent from the trough in Apr 2009 to Dec 2012. Manufacturing grew 21.5 percent from the trough in Apr 2009 to Sep 2013. Manufacturing output in Sep 2013 is 5.1 percent below the peak in Jun 2007.
Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points
| Exports | Exports 12 M ∆% | Imports | 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 | 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, increased to 55.5 in Oct from 53.6 in Sep, indicating expansion at a faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/c79ee00ee91f455481b9003790967656). This index has remained above the contraction territory of 50.0 during 51 consecutive months. The employment index increased from 51.1 in Sep to 52.7 in Oct with input prices rising at a slower rate and new orders increasing at slower rate and output increasing at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/c79ee00ee91f455481b9003790967656). David Hensley, Director of Global Economic Coordination at JP Morgan, finds acceleration in the first month of IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c79ee00ee91f455481b9003790967656). The JP Morgan Global Manufacturing PMI™, produced by JP Morgan and Markit in association with ISM and IFPSM, was higher at 52.1 in Oct from 51.8 in Sep, which is the highest reading in about two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/2711528c99224748b8842d9cb3e54a6b). New export orders expanded at the fastest pace since Mar 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2711528c99224748b8842d9cb3e54a6b). David Hensley, Director of Global Economic Coordination at JP Morgan finds acceleration of global manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/2711528c99224748b8842d9cb3e54a6b). The HSBC Brazil Composite Output Index, compiled by Markit, increased from 50.7 in Sep to 52.0 in Oct, indicating moderate expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/48044fa43da14afdb6f777309c47ccfe). The HSBC Brazil Services Business Activity index, compiled by Markit increased marginally from 50.7 in Sep to 52.1 in Oct, indicating moderate improvement in business activity in an eight-month high (http://www.markiteconomics.com/Survey/PressRelease.mvc/48044fa43da14afdb6f777309c47ccfe). Andre Loes, Chief Economist, Brazil, at HSBC, finds that the reading of services of 52.1 is the highest since Feb, indicating stronger growth in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/48044fa43da14afdb6f777309c47ccfe). The HSBC Brazil Purchasing Managers’ IndexTM (PMI™) increased from 49.9 in Sep to 50.2 in Oct for the first reading above 50 in four months but with only marginal improvement (http://www.markiteconomics.com/Survey/PressRelease.mvc/b34553b098084f75b4bed09bebe6887c). Andre Loes, Chief Economist, Brazil at HSBC, finds acceleration of output with unchanged orders and the highest rate of output inflation in the history of the survey while input costs increased at the fastest rate since Oct 2008 (http://www.markiteconomics.com/Survey/PressRelease.mvc/b34553b098084f75b4bed09bebe6887c).
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 51.8 in Oct from 52.8 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/ef50b354e0ca4801b08e53072919d1c2). The index of new exports orders increased from 49.0 in Sep to 51.3 in Oct while total new orders decreased from 53.2 in Sep to 52.7 in Oct. Chris Williamson, Chief Economist at Markit, finds that the index suggests standstill of manufacturing in the US with uncertainty in the overall economy and job creation (http://www.markiteconomics.com/Survey/PressRelease.mvc/ef50b354e0ca4801b08e53072919d1c2). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business® increased 0.2 percentage points from 56.2 in Sep to 56.4 in Oct, which indicates growth at a higher rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 0.1 percentage points from 60.5 in Sep to 60.6 in Oct. The index of exports increased 5.0 percentage point from 52.0 in Sep to 57.0 in Oct, growing at a faster rate. The Non-Manufacturing ISM Report on Business® PMI increased 1.0 percentage points from 54.4 in Sep to 55.4 in Oct, indicating growth of business activity/production during 51 consecutive months, while the index of new orders decreased 2.8 percentage points from 59.6 in Sep to 56.8 in Oct (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 | Sep 12 months NSA ∆%: 1.2; ex food and energy ∆%: 1.7 Sep month SA ∆%: 0.2; ex food and energy ∆%: 0.1 |
| Producer Price Index | Sep 12-month NSA ∆%: 0.3; ex food and energy ∆% 1.1 |
| PCE Inflation | Sep 12-month NSA ∆%: headline 0.9; ex food and energy ∆% 1.2 |
| Employment Situation | Household Survey: Oct Unemployment Rate SA 7.3% |
| Nonfarm Hiring | Nonfarm Hiring fell from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million |
| GDP Growth | BEA Revised National Income Accounts IIQ2012/IIQ2011 2.8 IIIQ2012/IIIQ2011 3.1 IVQ2012/IVQ2011 2.0 IQ2013/IQ2012 1.3 IIQ2013/IIQ2012 1.6 IIIQ2013/IIIQ2012 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 IIIQ2013 SAAR 2.8 |
| Real Private Fixed Investment | SAAR IIIQ2013 4.1 ∆% IVQ2007 to IIIQ2013: minus 4.0% Blog 11/10/13 |
| Personal Income and Consumption | Sep month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.4 |
| Quarterly Services Report | IIQ13/IIQ12 SA ∆%: Financial & Insurance 4.2 |
| Employment Cost Index | Compensation Private IIQ2013 SA ∆%: 0.5 |
| Industrial Production | Sep month SA ∆%: 0.6 Manufacturing Sep SA ∆% 0.1 Sep 12 months SA ∆% 2.6, NSA 2.4 |
| 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 |
| Philadelphia Fed Business Outlook Index | General Index from Sep 22.3 to Oct 19.8 |
| Manufacturing Shipments and Orders | New Orders SA Sep ∆% 1.7 Ex Transport -0.2 Jan-Sep NSA New Orders 2.4 Ex transport 1.5 |
| Durable Goods | Sep New Orders SA ∆%: 3.7; ex transport ∆%: -0.1 |
| Sales of New Motor Vehicles | Jan-Oct 2013 12,994,572; Jan-Oct 2012 11,992,071. Oct 13 SAAR 15.23 million, Sep 13 SAAR 16.28 million, Oct 2012 SAAR 14.40 million Blog 11/3/13 |
| Sales of Merchant Wholesalers | Jan-Aug 2013/Jan-Aug 2012 NSA ∆%: Total 3.2; Durable Goods: 3.1; Nondurable |
| Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers | Aug 13/Jul 12-M NSA ∆%: Sales Total Business 2.9; Manufacturers 1.5 |
| Sales for Retail and Food Services | Jan-Sep 2013/Jan-Sep 2012 ∆%: Retail and Food Services 4.2; Retail ∆% 4.3 |
| Value of Construction Put in Place | Aug SAAR month SA ∆%: 0.6 Aug 12-month NSA: 6.5 Jan-Aug 2013 ∆% 5.9 |
| Case-Shiller Home Prices | Aug 2013/Aug 2012 ∆% NSA: 10 Cities 12.8; 20 Cities: 12.8 |
| FHFA House Price Index Purchases Only | Aug SA ∆% 0.3; |
| New House Sales | Aug 2013 month SAAR ∆%: 7.9 |
| Housing Starts and Permits | Aug Starts month SA ∆%: 0.9 ; Permits ∆%: -3.8 |
| Trade Balance | Balance Aug SA -$38,803 million versus Jul -$39,642 million |
| Export and Import Prices | Sep 12-month NSA ∆%: Imports -1.0; Exports -1.6 |
| Consumer Credit | Sep ∆% annual rate: Total 5.4; Revolving minus 2.9; Nonrevolving 8.7 |
| Net Foreign Purchases of Long-term Treasury Securities | Aug Net Foreign Purchases of Long-term US Securities: -$8.9 billion |
| Treasury Budget | Fiscal Year 2013/2012 ∆% Sep: Receipts 13.3; Outlays minus 2.4; Individual Income Taxes 16.3 Deficit Fiscal Year 2012 $1,087 billion Blog 11/3/2013 |
| 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 | Sep 2013 SAAR ∆%: Securities -8.7 Loans 1.2 Cash Assets 59.9 Deposits 8.0 Blog 11/3/13 |
| 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:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.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
9/8/13 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 increased 0.1 percent in Sep 2013, 0.2 percent in Aug 2013 after increasing 1.1 percent in Jul 2013. New orders increased 1.7 percent in Sep 2013, after decreasing 0.1 percent in Aug 2013 and 2.8 percent in Jul 2013, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by increase of 2642.2 percent of new orders of nondefense aircraft in Sep 2012 following decline by 97.2 percent in Aug. New orders excluding transportation equipment decreased 0.2 percent in Sep 2013 after decreasing 0.4 percent in Aug 2013 and increasing 1.2 percent in Jul 2013. Capital goods new orders, indicating investment, increased 7.8 percent in Aug 2013 after decreasing 0.4 percent in Aug 2013 and decreasing 18.2 percent in Jul 2013. New orders of nondefense capital goods increased 6.7 percent in Sep 2013 after decreasing 0.1 percent in Aug 2013 and decreasing 17.5 percent in Jul 2013. Excluding more volatile aircraft, capital goods orders decreased 1.3 percent in Sep 2013 after increasing 1.0 percent in Aug 2013 and decreasing 3.5 percent in Jul 2013.
Table VA-1, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%
| Sep 2013 ∆% | Aug 2013 | Jul 2013 | |
| Total | |||
| S | 0.1 | 0.2 | 1.1 |
| NO | 1.7 | -0.1 | -2.8 |
| Excluding | |||
| S | 0.0 | -0.1 | 1.4 |
| NO | -0.2 | -0.4 | 1.2 |
| Excluding | |||
| S | 0.1 | 0.0 | 1.3 |
| NO | 1.3 | 0.1 | -2.4 |
| Durable Goods | |||
| S | 0.4 | 1.0 | -0.1 |
| NO | 3.8 | 0.5 | -8.1 |
| Machinery | |||
| S | 0.3 | 0.5 | -1.6 |
| NO | -2.6 | 0.7 | -0.6 |
| Computers & Electronic Products | |||
| S | 0.9 | 1.8 | -1.1 |
| NO | 1.6 | -4.6 | -2.8 |
| Computers | |||
| S | -2.8 | -22.7 | -6.2 |
| NO | 11.8 | 0.2 | 12.1 |
| Transport | |||
| S | 0.3 | 1.6 | -0.2 |
| NO | 12.9 | 1.8 | -21.9 |
| Automobiles | |||
| S | 1.9 | 7.1 | -3.6 |
| Motor Vehicles | |||
| S | 0.2 | 3.6 | -2.1 |
| NO | -0.7 | 4.2 | -2.1 |
| Nondefense | |||
| S | 3.9 | -5.0 | 1.1 |
| NO | 16.0 | -12.0 | -3.3 |
| Capital Goods | |||
| S | 0.0 | 1.5 | -1.9 |
| NO | 7.8 | -0.4 | -18.2 |
| Nondefense Capital Goods | |||
| S | 0.4 | 0.4 | -1.4 |
| NO | 6.7 | -0.1 | -17.5 |
| Capital Goods ex Aircraft | |||
| S | -0.2 | 1.4 | -1.4 |
| NO | -1.3 | 1.0 | -3.5 |
| Nondurable Goods | |||
| S | -0.2 | -0.6 | 2.3 |
| NO | -0.2 | -0.6 | 2.3 |
Note: Mfg: manufacturing; S: shipments; NO: new orders; Transport: transportation
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Chart VA-1 of the US Census Bureau provides new orders of manufacturers from Oct 2012 to Sep 2013. There is significant volatility that prevents discerning clear trends.
Chart VA-1, US, Manufacturers’ New Orders 2010-2011 Seasonally Adjusted, Month ∆%
Source: US Census Bureau
http://www.census.gov/briefrm/esbr/www/esbr022.html
Chart VA-2 of the US Census Bureau provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2013. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments occurred in earlier periods followed with continuing growth and stability currently.
Chart VA-2, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2013
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-2. Values are cumulative millions of dollars in Jan-Sep 2013 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Sep 2013 total $4371.1 billion and new orders total $4349.8 billion, growing respectively by 1.7 percent and 2.4 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 0.8 percent and new orders increased 1.5 percent. Excluding defense, shipments grew 1.7 percent and new orders grew 2.8 percent. Durable goods shipments reached $2062.4 billion in Jan-Sep 2013, or 47.2 percent of the total, growing by 3.1 percent, and new orders $2041.1 billion, or 46.9 percent of the total, growing by 4.7 percent. Important information in Table VA-2 is the large share of nondurable goods with shipments of $2308.7 billion or 52.8 percent of the total, growing by 0.4 percent. Capital goods have relatively high value of $744.7 billion for shipments, growing 2.1 percent, and new orders $782.1 billion, increasing 4.6 percent, which could be an indicator of future investment. Excluding aircraft, capital goods shipments reached $589.5 billion, growing 1.4 percent, and new orders $609.3 billion, increasing 4.4 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 10.8 percent of US national income in IIQ2013. These data are not adjusted for inflation.
Table VA-2, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars
| Jan-Sep 2013 | Shipments | ∆% 2013/ | New Orders | ∆% 2013/ |
| Total | 4,371,062 | 1.7 | 4,349,767 | 2.4 |
| Excluding Transport | 3,762,583 | 0.8 | 3,723,802 | 1.5 |
| Excluding Defense | 4,262,950 | 1.7 | 4,255,563 | 2.8 |
| Durable Goods | 2,062,352 | 3.1 | 2,041,057 | 4.7 |
| Machinery | 308,315 | 3.3 | 312,973 | 7.2 |
| Computers & Electronic Products | 245,761 | -3.4 | 188,443 | -4.2 |
| Computers | 4,645 | -28.2 | 4,753 | -27.8 |
| Transport Equipment | 608,479 | 7.5 | 625,965 | 7.9 |
| Automobiles | 94,496 | 21.3 | ||
| Motor Vehicles | 175,022 | 5.3 | 174,380 | 5.9 |
| Nondefense Aircraft | 98,026 | 8.8 | 129,632 | 22.5 |
| Capital Goods | 744,679 | 2.1 | 782,118 | 4.6 |
| Nondefense Capital Goods | 657,082 | 2.3 | 705,809 | 7.2 |
| Capital Goods ex Aircraft | 589,472 | 1.4 | 609,305 | 4.4 |
| Nondurable Goods | 2,308,710 | 0.4 | 2,308,710 | 0.4 |
| Food Products | 551,829 | 2.8 | ||
| Petroleum Refineries | 625,439 | -0.6 | ||
| Chemical Products | 579,207 | -0.6 |
Note: Transport: transportation Source: US Census Bureau http://www.census.gov/manufacturing/m3/
Chart VA-3 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Jul 2013. Fluctuations are evident, which are smoothed by seasonal adjustment in the earlier Chart VA-17. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend, flattening recently.
Chart VA-3, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2013
Source: US Census Bureau
http://www.census.gov/manufacturing/m3/
The report of consumer credit outstanding of the Board of Governors of the Federal Reserve System is provided in Table VA-3. The data are in seasonally adjusted annual rates both percentage changes and billions of dollars. The estimate of consumer credit “covers most short- and intermediate-term credit extended to individuals, excluding loans secured by real estate (http://www.federalreserve.gov/releases/g19/current/default.htm). Consumer credit is divided into two categories. (1) Revolving consumer credit (REV in Table VA-3) consists mainly of unsecured credit cards. (2) Non-revolving consumer credit (NREV in Table VA-3) “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers or vacations” (http://www.federalreserve.gov/releases/g19/current/default.htm). In Sep 2013, revolving credit was $847 billion, or 27.8 percent of total consumer credit of $3052 billion, and non-revolving credit was $2205 billion, or 72.2 percent of total consumer credit outstanding. Consumer credit grew at relatively high rates before the recession beginning in IVQ2007 (Dec) and extending to IIQ2009 (Jun) as dated by the National Bureau of Economic Research or NBER (http://www.nber.org/cycles/cyclesmain.html). Percentage changes of consumer credit outstanding fell already in 2009. Rates were still negative in 2010 with decline of 1.0 percent in annual data and sharp decline of 7.6 percent in revolving credit. In IVQ 2012, total consumer credit grew at 6.5 percent with increase of revolving credit at 0.3 percent and increase of non-revolving credit at 9.1 percent. Growth continued in Sep 2013 with total credit at 5.4 percent, revolving at minus 2.9 percent and non-revolving at 8.7 percent.
Table VA-3, US, Consumer Credit Outstanding, SA, Annual Rate and Billions of Dollars
| Total ∆% | REV ∆% | NRV ∆% | Total $B | REV $B | NREV $B | |
| 2013 | ||||||
| Sep | 5.4 | -2.9 | 8.7 | 3052 | 847 | 2205 |
| Aug | 5.6 | -1.2 | 8.3 | 3038 | 849 | 2189 |
| Jul | 4.4 | -2.6 | 7.1 | 3024 | 850 | 2174 |
| IIQ | 5.9 | 1.2 | 7.7 | 3013 | 852 | 2161 |
| IQ | 6.2 | 1.5 | 8.1 | 2969 | 849 | 2120 |
| 2012 | ||||||
| IVQ | 6.5 | 0.3 | 9.1 | 2924 | 846 | 2078 |
| IIIQ | 4.8 | 0.4 | 6.7 | 2878 | 845 | 2033 |
| 2012 | 6.1 | 0.4 | 8.7 | 2924 | 846 | 2078 |
| 2011 | 4.1 | 0.2 | 5.9 | 2757 | 842 | 1915 |
| 2010 | -1.0 | -7.6 | 2.7 | 2648 | 841 | 1807 |
| 2009 | -3.9 | -8.8 | -1.0 | 2553 | 917 | 1636 |
| 2008 | 1.3 | 0.2 | 2.0 | 2651 | 1005 | 1646 |
| 2007 | 5.9 | 8.5 | 4.3 | 2529 | 1008 | 1521 |
Note: REV: Revolving; NREV: Non-revolving; ∆%: simple annual rate from unrounded data; Total may not add exactly because of rounding
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g19/current/default.htm
Chart VA-4 of the Board of Governors of the Federal Reserve System total consumer credit outstanding in millions of dollars measured in the right axis and the finance rate on 24-month personal loans at commercial banks, not seasonally adjusted, measured on the left axis. There was sharp decline of total consumer loans outstanding during the global recession followed by strong recovery. There is long-term decline of the financing rate.
Chart VA-4, US, Total Consumer Credit Owned and Securitized NSA and Financing Rate on 24-month Personal Loans at Commercial Banks NSA, Millions of Dollars and Percent, Feb 1972-Sep 2013
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g19/current/default.htm
Chart VA-5 of the Board of Governors of the Federal Reserve System provides percentage changes of total consumer credit outstanding in the US and the financing rate on 24-month personal consumer loans at commercial banks, since 1972. The shaded bars are the cyclical contraction dates of the National Bureau of Economic Research (http://www.nber.org/cycles/cyclesmain.html). Consumer credit is cyclical, declining during contractions as shown by negative percentage changes during economic contractions. There is clear upward trend in 2012-2013 but with significant fluctuations.
Chart VA-5, US, Percent Change of Total Consumer Credit, Seasonally Adjusted at an Annual Rate and Finance Rate on 24-month Personal Loans at Commercial Banks NSA, Feb 1972-Sep 2013
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/g19/current/default.htm
VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/announcements/release_2013/k130711a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.6 and 3.0 percent, with the all items CPI less fresh food of 0.6 to 1.0 percent. The critical difference is forecast of the CPI excluding fresh food of 2.8 to 3.6 percent in 2014 and 1.6 to 2.9 percent in 2015. The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:
“The Bank of Japan conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy, and is responsible for maintaining financial system stability. The Bank aims to achieve price stability on a sustainable basis, given that there are various factors that affect prices in the short run.
The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan's economy make progress. Based on this recognition, the Bank sets the price stability target at 2 percent in terms of the year-on-year rate of change in the consumer price index.
Under the price stability target specified above, the Bank will pursue monetary easing and aim to achieve this target at the earliest possible time. Taking into consideration that it will take considerable time before the effects of monetary policy permeate the economy, the Bank will ascertain whether there is any significant risk to the sustainability of economic growth, including from the accumulation of financial imbalances.”
The Bank of Japan also provided explicit analysis of its view on price stability in a “Background note regarding the Bank’s thinking on price stability” (http://www.boj.or.jp/en/announcements/release_2013/data/rel130123a1.pdf http://www.boj.or.jp/en/announcements/release_2013/rel130123a.htm/). The Bank of Japan also amended “Principal terms and conditions for the Asset Purchase Program” (http://www.boj.or.jp/en/announcements/release_2013/rel130122a.pdf): “Asset purchases and loan provision shall be conducted up to the maximum outstanding amounts by the end of 2013. From January 2014, the Bank shall purchase financial assets and provide loans every month, the amount of which shall be determined pursuant to the relevant rules of the Bank.”
Financial markets in Japan and worldwide were shocked by new bold measures of “quantitative and qualitative monetary easing” by the Bank of Japan (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The objective of policy is to “achieve the price stability target of 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) at the earliest possible time, with a time horizon of about two years” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf). The main elements of the new policy are as follows:
- Monetary Base Control. Most central banks in the world pursue interest rates instead of monetary aggregates, injecting bank reserves to lower interest rates to desired levels. The Bank of Japan (BOJ) has shifted back to monetary aggregates, conducting money market operations with the objective of increasing base money, or monetary liabilities of the government, at the annual rate of 60 to 70 trillion yen. The BOJ estimates base money outstanding at “138 trillion yen at end-2012) and plans to increase it to “200 trillion yen at end-2012 and 270 trillion yen at end 2014” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
- Maturity Extension of Purchases of Japanese Government Bonds. Purchases of bonds will be extended even up to bonds with maturity of 40 years with the guideline of extending the average maturity of BOJ bond purchases from three to seven years. The BOJ estimates the current average maturity of Japanese government bonds (JGB) at around seven years. The BOJ plans to purchase about 7.5 trillion yen per month (http://www.boj.or.jp/en/announcements/release_2013/rel130404d.pdf). Takashi Nakamichi, Tatsuo Ito and Phred Dvorak, wiring on “Bank of Japan mounts bid for revival,” on Apr 4, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323646604578401633067110420.html ), find that the limit of maturities of three years on purchases of JGBs was designed to avoid views that the BOJ would finance uncontrolled government deficits.
- Seigniorage. The BOJ is pursuing coordination with the government that will take measures to establish “sustainable fiscal structure with a view to ensuring the credibility of fiscal management” (http://www.boj.or.jp/en/announcements/release_2013/k130404a.pdf).
- Diversification of Asset Purchases. The BOJ will engage in transactions of exchange traded funds (ETF) and real estate investment trusts (REITS) and not solely on purchases of JGBs. Purchases of ETFs will be at an annual rate of increase of one trillion yen and purchases of REITS at 30 billion yen.
Table VB-BOJF, Bank of Japan, Forecasts of the Majority of Members of the Policy Board, % Year on Year
| Fiscal Year | Real GDP | CPI All Items Less Fresh Food | Excluding Effects of Consumption Tax Hikes |
| 2013 | |||
| Oct 2013 | +2.6 to +3.0 [+2.7] | +0.6 to +1.0 [+0.7] | |
| Jul 2013 | +2.5 to +3.0 [+2.8] | +0.5 to +0.8 [+0.6] | |
| 2014 | |||
| Oct 2013 | +0.9 to +1.5 [+1.5] | +2.8 to +3.6 [+3.3] | +0.8 to +1.6 [+1.3] |
| Jul 2013 | +0.8 to +1.5 [+1.3] | +2.7 to +3.6 [+3.3] | +0.7 to +1.6 [+1.3] |
| 2015 | |||
| Oct 2013 | +1.3 to +1.8 [+1.5] | +1.6 to +2.9 [+2.6] | +0.9 to +2.2 [+1.9] |
| Jul 2013 | +1.3 to +1.9 [+1.5] | +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/mopo/outlook/gor1310b.pdf
Private-sector activity in Japan expanded with the Markit Composite Output PMI™ Index increasing from 53.2 in Sep to 56.0 in Oct, which is the highest reading in the six-year history of the survey (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d6234f82c1546af972d0f1efd234068). Claudia Tillbrooke, Economist at Markit and author of the report, finds that the survey data suggest continuing strong growth of the economy of Japan (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d6234f82c1546af972d0f1efd234068). The Markit Business Activity Index of Services increased from 53.0 in Sep to 55.3 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d6234f82c1546af972d0f1efd234068). Claudia Tillbrooke, Economist at Markit and author of the report, finds growth in services with strength in new orders and employment (http://www.markiteconomics.com/Survey/PressRelease.mvc/4d6234f82c1546af972d0f1efd234068). The Markit/JMMA Purchasing Managers’ Index™ (PMI™), seasonally adjusted, increased from 52.5 in Sep to 54.2 in Oct, which is the highest level since May 2010 (http://www.markiteconomics.com/Survey/PressRelease.mvc/53c9d4335c3340399112967379f52a18). New orders grew at the highest rate in four years in anticipation of the increase in the sales tax next year. New export orders recovered from decline in Aug, growing at high rates in Sep and Oct with respondents pointing to yen devaluation. Claudia Tillbrooke, Economist at Markit and author of the report, finds improving manufacturing conditions at the highest levels in more than three years with impulse originating in new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/53c9d4335c3340399112967379f52a18).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 |
| Corporate Goods Prices | Aug ∆% +0.3 |
| Consumer Price Index | Sep NSA ∆% 0.3; Sep 12 months NSA ∆% 1.1 |
| Real GDP Growth | IIQ2013 ∆%: 0.9 on IQ2013; IIQ2013 SAAR 3.8; |
| Employment Report | Sep Unemployed 2.58 million Change in unemployed since last year: minus 170 thousand |
| All Industry Indices | Aug month SA ∆% 0.3 Blog 10/27/13 |
| Industrial Production | Sep SA month ∆%: 1.5 |
| Machine Orders | Total Aug ∆% 4.5 Private ∆%: 3.2 Aug ∆% Excluding Volatile Orders 5.4 |
| Tertiary Index | Aug month SA ∆% 0.7 |
| Wholesale and Retail Sales | Sep 12 months: |
| Family Income and Expenditure Survey | Sep 12-month ∆% total nominal consumption 5.2, real 3.7 Blog 11/3/13 |
| Trade Balance | Exports Sep 12 months ∆%: 11.5 Imports Sep 12 months ∆% 16.5 Blog 11/3/13 |
Links to blog comments in Table JPY:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
10/13/13 http://cmpassocregulationblog.blogspot.com/2013/10/imf-view-collapse-of-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
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 2012 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 and 56.3 in Oct 2013.
Table CIPMNM, China, Nonmanufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| Total Index | New Orders | Interm. | Subs Prices | Exp | |
| Oct 2013 | 56.3 | 51.6 | 56.1 | 51.4 | 60.5 |
| Sep | 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 and 56.3 in Oct 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 with marginal improvement to 51.4 in Oct 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 with marginal decline to 52.5 in Oct 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 with marginal improvement to 49.2 in Oct 2013.
Table CIPMMFG, China, Manufacturing Index of Purchasing Managers, %, Seasonally Adjusted
| IPM | PI | NOI | INV | EMP | SDEL | |
| Oct 2013 | 51.4 | 54.4 | 52.5 | 48.6 | 49.2 | 50.8 |
| Sep | 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, 51.1 in Sep 2013 and 51.4 in Oct 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 51.2 in Sep to 51.8 in Oct, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/59995475378d43528ffca417425078de). 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/59995475378d43528ffca417425078de). The HSBC Business Activity index increased from 52.4 in Sep to 52.6 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/59995475378d43528ffca417425078de). Hongbin Ku, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds strength in services with recovery of manufacturing and improving labor markets (http://www.markiteconomics.com/Survey/PressRelease.mvc/59995475378d43528ffca417425078de). The HSBC Purchasing Managers’ Index™ (PMI™), compiled by Markit, increased to 50.9 in Oct from 50.2 in Sep, indicating marginally improving manufacturing in China (http://www.markiteconomics.com/Survey/PressRelease.mvc/3308d2cd1c824ec1a9842f2fbc17645b). New export orders posted the strongest increase in about a year with demand from the US. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds China moving in the path of moderate recovery of growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/3308d2cd1c824ec1a9842f2fbc17645b). 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 |
| Consumer Price Index | Sep month ∆%: 0.8 Sep 12 months ∆%: 3.1 |
| Value Added of Industry | Sep month ∆%: 0.72 Jan-Sep 2013/Jan-Sep 2012 ∆%: 9.6 Sep 12-Month ∆%: 10.2 |
| GDP Growth Rate | Year IIIQ2013 ∆%: 7.8 |
| Investment in Fixed Assets | Total Jan-Sep 2013 ∆%: 20.2 Real estate development: 19.7 |
| Retail Sales | Sep month ∆%: 1.24 Jan-Sep ∆%: 12.9 |
| Trade Balance | Oct balance $31.1 billion Cumulative Oct: $200.46 billion |
Links to blog comments in Table CNY:
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
10/20/13 http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html
Table VC-1 provides China’s exports, imports, trade balance and 12-month percentage changes from Dec 2010 to Oct 2013. Exports rebounded with growth of 5.6 percent in the 12 months ending in Oct 2013 while imports increased 7.6 percent for a trade surplus of $31.1 billion. Exports fell 0.3 percent in the 12 months ending in Sep 2013 while imports increased 7.4 for reduction of the trade surplus to $15.2q billion. Markets reacted positively to China’s trade data in Aug 2013 with exports growing 7.2 percent relative to a year earlier and imports 7.1 percent for increasing trade surplus of $28.52. Exports fell 3.1 percent in Jun 2013 and imports declined 0.7 percent with growth of 5.1 percent of exports in Jul 2013 and 10.9 percent of imports. The trade surplus reached $17.82 billion. Exports increased 1.0 percent in May 2013 relative to a year earlier while imports fell 0.3 percent with trade surplus of $20.43 billion. Exports increased 14.7 percent in Apr 2013 relative to a year earlier and imports 16.8 percent for trade surplus of $18.16 billion. Exports increased 10.0 percent in Mar 2013 relative to a year earlier and imports increased 14.1 percent for trade deficit of $0.88 billion. Exports increased 21.8 percent in Feb 2013 relative to a year earlier and imports fell 15.2 percent for trade surplus of $15.25 billion. China’s trade growth was stronger in Jan 2013 with growth of exports of 25.0 percent in 12 months and of imports of 28.8 percent for trade surplus of $29.15 billion. China’s trade growth strengthened in Dec 2012 with growth in 12 months of exports of 14.1 percent and of imports of 6.0 percent. China’s trade growth weakened again in Nov 2012 with growth of exports of 2.9 percent and no change in imports. China’s trade growth rebounded with growth of exports in 12 months of 11.6 percent in Oct 2012 and 9.9 percent in Sep 2012 after 2.7 percent in Aug 2012 and 1.0 percent in Jul 2012 while imports grew 2.4 percent in both Sep and Oct 2012, stagnating in Nov 2012. As a result, the monthly trade surplus increased from $25.2 billion in Jul 2012 to $31.9 billion in Oct 2012, declining to $19.6 billion in Nov 2012 but increasing to $31.62 billion in Dec 2012. China’s trade growth rebounded in Oct 2012 with growth of exports of 11.6 percent in 12 months and 2.4 percent for imports and trade surplus of $31.9 billion. The number that caught attention in financial markets was growth of 1.0 percent in exports in the 12 months ending in Jul 2012. Imports were also weak, growing 4.7 percent in 12 months ending in Jul 2012. Exports increased 11.3 percent in Jun 2012 relative to a year earlier while imports grew 6.3 percent. The rate of growth of exports fell to 4.9 percent in Apr 2012 relative to a year earlier and imports increased 0.3 percent but export growth was 15.3 percent in May and imports increased 12.7 percent. China reversed the large trade deficit of USD 31.48 billion in Feb 2012 with a surplus of $5.35 billion in Mar 2012, $18.42 billion in Apr 2012, $18.7 billion in May 2012, $31.7 billion in Jun 2012, $25.2 billion in Jul 2012, $26.7 billion in Aug 2012, $27.7 billion in Sep 2012, $31.9 billion in Oct 2012 and $19.6 billion in Nov 2012. Exports fell 0.5 percent in the 12 months ending in Jan 2012 while imports fell 15.3 percent for a still sizeable trade surplus of $27.3 billion. In Feb, exports increased 18.4 percent while imports jumped 39.6 percent for a sizeable deficit of $31.48 billion. There are distortions from the New Year holidays.
Table VC-1, China, Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Oct 2013 | 185.40 | 5.6 | 154.30 | 7.6 | 31.1 |
| Sep | 185.64 | -0.3 | 170.44 | 7.4 | 15.21 |
| Aug | 190.61 | 7.2 | 162.09 | 7.0 | 28.52 |
| Jul | 185.99 | 5.1 | 168.17 | 10.9 | 17.82 |
| Jun | 174.32 | -3.1 | 147.19 | -0.7 | 27.12 |
| May | 182.77 | 1.0 | 162.34 | -0.3 | 20.43 |
| Apr | 187.06 | 14.7 | 168.90 | 16.8 | 18.16 |
| Mar | 182.19 | 10.0 | 183.07 | 14.1 | -0.88 |
| Feb | 139.37 | 21.8 | 124.12 | -15.2 | 15.25 |
| Jan | 187.37 | 25.0 | 158.22 | 28.8 | 29.15 |
| Dec 2012 | 199.23 | 14.1 | 167.61 | 6.0 | 31.62 |
| Nov | 179.38 | 2.9 | 159.75 | 0.0 | 19.63 |
| Oct | 175.57 | 11.6 | 143.58 | 2.4 | 31.99 |
| Sep | 186.35 | 9.9 | 158.68 | 2.4 | 27.67 |
| Aug | 177.97 | 2.7 | 151.31 | -2.6 | 26.66 |
| Jul | 176.94 | 1.0 | 151.79 | 4.7 | 25.15 |
| Jun | 180.20 | 11.3 | 148.48 | 6.3 | 31.72 |
| May | 181.14 | 15.3 | 162.44 | 12.7 | 18.70 |
| Apr | 163.25 | 4.9 | 144.83 | 0.3 | 18.42 |
| Mar | 165.66 | 8.9 | 160.31 | 5.3 | 5.35 |
| Feb | 114.47 | 18.4 | 145.95 | 39.6 | -31.48 |
| Jan | 149.94 | -0.5 | 122.66 | -15.3 | 27.28 |
| Dec 2011 | 174.72 | 13.4 | 158.20 | 11.8 | 16.52 |
| Nov | 174.46 | 13.8 | 159.94 | 22.1 | 14.53 |
| Oct | 157.49 | 15.9 | 140.46 | 28.7 | 17.03 |
| Sep | 169.67 | 17.1 | 155.16 | 20.9 | 14.51 |
| Aug | 173.32 | 24.5 | 155.56 | 30.2 | 17.76 |
| Jul | 175.13 | 20.4 | 143.64 | 22.9 | 31.48 |
| Jun | 161.98 | 17.9 | 139.71 | 19.3 | 22.27 |
| May | 157.16 | 19.4 | 144.11 | 28.4 | 13.05 |
| Apr | 155.69 | 29.9 | 144.26 | 21.8 | 11.42 |
| Mar | 152.20 | 35.8 | 152.06 | 27.3 | 0.14 |
| Feb | 96.74 | 2.4 | 104.04 | 19.4 | -7.31 |
| Jan | 150.73 | 37.7 | 144.27 | 51.0 | 6.46 |
| Dec 2010 | 154.15 | 17.9 | 141.07 | 25.6 | 13.08 |
Source: http://english.mofcom.gov.cn/article/statistic/BriefStatistics/
Table VC-2 provides cumulative exports, imports and the trade balance of China together with percentage growth of exports and imports relative to a year earlier. Exports grew 7.7 percent in Jan-Oct 2013 relative to a year earlier while imports grew 7.3 percent for cumulative trade surplus of $200.46 billion. Exports increased 8.0 percent in Jan-Sep 2013 relative to a year earlier while imports increased 7.3 percent for cumulative surplus of $169.36 billion. Exports increased 9.2 percent in in Jan-Aug 2013 relative to a year earlier and imports 7.3 percent for trade surplus of $154.21 billion. Exports grew 9.5 percent in Jul 2013 relative to a year earlier and imports 7.3 percent with cumulative surplus of $125.71 billion. Exports increased 10.4 percent cumulatively in Jun 2013 and imports 6.7 for cumulative surplus of $107.95 billion. Exports increased 13.5 percent in Jan-May 2013 relative to a year earlier while imports increased 8.2 percent for cumulative surplus of $80.87 billion. Exports increased 17.4 percent in Jan-Apr 2012 relative to a year earlier while imports increased 10.6 percent for cumulative surplus of $60.98 billion. Exports increased 18.4 percent in Jan-Mar 2013 relative to a year earlier while imports increased 8.4 percent for cumulative surplus of $43.07 billion. Cumulative exports in Jan-Feb 2013 grew 23.6 percent relative to a year earlier and imports 5.0 percent for trade surplus of $44.15 billion. There is strong beginning of 2013 with trade surplus of $29.15 in Jan 2013 and growth of exports of 25.0 percent and imports of 28.8 percent. The trade balance of $231.1 billion in 2012 is stronger than the trade balance of $155.14 billion in 2011. The trade balance in 2011 of $155.14 billion is lower than those from 2008 to 2010. China’s trade balance reached $231.1 billion in Jan-Dec 2012 with cumulative growth of exports of 7.9 percent and 4.3 percent of imports, which is much lower than 20.3 percent for exports and 24.9 percent for imports in 2011 and 31.3 percent for exports and 38.7 percent for imports in 2010. There is a rare cumulative deficit of $4.2 billion in Feb 2012 reversed to a small surplus in Mar 2012 and a higher surplus of $19.3 billion in Apr 2012, increasing to $37.9 billion in May, $68.9 billion in Jun 2012, $94.1 billion in Jul 2012, $120.6 billion in Aug 2012, $148.3 billion in Sep 2012, $180.24 billion in Oct 2012, $199.54 billion in Nov 2012 and $231.1 billion in Dec 2012. More observations are required to detect trends of Chinese trade but available data suggest deceleration that would be expected from the large share of trade with Europe.
Table VC-2, China, Year to Date Exports, Imports and Trade Balance USD Billion and ∆%
| Exports | ∆% Relative | Imports USD | ∆% Relative | Balance | |
| Oct 2013 | 1800.26 | 7.7 | 1599.80 | 7.3 | 200.46 |
| Sep | 1614.86 | 8.0 | 1445.50 | 7.3 | 169.36 |
| Aug | 1429.26 | 9.2 | 1275.05 | 7.3 | 154.21 |
| Jul | 1238.73 | 9.5 | 1113.02 | 7.3 | 125.71 |
| Jun | 1052.82 | 10.4 | 944.87 | 6.7 | 107.95 |
| May | 878.56 | 13.5 | 797.69 | 8.2 | 80.87 |
| Apr | 695.87 | 17.4 | 634.88 | 10.6 | 60.98 |
| Mar | 508.87 | 18.4 | 465.80 | 8.4 | 43.07 |
| Feb | 326.73 | 23.6 | 282.58 | 5.0 | 44.15 |
| Jan | 187.37 | 25.0 | 158.22 | 28.8 | 29.15 |
| Dec 2012 | 2048.93 | 7.9 | 1817.83 | 4.3 | 231.11 |
| Nov | 1849.91 | 7.3 | 1650.37 | 4.1 | 199.54 |
| Oct | 1670.90 | 7.8 | 1490.67 | 4.6 | 180.24 |
| Sep | 1495.39 | 7.4 | 1347.08 | 4.8 | 148.31 |
| Aug | 1309.11 | 7.1 | 1188.51 | 5.1 | 120.61 |
| Jul | 1131.24 | 7.8 | 1037.14 | 6.4 | 94.10 |
| Jun | 954.38 | 9.2 | 885.46 | 6.7 | 68.91 |
| May | 774.40 | 8.7 | 736.49 | 6.7 | 37.92 |
| Apr | 593.24 | 6.9 | 573.94 | 5.1 | 19.3 |
| Mar | 430.02 | 7.6 | 429.36 | 6.6 | 0.66 |
| Feb | 264.40 | 6.9 | 268.64 | 7.7 | -4.24 |
| Jan | 149.94 | -0.5 | 122.66 | -15.3 | 27.28 |
| Dec 2011 | 1,898.60 | 20.3 | 1,743.46 | 24.9 | 155.14 |
| Nov | 1,724.01 | 21.1 | 1585.61 | 26.4 | 138.40 |
| Oct | 1,549.71 | 22.0 | 1,425.68 | 26.9 | 124.03 |
| Sep | 1,392.27 | 22.7 | 1,285.17 | 26.7 | 107.10 |
| Aug | 1,222.63 | 23.6 | 1,129.90 | 27.5 | 92.73 |
| Jul | 1,049.38 | 23.4 | 973.17 | 26.9 | 76.21 |
| Jun | 874.3 | 24.0 | 829.37 | 27.6 | 44.93 |
| May | 712.37 | 25.5 | 689.41 | 29.4 | 22.96 |
| Apr | 555.30 | 27.4 | 545.02 | 29.6 | 10.28 |
| Mar | 399.64 | 26.5 | 400.66 | 32.6 | -1.02 |
| Feb | 247.47 | 21.3 | 248.36 | 36.0 | -0.89 |
| Jan | 150.7 | 37.7 | 144.27 | 51.0 | 6.46 |
| Dec 2010 | 1577.93 | 31.3 | 1394.83 | 38.7 | 183.10 |
Source: http://english.mofcom.gov.cn/article/statistic/BriefStatistics/
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, decreased from 52.2 in Sep to 51.9 in Oct in the fourth consecutive monthly expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/71569592047842d8b4a3070d32eff19e). Chris Williamson, Chief Economist at Markit, finds growth in IVQ2013 at the rate of about 0.2 percent similar to IIIQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/71569592047842d8b4a3070d32eff19e). 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/71569592047842d8b4a3070d32eff19e). The Markit Eurozone Manufacturing PMI® increased to 51.3 in Oct from 51.3 in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/15ea3e8c87c84f588424617cd2576d3a). New orders increased for the fourth consecutive month close to the highest rate in 27 months in Aug. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at an annual rate between 2 and 3 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/15ea3e8c87c84f588424617cd2576d3a). 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 | Sep 2013: 12.2 % unemployment rate Sep 2013: 19.447 million unemployed Blog 11/3/13 |
| HICP | Sep month ∆%: 0.5 12 months Sep ∆%: 1.1 |
| Producer Prices | Euro Zone industrial producer prices Sep ∆%: 0.1 |
| Industrial Production | Aug month ∆%: 1.0; Aug 12 months ∆%: -2.1 |
| Retail Sales | Sep month ∆%: minus 0.6 |
| Confidence and Economic Sentiment Indicator | Sentiment 97.8 Oct 2013 Consumer minus 14.5 Oct 2013 Blog 11/3/13 |
| Trade | Jan-Aug 2013/Jan-Aug 2012 Exports ∆%: 0.9 Aug 2013 12-month Exports ∆% -5.4 Imports ∆% -7.2 |
Links to blog comments in Table EUR:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
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
Advanced economies are experiencing weak demand. Table VD-1 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Sep 2013. Retail sales decreased 0.6 percent in Sep 2013 and increased 0.3 percent in 12 months. The 12-month rates of growth have become negative since Mar 2011 with exception of 1.1 percent in Apr 2011, Aug 2011 at 0.1 percent, in Mar 2012 at 0.0 percent and growth of 0.1 percent in May 2013 and 0.3 percent in Sep 2013. The lower part of Table VD-1 provides annual percentage changes of inflation-adjusted retail sales in the euro zone since 2001. Retail sales fell 0.5 percent in 2010 after falling 0.4 percent in 2009 and 1.7 percent in 2008 and fell again by 1.4 percent in 2011 and 2.7 percent in 2012.
Table VD-1, Euro Zone, Volume of Retail Sales, Deflated ∆%
| Month ∆% | 12-Month CA ∆% | |
| Sep 2013 | -0.6 | 0.3 |
| Aug | 0.5 | -0.2 |
| Jul | 0.7 | -0.5 |
| Jun | -0.8 | -1.3 |
| May | 1.2 | 0.1 |
| Apr | 0.0 | -1.1 |
| Mar | -0.2 | -2.2 |
| Feb | -0.3 | -1.9 |
| Jan | 0.9 | -1.8 |
| Dec 2012 | -0.6 | -2.7 |
| Nov | 0.2 | -1.9 |
| Oct | -0.5 | -3.2 |
| Sep | -1.4 | -1.8 |
| Aug | 0.4 | -0.8 |
| Jul | -0.2 | -1.5 |
| Jun | 0.3 | -1.0 |
| May | 0.5 | -0.7 |
| Apr | -1.5 | -3.5 |
| Mar | 0.3 | 0.0 |
| Feb | -0.2 | -2.2 |
| Jan | -0.1 | -1.0 |
| Dec 2011 | 0.0 | -1.4 |
| Nov | -0.7 | -1.1 |
| Oct | 0.2 | -0.3 |
| Sep | -0.3 | -0.8 |
| Aug | -0.1 | 0.1 |
| Jul | 0.1 | -0.1 |
| Jun | 0.8 | -0.4 |
| May | -1.8 | -1.4 |
| Apr | 1.4 | 1.1 |
| Mar | -1.6 | -1.2 |
| Feb | 0.7 | 1.6 |
| Jan | 0.1 | 1.1 |
| Dec ∆% | ||
| 2012 | -2.7 | |
| 2011 | -1.4 | |
| 2010 | -0.5 | |
| 2009 | -0.4 | |
| 2008 | -1.7 | |
| 2007 | -0.9 | |
| 2006 | 2.5 | |
| 2005 | 0.8 | |
| 2004 | 2.3 | |
| 2003 | 0.7 | |
| 2002 | -0.3 | |
| 2001 | 1.9 |
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
Growth rates of retail sales of the euro zone by major segments are in Table VD-2. Total sales decreased 0.6 percent in Sep 2013 and increased 0.3 percent in the 12 months ending in Sep 2013. Food sales decreased 0.6 percent and fell 1.1 percent in 12 months and nonfood products decreased 0.1 percent in Sep and increased 1.1 percent in 12 months. Sales of automotive fuel stores changed 0.0 percent in Sep and increased 3.7 percent in 12 months.
Table VD-2, Euro Zone, Volume of Retail Sales by Products, ∆%
| Sep 2013 | Month ∆% | 12-Month ∆% |
| Total | -0.6 | 0.3 |
| Food, Drinks, Tobacco | -0.6 | -1.1 |
| Nonfood Products ex Automotive Fuel | -0.1 | 1.1 |
| Automotive Fuel in Specialized Stores | 0.0 | 3.7 |
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
Month and 12-month percentage rates of change of retail sales by member countries of the euro zone are shown in Table VD-3 for Sep 2013. Retail sales are weak throughout the euro zone. The 12-month percentage changes are positive for some members in Table VD-3 such as 0.1 percent for Ireland, 2.3 percent for France, 2.2 percent for Spain and 0.2 percent for Germany. The 12-month percentage change for the UK, which is not a member of the euro zone, was 2.1 percent. The European Union’s 12-month percentage change was 0.8 percent.
Table VD-3, Euro Zone, Volume of Retail Sales by Member Countries, ∆%
| Sep 2013 | Month ∆% | 12-Month ∆% |
| Euro Zone | -0.6 | 0.3 |
| Germany | -0.4 | 0.2 |
| France | 0.0 | 2.3 |
| Netherlands | NA | NA |
| Finland | -0.5 | -1.4 |
| Belgium | -0.8 | -2.8 |
| Portugal | -6.2 | -2.2 |
| Ireland | 0.1 | 0.1 |
| Italy | NA | NA |
| Greece | NA | NA |
| Spain | -2.5 | 2.2 |
| UK | 0.6 | 2.1 |
| European Union | -0.3 | 0.8 |
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
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, was unchanged from 52.2 in Sep to 52.2 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/92b2f24be3384e999a9cde3204e471db). Tim Moore, Senior Economist at Markit and author of the report, finds strengthening conditions in Germany (http://www.markiteconomics.com/Survey/PressRelease.mvc/92b2f24be3384e999a9cde3204e471db). The Germany Services Business Activity Index decreased from 53.7 in Sep to 52.9 in Oct (http://www.markiteconomics.com/Survey/PressRelease.mvc/92b2f24be3384e999a9cde3204e471db). The Markit/BME Germany Purchasing Managers’ Index® (PMI®), showing close association with Germany’s manufacturing conditions, increased from 51.1 in Sep to 51.7 in Oct, in movement away from contraction territory below 50.0 during four consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/64e06121429145c6af653a8c13f0b3b9). New export orders increased moderately for the third consecutive month. Tim Moore, Senior Economist at Markit and author of the report, finds improvement in manufacturing conditions with increasing export sales (http://www.markiteconomics.com/Survey/PressRelease.mvc/64e06121429145c6af653a8c13f0b3b9).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 |
| Producer Price Index | Sep month ∆%: 0.0 CSA, 0.3 |
| Industrial Production | MFG Aug month CSA ∆%: 2.1 |
| Machine Orders | MFG Sep month ∆%: 3.3 |
| Retail Sales | Sep Month ∆% -0.4 12-Month ∆% 0.2 Blog 11/3/13 |
| Employment Report | Unemployment Rate SA Sep 5.2% |
| Trade Balance | Exports Aug 12-month NSA ∆%: -5.4 Blog 10/13/13 |
Links to blog comments in Table DE:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
10/13/13 http://cmpassocregulationblog.blogspot.com/2013/10/imf-view-collapse-of-united-states.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
Table VE-1 provides month and 12-month rates of growth of new orders of manufacturing in Germany from Jan 2010 to Sep 2013. There are fluctuations in both monthly rates and in the past 12 months. Table VE-1 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany with recent improvement. Total orders for manufacturing increased 3.3 percent in Sep 2013 and increased 11.0 percent in 12 months. There is the same behavior for total, foreign and domestic orders with decline in 12-month rates from two-digit levels to single digits and negative changes. An important aspect of Germany is that the bulk of orders is domestic or from other European countries while foreign orders have been growing rapidly. There is weakening world trade affecting export economies. As in other countries, data on orders for manufacturing are highly volatile. Most 12-month percentage changes from Jan 2012 to Sep 2012 in Table VE-1 are negative largely because of the unusual strength of the Germany economy in the beginning of 2011 but more recently because of slowing world economy in 2012-2013.
Table VE-1, Germany, Volume of Orders Received in Manufacturing, Total, Domestic and Foreign, ∆%
| Total | Total | Foreign 12 M | Foreign M | Home | Home | |
| 2013 | ||||||
| Sep | 11.0 | 3.3 | 13.6 | 6.8 | 7.7 | -1.0 |
| Aug | 0.1 | -0.3 | -0.7 | -2.2 | 1.1 | 2.1 |
| Jul | 5.3 | -2.0 | 6.3 | -3.1 | 4.1 | -0.2 |
| Jun | 4.6 | 4.5 | 7.8 | 5.1 | 0.3 | 3.5 |
| May | -3.7 | -0.7 | -1.9 | 0.2 | -6.1 | -1.8 |
| Apr | 5.7 | -1.7 | 7.3 | -0.7 | 3.5 | -2.9 |
| Mar | -5.9 | 2.2 | -4.9 | 2.5 | -7.3 | 1.8 |
| Feb | -3.1 | 2.0 | -2.0 | 1.9 | -4.6 | 2.1 |
| Jan | -1.0 | -1.3 | 0.5 | -2.5 | -2.7 | 0.2 |
| 2012 | ||||||
| Dec | -9.1 | 0.9 | -6.7 | 1.5 | -12.6 | 0.2 |
| Nov | -0.9 | -2.7 | 2.4 | -4.7 | -5.1 | 0.0 |
| Oct | 4.5 | 3.9 | 7.0 | 6.7 | 1.3 | 0.4 |
| Sep | -8.9 | -1.6 | -6.6 | -2.4 | -11.7 | -0.6 |
| Aug | -4.4 | -1.1 | -2.1 | -0.5 | -7.1 | -1.9 |
| Jul | -1.6 | 0.9 | 0.6 | 1.3 | -4.2 | 0.5 |
| Jun | -4.5 | -2.5 | -6.4 | -2.9 | -1.7 | -2.0 |
| May | -11.0 | 0.9 | -3.7 | 2.3 | -18.8 | -0.9 |
| Apr | -3.9 | -1.7 | -4.4 | -2.6 | -3.1 | -0.7 |
| Mar | -2.2 | 2.4 | -1.2 | 3.3 | -3.3 | 1.4 |
| Feb | -4.3 | 0.2 | -4.7 | 1.0 | -3.8 | -0.7 |
| Jan | -2.6 | -1.5 | -4.6 | -2.7 | -0.2 | -0.1 |
| 2011 | ||||||
| Dec | 0.0 | 2.1 | -0.3 | 4.4 | 0.5 | -0.6 |
| Nov | -4.8 | -2.9 | -8.2 | -5.1 | -0.3 | 0.0 |
| Oct | 0.1 | 1.5 | 2.1 | 2.8 | -2.1 | -0.1 |
| Sep | 2.2 | -2.9 | 1.9 | -3.3 | 2.6 | -2.3 |
| Aug | 7.1 | -1.0 | 5.2 | 0.0 | 9.4 | -2.3 |
| Jul | 4.9 | -1.9 | 4.6 | -5.8 | 5.4 | 3.2 |
| Jun | 3.5 | -0.8 | 7.8 | 8.1 | -2.0 | -10.6 |
| May | 23.1 | 2.7 | 16.0 | -3.7 | 31.8 | 10.8 |
| Apr | 6.7 | 1.9 | 9.6 | 2.5 | 3.0 | 1.1 |
| Mar | 9.8 | -3.2 | 12.3 | -3.3 | 6.9 | -3.1 |
| Feb | 21.5 | 0.7 | 24.1 | 0.0 | 18.4 | 1.7 |
| Jan | 22.5 | 4.3 | 26.1 | 4.2 | 18.2 | 4.3 |
| 2010 | ||||||
| Dec | 21.8 | -2.9 | 26.8 | -4.1 | 15.4 | -1.3 |
| Nov | 21.4 | 5.5 | 27.1 | 8.8 | 15.0 | 1.7 |
| Oct | 14.2 | 0.3 | 18.2 | -0.2 | 10.0 | 0.9 |
| Sep | 13.9 | -0.8 | 15.6 | -2.7 | 11.9 | 1.5 |
| Aug | 22.2 | 2.1 | 29.7 | 4.2 | 14.5 | -0.3 |
| Jul | 14.1 | -0.5 | 21.4 | -0.4 | 6.4 | -0.6 |
| Jun | 27.6 | 2.3 | 30.6 | 2.7 | 24.2 | 1.7 |
| May | 24.8 | -0.1 | 29.6 | 0.8 | 19.4 | -1.1 |
| Apr | 29.9 | 3.1 | 34.0 | 3.3 | 25.7 | 2.9 |
| Mar | 29.4 | 4.9 | 32.9 | 5.0 | 25.8 | 4.8 |
| Feb | 24.0 | -0.2 | 28.7 | 0.2 | 18.6 | -0.7 |
| Jan | 17.0 | 4.1 | 23.8 | 4.7 | 9.8 | 3.3 |
| Dec 2009 | 9.1 | -1.7 | 10.5 | -2.6 | 7.3 | -0.5 |
| Dec 2008 | -28.3 | -6.7 | -31.5 | -9.5 | -23.7 | -2.9 |
| Dec 2007 | 7.1 | -0.9 | 9.1 | -2.0 | 4.4 | 0.2 |
| Dec 2006 | 2.8 | 0.8 | 3.4 | 0.5 | 2.2 | 1.1 |
| Dec 2005 | 5.0 | -0.5 | 10.4 | -1.1 | -1.4 | 0.3 |
| Dec 2004 | 12.7 | 6.5 | 13.0 | 8.5 | 12.7 | 4.9 |
| Dec 2003 | 10.7 | 2.4 | 16.4 | 5.4 | 5.1 | -0.8 |
| Dec 2002 | -0.2 | -3.4 | -0.8 | -6.6 | 0.2 | -0.3 |
| Average ∆% 2003-2007 | 7.6 | 10.4 | 4.5 | |||
| Average ∆% 2003-2012 | 2.3 | 3.9 | 0.3 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally adjusted; 12 M: Non-adjusted Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Orders for capital goods of Germany are shown in Table VE-2. Total capital goods orders increased 5.5 percent in Sep 2013 and increased 14.7 percent in 12 months. Domestic orders decreased 2.3 percent in Sep and foreign orders increased 10.2 percent. There has been deceleration from 2010, early 2011 with growth rates falling from two digit levels to single digits, and multiple negative changes with recent improvement. An important aspect of Germany’s economy shown in Tables VE-1 and VE-2 is the success in increasing the competitiveness of its economic activities as shown by rapid growth of orders for industry after the recession of 2001 in the period before the global recession beginning in late 2007. Germany adopted fiscal and labor market reforms to increase productivity.
Table VE-2, Germany, Volume of Orders Received of Capital Goods Industries, Total, Foreign and Domestic, ∆%
| Total 12 M | Total M | Foreign 12 M | Foreign M | Domestic 12 M | Domestic M | |
| 2013 | ||||||
| Sep | 14.7 | 5.5 | 17.4 | 10.2 | 9.9 | -2.3 |
| Aug | 3.4 | -0.5 | 1.7 | -3.3 | 5.8 | 4.3 |
| Jul | 6.8 | -3.6 | 8.6 | -5.0 | 4.0 | -0.9 |
| Jun | 8.7 | 8.0 | 13.3 | 8.9 | 1.1 | 6.6 |
| May | -3.6 | -0.8 | -1.1 | 1.0 | -7.9 | -4.1 |
| Apr | 5.6 | -2.3 | 6.5 | -2.4 | 3.9 | -2.1 |
| Mar | -6.1 | 1.7 | -4.6 | 2.6 | -8.5 | 0.2 |
| Feb | -0.7 | 3.0 | 1.6 | 2.4 | -4.3 | 4.0 |
| Jan | 1.3 | -2.0 | 3.6 | -2.6 | -2.3 | -1.0 |
| 2012 | ||||||
| Dec | -7.7 | 2.4 | -4.6 | 2.6 | -13.3 | 1.8 |
| Nov | -0.7 | -3.9 | 3.1 | -5.6 | -6.5 | -0.6 |
| Oct | 4.6 | 4.7 | 6.3 | 6.8 | 2.1 | 1.1 |
| Sep | -7.5 | -0.4 | -4.8 | -0.7 | -11.6 | 0.0 |
| Aug | -4.6 | -2.4 | -2.6 | -1.5 | -7.4 | -3.8 |
| Jul | -0.3 | 1.3 | 1.2 | 1.9 | -2.7 | 0.4 |
| Jun | -7.1 | -2.9 | -9.9 | -3.5 | -1.9 | -1.7 |
| May | -12.0 | 1.0 | -2.8 | 2.1 | -23.9 | -0.7 |
| Apr | -3.3 | -3.2 | -4.2 | -3.9 | -1.7 | -1.9 |
| Mar | 2.2 | 5.1 | 3.3 | 7.2 | 0.2 | 1.5 |
| Feb | -5.9 | 1.2 | -7.0 | 1.1 | -4.2 | 1.3 |
| Jan | -3.7 | -3.6 | -6.5 | -4.1 | 1.0 | -2.9 |
| 2011 | ||||||
| Dec | 1.2 | 2.8 | -0.1 | 4.2 | 3.5 | 0.7 |
| Nov | -6.5 | -3.4 | -10.5 | -6.7 | 0.7 | 2.1 |
| Oct | 3.1 | 2.6 | 6.2 | 4.5 | -2.0 | -0.7 |
| Sep | 2.9 | -2.8 | 2.2 | -3.5 | 4.0 | -1.8 |
| Aug | 6.7 | -0.7 | 4.5 | 0.3 | 10.6 | -2.4 |
| Jul | 7.2 | -5.7 | 6.4 | -9.5 | 8.8 | 1.4 |
| Jun | 9.1 | 0.3 | 13.3 | 12.5 | 2.0 | -16.0 |
| May | 27.5 | 4.9 | 17.7 | -4.3 | 43.5 | 20.4 |
| Apr | 11.0 | 3.9 | 14.1 | 5.2 | 6.3 | 1.7 |
| Mar | 12.0 | -6.0 | 14.4 | -5.7 | 8.5 | -6.5 |
| Feb | 29.3 | 2.5 | 32.5 | 0.8 | 24.8 | 5.4 |
| Jan | 26.8 | 3.8 | 32.8 | 4.4 | 17.7 | 2.8 |
| 2010 | ||||||
| Dec | 27.4 | -5.1 | 31.2 | -6.8 | 21.1 | -1.9 |
| Nov | 30.4 | 9.7 | 37.0 | 13.9 | 20.1 | 2.9 |
| Oct | 20.5 | -0.6 | 24.9 | -1.9 | 14.3 | 1.7 |
| Sep | 18.2 | -1.7 | 20.3 | -3.6 | 14.7 | 1.7 |
| Aug | 27.5 | 5.0 | 40.0 | 7.0 | 11.5 | 1.7 |
| Jul | 14.1 | -1.7 | 28.1 | -1.7 | -2.5 | -1.8 |
| Jun | 32.0 | 3.0 | 38.7 | 4.3 | 22.1 | 0.7 |
| May | 26.2 | 1.7 | 36.6 | 1.8 | 12.8 | 1.5 |
| Apr | 31.0 | 3.1 | 41.4 | 4.1 | 18.1 | 1.7 |
| Mar | 25.8 | 6.3 | 33.8 | 7.1 | 15.7 | 5.0 |
| Feb | 21.2 | -1.1 | 31.3 | -0.1 | 8.3 | -2.4 |
| Jan | 17.0 | 4.4 | 29.6 | 3.0 | 2.8 | 6.9 |
| Dec 2009 | 8.1 | -1.2 | 13.6 | -1.5 | 0.3 | -1.0 |
| Dec 2008 | -32.2 | -7.2 | -36.8 | -10.0 | -24.5 | -3.6 |
| Dec 2007 | 9.4 | -0.6 | 11.6 | -2.3 | 6.1 | 2.2 |
| Dec 2006 | 3.5 | 2.2 | 3.9 | 2.9 | 2.9 | 1.2 |
| Dec 2005 | 1.8 | -2.1 | 9.7 | -2.5 | -8.4 | -1.6 |
| Dec 2004 | 19.5 | 11.2 | 18.6 | 12.2 | 20.6 | 9.7 |
| Dec 2003 | 11.7 | 2.1 | 17.2 | 5.0 | 5.4 | -1.6 |
| Dec 2002 | -2.8 | -4.3 | -3.7 | -8.1 | -1.8 | 0.2 |
| Average ∆% 2003-2007 | 9.0 | 12.1 | 4.9 | |||
| Average ∆% 2003-2012 | 3.0 | 4.7 | 0.5 |
Notes: AE: Annual Equivalent; M: Month; M: Calendar and seasonally-adjusted; 12 M: Non-adjusted
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-1 of the German Statistisches Bundesamt Deutschland shows the sharp upward trend of total orders in manufacturing before the global recession. There is also an obvious upward trend in the recovery from the recession with Germany’s economy being among the most dynamic in the advanced economies until the slowdown beginning in the final months of 2011 and what could be stationary series from late 2011 into 2012 but risk of decline in the final segment.
Chart VE-1, Germany, Volume of Total Orders in Manufacturing, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
Chart VE-2 of the German Statistisches Bundesamt Deutschland provides unadjusted volume of total orders in manufacturing and a trend curve. The final segment on the right could be the beginning of inversion to mildly increasing trend but it may be early to reach conclusions.
Chart VE-2, Germany, Volume of Total Orders in Manufacturing and Trend, Non-Adjusted, 2005=100
Source: Statistisches Bundesamt Deutschland
https://www.destatis.de/EN/FactsFigures/Indicators/ShortTermIndicators/ShortTermIndicators.html
VF France. Table VF-FR provides growth rates of GDP of France with the estimates of Institut National de la Statistique et des Études Économiques (INSEE). The long-term rate of GDP growth of France from IVQ1949 to IVQ2012 is quite high at 3.2 percent. France’s growth rates were quite high in the four decades of the 1950s, 1960, 1970s and 1980s with an average growth rate of 4.0 percent compounding the average rates in the decades and discounting to one decade. The growth impulse diminished with 1.9 percent in the 1990s and 1.7 percent from 2000 to 2007. The average growth rate from 2000 to 2012, using fourth quarter data, is 1.0 percent because of the sharp impact of the global recession from IVQ2007 to IIQ2009. The growth rate from 2000 to 2012 is 1.0 percent. Cobet and Wilson (2002) provide estimates of output per hour and unit labor costs in national currency and US dollars for the US, Japan and Germany from 1950 to 2000 (see Pelaez and Pelaez, The Global Recession Risk (2007), 137-44). The average yearly rate of productivity change from 1950 to 2000 was 2.9 percent in the US, 6.3 percent for Japan and 4.7 percent for Germany while unit labor costs in USD increased at 2.6 percent in the US, 4.7 percent in Japan and 4.3 percent in Germany. From 1995 to 2000, output per hour increased at the average yearly rate of 4.6 percent in the US, 3.9 percent in Japan and 2.6 percent in Germany while unit labor costs in US fell at minus 0.7 percent in the US, 4.3 percent in Japan and 7.5 percent in Germany. There was increase in productivity growth in the G7 in Japan and France in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Lucas (2011May) compares growth of the G7 economies (US, UK, Japan, Germany, France, Italy and Canada) and Spain, finding that catch-up growth with earlier rates for the US and UK stalled in the 1970s.
Table VF-FR, France, Average Growth Rates of GDP Fourth Quarter, 1949-2012
| Period | Average ∆% |
| 1949-2012 | 3.2 |
| 2000-2012 | 1.0 |
| 2000-2011 | 1.1 |
| 2000-2007 | 1.7 |
| 1990-1999 | 1.9 |
| 1980-1989 | 2.5 |
| 1970-1979 | 3.8 |
| 1960-1969 | 5.7 |
| 1950-1959 | 4.2 |
Source: Institut National de la Statistique et des Études Économiques
http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20130814
The Markit Flash France Composite Output Index 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, did not change from 50.5 in Sep to 50.5 in Ict, indicating moderate expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/5190492877554ca99d240fb4e6c9a623). 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/5190492877554ca99d240fb4e6c9a623). The Markit France Services Activity index decreased from 51.0 in Sep to 50.9 in Aug (http://www.markiteconomics.com/Survey/PressRelease.mvc/5190492877554ca99d240fb4e6c9a623). The Markit France Manufacturing Purchasing Managers’ Index® decreased marginally to 49.1 in Oct from 49.8 in Sep, which indicates marginal deterioration in conditions in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2d0f5b4f2d04a61a36714f852faa6d5). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI®, finds that export business rose at the highest pace since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f2d0f5b4f2d04a61a36714f852faa6d5). Table FR provides the country data table for France.
Table FR, France, Economic Indicators
| CPI | Sep month ∆% -0.2 |
| PPI | Sep month ∆%: 0.3 Blog 11/3/13 |
| GDP Growth | IIQ2013/IQ2013 ∆%: 0.5 |
| Industrial Production | Aug ∆%: |
| Consumer Spending | Manufactured Goods |
| Employment | Unemployment Rate: IIQ2013 10.5% |
| 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:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
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
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
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 decreased from 52.7 in Sep to 50.5 in Oct, (http://www.markiteconomics.com/Survey/PressRelease.mvc/cd59620a6b7a4ecd80e55ca91d034bad). 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/cd59620a6b7a4ecd80e55ca91d034bad). The Markit/ADACI Purchasing Managers’ Index® (PMI®), decreased marginally from 50.8 in Sep to 50.7 in Sep for the fourth consecutive reading above 50.0 with strong increase in foreign orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b3139c705f54ef7b6a5aacf0d3dd01a). Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI®, finds growth at a slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b3139c705f54ef7b6a5aacf0d3dd01a). Table IT provides the country data table for Italy.
Table IT, Italy, Economic Indicators
| Consumer Price Index | Oct month ∆%: -0.3 |
| Producer Price Index | Sep month ∆%: 0.0 Blog 11/3/13 |
| GDP Growth | IIQ2013/IQ2013 SA ∆%: minus 0.3 |
| Labor Report | Sep 2013 Participation rate 63.6% Employment ratio 55.4% Unemployment rate 12.5% Blog 11/3/13 |
| Industrial Production | Aug month ∆%: -0.3 |
| Retail Sales | Aug month ∆%: 0.0 Aug 12-month ∆%: 0.2 Blog 10/27/13 |
| Business Confidence | Mfg Oct 97.3, Jun 90.9 Construction Oct 80.8, Jun 71.6 Blog 11/3/13 |
| Trade Balance | Balance Aug SA €2477 million versus Jul €2260 |
Links to blog comments in Table IT:
11/3/2013 http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
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
9/15/13 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
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® increased from 60.3 in Sep to 62.5 in Sep, indicating increase in activity in every month since the beginning of 2013 at the highest rate since May 1997 (http://www.markiteconomics.com/Survey/PressRelease.mvc/886a8bb8c5af427ea8579b03fdb46ffe). Chris Williamson, Chief Economist at Markit, finds continuing improvement in the UK’s economy with possible higher growth of GDP in IVQ2013 at the quarterly rate of 1.3 percent, which would be the highest since the period before the 2007 financial crisis while creation of new jobs exceeds 100,000 per quarter (http://www.markiteconomics.com/Survey/PressRelease.mvc/886a8bb8c5af427ea8579b03fdb46ffe). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) decreased marginally to 56.0 in Oct from 56.3 in Sep with continuing strength of production and new orders above long-term averages (http://www.markiteconomics.com/Survey/PressRelease.mvc/9620f11fc5c748d8aaf417b28e6f9b1b). Respondents indicated increase in new foreign orders at the highest rate since Feb 2011. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI®, finds that manufacturing conditions continue around the levels in Aug with output and new orders close to the fastest pace in 19 years (http://www.markiteconomics.com/Survey/PressRelease.mvc/9620f11fc5c748d8aaf417b28e6f9b1b). Table UK provides the economic indicators for the United Kingdom.
Table UK, UK Economic Indicators
| CPI | Sep month ∆%: 0.4 |
| Output/Input Prices | Output Prices: Sep 12-month NSA ∆%: 1.2; excluding food, petroleum ∆%: 0.7 |
| GDP Growth | IIIQ2013 prior quarter ∆% 0.8; year earlier same quarter ∆%: 1.5 |
| Industrial Production | Sep 2013/Sep 2012 ∆%: Production Industries 2.2; Manufacturing 0.8 |
| Retail Sales | Sep month ∆%: 0.6 |
| Labor Market | Jun-Aug Unemployment Rate: 7.7%; Claimant Count 4.0%; Earnings Growth 0.7% |
| Trade Balance | Balance SA Aug minus ₤3320 million |
Links to blog comments in Table UK:
10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html
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 the output of production industries with revisions. Table VH-1 incorporates the revisions released in Dec, 2011(http://www.ons.gov.uk/ons/rel/iop/index-of-production/november-2012/index.html) and the latest available data for Sep 2013. Manufacturing accounts for 68.4 percent of the production industries of the UK and increased 0.8 percent in the 12 months ending in Sep 2013. Capital goods industries increased 3.4 percent in the 12 months ending in Sep 2013, increasing 2.0 percent in the 12 months ending in Aug 2013. Capital goods industries fell 1.4 percent in the 12 months ending in May 2013, grew 3.4 percent in the 12 months ending in Apr 2013 and had been growing at very high rates during the current cyclical recovery but falling from the unsustainable high of 12.0 percent in the 12 months ending in Feb 2011. Mining and quarrying increased 11.5 percent in the 12 months ending in Sep 2013. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Mar 2011 to May 2013. With exception of most months for capital goods and Sep to Dec 2012 for consumer durables, 12-month percentage changes of all segments are mostly negative from Jan to Dec 2012. Energy and mining have been drivers of decline. The upper part of Table VH-1 provides rates of change of yearly values. Manufacturing output fell 10.2 percent in 2009 after falling 2.8 percent in 2008 but grew at 4.2 percent in the initial phase of the recovery in 2010 and 1.8 percent in 2011 but fell 1.7 percent in 2012.
Table VH-1, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, 12-Month ∆%
| PROD | MNG | MFG | CON DUR | NCON DUR | CAP | ENGY | |
| 2008 | -2.9 | -6.1 | -2.8 | -5.5 | -1.7 | -3.3 | -2.9 |
| 2009 | -9.5 | -9.7 | -10.2 | -6.8 | -0.8 | -12.1 | -6.5 |
| 2010 | 2.8 | -2.4 | 4.2 | -4.1 | -0.3 | 10.4 | -2.5 |
| 2011 | -1.2 | -14.8 | 1.8 | 0.6 | -0.7 | 6.7 | -10.7 |
| 2012 | -2.5 | -9.8 | -1.7 | -2.6 | -4.1 | 1.7 | -7.5 |
| PROD IND | MNG | MFG | CON DUR | NCONS DUR | CAP | ENGY | ||
| 2011 | Jul | -0.9 | -15.2 | 1.8 | 2.2 | 1.8 | 5.2 | -9.9 |
| Aug | -2.1 | -16.5 | 0.2 | -1.5 | -1.0 | 4.3 | -10.5 | |
| Sep | -2.3 | -18.6 | 0.7 | -2.0 | -2.7 | 7.4 | -12.1 | |
| Oct | -3.0 | -14.2 | -1.0 | -1.1 | -3.9 | 4.5 | -11.9 | |
| Nov | -3.4 | -14.0 | -1.0 | -0.3 | -2.7 | 5.6 | -12.6 | |
| Dec | -2.5 | -14.1 | 0.9 | -3.7 | -1.7 | 7.1 | -15.4 | |
| 2012 | Jan | -3.5 | -20.0 | 0.5 | -5.0 | 0.5 | 4.9 | -15.6 |
| Feb | -1.6 | -7.7 | -1.4 | -6.5 | -0.5 | -0.8 | -4.9 | |
| Mar | -2.0 | -6.2 | -0.8 | -6.2 | -1.9 | 1.6 | -8.2 | |
| Apr | -1.3 | -10.9 | -1.1 | -2.1 | -5.2 | 3.0 | -6.2 | |
| May | -1.5 | -6.5 | -1.2 | -2.9 | -6.1 | 3.2 | -4.6 | |
| Jun | -4.2 | -4.5 | -4.2 | -9.8 | -6.7 | 0.7 | -5.3 | |
| Jul | -0.9 | -1.6 | -1.0 | -2.5 | -5.4 | 4.7 | -3.7 | |
| Aug | -1.1 | 0.6 | -1.6 | -2.2 | -4.4 | 2.0 | -2.9 | |
| Sep | -3.9 | -16.8 | -1.8 | 1.5 | -2.2 | - | -12.1 | |
| Oct | -4.0 | -20.6 | -2.5 | 4.0 | -4.8 | 0.1 | -11.7 | |
| Nov | -3.1 | -13.4 | -2.7 | 0.8 | -5.7 | - | -7.8 | |
| Dec | -3.1 | -8.7 | -2.6 | 0.8 | -6.3 | 1.3 | -5.6 | |
| 2013 | Jan | -3.3 | -5.8 | -4.1 | -0.4 | -6.2 | 0.2 | -3.5 |
| Feb | -2.3 | -7.1 | -2.3 | -3.2 | -5.3 | 3.3 | -7.4 | |
| Mar | -1.9 | -11.6 | -1.6 | 1.7 | -4.3 | 2.5 | -3.7 | |
| Apr | -1.4 | -6.5 | -0.8 | -0.5 | 0.5 | 3.4 | -4.9 | |
| May | -2.2 | -2.4 | -2.7 | -2.9 | 0.2 | -1.4 | -4.2 | |
| Jun | 1.6 | -3.4 | 2.4 | 2.9 | 2.5 | 3.1 | -5.9 | |
| Jul | -1.1 | -7.7 | -0.4 | 2.7 | 0.3 | 2.2 | -7.2 | |
| Aug | -1.5 | -10.1 | -0.2 | -1.2 | -2.7 | 2.0 | -8.2 | |
| Sep | 2.2 | 11.5 | 0.8 | 0.3 | -1.5 | 3.4 | 2.6 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Energy; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/iop/index-of-production/september-2013/index.html
Percentage changes in the production industries and major components in a month relative to the prior month are shown in Table VH-2. The index of production increased 0.9 percent in Sep 2013, with manufacturing increasing 1.2 percent, consumer durable goods 2.3 percent and capital goods 1.9 percent. All segments increased in Jun 2013 with exception of energy. There is significant fluctuation in monthly percentage changes. Many segments fell in May and Apr 2013. Capital goods industries fell 2.0 percent in Jan 2013 and increased 1.5 percent in Mar and 3.2 percent in Jun while manufacturing fell 1.3 percent in Jan but increased 1.2 percent in Mar and 2.0 percent in Jun. Performance was strong in Dec 2012 with growth of manufacturing of 1.1 percent and capital goods of 2.0 percent. Fluctuations of monthly production are quite wide.
Table VH-2, UK, Output of the Production Industries, Chained Volume Indices of Gross Value Added, Latest Month on Previous Month ∆%
| PROD IND | MNG | MFG | CONS DUR | NCONS DUR | CAP | ENGY | ||
| 2011 | Jul | -0.6 | 1.1 | -0.5 | -4.5 | 0.1 | -1.1 | 0.0 |
| Aug | -0.5 | -0.1 | -0.7 | -2.5 | -0.8 | -0.3 | -0.4 | |
| Sep | 0.1 | -1.1 | 0.4 | -3.0 | -1.8 | 2.5 | -1.0 | |
| Oct | -0.6 | 1.9 | -0.8 | -0.5 | -0.2 | -1.0 | -0.7 | |
| Nov | -0.2 | -0.9 | 0.1 | 0.9 | -0.1 | 1.3 | -0.8 | |
| Dec | 0.7 | -2.9 | 0.9 | 0.3 | 1.1 | 0.7 | -1.6 | |
| 2012 | Jan | -0.7 | -2.7 | 0.2 | 1.2 | 0.5 | -1.0 | -1.7 |
| Feb | - | 2.9 | -1.4 | -1.0 | -0.9 | -2.7 | 4.3 | |
| Mar | -0.3 | 0.2 | 0.4 | 0.1 | -0.3 | 2.3 | -4.3 | |
| Apr | -0.6 | -4.1 | -1.0 | 1.7 | -3.0 | -1.0 | 1.2 | |
| May | 0.9 | -0.5 | 1.2 | -0.2 | -0.1 | 2.4 | 0.2 | |
| Jun | -2.5 | 1.9 | -3.0 | -2.6 | -1.3 | -1.2 | -0.3 | |
| Jul | 2.9 | 4.3 | 2.9 | 3.3 | 1.5 | 2.8 | 1.7 | |
| Aug | -0.7 | 2.1 | -1.3 | -2.3 | 0.2 | -2.8 | 0.4 | |
| Sep | -2.7 | -18.2 | 0.2 | 0.7 | 0.5 | 0.5 | -10.5 | |
| Oct | -0.7 | -2.8 | -1.6 | 2.0 | -2.9 | -0.8 | -0.2 | |
| Nov | 0.7 | 8.1 | -0.1 | -2.3 | -1.0 | 1.1 | 3.6 | |
| Dec | 0.7 | 2.3 | 1.1 | 0.4 | 0.5 | 2.0 | 0.8 | |
| 2013 | Jan | -0.9 | 0.4 | -1.3 | - | 0.6 | -2.0 | 0.4 |
| Feb | 0.9 | 1.4 | 0.4 | -3.8 | 0.1 | 0.2 | 0.2 | |
| Mar | 0.1 | -4.6 | 1.2 | 5.2 | 0.7 | 1.5 | -0.5 | |
| Apr | -0.1 | 1.3 | -0.2 | -0.5 | 1.8 | -0.1 | -0.1 | |
| May | - | 3.9 | -0.7 | -2.6 | -0.4 | -2.4 | 0.9 | |
| Jun | 1.4 | 0.8 | 2.0 | 3.2 | 1.0 | 3.2 | -2.1 | |
| Jul | 0.1 | -0.4 | 0.2 | 3.1 | -0.6 | 2.0 | 0.3 | |
| Aug | -1.1 | -0.6 | -1.2 | -6.0 | -2.8 | -3.0 | -0.7 | |
| Sep | 0.9 | 1.5 | 1.2 | 2.3 | 1.7 | 1.9 | 0.1 |
Notes: PROD IND: Production Industries; MNG: Mining; MFG: Manufacturing; ENGY: Energy; CON DUR: Consumer Durables; CONS NDUR: Consumer Nondurables; CAP: Capital Goods
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/iop/index-of-production/september-2013/index.html
Weights of components of the production index and contributions by components to the monthly and 12-month percentage changes of volume are provided by the UK Office for National Statistics and shown in Table VH-3. The 12-month rate of output of the production industries of 2.2 percent was driven by positive contribution of 1.26 percentage points by mining and quarrying with the subcomponent of oil and gas adding 0.78 percentage points. Manufacturing added 0.60 percentage points. The contribution of manufacturing is strong because of its share of 68.4 percent in the production index with growth of 0.8 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing increased 1.2 percent in Sep 2013, adding 0.87 percentage points. Mining increased 1.7 percent in Sep 2013, adding 0.14 percentage points. Electricity changed 0.0 percent in Sep contributing 0.00 percentage points.
Table VH-3, UK, Weights of Components, Volume 12-Month and Month ∆% and Percentage Point Contributions of Production Industries by Components
| Weight % | Volume 12-Month ∆% Ending in Sep 2013 | % Point | Volume | % Point | |
| PROD | 100.0 | 2.2 | 2.2 | 0.9 | 0.9 |
| MNG | 15.1 | 11.5 | 1.26 | 1.5 | 0.18 |
| MNG 06 | 12.4 | 9.9 | 0.78 | 1.7 | 0.14 |
| MFG | 68.4 | 0.8 | 0.60 | 1.2 | 0.87 |
| ELEC | 8.6 | 3.4 | -0.28 | 0.0 | 0.00 |
| WATER | 7.9 | 7.1 | 0.59 | -1.6 | -0.14 |
Notes: Cont: Contribution; PROD IND: Index of Production; MNG: Mining and Quarrying (of which 14.4 percent of the total weight in oil and gas extraction); MNG 06: Subdivision of Mining including oil and gas extraction; MFG: Manufacturing; ELEC: Electricity, gas, steam and air conditioning; WATER & SEW: water supply, sewerage and waste management
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/iop/index-of-production/september-2013/index.html
Table VH-4 provides the breakdown of manufacturing 12-month and monthly growth and percentage contributions.
Table VH-4, UK, Growth Rates of Manufacturing and Percentage Point Contributions to the Index of Production
| Summary Description | % of production | Month on same month a year ago growth (%) | Contribution to production (% points) |
| Index of Production | 100.0 | 2.2 | 2.2 |
| Total Mining & Quarrying | 15.1 | 11.5 | 1.26 |
| Total Manufacturing | 68.4 | 0.8 | 0.60 |
| Food, beverages and tobacco | 10.9 | -3.0 | -0.35 |
| Textiles and leather products | 2.1 | -0.3 | -0.01 |
| Wood, paper and printing | 5.5 | 6.1 | 0.31 |
| Coke and petroleum | 1.7 | -3.6 | -0.06 |
| Chemical Products | 4.2 | 4.7 | 0.20 |
| Pharmaceutical Products | 6.4 | -4.6 | -0.26 |
| Rubber and plastic products | 5.7 | -1.6 | -0.09 |
| Metal products | 7.7 | -1.7 | -0.15 |
| Computer, electronic & optical | 4.3 | -3.1 | -0.15 |
| Electrical equipment | 2.1 | -7.5 | -0.18 |
| Machinery and equipment | 5.0 | -8.5 | -0.48 |
| Transport equipment | 7.7 | 15.3 | 1.42 |
| Other manufacturing & repair | 5.4 | 7.0 | 0.40 |
| Total Electricity & Gas | 8.6 | -3.4 | -0.28 |
| Total Water | 7.9 | 7.1 | 0.59 |
| Sector | Summary Description | % of production | Month on previous month growth (%) | Contribution to production (% points) |
| IoP | Index of Production | 100.0 | 0.9 | 0.9 |
| B | Total Mining & Quarrying | 15.1 | 1.5 | 0.18 |
| C | Total Manufacturing | 68.4 | 1.2 | 0.87 |
| CA | Food, beverages and tobacco | 10.9 | -0.7 | -0.08 |
| CB | Textiles and leather products | 2.1 | -0.2 | 0.00 |
| CC | Wood, paper and printing | 5.5 | 0.5 | 0.02 |
| CD | Coke and petroleum | 1.7 | -6.1 | -0.10 |
| CE | Chemical Products | 4.2 | 0.2 | 0.01 |
| CF | Pharmaceutical Products | 6.4 | 9.4 | 0.45 |
| CG | Rubber and plastic products | 5.7 | -0.4 | -0.02 |
| CH | Metal products | 7.7 | 1.1 | 0.09 |
| CI | Computer, electronic & optical | 4.3 | 2.6 | 0.11 |
| CJ | Electrical equipment | 2.1 | -0.4 | -0.01 |
| CK | Machinery and equipment | 5.0 | -0.8 | -0.04 |
| CL | Transport equipment | 7.7 | 3.4 | 0.35 |
| CM | Other manufacturing & repair | 5.4 | 1.4 | 0.08 |
| D | Total Electricity & Gas | 8.6 | 0.0 | 0.00 |
| E | Total Water | 7.9 | -1.6 | -0.14 |
Source: UK Office for National Statistics
http://www.ons.gov.uk/ons/rel/iop/index-of-production/september-2013/index.html
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013
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