Twenty Nine Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, Collapse of United States Dynamism of Income Growth and Employment Creation, Theory and Reality of Secular Stagnation, World Economic Slowdown and Global Recession Risk: Part IV

 

Twenty Nine Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, Collapse of United States Dynamism of Income Growth and Employment Creation, Theory and Reality of Secular Stagnation, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014

Executive Summary

I Twenty Nine Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

IC Collapse of United States Dynamism of Income Growth and Employment Creation

II United States International Trade

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

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. Consumer price inflation in Japan excluding fresh food was 0.3 percent in Oct 2013 and 0.9 percent in 12 months (http://www.stat.go.jp/english/data/cpi/1581.htm). The new monetary policy of the Bank of Japan aims to increase inflation to 2 percent. These forecasts are biannual in Apr and Oct. The Cabinet Office, Ministry of Finance and Bank of Japan released on Jan 22, 2013, a “Joint Statement of the Government and the Bank of Japan on Overcoming Deflation and Achieving Sustainable Economic Growth” (http://www.boj.or.jp/en/announcements/release_2013/k130122c.pdf) with the important change of increasing the inflation target of monetary policy from 1 percent to 2 percent:

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

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

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

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

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

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

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
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 unchanged from 54.0 in Nov to 54.0 in Dec, indicating strong growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a46c780971f46dfa4572eb754475113). Claudia Tillbrooke, Economist at Markit and author of the report, finds that the survey data suggest continuing strong growth of the economy of Japan with strength in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a46c780971f46dfa4572eb754475113). The Markit Business Activity Index of Services increased from the record of 51.8 in Nov to 52.1 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a46c780971f46dfa4572eb754475113). Claudia Tillbrooke, Economist at Markit and author of the report, finds growth in services converging to manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/0a46c780971f46dfa4572eb754475113). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 55.1 in Nov to 55.2 in Dec, which is the highest level since Jul 2006 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a42e8a52c4114460ad2b9f8cea030c3f). New orders grew at a high rate for the tenth consecutive month. New export orders increased for the fourth consecutive month. Claudia Tillbrooke, Economist at Markit and author of the report, finds improving manufacturing conditions at the highest levels since 2006 with some concerns about the sales tax increase in Apr and employment (http://www.markiteconomics.com/Survey/PressRelease.mvc/a42e8a52c4114460ad2b9f8cea030c3f).Table JPY provides the country data table for Japan.

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	Nov ∆% 0.1 12 months ∆% 2.7 Blog 12/15/13
Consumer Price Index	Nov NSA ∆% 0.0; Nov 12 months NSA ∆% 1.5 Blog 12/29/13
Real GDP Growth	IIIQ2013 ∆%: 0.3 on IIQ2013;  IIIQ2013 SAAR 1.1; ∆% from quarter a year earlier: 2.4 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13
Employment Report	Nov Unemployed 2.49 million Change in unemployed since last year: minus 110 thousand Unemployment rate: 4.0 % Blog 12/29/13
All Industry Indices	Oct month SA ∆% -0.2 12-month NSA ∆% 1.9 Blog 12/22/13
Industrial Production	Nov SA month ∆%: 0.1 12-month NSA ∆% 5.0 Blog 12/29/13
Machine Orders	Total Oct ∆% -4.6 Private ∆%: 7.0 Oct ∆% Excluding Volatile Orders 0.6 Blog 12/15/13
Tertiary Index	Oct month SA ∆% -0.7 Oct 12 months NSA ∆% 0.3 Blog 12/15/13
Wholesale and Retail Sales	Nov 12 months: Total ∆%: 3.-0 Wholesale ∆%: 2.5 Retail ∆%: 4.0 Blog 12/29/13
Family Income and Expenditure Survey	Nov 12-month ∆% total nominal consumption 2.1, real 0.2 Blog 12/29/13
Trade Balance	Exports Nov 12 months ∆%: 18.4 Imports Nov 12 months ∆% 21.1 Blog 12/22/13

Links to blog comments in Table JPY:

12/29/13 http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.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 based on 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 total index increased from 55.7 in Mar 2012 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	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. The index fell from 56.1 in Dec 2012 to 53.9 in Jun 2013. The index recovered to 56.3 in Oct 2013, decreasing marginally to 54.6 in Dec 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 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index of new orders fell from 57.2 in Apr 2012 to 52.0 in Dec 2012. The index of new orders fell from 54.5 in Nov 2013 to 53.9 in Dec 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	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. The index fell to 50.1 in Feb 2013 and in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 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/2d9203c17a714e2382ce2e5ea6555448) is slowing. The overall Flash HSBC China Manufacturing PMI^™ decreased from 50.8 in Nov to 50.5 in Dec, which is moderately above the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index decreased from 52.2 in Nov to 51.8 in Dec, moving into moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the index is consistent with GDP growth at 7.8 percent in IVQ2013 relative to a year earlier (http://www.markiteconomics.com/Survey/PressRelease.mvc/2d9203c17a714e2382ce2e5ea6555448). 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, decreasing from 52.3 in Nov to 51.2 in Dec, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4eff443fc7a4ad8ba13150b37fa7ff3). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds support of manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4eff443fc7a4ad8ba13150b37fa7ff3). The HSBC Business Activity index decreased from 52.5 in Nov to 50.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4eff443fc7a4ad8ba13150b37fa7ff3). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds manufacturing supporting growth of services (http://www.markiteconomics.com/Survey/PressRelease.mvc/d4eff443fc7a4ad8ba13150b37fa7ff3). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, decreased marginally to 50.5 in Dec from 50.8 in Nov, indicating marginally expanding manufacturing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/c3747b7d95134930925b6676bf0db89c). New export orders increased marginally with growth of total new orders originating in domestic demand. 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 into 2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c3747b7d95134930925b6676bf0db89c). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Dec 12-month ∆%: minus 1.4 Dec month ∆%: 0.0 Blog 1/12/14
Consumer Price Index	Dec month ∆%: 0.3 Dec 12 months ∆%: 2.5 Blog 1/12/14
Value Added of Industry	Nov month ∆%: 0.76 Jan-Nov 2013/Jan-No 2012 ∆%: 9.7 Nov 12-Month ∆%: 10.0 Blog 12/15/13
GDP Growth Rate	Year IIIQ2013 ∆%: 7.8 Quarter IIQ2013 AE ∆%: 9.1 Blog 10/27/13
Investment in Fixed Assets	Total Jan-Nov 2013 ∆%: 19.9 Real estate development: 19.5 Blog 12/15/13
Retail Sales	Nov month ∆%: 1.32 Nov 12 month ∆%: 13.7 Jan-No ∆%: 13.0 Blog 12/15/13
Trade Balance	Dec balance $25.60 billion Exports 12M ∆% 4.3 Imports 12M ∆% 8.3 Cumulative Dec: $259.75 billion Blog 1/12/14

Links to blog comments in Table CNY:

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.html

Table VC-1 provides China’s exports, imports, trade balance and 12-month percentage changes from Dec 2010 to Dec 2013. Exports increased 4.3 percent in the 12 months ending in Dec 2013 while imports increased 8.3 percent for trade surplus of $25.60 billion. Exports surged 12.7 percent in the 12 months ending in Nov 2013 while imports increased 5.3 percent for trade surplus of $33.8 billion. 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 $31.11 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 $15.2 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 USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Dec 2013	207.70	4.3	182.10	8.3	25.60
Nov	202.20	12.7	168.40	5.3	33.8
Oct	185.41	5.6	154.30	7.6	31.11
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/?3

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 increased 7.9 percent in Jan-Dec 2013 relative to the same period a year earlier while imports increased 7.3 percent for cumulative surplus of $259.75 billion. Exports grew 8.3 percent in Jan-Nov 2013 relative to a year earlier while imports increased 7.1 percent for cumulative surplus of $234.15 billion. Exports grew 7.8 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 USD Billion	∆% Relative Year Earlier	Imports USD Billion	∆% Relative Year Earlier	Balance USD Billion
Dec 2013	2210.02	7.9	1950.27	7.3	259.75
Nov	2002.32	8.3	1768.17	7.1	234.15
Oct	1800.21	7.8	1599.75	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/?3

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 1.1 percent in 2014 and 1.7 percent in 2015.

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

Year	HICP ∆%	Unemployment %	GDP ∆%
1999	1.2	9.6	2.9
2000	2.2	8.7	3.8
2001	2.4	8.1	2.0
2002	2.3	8.5	0.9
2003	2.1	9.0	0.7
2004	2.2	9.3	2.2
2005	2.2	9.2	1.7
2006	2.2	8.5	3.3
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	10.1	1.6
2012	2.5	11.4	-0.7
2013*			-0.4
2014*			1.1
2015*			1.7

*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, 2014 and 2015 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
2015*	1.7	1.9	1.7	1.2	1.7
2014*	1.1	1.7	0.9	0.7	0.5
2013*	-0.4	0.5	0.2	-1.8	-1.3
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, increased from 51.7 in Nov to 52.1 in Dec, which is a three month high after a high in 27 months in Sep (http://www.markiteconomics.com/Survey/PressRelease.mvc/d92ab787877e4484849a94b75c6ebfff). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with modest growth of GDP of 0.2 percent based on growth in two consecutive months in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d92ab787877e4484849a94b75c6ebfff). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 51.7 in Nov to 52.1 in Dec, which is the second highest in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). Chris Williamson, Chief Economist at Markit, finds growth in IVQ2013 at the rate of about 0.2 percent in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). The Markit Eurozone Services Business Activity Index decreased from 51.2 in Nov to 51.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). The Markit Eurozone Manufacturing PMI^® increased to 52.7 in Dec from 51.6 in Nov with the reading for IVQ2013 at the highest level in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2dfe04a4c1e4e71802d7338b698602f). New orders increased for the sixth consecutive month with foreign orders at the highest in more than two-and-a-half years. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at a quarterly rate of 1.0 percent. (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2dfe04a4c1e4e71802d7338b698602f). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2013 ∆% 0.1; IIIQ2013/IIIQ2012 ∆% -0.3 Blog 1/12/14
Unemployment	Nov 2013: 12.1 % unemployment rate Nov 2013: 19.241 million unemployed Blog 1/12/14
HICP	Nov month ∆%: -0.1 12 months Nov ∆%: 0.9 Blog 12/22/13
Producer Prices	Euro Zone industrial producer prices Nov ∆%: -0.1 Nov 12-month ∆%: -1.2 Blog 1/12/14
Industrial Production	Oct month ∆%: -1.1; Oct 12 months ∆%: 0.2 Blog 12/15/13
Retail Sales	Nov month ∆%: minus 1.4 Nov 12 months ∆%: minus 1.6 Blog 1/12/14
Confidence and Economic Sentiment Indicator	Sentiment 98.5 Nov 2013 Consumer minus 15.4 Nov 2013 Blog 12/1/13
Trade	Jan-Oct 2013/Jan-Oct 2012 Exports ∆%: 0.9 Imports ∆%: -3.4 Oct 2013 12-month Exports ∆% 1.2 Imports ∆% -3.4 Blog 12/22/13

Links to blog comments in Table EUR:

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

12/1/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

Table VD-1 provides percentage changes of euro area real GDP in a quarter relative to the prior quarter. Real GDP fell 0.2 percent in IVQ2011, fell 0.1 in IQ2012 and fell in the final three quarters of 2012: 0.3 percent in IIQ2012, 0.2 percent in IIIQ2012 and 0.5 percent in IVQ2012. GDP fell 0.2 percent in IQ2013 and increased 0.3 percent in IIQ2013. Growth slowed at 0.1 percent in IIIQ2013. The global recession manifested in the euro area in five consecutive quarterly declines from IIQ2008 to IIQ2009. The strongest impact was contraction of 2.8 percent in IQ2009. Recovery began in IIIQ2009 with cumulative growth of 3.9 percent to IQ2011 or at the annual equivalent rate of 2.2 percent. Growth was much more vigorous from IVQ2003 to IQ2008.

Table VD-1, Euro Area, Real GDP, Percentage Change from Prior Quarter, Calendar and Seasonally and Working Day Adjusted ∆%

	IQ	IIQ	IIIQ	IVQ
2013	-0.2	0.3	0.1
2012	-0.1	-0.3	-0.2	-0.5
2011	0.8	0.0	0.1	-0.2
2010	0.4	0.9	0.4	0.5
2009	-2.8	-0.3	0.4	0.5
2008	0.6	-0.4	-0.6	-1.7
2007	0.8	0.5	0.6	0.4
2006	0.9	1.1	0.6	1.1
2005	0.2	0.7	0.6	0.7
2004	0.5	0.6	0.4	0.3
2003	-0.1	0.1	0.5	0.7
2002	0.2	0.6	0.3	0.1
2001	0.9	0.1	0.1	0.2
2000	1.3	0.9	0.5	0.7

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

Table VD-2 provides percentage change in real GDP in the euro area in a quarter relative to the same quarter a year earlier. Growth rates were quite strong from 2004 to 2007. There were five consecutive quarters of sharp declines in GDP in a quarter relative to the same quarter a year earlier from IVQ2008 to IVQ2009 with sharp contractions of 5.5 percent in IQ2009, 5.3 percent in IIQ2009 and 4.4 percent in IIIQ2009. Growth rates decline in magnitude with 1.4 percent in IIIQ2011, 0.7 percent in IVQ211 and -0.2 percent in IQ2012 followed by contractions of 0.5 percent in IIQ2012, 0.7 percent in IIIQ2012 and 1.0 percent in IVQ2012. GDP contracted 1.2 percent in IQ2013 relative to a year earlier and contracted 0.6 percent in IIQ2013 relative to a year earlier. Euro area GDP contracted 0.3 percent in IIIQ2013 relative to a year earlier.

Table VD-2, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a

Year Earlier, Seasonally and Working Day Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2013	-1.2	-0.6	-0.3
2012	-0.2	-0.5	-0.7	-1.0
2011	2.6	1.8	1.4	0.7
2010	1.0	2.2	2.2	2.2
2009	-5.5	-5.3	-4.4	-2.3
2008	2.1	1.2	0.0	-2.1
2007	3.7	3.0	3.0	2.3
2006	2.9	3.4	3.4	3.8
2005	1.5	1.6	1.9	2.2
2004	1.8	2.2	2.2	1.8
2003	0.8	0.4	0.5	1.2
2002	0.5	1.0	1.2	1.1
2001	2.9	2.1	1.7	1.2
2000	4.3	4.4	3.8	3.3

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

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

Table VD-3 provides growth of euro area real GDP in a quarter relative to the same quarter a year earlier not seasonally adjusted. GDP changed 0.0 percent in IIIQ2013 NSA relative to a year earlier. GDP fell 0.5 percent in IIQ2013 relative to a year earlier without seasonal adjustment and declined 1.8 percent in IQ2013 relative to a year earlier without seasonal adjustment. Growth rates in 2006 and 2007 were quite strong followed by sharp declines of 5.6 percent in IQ2009, 5.9 percent in IIQ2009 and 4.2 percent in IQ2009.

Table VD-3, Euro Area, Real GDP Percentage Change in a Quarter Relative to Same Quarter a Year Earlier, Not Seasonally Adjusted ∆%

	IQ	IIQ	IIIQ	IV
2013	-1.8	-0.5	0.0
2012	0.2	-0.9	-0.9	-1.1
2011	2.8	1.9	1.5	0.2
2010	1.1	2.4	2.2	2.1
2009	-5.6	-5.9	-4.2	-2.0
2008	1.7	1.6	0.5	-2.1
2007	3.5	3.1	3.0	2.4
2006	3.5	2.6	3.1	3.7
2005	1.0	2.1	1.9	1.8
2004	2.1	2.5	2.2	2.0
2003	1.0	0.1	0.5	1.2
2002	0.1	1.2	1.5	0.9
2001	2.7	2.0	1.7	1.5
2000	4.9	4.2	3.3	2.7

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

Table VD-4 provides GDP growth in IIIQ2013 and relative to the same quarter a year earlier with SAWDA (seasonal and working day adjustment) and NSA (not seasonally adjusted) for the euro zone, European Union, Japan and the US. The GDP of the euro zone increased 0.1 percent in IIIQ2013 and declined 0.3 percent relative to a year earlier SWDA and 0.0 percent NSA for IIIQ2013. The GDP of the European Union increased 0.3 percent in IIIQ2013, increased 0.2 percent SWDA in IIIQ2013 relative to a year earlier and increased 0.4 percent relative to a year earlier NSA in IIIQ2013. Growth in IIIQ2013 was weak worldwide with somewhat stronger performance by the US but still insufficient to reduce unemployment and underemployment (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/12/risks-of-zero-interest-rates-mediocre.html) and motivate hiring (http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html).

Table VD-4, Euro Zone, European Union, Japan and USA, Real GDP Growth

	∆% IIIQ2013/ IIQ2013 SAWDA	∆% IIIQ2013/ IIIQ2012 SWDA	∆% IIIQ2013/ IIIQ2012 NSA
Euro Zone	0.1	-0.3	0.0
European Union	0.3	0.2	0.4
Germany	0.3	0.6	1.1
France	-0.1	0.2	0.5
Netherlands	0.2	-0.6	-0.4
Finland	0.0	-1.0	-1.0
Belgium	0.3	0.4	0.4
Portugal	0.2	-1.0	-1.7
Ireland	1.5	1.7	1.7
Italy	0.0	-1.8	-1.6
Greece	NA	-3.0	-3.0
Spain	0.1	-1.1	-0.7
United Kingdom	0.8	1.9	1.2
Japan	0.3	2.4	2.4
USA	1.0	2.0	NA

*SAWDA: Seasonally and Working Day Adjusted except UK, Japan and USA

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

EUROSTAT estimates the rate of unemployment in the euro area at 12.1 percent in Nov 2013, as shown in Table VD-5. The number of unemployed in Nov 2013 was 19.241 million, which was 0.452 million higher than 18.789 million in Nov 2012. The rate of unemployment jumped from 11.8 percent in Nov 2012 to 12.1 percent in Nov 2013.

Table VD-5, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA 

	Unemployment Rate %	Number Unemployed Millions
Nov 2013	12.1	19.241
Oct	12.1	19.237
Sep	12.1	19.301
Aug	12.1	19.252
Jul	12.1	19.205
Jun	12.1	19.187
May	12.1	19.199
Apr	12.1	19.173
Mar	12.0	19.125
Feb	12.0	19.113
Jan	12.0	19.082
Dec 2012	11.9	18.848
Nov	11.8	18.789
Oct	11.7	18.886
Sep	11.6	18.441
Aug	11.5	18.288
Jul	11.5	18.224
Jun	11.4	18.110
May	11.3	17.885
Apr	11.2	17.735
Mar	11.0	17.457
Feb	10.9	17.231
Jan	10.7	17.020
Dec 2011	10.7	16.913
Nov	10.6	16.823
Oct	10.4	16.518
Sep	10.3	16.336
Aug	10.2	16.097
Jul	10.1	15.938
Jun	10.0	15.718
May	9.9	15.652
Apr	9.8	15.503
Mar	9.9	15.576
Feb	9.9	15.602
Jan	10.0	15.688
Dec 2010	10.1	15.803

Source: EUROSTAT

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

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

Table VD-6 shows the disparity in rates of unemployment in the euro area with 12.1 percent for the region as a whole and 19.241 million unemployed but 5.2 percent in Germany and 2.204 million unemployed. At the other extreme is Spain with rate of unemployment of 26.7 percent and 6.014 million unemployed. The rate of unemployment of the European Union in Nov 2013 is 10.9 percent with 26.553 million unemployed.

Table VD-6, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Nov 2013	Unemployment Rate %	Unemployed Millions
Euro Zone	12.1	19.241
Germany	5.2	2.204
France	10.8	3.193
Netherlands	6.9	0.621
Finland	8.4	0.223
Portugal	15.5	0.824
Ireland	12.3	0.266
Italy	12.7	3.254
Greece	27.4*	1.376*
Spain	26.7	6.014
Belgium	8.4	0.416
European Union	10.9	26.553

*Sep 2013

Source: EUROSTAT

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

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

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

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

Source: EUROSTAT

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

Advanced economies are experiencing weak demand. Table VD-7 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Nov 2013. Retail sales increased 1.4 percent in Nov 2013 and increased 1.6 percent in 12 months. The 12-month rates of growth became negative since Mar 2011 with exception of 1.0 percent in Apr 2011, 0.1 percent in May 2013, 0.0 percent in Sep 2013 and 1.6 percent in Nov 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 0.6 percent in 2010 after falling 0.4 percent in 2009 and 1.8 percent in 2008 and fell again by 1.5 percent in 2011 and 2.7 percent in 2012.

Table VD-7, Euro Zone, Volume of Retail Sales, Deflated ∆%

	Month ∆%	12-Month CA ∆%
Nov 2013	1.4	1.6
Oct	-0.4	-0.3
Sep	-0.6	0.0
Aug	0.5	-0.2
Jul	0.5	-0.7
Jun	-0.8	-1.4
May	1.1	0.1
Apr	0.0	-1.1
Mar	-0.2	-2.2
Feb	-0.3	-1.9
Jan	0.9	-1.9
Dec 2012	-0.5	-2.7
Nov	0.1	-2.0
Oct	-0.3	-3.2
Sep	-1.3	-1.9
Aug	0.3	-0.8
Jul	-0.2	-1.5
Jun	0.3	-1.1
May	0.5	-0.7
Apr	-1.5	-3.5
Mar	0.3	-0.1
Feb	-0.1	-2.2
Jan	-0.1	-1.1
Dec 2011	0.0	-1.5
Nov	-0.8	-1.1
Oct	0.4	-0.4
Sep	-0.2	-1.0
Aug	-0.1	0.1
Jul	0.1	-0.1
Jun	0.9	-0.5
May	-1.8	-1.5
Apr	1.3	1.0
Mar	-1.6	-1.2
Feb	0.7	1.5
Jan	0.1	1.0
Dec ∆%
2012		-2.7
2011		-1.5
2010		-0.6
2009		-0.4
2008		-1.8
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-8. Total sales increased 1.4 percent in Nov 2013 and increased 1.6 percent in the 12 months ending in Nov 2013. Food sales increased 1.1 percent in Nov 2013 and 1.4 percent in 12 months and nonfood products increased 1.9 percent in Nov and increased 2.4 percent in 12 months. Sales of automotive fuel stores increased 0.1 percent in Nov and increased 0.2 percent in 12 months.

Table VD-8, Euro Zone, Volume of Retail Sales by Products, ∆%

Nov 2013	Month ∆%	12-Month ∆%
Total	1.4	1.6
Food, Drinks, Tobacco	1.1	1.4
Nonfood Products ex Automotive Fuel	1.9	2.4
Automotive Fuel in Specialized Stores	0.1	0.2

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 Nov 2013. Retail sales are mixed throughout the euro zone. The 12-month percentage changes are positive for some members in Table VD-3 such as 1.6 percent for Germany, 2.4 percent for France, 3.5 percent for Portugal and 2.1 percent for Spain. The 12-month percentage change for the UK, which is not a member of the euro zone, was 2.6 percent. The European Union’s 12-month percentage change was 1.6 percent.

Table VD-9, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Nov 2013	Month ∆%	12-Month ∆%
Euro Zone	1.4	1.6
Germany	1.5	1.6
France	2.1	2.4
Netherlands	-0.3*	-3.1*
Finland	0.1	-0.5
Belgium	1.7	-0.5
Portugal	3.1	3.5
Ireland	0.4*	-1.5*
Italy	0.0*	-0.4*
Greece	-0.1*	-0.9*
Spain	1.9	2.1
UK	0.3	2.6
European Union	1.4	1.6

*Oct 2013

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 https://www.destatis.de/EN/PressServices/Press/pr/2013/11/PE13_381_811.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, decreased from 55.4 in Nov to 55.2 in Dec. The index of manufacturing output reached 57.5 in Dec, for a 31-month high, from 54.9 in Nov, while the index of services decreased to 54.0 in Dec from 55.7 in Nov. The overall Flash Germany Manufacturing PMI^® increased from 52.7 in Nov to 54.2 in Dec, which is a 30-month high (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b431b589cec404abbd8256d72ad1a6e). New export work volumes increased at the fastest pace in more than two and a half years. Tim Moore, Senior Economist at Markit, finds expansion of Germany’s private sector in eight consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/7b431b589cec404abbd8256d72ad1a6e). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, decreased from 55.4 in Nov to 55.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). Tim Moore, Senior Economist at Markit and author of the report, finds improving expectations by German private sector companies (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). The Germany Services Business Activity Index decreased from 55.7 in Nov to 53.5 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 52.7 in Nov to 54.3 in Dec, in the best reading in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/13f1cfefa2034863a31e87812f389789). New export orders increased for the sixth consecutive month at the highest rate in two-and-a-half years. Tim Moore, Senior Economist at Markit and author of the report, finds the highest growth of manufacturing in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/13f1cfefa2034863a31e87812f389789).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IIIQ2013 0.3 ∆%; III/Q2013/IIIQ2012 ∆% 1.1 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 11/17/13 11/24/13
Consumer Price Index	Nov month NSA ∆%: 0.2 Nov 12-month NSA ∆%: 1.3 Blog 12/15/13
Producer Price Index	Nov month ∆%: -0.1 CSA, -0.1 12-month NSA ∆%: -0.8 Blog 12/22/13
Industrial Production	MFG Nov month CSA ∆%: minus 3.1 12-month NSA: 1.1 Blog 1/12/14
Machine Orders	MFG Nov month ∆%: 2.1 Nov 12-month ∆%: 3.7 Blog 1/12/14
Retail Sales	Oct Month ∆% -0.8 12-Month ∆% -0.2 Blog 12/1/13
Employment Report	Unemployment Rate SA Nov 5.2% Blog 1/12/14
Trade Balance	Exports Nov 12-month NSA ∆%: 1.0 Imports Nov 12 months NSA ∆%: -0.4 Exports Nov month CSA ∆%: 0.3; Imports Nov month SA minus 1.1 Blog 1/12/14

Links to blog comments in Table DE:

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

12/1/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

11/24/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.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

The production industries index of Germany in Table VE-1 shows increase of 0.4 percent in Dec 2012 and decrease of 9.4 percent in the 12 months ending in Dec 2012. The index decreased 0.6 percent in Jan 2013 and 1.4 percent in 12 months and increased 0.6 percent in Feb 2013, declining 5.0 percent in 12 months. In Mar 2013, the production index of Germany increased 0.7 percent and fell 9.0 percent in 12 months. The production index jumped 1.0 percent in Apr 2013 and 7.3 percent in 12 months. In May 2013, the production index fell 1.3 percent and 4.5 percent in 12 months. The production index of Germany increased 2.2 percent in Jun 2013 and fell 0.6 percent in 12 months. In Jul 2013, the production industries index fell 1.1 percent and increased 1.9 percent in 12 months. The production industries index increased 1.6 percent in Aug 2013 and fell 2.7 percent in 12 months. In Sep 2013, the production index fell 0.6 percent and increased 4.2 percent in 12 months. In Oct 2013, the production index of Germany fell 1.2 percent and increased 1.2 percent in 12 months. The index of production industries increased 1.9 percent in Nov 2013 and 0.1 percent in 12 months. Germany’s production industries suffered decline of 7.3 percent in Dec 2008 relative to Dec 2007 and decline of 2.3 percent in 2009. Recovery was vigorous with 17.1 percent in the 12 months ending in Dec 2010. The first quarter of 2011 was quite strong when the German economy outperformed the other advanced economies. The performance of Germany’s production industries from 2002 to 2006 was vigorous with average rate of 4.5 percent. Data for the production industries index of Germany fluctuate sharply from month to month and in 12-month rates.

Table VE-1, Germany, Production Industries, Month and 12-Month ∆%

	12-Month ∆% NSA	Month ∆% Calendar SA
Nov 2013	0.1	1.9
Oct	1.2	-1.2
Sep	4.2	-0.6
Aug	-2.7	1.6
Jul	1.9	-1.1
Jun	-0.6	2.2
May	-4.5	-1.3
Apr	7.3	1.0
Mar	-9.0	0.7
Feb	-5.0	0.6
Jan	-1.4	-0.6
Dec 2012	-9.4	0.4
Nov	-2.9	-0.4
Oct	4.1	-1.6
Sep	-6.7	-0.9
Aug	-0.6	-0.5
Jul	2.4	1.0
Jun	4.2	-0.7
May	-6.3	1.3
Apr	-0.6	-2.2
Mar	-0.1	2.4
Feb	2.4	-0.7
Jan	4.8	0.9
Dec 2011	2.0	-1.5
Nov	3.9	-0.1
Oct	0.1	1.1
Sep	4.5	-1.6
Aug	10.2	-1.1
Jul	5.8	3.2
Jun	-0.8	-1.5
May	18.2	0.8
Apr	5.3	-0.1
Mar	9.8	0.7
Feb	15.8	1.1
Jan	15.1	1.4
Dec 2010	17.1
Dec 2009	-2.3
Dec 2008	-7.3
Dec 2007	-0.1
Dec 2006	2.5
Dec 2005	4.9
Dec 2004	5.3
Dec 2003	5.1
Dec 2002	2.0
Average ∆% per Year
Dec 1994 to Dec 2012	0.7
Dec 1994 to Dec 2000	0.8
Dec 1994 to Dec 2006	1.3
Dec 2002 to Dec 2006	4.5

Source: Source: Statistisches Bundesamt Deutschland (Destatis)

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

Table VE-2 provides monthly percentage changes of the German production industries index by components from Apr to Nov 2013. The index decreased 1.9 percent in Oct 2013 with increases of 3.1 percent in industry, 3.1 percent in manufacturing, 5.1 percent in capital goods, 3.7 percent in durable goods and 7.8 percent in energy. The index fell 1.2 percent in Oct 2013 with all segments declining with exception of 0.7 percent for intermediate goods and 0.2 percent for nondurable goods.

Table VE-2, Germany, Production Industries, Industry and Components, Month ∆%

	Nov 2013	Oct	Sep	Aug	Jul	Jun	May	Apr
Production Industries	1.9	-1.2	-0.6	1.6	-1.1	2.2	-1.3	1.0
Industry	3.1	-1.1	-1.0	2.2	-1.6	2.0	-1.3	1.0
Mfg	3.1	-1.1	-1.0	2.2	-1.6	2.0	-1.3	0.9
Intermediate Goods	1.2	0.7	0.3	0.2	-0.5	0.3	0.5	0.4
Capital Goods	5.1	-2.8	-2.5	4.6	-2.6	3.7	-3.2	1.8
Durable Goods	3.7	-4.4	2.1	-3.0	-3.7	12.3	-5.0	-1.6
Nondurable Goods	1.5	0.2	-0.4	1.4	-0.5	-1.1	0.9	1.0
Energy	7.8	-1.9	2.9	-2.5	0.3	4.5	-1.9	-3.9

Seasonally Calendar Adjusted

Source: Source: Statistisches Bundesamt Deutschland (Destatis

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

Table VE-3 provides 12-month unadjusted percentage changes of industry and components in Germany. There have been percentage declines of 12-month rates in the production index of Germany and all segments in the four months from Dec 2012 to Mar 2013 with exception of nondurables in Jan 2013 and energy in Mar 2013. There is sharp recovery in Apr 2013 with growth of manufacturing by 8.1 percent and capital goods by 11.2 percent. All segments show declines in 12 months in May 2013. There are increases in the 12 months ending in Jun of 0.9 percent in capital goods and 2.5 percent in durable goods. All segments increased in Jul 2013. All segments fell in Aug 2013 with sharp declines. There is strong recovery in Sep with high rates of increase. Many segments increased in the 12 months ending in Oct 2013 with 1.5 percent growth in manufacturing and 1.6 percent in capital goods. All segments increased in Nov 2013 with 1.1 percent in manufacturing and 1.5 percent in capital goods. Percentage declines in 12 months are quite sharp in Dec 2012 with most percentage changes negative around two-digits. Although there are sharp fluctuations in the data, there is suggestion of deceleration that would be expected from much higher earlier rates. The deceleration is quite evident in single-digit percentage changes from Sep 2011 to Dec 2012 relative to high double-digit percentage changes in Jan-Mar 2011. There are multiple negative 12-month percentage changes across many segments. Growth rates in the recovery from the global recession from IVQ2007 to IIQ2009 were initially very vigorous in comparison with the growth rates before the contraction that are shown in the bottom part of Table VE-3.

Table VE-3, Germany, Industry and Components, 12-Month ∆% Unadjusted

	IND	MFG	INTG	CG	DG	NDG	EN
2013
Nov	1.1	1.1	1.1	1.5	0.1	0.3	-3.6
Oct	1.6	1.5	2.5	1.6	0.0	-1.0	-0.9
Sep	4.6	4.5	4.2	5.6	6.1	2.1	0.4
Aug	-2.7	-2.8	-3.5	-1.6	-7.2	-2.9	-3.4
Jul	1.5	1.4	1.9	0.4	4.0	2.9	2.2
Jun	-0.3	-0.3	-1.8	0.9	2.5	-1.1	-0.9
May	-4.4	-4.4	-3.5	-5.8	-10.4	-1.3	-5.3
Apr	8.2	8.1	4.6	11.2	9.3	8.7	-1.8
Mar	-8.8	-8.7	-8.1	-9.6	-9.3	-7.9	0.5
Feb	-4.8	-4.9	-5.6	-4.7	-6.4	-2.9	-12.0
Jan	-0.7	-0.6	-1.3	-1.8	-2.0	4.7	-4.2
2012
Dec	-9.6	-9.4	-11.8	-8.5	-12.5	-7.0	-2.4
Nov	-3.1	-3.1	-3.9	-2.7	-7.6	-1.2	0.7
Oct	3.9	3.8	2.8	4.0	0.7	7.0	3.2
Sep	-7.6	-7.5	-8.8	-7.1	-11.2	-5.2	4.0
Aug	-1.1	-1.0	-3.2	0.3	0.4	0.7	4.5
Jul	2.0	2.0	0.3	4.6	-2.4	-0.7	2.2
Jun	3.8	3.7	1.9	6.5	7.2	0.3	6.7
May	-7.0	-6.8	-7.5	-6.1	-10.6	-7.7	4.0
Apr	-1.1	-1.1	-2.0	1.9	-5.3	-5.9	3.7
Mar	-0.5	-0.4	-3.1	2.8	-6.2	-2.3	-0.8
Feb	3.2	3.3	0.9	7.3	-0.1	-2.3	5.9
Jan	5.6	5.6	3.0	10.4	4.7	0.1	-3.3
2011
Dec	1.5	1.4	1.8	1.3	0.2	1.4	-9.2
Nov	4.6	4.5	2.9	8.1	2.3	-1.0	-5.8
Oct	0.6	0.7	-0.3	3.2	-2.3	-3.4	-6.1
Sep	5.7	5.7	4.6	9.2	3.4	-0.8	-6.1
Aug	12.4	12.2	9.3	20.4	4.8	1.4	-3.0
Jul	7.9	7.8	5.0	13.7	6.8	0.1	-5.7
Jun	0.5	0.5	0.2	2.3	-10.2	-2.1	-4.7
May	21.5	21.2	17.9	28.3	20.8	12.8	-7.3
Apr	7.5	7.5	6.1	11.1	4.6	1.6	-5.5
Mar	11.2	11.2	10.8	15.0	8.6	2.0	2.8
Feb	17.3	17.1	16.3	23.1	10.1	6.3	-0.4
Jan	17.2	16.9	17.5	23.1	9.9	3.6	-2.6
2010
Dec	17.6	17.6	14.8	25.9	8.5	1.7	2.6
Nov	13.9	13.9	12.9	19.2	7.7	3.9	3.5
Oct	9.9	9.9	9.7	14.0	6.3	0.8	2.5
Sep	9.8	9.5	12.2	10.1	8.3	2.6	2.1
Aug	16.9	17.0	19.3	19.9	18.3	6.9	1.3
Jul	9.0	8.9	13.2	8.7	7.4	0.8	1.9
Jun	16.4	16.2	20.8	16.1	19.7	5.1	-2.8
May	13.1	13.3	20.0	12.0	11.2	1.4	11.1
Apr	14.9	14.9	21.7	15.5	8.8	0.2	9.4
Mar	14.3	14.5	20.4	12.3	11.8	5.8	4.2
Feb	6.8	7.4	10.6	6.5	7.9	-1.0	3.7
Jan	0.4	0.9	6.3	-3.8	0.8	-3.0	0.8
Dec 2010	17.6	17.6	14.8	25.9	8.5	1.7	2.6
Dec 2009	-3.2	-3.1	3.3	-9.9	-0.1	1.1	3.7
Dec 2008	-7.6	-7.4	-14.3	-5.4	-11.2	3.7	-9.0
Dec 2007	0.0	-0.3	-0.6	2.5	-10.0	-2.7	1.6
Dec 2006	3.2	3.1	5.2	2.3	8.6	-0.9	-5.3
Dec 2005	5.8	5.9	3.5	9.0	3.2	2.1	0.6
Dec 2004	5.3	5.5	7.7	3.4	0.8	5.7	9.6
Dec 2003	5.5	5.3	5.5	6.4	1.7	4.4	0.3
Dec 2002	3.7	3.3	5.4	3.4	-5.9	2.3	-2.6

Note: IND: Industry; MFG: Manufacturing; INTG: Intermediate Goods; CG: Capital Goods; DG: Durable Goods; NDG: Nondurable Goods; EN: Energy

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Broader perspective since 2005 is provided by Chart VE-1 of the Statistisches Bundesamt Deutschland, Federal Statistical Agency of Germany. The index of production industries not seasonally adjusted rises by more than one third between 2003 and 2008 with sharp fluctuations and then collapses during the global recession in 2008. Recovery has been in a steep upward trajectory that has recovered at the more recent peaks the losses during the contraction. Recovery stalled recently.

Chart VE-1, Germany, Production Industries, Not Adjusted, 2010=100

Source: Statistiche Bundesamt Deutschland

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

More detail is provided by Chart VE-2 of the Statistiche Bundesamt Deutschland, or Federal Statistical Agency of Germany, with the unadjusted production industries index and trend from 2009 to 2013. There could be some flattening in recent months probably leading into stagnation, mild downturn and probable recovery as depicted by trend.

Chart VE-2, Germany, Production Industries, Not Adjusted, 2010=100

Source: Statistiche Bundesamt Deutschland

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

Table VE-4 provides month and 12-month rates of growth of manufacturing in Germany from Dec 2010 to Nov 2013. There are fluctuations in both monthly rates and in the past 12 months. In Jan 2013, manufacturing fell 0.9 percent and decreased 0.6 percent in 12 months. Manufacturing increased 0.8 percent in Feb 2013, declining 4.9 percent in 12 months. In Mar 2013, manufacturing increased 0.4 percent but fell 8.7 percent in 12 months. There is strong recovery in Apr 2013 with growth of 0.9 percent and 8.1 percent in 12 months. Manufacturing fell 1.3 percent in May 2013 and declined 4.4 percent in 12 months. Recovery is strong in Jun 2013 with growth of 2.0 percent in the month but decline of 0.3 percent in 12 months. Manufacturing fell 1.6 percent in Jul 2013 and increased 1.4 percent in 12 months. In Aug 2013, manufacturing increased 2.2 percent and fell 2.8 percent in 12 months. Manufacturing fell 1.0 percent in Sep 2013 and increased 4.4 percent in 12 months. In Oct 2013, manufacturing fell 1.1 percent and increased 1.3 percent in12 months. Manufacturing increased 3.1 percent in Nov 2013 and 1.1 percent in 12 months.

Table VE-4, Germany, Manufacturing Month and 12-Month ∆%

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Nov 2013	1.1	3.1
Oct	1.5	-1.1
Sep	4.5	-1.0
Aug	-2.8	2.2
Jul	1.4	-1.6
Jun	-0.3	2.0
May	-4.4	-1.3
Apr	8.1	0.9
Mar	-8.7	0.4
Feb	-4.9	0.8
Jan	-0.6	-0.9
Dec 2012	-9.4	1.2
Nov	-3.1	-0.1
Oct	3.8	-1.7
Sep	-7.5	-1.3
Aug	-1.0	-0.6
Jul	2.0	1.6
Jun	3.7	-1.1
May	-6.8	1.8
Apr	-1.1	-2.0
Mar	-0.4	1.2
Feb	3.3	0.1
Jan	5.6	0.7
Dec 2011	1.4	-1.6
Nov	4.5	-0.3
Oct	0.7	0.9
Sep	5.7	-1.7
Aug	12.2	-1.1
Jul	7.8	3.4
Jun	0.5	-1.5
May	21.2	1.0
Apr	7.5	0.4
Mar	11.2	0.8
Feb	17.1	1.3
Jan	16.9	0.0
Dec 2010	17.6	1.3

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Chart VE-3 of the Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, provides the manufacturing index of Germany from 2009 to 2013. Manufacturing was already flattening in 2007 and fell sharply in 2008 to the beginning of 2010. Manufacturing grew sharply in the initial phase of recovery but has flattened in recent months as revealed by the trend that may be turning upward.

Chart VE-3, Germany, Production Index, Manufacturing, Not Adjusted Index and Trend, 2010=100

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

Table VE-5 provides month and 12-month rates of growth of new orders of manufacturing in Germany from Jan 2010 to Nov 2013. There are fluctuations in both monthly rates and in the past 12 months. Table VE-5 reveals strong fluctuations in an evident deceleration of total orders for industry of Germany with recent improvement. Total orders for manufacturing increased 2.1 percent in Nov 2013 and increased 3.7 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-5 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-5, Germany, Volume of Orders Received in Manufacturing, Total, Domestic and Foreign, ∆%  

	Total 12 M	Total M	Foreign 12 M	Foreign M	Home 12 M	Home M
2013
Nov	3.7	2.1	6.4	2.2	0.4	1.9
Oct	2.0	-2.1	2.1	-2.2	1.9	-1.9
Sep	10.8	3.1	13.2	6.3	7.8	-0.9
Aug	0.1	-0.2	-0.7	-2.0	1.1	2.1
Jul	5.3	-2.0	6.3	-3.2	4.1	-0.2
Jun	4.6	4.5	7.8	5.2	0.3	3.5
May	-3.7	-0.6	-1.9	0.4	-6.1	-1.8
Apr	5.7	-1.8	7.3	-0.9	3.5	-2.9
Mar	-5.9	2.1	-4.9	2.4	-7.3	1.8
Feb	-3.1	2.2	-2.0	2.1	-4.6	2.1
Jan	-1.0	-1.5	0.5	-2.7	-2.7	0.2
2012
Dec	-9.1	1.0	-6.7	1.6	-12.6	0.2
Nov	-0.9	-2.6	2.4	-4.5	-5.1	0.0
Oct	4.5	3.8	7.0	6.4	1.3	0.4
Sep	-8.9	-1.7	-6.6	-2.4	-11.7	-0.6
Aug	-4.4	-1.0	-2.1	-0.4	-7.1	-1.9
Jul	-1.6	0.9	0.6	1.2	-4.2	0.5
Jun	-4.5	-2.5	-6.4	-2.8	-1.7	-2.0
May	-11.0	1.0	-3.7	2.4	-18.8	-0.9
Apr	-3.9	-1.8	-4.4	-2.7	-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	-2.6	-0.2	-0.1
2011
Dec	0.0	2.1	-0.3	4.3	0.5	-0.6
Nov	-4.8	-2.8	-8.2	-5.0	-0.3	0.0
Oct	0.1	1.2	2.1	2.5	-2.1	-0.1
Sep	2.2	-2.9	1.9	-3.3	2.6	-2.3
Aug	7.1	-0.9	5.2	0.1	9.4	-2.3
Jul	4.9	-2.0	4.6	-5.9	5.4	3.2
Jun	3.5	-0.6	7.8	8.3	-2.0	-10.6
May	23.1	2.6	16.0	-3.7	31.8	10.8
Apr	6.7	1.9	9.6	2.4	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	4.3	18.2	4.3
2010
Dec	21.8	-2.9	26.8	-4.2	15.4	-1.3
Nov	21.4	5.6	27.1	9.0	15.0	1.7
Oct	14.2	0.2	18.2	-0.4	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	2.2	30.6	2.6	24.2	1.7
May	24.8	0.0	29.6	0.9	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-6. Total capital goods orders increased 3.2 percent in Nov 2013 and increased 5.9 percent in 12 months. Domestic orders increased 2.7 percent in Nov and foreign orders increased 3.5 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-5 and VE-6 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-6, 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
Nov	5.9	3.2	8.3	3.4	1.5	2.7
Oct	1.6	-4.9	1.5	-5.6	1.5	-3.8
Sep	14.5	5.2	16.9	9.7	10.1	-2.2
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 in 2013.

Chart VE-4, 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-5, 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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-7. The number unemployed, not seasonally adjusted, decreased from 2.22 million in Nov 2012 to 2.13 million in Nov 2013, or 4.1 percent, while the unemployment rate fell from 5.2 percent in Nov 2012 to 5.0 percent in Nov 2013. The number of persons in employment, not seasonally adjusted, increased from 40.40 million in Nov 2012 to 40.77 million in Nov 2013, or 0.9 percent, while the employment rate increased from 64.1 percent in Nov 2012 to 64.8 percent in Nov 2013. The number unemployed, seasonally adjusted, fell from 2.22 million in Oct 2013 to 2.20 million in Nov 2013, while the unemployment rate remained at 5.2 percent in Oct 2013 relative to 5.2 percent in Sep 2013. The number of persons in employment, seasonally adjusted, increased from 40.45 million in Oct 2013 to 40.50 million in Nov 2013, or 0.1 percent. The employment rate seasonally adjusted increased from 64.2 in Oct 2013 to 64.3 in Nov 2013.

Table VE-7, Germany, Unemployment Labor Force Survey

	Nov 2013	Oct 2013	Nov 2012
NSA
Number Unemployed Millions	2.13 ∆% Oct 2013 /Sep 2013: -1.4 ∆% Oct 2013/Oct 2012: -4.1	2.16	2.22
% Rate Unemployed	5.0	5.1	5.2
Persons in Employment Millions	40.77 ∆% Nov 2013/Oct 2013: 0.6 ∆% Nov 2013/Nov 2012: 0.9	40.54	40.40
Employment Rate	64.8	64.4	64.1
SA
Number Unemployed Millions	2.20 ∆% Nov 2013/Oct  2013: -0.9 ∆% Nov 2013/Nov 2012: –3.9	2.22	2.29
% Rate Unemployed	5.2	5.2	5.4
Persons in Employment Millions	40.50 ∆% Nov 2013/Oct 2013: 0.1 ∆% Nov 2013/Nov 2012: 1.0	40.45	40.10
Employment Rate	64.3	64.2	63.7

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_004_132.html

The unemployment rate in Germany as percent of the labor force in Table VE-8 stood at 6.5 percent in Sep, Oct and Nov 2012, increasing to 6.7 percent in Dec 2012, 7.4 percent in Jan 2013, 7.3 in Mar 2013 and 7.1 percent in Apr 2013. The unemployment rate fell to 6.8 percent in May 2013 and 6.6 percent in Jun 2013 and rose to 6.8 percent in Jul-Aug 2013. The rate fell to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013 and Nov 2013. The unemployment rate increased to 6.7 percent in Dec 2013. The rate is much lower than 11.1 percent in 2005 and 9.6 percent in 2006.

Table VE-8, Germany, Unemployment Rate in Percent of Labor Force

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

Source: Statistisches Bundesamt Deutschland

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

Chart VE-6 of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, increasing to 6.7 percent in Dec 2012, 6.8 percent in Apr 2013 and 6.6 percent in May 2013. The unemployment rate rose slightly to 6.8 percent in Aug 2013, falling to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013. The rate remained at 6.5 percent in Nov 2013, increasing to 6.7 percent in Dec 2013.

Chart VE-6, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland

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

Twelve-month rates of growth Germany’s exports and imports are shown in Table VE-9. There was sharp decline in the rates in Jun and Jul 2011 to single-digit levels especially for exports. In the 12 months ending in Aug 2011, exports rose 14.6 percent and imports 13.2 percent. In Sep 2011, exports grew 10.4 percent relative to a year earlier and imports grew 11.7 percent. Growth rates in 12 months ending in Oct 2011 fell significantly to 3.6 percent for exports and 9.2 percent for imports. Lower prices may explain part of the decline in nominal values. Exports fell 3.8 percent in 12 months ending in Sep 2012, rebounding to growth of 10.5 percent in Oct 2012 and minus 0.5 percent in Nov 2012 but sharp decline of 7.3 percent in Dec 2012 followed by rebound of 2.4 percent in Jan 2013. Exports fell 3.2 percent in the 12 months ending in Feb 2013 and declined 4.6 percent in the 12 months ending in Mar 2013. In Apr 2013, exports increased 7.7 percent relative to a year earlier. Exports fell 4.8 percent in the 12 months ending in May 2013. Exports fell 5.7 percent in the 12 months ending in Aug 2013 and imports fell 2.3 percent. In the 12 months ending in Sep 2013, exports increased 3.5 percent and imports fell 0.3 percent. Exports increased 0.7 percent in the 12 months ending in Oct 2013 while imports fell 1.5 percent. Exports increased 1.0 percent in the 12 months ending in Nov 2013 and imports fell 0.4 percent. Imports decreased 4.1 percent in the 12 months ending in Sep 2012, rebounding to growth of 5.7 percent in Oct 2012, decreasing 1.5 percent in Nov 2012 and 7.8 percent in Dec 2012 and rebounding 2.7 percent in Jan 2013. Imports fell 5.7 percent in the 12 months ending in Feb 2013 and declined 7.5 percent in Mar 2013. In Apr 2013, imports increased 4.3 percent relative to a year earlier. In May 2013, imports fell 3.1 percent relative to a year earlier. Imports fell 1.2 percent in the 12 months ending in Jun 2013. In Jul 2013, imports increased 0.9 percent relative to a year earlier. Imports fell 2.3 percent in the 12 months ending in Aug 2013. In the 12 months ending in Sep 2013, exports declined 0.3 percent. Imports fell 1.6 percent in the 12 months ending in Oct 2013. Imports fell 0.4 percent in the 12 months ending in Nov 2013. Growth was much stronger in the recovery during 2010 and 2011 from the fall from 2007 to 2009. Germany’s trade grew at high rates in 2006 and 2005.

Table VE-9, Germany, Exports and Imports NSA Euro Billions and 12-Month ∆%

	Exports EURO Billions	12- Month ∆%	Imports EURO Billions	12-Month ∆%
Nov 2013	94.6	1.0	76.5	-0.4
Oct	99.1	0.7	81.3	-1.5
Sep	94.6	3.5	74.3	-0.3
Aug	85.0	-5.7	71.7	-2.3
Jul	93.1	-0.3	76.8	0.9
Jun	92.4	-2.0	75.4	-1.2
May	88.2	-4.8	74.6	-3.1
Apr	94.0	7.7	76.0	4.3
Mar	94.2	-4.6	75.4	-7.5
Feb	88.3	-3.2	71.5	-5.7
Jan	88.2	2.4	74.6	2.7
Dec 2012	78.6	-7.3	66.6	-7.8
Nov	93.7	-0.5	76.8	-1.5
Oct	98.4	10.5	82.5	5.7
Sep	91.4	-3.8	74.5	-4.1
Aug	90.2	5.7	73.4	-0.1
Jul	93.3	9.1	76.2	1.5
Jun	94.3	7.0	76.3	1.4
May	92.7	0.3	77.0	-0.7
Apr	87.2	3.2	72.9	-1.1
Mar	98.7	0.1	81.5	2.1
Feb	91.2	7.9	75.8	4.6
Jan	86.1	8.6	72.6	4.6
Dec 2011	84.8	4.7	72.3	5.6
Nov	94.1	7.4	78.0	5.8
Oct	89.1	3.6	78.1	9.2
Sep	95.0	10.4	77.7	11.7
Aug	85.3	14.6	73.5	13.2
Jul	85.6	5.2	75.0	9.7
Jun	88.1	3.3	75.2	5.6
May	92.4	21.2	77.5	17.4
Apr	84.5	12.4	73.7	18.5
Mar	98.7	15.3	79.8	15.1
Feb	84.5	20.8	72.5	27.6
Jan	79.3	25.2	69.4	26.0
Dec 2010	81.0	20.0	68.4	24.4
Nov	87.6	21.2	73.7	30.9
Oct	86.0	18.7	71.5	19.2
Sep	86.0	21.2	69.5	17.0
Aug	74.4	23.8	64.9	27.1
Jul	81.4	15.3	68.4	24.4
Jun	85.3	27.5	71.2	33.9
May	76.2	25.6	66.1	31.3
Apr	75.2	16.8	62.2	14.4
Mar	85.6	22.0	69.3	18.0
Feb	70.0	9.7	56.8	3.2
Jan	63.4	-0.3	55.1	-1.9
Dec 2009	67.5	1.2	55.0	-7.3
Dec 2008	66.7	-8.6	59.4	-5.1
Dec 2007	73.0	-0.6	62.5	-0.1
Dec 2006	73.4	10.2	62.6	8.5
Dec 2005	66.6	11.5	57.7	18.1
Dec 2004	59.7	9.2	48.9	10.8
Dec 2003	54.7	7.6	44.1	3.9
Dec 2002	50.8	5.5	42.5	6.4
Dec 2001	48.2	-3.7	39.9	-17.5
Dec 2000	50.0		48.4

Source: Statistisches Bundesamt Deutschland

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

Chart VE-7 of the Statistisches Bundesamt Deutschland shows exports and trend of German exports. Growth has been with fluctuations around a strong upward trend that is milder than earlier in the recovery but could be moving upwardly after flattening.

Chart VE-7, Germany, Exports Original Value and Trend 2009-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-8 of the Statistisches Bundesamt Deutschland provides German imports and trend. Imports also fell sharply and have been recovering with fluctuations around a strong upward trend that could be flattening.

Chart VE-8, Germany, Imports Original Value and Trend 2009-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-9 of the Statistisches Bundesamt Deutschland shows the trade balance of Germany since 2008. There was sharp decline during the global recession and fluctuations around a mild upward trend during the recovery with stabilization followed by stronger trend in recent months and flattening/declining recently. The final segment could be an upward movement again.

Chart VE-9, Germany, Trade Balance Original and Trend 2009-2012

Source: Statistisches Bundesamt Deutschland

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

Table VE-10 provides monthly rates of growth of exports and imports of Germany. Exports increased 0.3 percent in Nov 2013 calendar and seasonally adjusted (CSA) and imports decreased 1.1 percent. Export growth had been relatively strong from Dec 2012 to Apr 2013 with only one monthly decline of 1.2 percent in Feb 2013. Exports fell 2.3 percent in May 2013 and 0.8 percent in Jul 2013. Exports grew in four consecutive months from Aug to Nov 2013. Export growth and import growth were vigorous in Jan-Mar 2011 when Germany’s economy outperformed most advanced economies but less dynamic and consistent in following months as world trade weakens.

Table VE-10, Germany, Exports and Imports Month ∆% Calendar and Seasonally Adjusted 

	Exports	Imports
Nov 2013	0.3	-1.1
Oct	0.3	3.0
Sep	1.6	-1.9
Aug	1.0	0.1
Jul	-0.8	0.2
Jun	1.2	-0.4
May	-2.3	0.9
Apr	1.6	1.4
Mar	0.3	0.4
Feb	-1.2	-2.8
Jan	1.7	2.8
Dec 2012	0.2	-1.2
Nov	-2.6	-3.9
Oct	0.4	2.6
Sep	-2.5	-0.5
Aug	1.7	-0.1
Jul	0.6	0.2
Jun	-0.9	-1.9
May	3.7	4.3
Apr	-0.9	-4.2
Mar	-0.5	1.1
Feb	1.0	3.4
Jan	2.9	-0.2
Dec 2011	-2.9	-1.7
Nov	2.8	-0.4
Oct	-3.5	-0.4
Sep	1.6	0.1
Aug	2.6	-0.1
Jul	-1.2	0.2
Jun	0.0	0.7
May	1.9	0.9
Apr	-3.1	-0.6
Mar	4.5	1.9
Feb	1.1	2.5
Jan	1.0	3.1
Dec 2010	-0.1	-1.9

Source: Statistisches Bundesamt Deutschland

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

There is extremely important information in Table VE-11 for the current sovereign risk crisis in the euro zone. Table VE-11 provides the structure of regional and country relations of Germany’s exports and imports with newly available data for Nov 2013. German exports to other European Union (EU) members are 56.4 percent of total exports in Nov 2013 and 57.0 percent in cumulative Jan-Nov 2013. Exports to the euro area are 36.3 percent of the total in Nov and 36.8 percent cumulative in Jan-Nov. Exports to third countries are 43.6 percent of the total in Nov and 42.9 percent cumulative in Jan-Nov. There is similar distribution for imports. Exports to non-euro countries are increasing 4.9 percent in the 12 months ending in Nov 2013, increasing 2.0 percent cumulative in Jan-Nov 2013 while exports to the euro area are increasing 0.1 percent in the 12 months ending in Nov 2013 and decreasing 1.6 percent cumulative in Jan-Nov 2013. Exports to third countries, accounting for 43.6 percent of the total in Nov 2013, are changing 0.0 percent in the 12 months ending in Nov 2013 and decreasing 0.8 percent cumulative in Jan-Nov 2013, accounting for 42.9 percent of the cumulative total in Jan-Nov 2013. Price competitiveness through devaluation could improve export performance and growth. Economic performance in Germany is closely related to Germany’s high competitiveness in world markets. Weakness in the euro zone and the European Union in general could affect the German economy. This may be the major reason for choosing the “fiscal abuse” of the European Central Bank considered by Buiter (2011Oct31) over the breakdown of the euro zone. There is a tough analytical, empirical and forecasting doubt of growth and trade in the euro zone and the world with or without maintenance of the European Monetary Union (EMU) or euro zone. Germany could benefit from depreciation of the euro because of high share in its exports to countries not in the euro zone but breakdown of the euro zone raises doubts on the region’s economic growth that could affect German exports to other member states.

Table VE-11, Germany, Structure of Exports and Imports by Region, € Billions and ∆%

	Nov 2013  € Billions	Nov 12-Month ∆%	Cumulative Jan-Nov 2012 € Billions	Cumulative Jan-Nov 2013/ Jan-Nov 2012 ∆%
Total Exports	94.6	1.0	1,011.7	-0.5
A. EU Members	53.4 % 56.4	1.8	576.9 % 57.0	-0.4
Euro Area	34.3 % 36.3	0.1	371.9 % 36.8	-1.6
Non-euro Area	19.1 % 20.2	4.9	205.0 % 20.3	2.0
B. Third Countries	41.2 % 43.6	0.0	434.7 % 42.9	-0.8
Total Imports	76.5	-0.4	828.0	-1.3
C. EU Members	49.8 % 65.1	0.0	533.8 % 64.5	0.5
Euro Area	34.1 % 44.6	-1.0	370.9 % 44.8	-0.4
Non-euro Area	15.7 % 20.5	2.1	162.9 % 19.7	2.6
D. Third Countries	26.7 % 34.9	-1.0	294.2 % 35.5	-4.5

Notes: Total Exports = A+B; Total Imports = C+D

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_006_51.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=28&date=20131224

The Markit Flash France Composite Output Index decreased from 48.0 in Nov to 47.0 in Dec for a seven-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/29ff41a3c1d547a7ac763502a35efc35). Andrew Harker, Senior Economist at Markit and author of the report, finds economic weakness in the French private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/29ff41a3c1d547a7ac763502a35efc35). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, fell from 48.0 in Nov to 47.3 in Nov, indicating sharper contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds continuing weak demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). The Markit France Services Activity index decreased from 48.0 in Nov to 47.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 47.0 in Dec from 48.4 in Nov for the lowest reading in seven months (http://www.markiteconomics.com/Survey/PressRelease.mvc/45fadf38ca6745b1b423f91ecb61df83). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds sharper decline of output and new orders with weak internal demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/45fadf38ca6745b1b423f91ecb61df83). Table FR provides the country data table for France.

The Markit/ADACI Business Activity Index increased from 47.2 in Nov to 47.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/81f6dcfaf618459cadc3bd4bcc1449bd). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index suggesting nil growth with manufacturing strength compensating for services weakness (http://www.markiteconomics.com/Survey/PressRelease.mvc/81f6dcfaf618459cadc3bd4bcc1449bd). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 51.4 in Nov to 53.3 in Dec for the highest reading since Apr 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/337850bc94a34a3a892567600df53850). New export orders grew at the fastest rate in 32 months in Nov and Dec. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds the best conditions in more than two-and-a-half years with concern on the margins of sales prices relative to input costs (http://www.markiteconomics.com/Survey/PressRelease.mvc/337850bc94a34a3a892567600df53850). Table IT provides the country data table for Italy.

Table FR, France, Economic Indicators

CPI	Nov month ∆% 0.0 12 months ∆%: 0.7 12/15/13
PPI	Nov month ∆%: 0.5 Nov 12 months ∆%: -0.6 Blog 12/29/13
GDP Growth	IIIQ2013/IIQ2013 ∆%: minus 0.1 IIIQ2013/IIIQ2012 ∆%: 0.2 Blog 3/31/13 5/19/12 6/30/13 9/29/13 11/17/13 12/29/13
Industrial Production	Nov ∆%: Manufacturing 0.2 12-Month ∆%: Manufacturing 1.6 Blog 1/12/14
Consumer Spending	Manufactured Goods Nov ∆%: 0.1 Nov 12-Month Manufactured Goods ∆%: 1.3 Blog 12/29/13
Employment	Unemployment Rate: IIIQ2013 10.5% Blog 12/8/13
Trade Balance	Nov Exports ∆%: month -2.1, 12 months -2.6 Nov Imports ∆%: month 0.2, 12 months -0.1 Blog 1/12/14
Confidence Indicators	Historical averages 100 Dec Mfg Business Climate 100 Blog 12/22/13

Links to blog comments in Table FR:

12/29/13 http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

12/8/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.html

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

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

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

Table VF-1 provides longer historical perspective of manufacturing in France. Output of manufacturing increased 0.2 percent in Nov 2013 and increased 1.6 percent in the 12 months ending in Nov 2013. Manufacturing in France fell 14.2 percent in the 12 months ending in Dec 2008 and 4.1 percent in Dec 2009.

Table VF-1, France, Manufacturing, Month and 12-Month ∆%

	Month ∆%	12-Month ∆%
Nov 2013	0.2	1.6
Oct	0.3	0.5
Sep	-0.5	-1.2
Aug	0.9	-3.0
Jul	-0.9	-2.1
Jun	-0.3	-0.1
May	-1.0	0.0
Apr	2.7	0.5
Mar	-1.0	-3.8
Feb	0.8	-1.2
Jan	-0.7	-3.8
Dec 2012	1.2	-3.3
Nov	-0.9	-6.2
Oct	-1.4	-3.3
Sep	-2.3	-2.3
Aug	1.9	-0.7
Jul	1.1	-2.6
Jun	-0.2	-3.4
May	-0.5	-5.3
Apr	-1.8	-3.2
Mar	1.7	-2.3
Feb	-1.9	-5.3
Jan	-0.2	-2.8
Dec 2011	-1.8	-0.5
Nov	2.2	2.0
Oct	-0.4	2.0
Sep	-0.7	1.4
Aug	-0.1	3.6
Jul	0.3	3.3
Jun	-2.2	3.3
May	1.7	4.9
Apr	-0.9	4.0
Mar	-1.4	5.4
Feb	0.8	9.2
Jan	2.1	8.4
Dec 2010	0.6	5.9
Dec 2009		-4.1
Dec 2008		-14.2
Dec 2007		-0.8
Dec 2006		2.6
Dec 2005		0.7
Dec 2004		0.9
Dec 2003		0.3
Dec 2002		-1.1
Dec 2001		-5.4
Dec 2000		4.6

Source:

Institut National de la Statistique et des Études

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20140110

Chart VF-3 of the Institut National de la Statistique et des Études Économiques provides France’s index of manufacturing, adjusted for working days and seasonal effects, from Jan 1990 to Nov 2013. Growth was robust in the 1990s and in recovery from the 2001 recession. Manufacturing output fell sharply during the global recession followed by recovery and another trend of decline.

Chart VF-1, France, Index of Manufacturing 2010=100, Jan 1990-Nov 2013, Seasonal and Working-Day Adjusted

Source:

Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20140110

Chart VF-2 of France’s Institut National de la Statistique et des Études Économiques shows indices of manufacturing in France from 2009 to 2013. Manufacturing, which is CZ in Chart VF-2, fell deeply in 2008 and part of 2009. All curves of industrial indices tend to flatten recently with oscillations and declines and marginal improvement followed by renewed decline/stability in the final segment with jump in Mar-Apr 2013. Manufacturing fell in May-Jul 2013 with mild recovery in Aug 2013 and decline in Sep 2013. Manufacturing increased in Oct-Nov 2013.

Chart VF-2, France, Industrial Production Indices 2009-2013

Legend: CZ : Manufacturing – (C1) : Manufacture of food products and beverages – (C3) : Electrical and electronic equipment; machine equipment – (C4) : Manufacture of transport equipment – (C5) : Other manufacturing

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=10&date=20140110

France has been running a trade deficit fluctuating around €5,000 million as shown in Table VF-2. Exports decreased 2.1 percent in Nov 2013 while imports increased 0.2 percent. The trade deficit increased from revised €4697 million in Oct 2013 to €5680 million in Nov 2013.

Table VF-2, France, Exports, Imports and Trade Balance, € Millions 

	Exports	Imports	Trade Balance
Nov 2013	35,589	41,269	-5,680
Oct	36,526	41,223	-4,697
Sep	36,515	42,374	-5,859
Aug	35,892	40,926	-5,034
Jul	36,457	41,646	-5,189
Jun	36,087	40,666	-4,579
May	35,921	41,696	-5,775
Apr	38,306	42,073	-3,767
Mar	36,123	40,720	-4,597
Feb	35,660	41,496	-5,836
Jan	36,445	42,036	-5,591
Dec 2012	37,300	43,048	-5,748
Nov	36,557	41,294	-4,737
Oct	37,169	42,399	-5,230
Sep	37,055	42,233	-5,178
Aug	38,871	44,170	-6,299
Jul	36,686	41,068	-4,382
Jun	36,477	43,217	-6,740
May	37,688	43,046	-5,358
Apr	36,526	42,642	-6,116
Mar	36,388	42,446	-6,058
Feb	37,169	43,597	-6,428
Jan	36,585	42,315	-5,730
Dec 2011	35,984	41,489	-5,505
Dec 2010	33,759	39,500	-5,741

Source: France, Direction générale des douanes et droits indirects

http://lekiosque.finances.gouv.fr/Appchiffre/portail_default.asp

Table VF-3 provides month and 12-month percentage changes of France’s exports and imports. Exports decreased 2.1 percent in Nov 2013 and decreased 2.6 percent in the 12 months ending in Nov 2013. Imports increased 0.2 percent in Nov 2013 and decreased 0.1 percent in 12 months. Growth of exports and imports has fluctuated in 2011, 2012 and 2013 because of price surges of commodities and raw materials. Weak economic conditions worldwide also influence trade performance.

Table VF-3, France, Exports and Imports, Month and 12-Month ∆%

	Exports Month ∆%	Exports 12-Month ∆%	Imports Month ∆%	Imports 12-Month ∆%
Nov 2013	-2.1	-2.6	0.2	-0.1
Oct	-0.4	-2.2	-2.8	-2.9
Sep	1.7	-1.5	3.5	0.3
Dec 2012		3.7		3.8
Dec 2011		6.6		5.0
Dec 2010		13.2		14.8
Dec 2009		-9.5		-1.9
Dec 2008		-6.9		-10.8
Dec 2007		5.8		8.0
Dec 2006		6.2		6.7
Dec 2005		11.8		15.4
Dec 2004		-3.7		5.8
Dec 2003		7.1		1.6

Source: France, Direction générale des douanes et droits indirects

http://lekiosque.finances.gouv.fr/Appchiffre/portail_default.asp

Annual data for France’s exports, imports and trade balance are provided in Table VF-4. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €73,875 million in 2011. Annual growth rates of exports have not been sufficiently high to compensate for growth of imports driven in part by commodity price increases. In 2012, the trade deficit declined to €65,080 million with growth of exports of 3.1 percent and of imports of 1.5 percent.

Table VF-4, France, Exports, Imports and Balance Year € Millions and ∆%

	Exports € Millions	∆%	Imports € Millions	∆%	Balance € Millions
Oct 2013 12 Months	434,035		495,626		-61,591
Year
2012	441,366	3.1	509,446	1.5	-65,080
2011	428,241	8.4	502,116	12.2	-73,875
2010	395,039	14.0	447,483	14.2	-52,444
2009	346,481	-17.0	391,872	-17.3	-45,391
2008	417,636	2.7	473,853	5.5	-56,217
2007	406,487	3.0	448,981	5.8	-42,494
2006	394,621	9.5	424,549	10.4	-29,928
2005	360,376	4.4	384,588	9.6	-24,212
2004	345,256	5.4	350,996	7.0	-5,740
2003	327,653		327,884		-231

Source: France, Direction générale des douanes et droits indirects

http://lekiosque.finances.gouv.fr/Appchiffre/portail_default.asp

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 0.6 percent in IVQ2011 to minus 3.0 percent in IVQ2012, minus 2.5 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.8 percent in IIIQ2013. 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 IIIQ2013, 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
IIIQ	-1.8	-1.2	-1.5	-5.1	0.0
IIQ	-2.2	-4.7	-2.5	-5.8	0.2
IQ	-2.5	-4.8	-2.6	-7.3	-0.6
2012
IVQ	-3.0	-6.9	-4.0	-8.1	0.8
IIIQ	-2.8	-7.5	-4.1	-8.7	1.8
IIQ	-2.6	-7.3	-3.6	-8.8	2.1
IQ	-1.8	-8.2	-3.4	-8.1	2.8
2011
IVQ	-0.6	-6.8	-2.0	-3.8	3.5
IIIQ	0.5	0.5	-1.0	-2.4	6.0
IIQ	1.1	3.7	0.4	-0.7	7.5
IQ	1.4	9.1	0.7	0.6	11.0
2010
IVQ	2.3	15.6	1.1	1.3	13.4
IIIQ	1.8	13.2	1.3	2.4	12.1
IIQ	1.8	13.4	0.8	0.9	12.0
IQ	0.9	7.0	1.0	-2.4	7.1
2009
IVQ	-3.5	-6.3	0.2	-8.2	-9.3
IIIQ	-5.0	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.4	-13.6	-21.4
IQ	-6.9	-17.2	-1.8	-12.4	-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/106657

The Markit/ADACI Business Activity Index increased from 47.2 in Nov to 47.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/81f6dcfaf618459cadc3bd4bcc1449bd). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index suggesting nil growth with manufacturing strength compensating for services weakness (http://www.markiteconomics.com/Survey/PressRelease.mvc/81f6dcfaf618459cadc3bd4bcc1449bd). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), increased from 51.4 in Nov to 53.3 in Dec for the highest reading since Apr 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/337850bc94a34a3a892567600df53850). New export orders grew at the fastest rate in 32 months in Nov and Dec. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds the best conditions in more than two-and-a-half years with concern on the margins of sales prices relative to input costs (http://www.markiteconomics.com/Survey/PressRelease.mvc/337850bc94a34a3a892567600df53850). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Dec month ∆%: 0.2 Dec 12-month ∆%: 0.7 Blog 1/5/14
Producer Price Index	Nov month ∆%: -0.1 Nov 12-month ∆%: -2.3 Blog 1/5/14
GDP Growth	IIIQ2013/IIQ2013 SA ∆%: 0.0 IIIQ2013/IIIQ2012 NSA ∆%: minus 1.8 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13
Labor Report	Nov 2013 Participation rate 63.6% Employment ratio 55.4% Unemployment rate 12.7% Youth Unemployment 41.6% Blog 1/12/14
Industrial Production	Oct month ∆%: 0.5 12 months CA ∆%: -0.5 Blog 12/15/13
Retail Sales	Oct month ∆%: -0.1 Oct 12-month ∆%: -1.6 Blog 12/22/13
Business Confidence	Mfg Dec 92.3, Aug 93.5 Construction Dec 77.1, Aug 76.8 Blog 1/5/14
Trade Balance	Balance Oct SA €2832 million versus Sep €2198 Exports Oct month SA ∆%: -0.5; Imports Oct month ∆%: -2.6 Exports 12 months Oct NSA ∆%: 0.8 Imports 12 months NSA ∆%: -4.3 Blog 12/22/13

Links to blog comments in Table IT:

1/5/14 http://cmpassocregulationblog.blogspot.com/2014/01/theory-and-reality-of-secular.html

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/15/13 http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html

11/17/13 http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-unwinding-monetary-policy.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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.2 percent in Dec 2006 to 12.7 percent in Nov 2013. The rate of youth unemployment for ages 15 to 24 years increased from 20.3 percent in Dec 2006 to 41.6 percent in Nov 2013. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %	Unemployment Rate 15-24 Years %
Nov 2013	63.6	55.4	12.7	41.6
Oct	63.6	55.5	12.5	41.4
Sep	63.5	55.4	12.5	40.6
Aug	63.5	55.6	12.4	40.2
Jul	63.5	55.7	12.1	39.4
Jun	63.5	55.7	12.1	39.1
May	63.5	55.6	12.2	38.4
Apr	63.4	55.7	12.0	39.3
Mar	63.6	55.9	11.9	39.0
Feb	63.7	56.0	11.8	38.6
Jan	63.7	56.0	11.9	38.6
Dec 2012	63.6	56.3	11.4	37.6
Nov	63.7	56.4	11.3	37.6
Oct	63.8	56.5	11.3	36.5
Sep	63.7	56.6	10.9	36.2
Aug	63.6	56.7	10.7	34.6
Jul	63.7	56.8	10.8	35.4
Jun	63.8	56.8	10.8	34.7
May	63.7	57.0	10.4	35.6
Apr	63.7	56.9	10.6	34.8
Mar	63.5	56.9	10.3	35.0
Feb	63.4	57.0	10.0	33.7
Jan	63.1	57.0	9.5	32.2
Dec 2011	63.0	56.9	9.5	31.8
Nov	62.7	56.8	9.3	31.8
Oct	62.6	57.0	8.8	30.4
Sep	62.5	56.8	8.9	30.5
Aug	62.4	57.0	8.5	29.3
Jul	62.2	56.9	8.4	28.7
Jun	62.0	57.0	8.0	27.9
May	62.1	57.0	8.1	27.8
Apr	61.8	56.9	7.8	27.3
Mar	62.1	57.1	7.9	27.8
Feb	61.8	56.8	7.9	27.6
Jan	62.0	56.9	8.0	28.2
Dec 2010	62.1	56.9	8.2	28.5
Dec 2009	62.4	57.1	8.4	26.6
Dec 2008	62.5	58.2	6.8	22.7
Dec 2007	63.1	58.9	6.5	21.6
Dec 2006	62.4	58.5	6.2	20.3
Dec 2005	62.6	57.8	7.6	23.4
Dec 2004	62.5	57.5	7.9	23.7

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/109133

Table VG-2 provides more detail on the labor report for Italy in Nov 2012. The level of employment increased 55,000 from Oct to Nov 2013 and fell 448,000 from Nov 2012 to Nov 2013. Unemployment increased 57,000 in Nov 2013 and increased 351,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 41.6 percent in Nov 2013 for ages 15 to 24 years.

Table VG-2, Italy, Labor Report, NSA

Nov 2013	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22.292	-55	-0.2	-448	-2.0
UNE	3.254	57	1.8	351	12.1
INA   15-64	14.366	-24	-0.2	-2	0.0
EMP %	55.4		-0.1		-1.0
UNE %	12.7		0.2		1.4
Youth UNE %  15-24	41.6		0.2		4.0
INA % 15-64	36.4		0.0		0.1

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/109133

Chart VG-1 of the Istituto Nazionale di Statistica provides the rate of unemployment in Italy. The rate increased from 11.3 percent in Nov 2012 to 12.7 percent in Nov 2013.

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

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment dropped from 22.740 million in Nov 2012 to 22.292 million in Nov 2013.

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

Source: Istituto Nazionale di Statistica

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

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

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

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

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 60.0 in Nov to 58.8 in Dec, which is still close to high historical levels (http://www.markiteconomics.com/Survey/PressRelease.mvc/1132e9ba11934548a369f9a4872acb02). Chris Williamson, Chief Economist at Markit, finds the UK economist growing at 1.9 percent in 2013, which would be the highest rate since 2007 (http://www.markiteconomics.com/Survey/PressRelease.mvc/1132e9ba11934548a369f9a4872acb02). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 57.3 in Dec from 58.1 in Nov with continuing strength close to the highest reading since Feb 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/f1cb2cbaa8794e7eb8ca538a5d252a2a). New export orders increased for the ninth consecutive month but with the lowest rate since Sep. New orders increased from Brazil, China, Ireland, Russia and the US. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions continue around the levels in Nov with output and new orders close to the fastest pace in 22 years and growth in IVQ2013 probably above 1.0 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/f1cb2cbaa8794e7eb8ca538a5d252a2a). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Nov month ∆%: 0.1 Nov 12-month ∆%: 2.1 Blog 12/22/13
Output/Input Prices	Output Prices: Nov 12-month NSA ∆%: 0.8; excluding food, petroleum ∆%: 0.7 Input Prices: Nov 12-month NSA ∆%: -1.0 Excluding ∆%: -0.9 Blog 12/22/13
GDP Growth	IIIQ2013 prior quarter ∆% 0.8; year earlier same quarter ∆%: 1.9 Blog 3/31/13 4/28/13 5/26/13 7/28/13 8/25/13 9/29/13 10/27/13 12/1/13 12/22/13
Industrial Production	Nov 2013/Nov 2012 ∆%: Production Industries 2.5; Manufacturing 2.8 Blog 1/12/14
Retail Sales	Nov month ∆%: 0.2 Oct 12-month ∆%: 2.0 Blog 12/22/13
Labor Market	Aug-Oct Unemployment Rate: 7.4%; Claimant Count 3.8%; Earnings Growth 0.9% Blog 12/22/13 LMGDP
GDP and the Labor Market	IIIQ2013 Weekly Hours 101.4, GDP 98.0, Employment 101.5 IQ2008 =100 Blog 12/22/13
Trade Balance	Balance SA Nov minus ₤3238 million Exports Nov ∆%: 1.2; Sep-Nov ∆%: 0.5 Imports Nov ∆%: 0.6 Sep-Nov ∆%: 2.2 Blog 1/12/14

Links to blog comments in Table UK:

12/22/13 http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

12/1/13 http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world.html

10/27/13 http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or.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 Nov 2013. Manufacturing accounts for 68.4 percent of the production industries of the UK and increased 2.8 percent in the 12 months ending in Nov 2013. Capital goods industries increased 3.5 percent in the 12 months ending in Nov 2013, increasing 5.1 percent in the 12 months ending in Oct 2013. Capital goods industries fell 1.5 percent in the 12 months ending in May 2013, grew 3.1 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 13.2 percent in the 12 months ending in Oct 2013 and 2.4 percent in the 12 months ending in Nov 2013. The 12-month rates of growth of the entire index of production industries registered declines for all 12 months from Mar 2011 to Aug 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 IND	MNG	MFG	CON DUR	CON NDUR	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	-2.9	-4.2	1.7	-7.5

		PROD IND	MNG	MFG	CON DUR	NCONS	CAP	ENGY
2011	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	-19.7	0.4	-5.0	0.2	4.8	-15.5
	Feb	-1.7	-7.6	-1.4	-6.6	-0.7	-0.9	-4.9
	Mar	-2.0	-6.0	-0.9	-6.3	-2.0	1.5	-8.2
	Apr	-1.3	-10.6	-1.2	-2.4	-5.1	2.9	-6.3
	May	-1.5	-6.8	-1.2	-3.2	-6.2	3.1	-4.9
	Jun	-4.2	-4.2	-4.1	-10.5	-6.9	0.5	-5.4
	Jul	-0.8	-1.2	-0.8	-3.1	-5.5	4.6	-3.8
	Aug	-1.1	0.3	-1.5	-2.7	-4.5	2.4	-3.0
	Sep	-3.8	-17.1	-1.7	1.3	-2.3	0.5	-12.3
	Oct	-3.9	-20.9	-2.5	4.4	-4.8	0.3	-11.5
	Nov	-3.1	-13.7	-2.7	0.7	-5.7	-0.2	-8.0
	Dec	-3.1	-8.7	-2.6	0.7	-6.3	1.1	-5.6
2013	Jan	-3.1	-6.4	-3.9	-1.2	-5.8	-	-3.6
	Feb	-2.1	-6.8	-2.2	-3.6	-5.0	3.1	-7.0
	Mar	-1.6	-11.0	-1.4	0.9	-4.2	2.3	-3.3
	Apr	-1.2	-5.9	-0.7	-1.2	0.8	3.1	-4.7
	May	-2.0	-1.2	-2.7	-3.6	0.5	-1.5	-3.6
	Jun	1.7	-2.8	2.2	2.1	3.0	2.8	-5.5
	Jul	-1.0	-7.6	-0.5	1.6	0.8	1.8	-6.9
	Aug	-1.4	-9.9	-0.4	-2.4	-2.2	1.2	-8.0
	Sep	2.2	11.4	0.7	-1.3	-0.8	2.4	2.5
	Oct	3.2	13.2	2.6	-3.6	1.2	5.1	1.0
	Nov	2.5	2.4	2.8	-1.7	1.8	3.5	-1.7

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/november-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 changed 0.0 percent in Nov 2013 with manufacturing changing 0.0 percent. Mining and quarrying fell 2.2 percent in Nov 2013 and capital goods fell 0.7 percent. Energy increased 0.4 percent. The index of production increased 0.3 percent in Oct 2013, with manufacturing increasing 0.4 percent, consumer durable goods 0.1 percent and capital goods 1.4 percent. All segments increased in Sep 2013 with exception of decline of 0.3 percent for energy. 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 2.1 percent in Jan 2013 and increased 1.4 percent in Mar and 3.0 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	CON DUR	CON NDUR	CAP	ENGY
2011	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	-0.8	-2.3	0.0	1.2	0.3	-1.0	-1.6
	Feb	0.0	2.5	-1.4	-1.1	-0.9	-2.7	4.2
	Mar	-0.3	0.3	0.4	0.1	-0.2	2.3	-4.3
	Apr	-0.6	-3.9	-1.0	1.6	-2.9	-1.0	1.1
	May	0.9	-1.2	1.3	-0.1	-0.2	2.3	-0.1
	Jun	-2.4	2.5	-2.9	-3.1	-1.4	-1.3	-0.2
	Jul	2.9	4.2	2.9	3.4	1.6	3.0	1.7
	Aug	-0.7	1.5	-1.3	-2.1	0.2	-2.4	0.4
	Sep	-2.7	-18.3	0.1	1.0	0.4	0.6	-10.5
	Oct	-0.7	-2.8	-1.6	2.5	-2.7	-1.2	0.2
	Nov	0.6	8.2	-0.2	-2.6	-1.0	0.8	3.2
	Dec	0.8	2.7	1.1	0.3	0.4	2.0	1.0
2013	Jan	-0.8	0.1	-1.3	-0.7	0.8	-2.1	0.4
	Feb	1.0	2.1	0.4	-3.6	0.0	0.3	0.6
	Mar	0.1	-4.3	1.2	4.8	0.7	1.4	-0.5
	Apr	-0.1	1.6	-0.2	-0.6	2.1	-0.3	-0.4
	May	0.1	3.8	-0.8	-2.5	-0.5	-2.2	1.1
	Jun	1.3	0.8	2.0	2.6	1.1	3.0	-2.2
	Jul	0.1	-0.9	0.1	2.9	-0.5	2.0	0.3
	Aug	-1.1	-0.9	-1.2	-5.9	-2.8	-3.0	-0.8
	Sep	0.9	1.0	1.2	2.1	1.8	1.9	-0.3
	Oct	0.3	-1.2	0.2	0.1	-0.8	1.4	-1.3
	Nov	0.0	-2.2	0.0	-0.8	-0.3	-0.7	0.4

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/november-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 2.5 percent was driven by positive contribution of 0.28 percentage points by mining and quarrying. Manufacturing added 1.97 percentage points. The contribution of manufacturing is strong because of its share of 68.4 percent in the production index with growth of 2.8 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing increased 0.0 percent in Oct 2013, adding 0.00 percentage points. Mining decreased 2.2 percent in Nov 2013, subtracting 0.25 percentage points. Electricity increased 3.0 percent in Nov contributing 0.24 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 Nov 2013	% Point Contrib.	Volume Month ∆% Nov 2013	% Point Contrib.
PROD IND	100.0	2.5	2.5	0.0	0.0
MNG	15.1	2.4	0.28	-2.2	-0.25
MFG	68.4	2.8	1.97	0.0	0.00
ELEC	8.6	-2.8	-0.24	3.0	0.24
WATER & SEW	7.9	5.6	0.50	-0.3	-0.02

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/november-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

Sector	Summary Description	% of production	Month on same month a year ago growth (%)	Contribution to production (% points)
IoP	Index of Production	100.0	2.5	2.5
B	Total Mining & Quarrying	15.1	2.4	0.28
C	Total Manufacturing	68.4	2.8	1.97
CA	Food, beverages and tobacco	10.9	0.9	0.11
CB	Textiles and leather products	2.1	1.8	0.04
CC	Wood, paper and printing	5.5	4.0	0.20
CD	Coke and petroleum	1.7	1.6	0.02
CE	Chemical Products	4.2	3.2	0.13
CF	Pharmaceutical Products	6.4	0.8	0.04
CG	Rubber and plastic products	5.7	1.6	0.09
CH	Metal products	7.7	2.6	0.21
CI	Computer, electronic & optical	4.3	-6.4	-0.29
CJ	Electrical equipment	2.1	2.2	0.05
CK	Machinery and equipment	5.0	-6.9	-0.39
CL	Transport equipment	7.7	12.3	1.18
CM	Other manufacturing & repair	5.4	10.5	0.58
D	Total Electricity & Gas	8.6	-2.8	-0.24
E	Total Water	7.9	5.6	0.50

Sector	Summary Description	% of production	Month on previous month growth (%)	Contribution to production (% points)
IoP	Index of Production	100.0	0.0	0.0
B	Total Mining & Quarrying	15.1	-2.2	-0.25
C	Total Manufacturing	68.4	0.0	0.00
CA	Food, beverages and tobacco	10.9	0.9	0.11
CB	Textiles and leather products	2.1	1.2	0.02
CC	Wood, paper and printing	5.5	-1.2	-0.06
CD	Coke and petroleum	1.7	1.8	0.03
CE	Chemical Products	4.2	0.4	0.02
CF	Pharmaceutical Products	6.4	-1.6	-0.08
CG	Rubber and plastic products	5.7	2.1	0.12
CH	Metal products	7.7	0.4	0.03
CI	Computer, electronic & optical	4.3	-0.9	-0.04
CJ	Electrical equipment	2.1	0.5	0.01
CK	Machinery and equipment	5.0	-1.7	-0.09
CL	Transport equipment	7.7	-0.6	-0.07
CM	Other manufacturing & repair	5.4	0.1	0.00
D	Total Electricity & Gas	8.6	3.0	0.24
E	Total Water	7.9	-0.3	-0.02

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/iop/index-of-production/november-2013/index.html

The UK’s trade account is shown in Table VH-5. In Nov 2013, the UK ran a deficit in trade of goods and services (total trade) of ₤3238 million. The deficit in trade of goods was ₤9439 million and ₤8525 million in goods excluding oil. A surplus in services of ₤6201 million contributed to the smaller overall deficit in goods and services (-₤9439 million plus ₤6201 million equal to -₤3238 million). Services have contributed to lower trade account deficits and softened the impact of the global recession on the UK economy. Exports of goods and services increased 1.2 percent in Nov 2013 and increased 0.5 percent in the quarter Sep-Nov 2013 relative to the same quarter a year earlier with imports increasing 0.6 percent in Nov and increasing 2.2 percent in Sep-Nov 2013 relative to the same quarter a year earlier. Excluding oil, UK exports of goods increased 1.4 percent in Nov 2013 and increased 1.3 percent in Sep-Nov 2013 relative to a year earlier while imports increased 1.7 percent in Nov and increased 4.1 percent in Sep-Nov 2013 relative to a year earlier. The great advantage of the UK similar to the US is the substantial surplus in services. Services exports increased 0.1 percent in Nov and decreased 1.1 percent in Sep-Nov 2013 relative to a year earlier and imports fell 0.3 percent in Nov and increased 1.9 percent in Sep-Nov 2013 relative to a year earlier.

Table VH-5, Value of UK Trade in Goods and Services, Balance of Payments Basis, ₤ Million  and ∆%

	₤ Million SA Nov 2013	Month ∆%    Nov 2013	Sep-Nov 2013 ∆% Sep-Nov 2012
Total Trade
Exports	41,470	1.2	0.5
Imports	44,708	0.6	2.2
Balance	-3,238
Trade in Goods
Exports	25,344	2.0	1.5
Imports	34,783	0.8	2.2
Balance	-9,439
Trade in Goods Excluding Oil
Exports	22,419	1.4	1.3
Imports	30,944	1.7	4.1
Balance	-8,525
Trade in Services
Exports	16,126	0.1	-1.1
Imports	9,925	-0.3	1.9
Balance	6,201

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/uktrade/uk-trade/november-2013/index.html

VI Valuation of Risk Financial Assets. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html 

Table VI-1 shows the phenomenal impulse to valuations of risk financial assets originating in the initial shock of near zero interest rates in 2003-2004 with the fed funds rate at 1 percent, in fear of deflation that never materialized, and quantitative easing in the form of suspension of the auction of 30-year Treasury bonds to lower mortgage rates. World financial markets were dominated by monetary and housing policies in the US. Between 2002 and 2008, the DJ UBS Commodity Index rose 165.5 percent largely because of unconventional monetary policy encouraging carry trades from low US interest rates to long leveraged positions in commodities, exchange rates and other risk financial assets. The charts of risk financial assets show sharp increase in valuations leading to the financial crisis and then profound drops that are captured in Table VI-1 by percentage changes of peaks and troughs. The first round of quantitative easing and near zero interest rates depreciated the dollar relative to the euro by 39.3 percent between 2003 and 2008, with revaluation of the dollar by 25.1 percent from 2008 to 2010 in the flight to dollar-denominated assets in fear of world financial risks. The dollar devalued 14.7 percent by Fri Jan 10, 2014. Dollar devaluation is a major vehicle of monetary policy in reducing the output gap that is implemented in the probably erroneous belief that devaluation will not accelerate inflation, misallocating resources toward less productive economic activities and disrupting financial markets. The last row of Table VI-1 shows CPI inflation in the US rising from 1.9 percent in 2003 to 4.1 percent in 2007 even as monetary policy increased the fed funds rate from 1 percent in Jun 2004 to 5.25 percent in Jun 2006.

Table VI-1, Volatility of Assets

DJIA	10/08/02-10/01/07	10/01/07-3/4/09	3/4/09- 4/6/10
∆%	87.8	-51.2	60.3
NYSE Financial	1/15/04- 6/13/07	6/13/07- 3/4/09	3/4/09- 4/16/07
∆%	42.3	-75.9	121.1
Shanghai Composite	6/10/05- 10/15/07	10/15/07- 10/30/08	10/30/08- 7/30/09
∆%	444.2	-70.8	85.3
STOXX EUROPE 50	3/10/03- 7/25/07	7/25/07- 3/9/09	3/9/09- 4/21/10
∆%	93.5	-57.9	64.3
UBS Com.	1/23/02- 7/1/08	7/1/08- 2/23/09	2/23/09- 1/6/10
∆%	165.5	-56.4	41.4
10-Year Treasury	6/10/03	6/12/07	12/31/08	4/5/10
%	3.112	5.297	2.247	3.986
USD/EUR	6/26/03	7/14/08	6/07/10	1/10/2014
Rate	1.1423	1.5914	1.192	1.3670
CNY/USD	01/03 2000	07/21 2005	7/15 2008	1/10/ 2014
Rate	8.2798	8.2765	6.8211	6.0503
New House	1963	1977	2005	2009
Sales 1000s	560	819	1283	375
New House	2000	2007	2009	2010
Median Price $1000	169	247	217	203
	2003	2005	2007	2010
CPI	1.9	3.4	4.1	1.5

Sources: http://professional.wsj.com/mdc/page/marketsdata.html?mod=WSJ_hps_marketdata

http://www.census.gov/const/www/newressalesindex_excel.html

http://federalreserve.gov/releases/h10/Hist/dat00_eu.htm

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

Chinese Yuan/Dollar (CNY/USD) exchange rate that reveal pursuit of exchange rate policies resulting from monetary policy in the US and capital control/exchange rate policy in China. The ultimate intentions are the same: promoting internal economic activity at the expense of the rest of the world. The easy money policy of the US was deliberately or not but effectively to devalue the dollar from USD 1.1423/EUR on Jun 26, 2003 to USD 1.5914/EUR on Jul 14, 2008, or by 39.3 percent. The flight into dollar assets after the global recession caused revaluation to USD 1.192/EUR on Jun 7, 2010, or by 25.1 percent. After the temporary interruption of the sovereign risk issues in Europe from Apr to Jul, 2010, shown in Table VI-4 below, the dollar has devalued again to USD 1.3670/EUR on Jan 10, 2014 or by 14.7 percent {[(1.3670/1.192)-1]100 = 14.7%}. Yellen (2011AS, 6) admits that Fed monetary policy results in dollar devaluation with the objective of increasing net exports, which was the policy that Joan Robinson (1947) labeled as “beggar-my-neighbor” remedies for unemployment. Risk aversion erodes devaluation of the dollar. China fixed the CNY to the dollar for a long period at a highly undervalued level of around CNY 8.2765/USD subsequently revaluing to CNY 6.8211/USD until Jun 7, 2010, or by 17.6 percent. After fixing again the CNY to the dollar, China revalued to CNY 6.0503/USD on Fri Jan 10, 2014, or by an additional 11.3 percent, for cumulative revaluation of 26.9 percent. The final row of Table VI-2 shows: devaluation of 0.1 percent in the week of Dec 20, 2013; revaluation of 0.1 percent in the week of Dec 27, 2013; revaluation of 0.3 percent the week of Jan 3, 2013; and no change in the week of Jan 10, 2013.

Table VI-2, Dollar/Euro (USD/EUR) Exchange Rate and Chinese Yuan/Dollar (CNY/USD) Exchange Rate

USD/EUR	12/26/03	7/14/08	6/07/10	1/10/14
Rate	1.1423	1.5914	1.192	1.3670
CNY/USD	01/03 2000	07/21 2005	7/15 2008	1/10/ 2014
Rate	8.2798	8.2765	6.8211	6.0503
Weekly Rates	12/20/2013	12/27/2013	1/3/2014	1/10/ 2014
CNY/USD	6.0725	6.0678	6.0516	6.0503
∆% from Earlier Week*	-0.1	0.1	0.3	0.0

*Negative sign is depreciation; positive sign is appreciation

Source: http://professional.wsj.com/mdc/public/page/mdc_currencies.html?mod=mdc_topnav_2_3000

The Dow Jones Newswires informs on Oct 15, 2011, that the premier of China Wen Jiabao announced that the Chinese yuan will not be further appreciated to prevent adverse effects on exports (http://professional.wsj.com/article/SB10001424052970203914304576632790881396896.html?mod=WSJ_hp_LEFTWhatsNewsCollection). Bob Davis and Lingling Wei, writing on “China shifts course, lets Yuan drop,” on Jul 25, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444840104577548610131107868.html?mod=WSJPRO_hpp_LEFTTopStories), find that China is depreciating the CNY relative to the USD in an effort to diminish the impact of appreciation of the CNY relative to the EUR. Table VI-2A provides the CNY/USD rate from Oct 28, 2011 to Apr 5, 2013 in selected intervals on Fridays. The CNY/USD revalued by 0.9 percent from Oct 28, 2012 to Apr 27, 2012. The CNY was virtually unchanged relative to the USD by Aug 24, 2012 to CNY 6.3558/USD from the rate of CNY 6.3588/USD on Oct 28, 2011 and then revalued slightly by 1.1 percent to CNY 6.2858/USD on Sep 28, 2012. Devaluation of 0.6 percent from CNY 6.2858/USD on Sep 28, 2012 to CNY 6.3240/USD on Oct 5, 2012, reduced to 0.5 percent the cumulative revaluation from Oct 28, 2011 to Oct 5, 2012. Revaluation by 0.2 percent to CNY 6.2546/USD on Oct 12, 2012 and revalued the CNY by 1.6 percent relative to the dollar from CNY 6.3588/USD on Oct 29, 2011. By Jan 10, 2014, the CNY revalued 4.9 percent to CNY 6.0503/USD relative to CNY 6.3588/USD on Oct 29, 2011. Meanwhile, the Senate of the US periodically considers a bill on China’s trade that could create a confrontation but may not be approved by the entire Congress. An important statement by the People’s Bank of China (PBC), China’s central bank, on Apr 14, 2012, announced the widening of the daily maximum band of fluctuation of the renminbi (RMB) yuan (http://www.pbc.gov.cn/publish/english/955/2012/20120414090756030448561/20120414090756030448561_.html):

“Along with the development of China’s foreign exchange market, the pricing and risk management capabilities of market participants are gradually strengthening. In order to meet market demands, promote price discovery, enhance the flexibility of RMB exchange rate in both directions, further improve the managed floating RMB exchange rate regime based on market supply and demand with reference to a basket of currencies, the People’s Bank of China has decided to enlarge the floating band of RMB’s trading prices against the US dollar and is hereby making a public announcement as follows:

Effective from April 16, 2012 onwards, the floating band of RMB’s trading prices against the US dollar in the inter-bank spot foreign exchange market is enlarged from 0.5 percent to 1 percent, i.e., on each business day, the trading prices of the RMB against the US dollar in the inter-bank spot foreign exchange market will fluctuate within a band of ±1 percent around the central parity released on the same day by the China Foreign Exchange Trade System. The spread between the RMB/USD selling and buying prices offered by the foreign exchange-designated banks to their customers shall not exceed 2 percent of the central parity, instead of 1 percent, while other provisions in the Circular of the PBC on Relevant Issues Managing the Trading Prices in the Inter-bank Foreign Exchange Market and Quoted Exchange Rates of Exchange-Designated Banks (PBC Document No.[2010]325) remain valid.

In view of the domestic and international economic and financial conditions, the People’s Bank of China will continue to fulfill its mandates in relation to the RMB exchange rate, keeping RMB exchange rate basically stable at an adaptive and equilibrium level based on market supply and demand with reference to a basket of currencies to preserve stability of the Chinese economy and financial markets.”

Table VI-2A, Renminbi Yuan US Dollar Rate

	CNY/USD	∆% from 10/28/2011
1/10/14	6.0503	4.9
1/3/14	6.0516	4.8
12/27/13	6.0678	4.6
12/20/13	6.0725	4.5
12/13/13	6.0691	4.6
12/6/13	6.0801	4.4
11/29/13	6.0914	4.2
11/22/13	6.0911	4.2
11/15/13	6.0928	4.2
11/8/13	6.0912	4.2
11/1/13	6.0996	4.1
10/25/13	6.0830	4.3
10/18/2013	6.0973	4.1
10/11/2013	6.1210	3.7
10/4/2013	6.1226	3.7
9/27/2013	6.1196	3.8
9/20/2013	6.1206	3.7
9/13/13	6.1190	3.8
9/6/13	6.1209	3.7
8/30/13	6.1178	3.8
8/23/13	6.1211	3.7
8/16/13	6.1137	3.9
8/9/13	6.1225	3.7
8/2/13	6.1295	3.6
7/26/13	6.1305	3.6
7/19/13	6.1380	3.5
7/12/13	6.1382	3.5
7/5/13	6.1316	3.6
6/28/13	6.1910	2.6
6/21/13	6.1345	3.5
6/14/13	6.1323	3.6
6/7/13	6.1334	3.5
5/31/13	6.1347	3.5
5/24/13	6.1314	3.6
5/17/13	6.1395	3.4
5/10/13	6.1395	3.4
5/3/13	6.1553	3.2
4/26/13	6.1636	3.1
4/19/13	6.1788	2.8
4/12/13	6.1947	2.6
4/5/13	6.2051	2.4
3/29/13	6.2119	2.3
3/22/13	6.2112	2.3
3/15/13	6.2131	2.3
3/8/13	6.2142	2.3
3/1/13	6.2221	2.1
2/22/15	6.2350	1.9
2/15/13	6.2328	2.0
2/8/13	6.2323	2.0
2/1/13	6.2316	2.0
1/25/13	6.2228	2.1
1/18/13	6.2182	2.2
1/11/13	6.2168	2.2
1/4/13	6.2316	2.0
12/28/12	6.2358	1.9
12/21/12	6.2352	1.9
12/14/12	6.2460	1.8
12/7/12	6.2254	2.1
11/30/12	6.2310	2.0
11/23/12	6.2328	2.0
11/16/12	6.2404	1.9
11/9/12	6.2452	1.8
11/2/12	6.2458	1.8
10/26/12	6.2628	1.5
10/19/12	6.2546	1.6
10/12/12	6.2670	1.4
10/5/12	6.3240	0.5
9/28/12	6.2858	1.1
9/21/12	6.3078	0.8
9/14/12	6.3168	0.7
9/7/12	6.3438	0.2
8/31/12	6.3498	0.1
8/24/12	6.3558	0.0
8/17/12	6.3589	0.0
8/10/12	6.3604	0.0
8/3/12	6.3726	-0.2
7/27/12	6.3818	-0.4
7/20/12	6.3750	-0.3
7/13/12	6.3868	-0.4
7/6/12	6.3658	-0.1
6/29/12	6.3552	0.1
6/22/12	6.3650	-0.1
6/15/12	6.3678	-0.1
6/8/2012	6.3752	-0.3
6/1/2012	6.3708	-0.2
4/27/2012	6.3016	0.9
3/23/2012	6.3008	0.9
2/3/2012	6.3030	0.9
12/30/2011	6.2940	1.0
11/25/2011	6.3816	-0.4
10/28/2011	6.3588	-

Source:

http://professional.wsj.com/mdc/public/page/mdc_currencies.html?mod=mdc_topnav_2_3000

http://federalreserve.gov/releases/h10/Hist/dat00_ch.htm

Professor Edward P Lazear (2013Jan7), writing on “Chinese ‘currency manipulation’ is not the problem,” on Jan 7, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887323320404578213203581231448.html), provides clear thought on the role of the yuan in trade between China and the United States and trade between China and Europe. There is conventional wisdom that Chinese exchange rate policy causes the loss of manufacturing jobs in the United States, which is shown by Lazear (2013Jan7) to be erroneous. The fact is that manipulation of the CNY/USD rate by China has only minor effects on US employment. Lazear (2013Jan7) shows that the movement of monthly exports of China to its major trading partners, United States and Europe, since 1995 cannot be explained by the fixing of the CNY/USD rate by China. The period is quite useful because it includes rapid growth before 2007, contraction until 2009 and weak subsequent expansion. Chart VI-1 of the Board of Governors of the Federal Reserve System provides the CNY/USD exchange rate from Jan 3, 1995 to Jan 3, 2014 together with US recession dates in shaded areas. China fixed the CNY/USD rate for a long period as shown in the horizontal segment from 1995 to 2005. There was systematic revaluation of 17.6 percent from CNY 8.2765 on Jul 21, 2005 to CNY 6.8211 on Jul 15, 2008. China fixed the CNY/USD rate until Jun 7, 2010, to avoid adverse effects on its economy from the global recession, which is shown as a horizontal segment from 2009 until mid 2010. China then continued the policy of appreciation of the CNY relative to the USD with oscillations until the beginning of 2012 when the rate began to move sideways followed by a final upward slope of devaluation that is measured in Table VI-2A but virtually disappeared in the rate of CNY 6.3589/USD on Aug 17, 2012 and was nearly unchanged at CNY 6.3558/USD on Aug 24, 2012. China then appreciated 0.2 percent in the week of Dec 21, 2012, to CNY 6.2352/USD for cumulative 1.9 percent revaluation from Oct 28, 2011 and left the rate virtually unchanged at CNY 6.2316/USD on Jan 11, 2013, appreciating to CNY 6.0505/USD on Jan 3, 2014, which is the last data point in Chart VI-1. Revaluation of the CNY relative to the USD by 26.9 percent by Jan 10, 2014 has not reduced the trade surplus of China but reversal of the policy of revaluation could result in international confrontation. The interruption with upward slope in the final segment on the right of Chart VI-I is measured as virtually stability in Table VI-2A followed with decrease or revaluation.

Chart VI-1, Chinese Yuan (CNY) per US Dollar (US), Jan 3, 1995-Jan 3, 2014

Note: US Recessions in Shaded Areas

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/H10/default.htm

Chart VI-1A provides the daily CNY/USD rate from Jan 5, 1981 to Jan 3, 2014. The exchange rate was CNY 1.5418/USD on Jan 5, 1981. There is sharp cumulative depreciation 107.8 percent to CNY 3.2031 by Jul 2, 1986, continuing to CNY 5.8145/USD on Dec 29, 1993 for cumulative 277.1 percent since Jan 5, 1981. China then devalued sharply to CNY 8.7117/USD on Jan 7, 1994 for 49.8 percent relative to Dec 29, 1993 and cumulative 465.0 percent relative to Jan 5, 1981. China then fixed the rate at CNY 8.2765/USD until Jul 21, 2005 and revalued as analyzed in Chart VI-1. The final data point in Chart VI-1A is CNY 6.0505/USD on Jan 3, 2014. To be sure, China fixed the exchange rate after substantial prior devaluation. It is unlikely that the devaluation could have been effective after many years of fixing the exchange rate with high inflation and multiple changes in the world economy. The argument of Lazear (2013Jan7) is still valid in view of the lack of association between monthly exports of China to the US and Europe since 1995 and the exchange rate of China.

Chart VI-1A, Chinese Yuan (CNY) per US Dollar (US), Business Days, Jan 5, 1981-Jan 3, 2014

Note: US Recessions in Shaded Areas

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/H10/default.htm

Inflation and unemployment in the period 1966 to 1985 is analyzed by Cochrane (2011Jan, 23) by means of a Phillips circuit joining points of inflation and unemployment. Chart VI-1B for Brazil in Pelaez (1986, 94-5) was reprinted in The Economist in the issue of Jan 17-23, 1987 as updated by the author. Cochrane (2011Jan, 23) argues that the Phillips circuit shows the weakness in Phillips curve correlation. The explanation is by a shift in aggregate supply, rise in inflation expectations or loss of anchoring. The case of Brazil in Chart VI-1B cannot be explained without taking into account the increase in the fed funds rate that reached 22.36 percent on Jul 22, 1981 (http://www.federalreserve.gov/releases/h15/data.htm) in the Volcker Fed that precipitated the stress on a foreign debt bloated by financing balance of payments deficits with bank loans in the 1970s. The loans were used in projects, many of state-owned enterprises with low present value in long gestation. The combination of the insolvency of the country because of debt higher than its ability of repayment and the huge government deficit with declining revenue as the economy contracted caused adverse expectations on inflation and the economy.  This interpretation is consistent with the case of the 24 emerging market economies analyzed by Reinhart and Rogoff (2010GTD, 4), concluding that “higher debt levels are associated with significantly higher levels of inflation in emerging markets. Median inflation more than doubles (from less than seven percent to 16 percent) as debt rises from the low (0 to 30 percent) range to above 90 percent. Fiscal dominance is a plausible interpretation of this pattern.”

The reading of the Phillips circuits of the 1970s by Cochrane (2011Jan, 25) is doubtful about the output gap and inflation expectations:

“So, inflation is caused by ‘tightness’ and deflation by ‘slack’ in the economy. This is not just a cause and forecasting variable, it is the cause, because given ‘slack’ we apparently do not have to worry about inflation from other sources, notwithstanding the weak correlation of [Phillips circuits]. These statements [by the Fed] do mention ‘stable inflation expectations. How does the Fed know expectations are ‘stable’ and would not come unglued once people look at deficit numbers? As I read Fed statements, almost all confidence in ‘stable’ or ‘anchored’ expectations comes from the fact that we have experienced a long period of low inflation (adaptive expectations). All these analyses ignore the stagflation experience in the 1970s, in which inflation was high even with ‘slack’ markets and little ‘demand, and ‘expectations’ moved quickly. They ignore the experience of hyperinflations and currency collapses, which happen in economies well below potential.”

Chart VI-1B provides the tortuous Phillips Circuit of Brazil from 1963 to 1987. There were no reliable consumer price index and unemployment data in Brazil for that period. Chart VI-1B used the more reliable indicator of inflation, the wholesale price index, and idle capacity of manufacturing as a proxy of unemployment in large urban centers.

©Carlos Manuel Pelaez, O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo: Editora Atlas, 1986, pages 94-5. Reprinted in: Brazil. Tomorrow’s Italy, The Economist, 17-23 January 1987, page 25.

The key to success in stabilizing an economy with significant risk aversion is finding parity of internal and external interest rates. Brazil implemented fiscal consolidation and reforms that are advisable in explosive foreign debt environments. In addition, Brazil had the capacity to find parity in external and internal interest rates to prevent capital flight and disruption of balance sheets (for analysis of balance sheets, interest rates, indexing, devaluation, financial instruments and asset/liability management in that period see Pelaez and Pelaez (2007), The Global Recession Risk: Dollar Devaluation and the World Economy, 178-87). Table VI-2C provides monthly percentage changes of inflation, devaluation and indexing and the monthly percent overnight interest rate. Parity was attained by means of a simple inequality:

Cost of Domestic Loan ≥ Cost of Foreign Loan

This ordering was attained in practice by setting the domestic interest rate of the overnight interest rate plus spread higher than indexing of government securities with lower spread than loans in turn higher than devaluation plus spread of foreign loans. Interest parity required equality of inflation, devaluation and indexing. Brazil devalued the cruzeiro by 30 percent in 1983 because the depreciation of the German mark DM relative to the USD had eroded the competitiveness of Brazil’s products in Germany and in competition with German goods worldwide. The database of the Board of Governors of the Federal Reserve System quotes DM 1.7829/USD on Mar 3 1980 and DM 2.4425/USD on Mar 15, 1983 (http://www.federalreserve.gov/releases/h10/hist/dat89_ge.htm) for devaluation of 37.0 percent. Parity of costs and rates of domestic and foreign loans and assets required ensuring that there would not be appreciation of the exchange rate, inducing capital flight in expectation of future devaluation that would have reversed stabilization. Table VI-2C provides inflation, devaluation, overnight interest rate and indexing. One of the main problems of adjustment of members of the euro area with high debts is that they cannot adjust the exchange rate because of the common euro currency. This is not an argument in favor of breaking the euro area because there would be also major problems of adjustment such as exiting the euro in favor of a new Drachma in the case of Greece. Another hurdle of adjustment in the euro area is that Brazil could have moved swiftly to adjust its economy in 1983 but the euro area has major sovereignty and distribution of taxation hurdles in moving rapidly.

Table VI-2C, Brazil, Inflation, Devaluation, Overnight Interest Rate and Indexing, Percent per Month, 1984

1984	Inflation IGP ∆%	Devaluation ∆%	Overnight Interest Rate %	Indexing ∆%
Jan	9.8	9.8	10.0	9.8
Feb	12.3	12.3	12.2	12.3
Mar	10.0	10.1	11.3	10.0
Apr	8.9	8.8	10.1	8.9
May	8.9	8.9	9.8	8.9
Jun	9.2	9.2	10.2	9.2
Jul	10.3	10.2	11.9	10.3
Aug	10.6	10.6	11.0	10.6
Sep	10.5	10.5	11.9	10.5
Oct	12.6	12.6	12.9	12.6
Nov	9.9	9.9	10.9	9.9
Dec	10.5	10.5	11.5	10.5

Source: Carlos Manuel Pelaez, O Cruzado e o Austral: Análise das Reformas Monetárias do Brasil e da Argentina. São Paulo, Editora Atlas, 1986, 86.

The G7 meeting in Washington on Apr 21 2006 of finance ministers and heads of central bank governors of the G7 established the “doctrine of shared responsibility” (G7 2006Apr):

“We, Ministers and Governors, reviewed a strategy for addressing global imbalances. We recognized that global imbalances are the product of a wide array of macroeconomic and microeconomic forces throughout the world economy that affect public and private sector saving and investment decisions. We reaffirmed our view that the adjustment of global imbalances:

• Is shared responsibility and requires participation by all regions in this global process;
• Will importantly entail the medium-term evolution of private saving and investment across countries as well as counterpart shifts in global capital flows; and
• Is best accomplished in a way that maximizes sustained growth, which requires strengthening policies and removing distortions to the adjustment process.

In this light, we reaffirmed our commitment to take vigorous action to address imbalances. We agreed that progress has been, and is being, made. The policies listed below not only would be helpful in addressing imbalances, but are more generally important to foster economic growth.

• In the United States, further action is needed to boost national saving by continuing fiscal consolidation, addressing entitlement spending, and raising private saving.
• In Europe, further action is needed to implement structural reforms for labor market, product, and services market flexibility, and to encourage domestic demand led growth.
• In Japan, further action is needed to ensure the recovery with fiscal soundness and long-term growth through structural reforms.

Others will play a critical role as part of the multilateral adjustment process.

• In emerging Asia, particularly China, greater flexibility in exchange rates is critical to allow necessary appreciations, as is strengthening domestic demand, lessening reliance on export-led growth strategies, and actions to strengthen financial sectors.

• In oil-producing countries, accelerated investment in capacity, increased economic diversification, enhanced exchange rate flexibility in some cases.

• Other current account surplus countries should encourage domestic consumption and investment, increase micro-economic flexibility and improve investment climates.

We recognized the important contribution that the IMF can make to multilateral surveillance.”

The concern at that time was that fiscal and current account global imbalances could result in disorderly correction with sharp devaluation of the dollar after an increase in premiums on yields of US Treasury debt (see Pelaez and Pelaez, The Global Recession Risk (2007)). The IMF was entrusted with monitoring and coordinating action to resolve global imbalances. The G7 was eventually broadened to the formal G20 in the effort to coordinate policies of countries with external surpluses and deficits.

The database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx) is used to contract Table VI-3 with fiscal and current account imbalances projected for 2014 and 2016.  The WEO finds the need to rebalance external and domestic demand (IMF 2011WEOSep xvii):

“Progress on this front has become even more important to sustain global growth. Some emerging market economies are contributing more domestic demand than is desirable (for example, several economies in Latin America); others are not contributing enough (for example, key economies in emerging Asia). The first set needs to restrain strong domestic demand by considerably reducing structural fiscal deficits and, in some cases, by further removing monetary accommodation. The second set of economies needs significant currency appreciation alongside structural reforms to reduce high surpluses of savings over investment. Such policies would help improve their resilience to shocks originating in the advanced economies as well as their medium-term growth potential.”

The IMF (2012WEOApr, XVII) explains decreasing importance of the issue of global imbalances as follows:

“The latest developments suggest that global current account imbalances are no longer expected to widen again, following their sharp reduction during the Great Recession. This is largely because the excessive consumption growth that characterized economies that ran large external deficits prior to the crisis has been wrung out and has not been offset by stronger consumption in surplus economies. Accordingly, the global economy has experienced a loss of demand and growth in all regions relative to the boom years just before the crisis. Rebalancing activity in key surplus economies toward higher consumption, supported by more market-determined exchange rates, would help strengthen their prospects as well as those of the rest of the world.”

Table VI-3, Fiscal Deficit, Current Account Deficit and Government Debt as % of GDP and 2011 Dollar GDP

	GDP $B 2013	FD %GDP 2014	CAD %GDP 2014	Debt %GDP 2014	FD%GDP 2016	CAD%GDP 2016	Debt %GDP 2016
US	16245	-2.6	-2.8	88.3	-1.9	-2.9	87.1
Japan	5007	-6.1	1.7	141.8	-3.9	1.8	145.9
UK	2490	-5.8	-1.9	88.0	-0.8	-0.4	91.2
Euro	12685	0.2	2.5	75.6	1.2	2.6	74.4
Ger	3593	1.8	5.7	54.6	1.9	5.1	51.2
France	2739	-1.5	-1.6	88.5	0.1	-0.6	87.5
Italy	2068	3.1	0.2	111.2	4.4	-0.4	108.0
Can	1825	-2.4	-3.1	38.0	-1.5	-2.7	38.9
China	8939	-2.1	2.7	20.9	-1.0	3.4	17.7
Brazil	2396	3.3	-2.4	33.6	3.1	-3.3	30.8

Note: GER = Germany; Can = Canada; FD = fiscal deficit; CAD = current account deficit

FD is primary except total for China; Debt is net except gross for China

Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx

The current account of the US balance of payments is provided in Table VI-IIIA for IIIQ2012 and IIIQ2013. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US not seasonally adjusted decreased from $122.5 billion in IIIQ2012 to $110.1 billion in IIIQ2013. The current account deficit seasonally adjusted at annual rate fell from 2.6 percent of GDP in IIIQ2012 to 2.3 percent of GDP in IIQ2013 and 2.2 percent of GDP in IIIQ2013. The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession but is combined now with much higher imbalance in the Treasury budget (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71).

Table VI-3A, US, Balance of Payments, Millions of Dollars NSA

	IIIQ2012	IIIQ2013	Difference
Goods Balance	-197,538	-197,137	4,010
X Goods	382,343	392,155	2.6 ∆%
M Goods	-579,881	-589,292	1.6 ∆%
Services Balance	52,940	61,771	8,813
X Services	166,800	177,595	6.5 ∆%
M Services	-113,860	-115,824	1.7 ∆%
Balance Goods and Services	-144,599	-135,366	-9,233
Balance Income	55,269	60,519	5,250
Unilateral Transfers	-33,140	-35,208	2,068
Current Account Balance	-122,470	-110,055	-12,415
% GDP	IIIQ2012	IIIQ2013	IIQ2013
	2.6	2.2	2.3

X: exports; M: imports

Balance on Current Account = Balance on Goods and Services + Balance on Income + Unilateral Transfers

Source: Bureau of Economic Analysis

http://www.bea.gov/international/index.htm#bop

In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

The alternative fiscal scenario of the CBO (2012NovCDR, 2013Sep17) resembles an economic world in which eventually the placement of debt reaches a limit of what is proportionately desired of US debt in investment portfolios. This unpleasant environment is occurring in various European countries.

The current real value of government debt plus monetary liabilities depends on the expected discounted values of future primary surpluses or difference between tax revenue and government expenditure excluding interest payments (Cochrane 2011Jan, 27, equation (16)). There is a point when adverse expectations about the capacity of the government to generate primary surpluses to honor its obligations can result in increases in interest rates on government debt.

This analysis suggests that there may be a point of saturation of demand for United States financial liabilities without an increase in interest rates on Treasury securities. A risk premium may develop on US debt. Such premium is not apparent currently because of distressed conditions in the world economy and international financial system. Risk premiums are observed in the spread of bonds of highly indebted countries in Europe relative to bonds of the government of Germany.

The issue of global imbalances centered on the possibility of a disorderly correction (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). Such a correction has not occurred historically but there is no argument proving that it could not occur. The need for a correction would originate in unsustainable large and growing United States current account deficits (CAD) and net international investment position (NIIP) or excess of financial liabilities of the US held by foreigners net relative to financial liabilities of foreigners held by US residents. The IMF estimated that the US could maintain a CAD of two to three percent of GDP without major problems (Rajan 2004). The threat of disorderly correction is summarized by Pelaez and Pelaez, The Global Recession Risk (2007), 15):

“It is possible that foreigners may be unwilling to increase their positions in US financial assets at prevailing interest rates. An exit out of the dollar could cause major devaluation of the dollar. The depreciation of the dollar would cause inflation in the US, leading to increases in American interest rates. There would be an increase in mortgage rates followed by deterioration of real estate values. The IMF has simulated that such an adjustment would cause a decline in the rate of growth of US GDP to 0.5 percent over several years. The decline of demand in the US by four percentage points over several years would result in a world recession because the weakness in Europe and Japan could not compensate for the collapse of American demand. The probability of occurrence of an abrupt adjustment is unknown. However, the adverse effects are quite high, at least hypothetically, to warrant concern.”

The United States could be moving toward a situation typical of heavily indebted countries, requiring fiscal adjustment and increases in productivity to become more competitive internationally. The CAD and NIIP of the United States are not observed in full deterioration because the economy is well below potential. There are two complications in the current environment relative to the concern with disorderly correction in the first half of the past decade. In the release of Jun 14, 2013, the Bureau of Economic Analysis (http://www.bea.gov/newsreleases/international/transactions/2013/pdf/trans113.pdf) informs of revisions of US data on US international transactions since 1999:

“The statistics of the U.S. international transactions accounts released today have been revised for the first quarter of 1999 to the fourth quarter of 2012 to incorporate newly available and revised source data, updated seasonal adjustments, changes in definitions and classifications, and improved estimating methodologies.”

Table VI-IIIB provides data on the US fiscal and balance of payments imbalances. In 2007, the federal deficit of the US was $161 billion corresponding to 1.1 percent of GDP while the Congressional Budget Office (CBO 2013Sep11) estimates the federal deficit in 2012 at $1087 billion or 6.8 percent of GDP. The combined record federal deficits of the US from 2009 to 2012 are $5090 billion or 31.6 percent of the estimate of GDP for fiscal year 2012 implicit in the CBO (CBO 2013Sep11) estimate of debt/GDP. The deficits from 2009 to 2012 exceed one trillion dollars per year, adding to $5.090 trillion in four years, using the fiscal year deficit of $1087 billion for fiscal year 2012, which is the worst fiscal performance since World War II. Federal debt in 2007 was $5035 billion, less than the combined deficits from 2009 to 2012 of $5090 billion. Federal debt in 2012 was 70.1 percent of GDP (CBO 2013Sep11). This situation may worsen in the future (CBO 2013Sep17):

“Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

The gap between federal spending and revenues would widen steadily after 2015 under the assumptions of the extended baseline, CBO projects. By 2038, the deficit would be 6½ percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 100 percent of GDP, more than in any year except 1945 and 1946. With such large deficits, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable.

Incorporating the economic effects of the federal policies that underlie the extended baseline worsens the long-term budget outlook. The increase in debt relative to the size of the economy, combined with an increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce output and raise interest rates relative to the benchmark economic projections that CBO used in producing the extended baseline. Those economic differences would lead to lower federal revenues and higher interest payments. With those effects included, debt under the extended baseline would rise to 108 percent of GDP in 2038.”

Table VI-3B, US, Current Account, NIIP, Fiscal Balance, Nominal GDP, Federal Debt and Direct Investment, Dollar Billions and %

	2007	2008	2009	2010	2011	2012
Goods & Services	-699	-702	-384	-499	-557	-535
Income	101	146	124	178	233	224
UT	-115	-125	-122	-128	-134	-130
Current Account	-713	-681	-382	-449	-458	-440
NGDP	14480	14720	14418	14958	15534	16245
Current Account % GDP	-4.9	-4.6	-2.6	-3.0	-2.9	-2.7
NIIP	-1796	-3260	-2275	-2250	-3730	-3863
US Owned Assets Abroad	18400	19464	18558	20555	21636	21638
Foreign Owned Assets in US	20196	22724	20833	22805	25366	25501
NIIP % GDP	-12.4	-22.1	-15.8	-15.0	-24.0	-23.8
Exports Goods Services Income	2487	2654	2185	2523	2874	2987
NIIP % Exports Goods Services Income	-72	-123	-104	-89	-130	-129
DIA MV	5274	3102	4322	4809	4514	5249
DIUS MV	3551	2486	2995	3422	3510	3924
Fiscal Balance	-161	-459	-1413	-1294	-1296	-1087
Fiscal Balance % GDP	-1.1	-3.1	-9.8	-8.7	-8.4	-6.8
Federal   Debt	5035	5803	7545	9019	10128	11281
Federal Debt % GDP	35.1	39.3	52.3	61.0	65.8	70.1
Federal Outlays	2729	2983	3518	3456	3598	3537
∆%	2.8	9.3	17.9	-1.8	4.1	-1.7
% GDP	19.0	20.2	24.4	23.4	23.4	22.0
Federal Revenue	2568	2524	2105	2162	2302	2450
∆%	6.7	-1.7	-16.6	2.7	6.5	6.4
% GDP	17.9	17.1	14.6	14.6	15.0	15.2

Sources: 

Notes: UT: unilateral transfers; NGDP: nominal GDP or in current dollars; NIIP: Net International Investment Position; DIA MV: US Direct Investment Abroad at Market Value; DIUS MV: Direct Investment in the US at Market Value. There are minor discrepancies in the decimal point of percentages of GDP between the balance of payments data and federal debt, outlays, revenue and deficits in which the original number of the CBO source is maintained. These discrepancies do not alter conclusions. Budget http://www.cbo.gov/ Balance of Payments and NIIP http://www.bea.gov/international/index.htm#bop Gross Domestic Product, Bureau of Economic Analysis (BEA). http://www.bea.gov/iTable/index_nipa.cfm

Table VI-IIIC provides quarterly estimates NSA of the external and internal imbalances of the United States. The current account deficit seasonally adjusted falls from 3.0 percent of GDP in IQ2012 to 2.5 percent in IQ2013 and 2.3 percent of GDP in IIQ2013. The net international investment position increases from $3.9 trillion in IQ2012 to $4.3 trillion in IQ2013 and $4.5 trillion in IIQ2013.

Table VI-IIIC, US, Current Account, NIIP, Fiscal Balance, Nominal GDP, Federal Debt and Direct Investment, Dollar Billions and % NSA

	IIQ2012	IIIQ2012	IVQ2012	IQ2013	IIQ2013
Goods & Services	-145	-145	-122	-100	-126
Income	58	55	55	52	57
UT	-31	-33	-32	-34	-33
Current Account	-118	-123	-99	-82	-102
Current Account % GDP	-2.7	-2.6	-2.5	-2.5	-2.3
NIIP	-4332	-4109	-3863	-4236	-4504
US Owned Assets Abroad	20948	21551	21638	21590	20984
Foreign Owned Assets in US	-25280	-25660	-25501	-25826	-25488
DIA MV	4679	5059	5249	5501	5430
DIUS MV	3765	3962	3924	4251	4343

Sources: 

Notes: UT: unilateral transfers; NIIP: Net International Investment Position; DIA MV: US Direct Investment Abroad at Market Value; DIUS MV: Direct Investment in the US at Market Value.

Sources: US Bureau of Economic Analysis http://www.bea.gov/international/index.htm#bop

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014