Financial Instability, Rules, Discretionary Authorities and Slow Productivity Growth, Thirty Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, World Economic Slowdown and Global Recession Risk: Part III

 

Financial Instability, Rules, Discretionary Authorities and Slow Productivity Growth, Thirty Million Unemployed or Underemployed, Stagnating Real Wages, United States International Trade, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

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

Executive Summary

I Thirty 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

II United States International Trade

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

V World Economic Slowdown. Table V-1 is constructed with the database of the IMF (http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx) to show GDP in dollars in 2012 and the growth rate of real GDP of the world and selected regional countries from 2013 to 2016. The data illustrate the concept often repeated of “two-speed recovery” of the world economy from the recession of 2007 to 2009. The IMF has lowered its forecast of the world economy to 2.9 percent in 2013 but accelerating to 3.6 percent in 2014, 4.0 percent in 2015 and 4.1 percent in 2016. Slow-speed recovery occurs in the “major advanced economies” of the G7 that account for $34,560 billion of world output of $72,216 billion, or 47.9 percent, but are projected to grow at much lower rates than world output, 2.1 percent on average from 2013 to 2016 in contrast with 3.6 percent for the world as a whole. While the world would grow 15.4 percent in the four years from 2013 to 2016, the G7 as a whole would grow 8.6 percent. The difference in dollars of 2012 is rather high: growing by 15.4 percent would add $11.1 trillion of output to the world economy, or roughly, two times the output of the economy of Japan of $5,960 billion but growing by 8.6 percent would add $6.2 trillion of output to the world, or about the output of Japan in 2012. The “two speed” concept is in reference to the growth of the 150 countries labeled as emerging and developing economies (EMDE) with joint output in 2012 of $27,221 billion, or 37.7 percent of world output. The EMDEs would grow cumulatively 21.9 percent or at the average yearly rate of 5.1 percent, contributing $6.0 trillion from 2013 to 2016 or the equivalent of somewhat less than the GDP of $8,221 billion of China in 2012. The final four countries in Table V-1 often referred as BRIC (Brazil, Russia, India, China), are large, rapidly growing emerging economies. Their combined output in 2012 adds to $14,346 billion, or 19.9 percent of world output, which is equivalent to 41.5 percent of the combined output of the major advanced economies of the G7.

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

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

Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries); POT: Portugal

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

Continuing high rates of unemployment in advanced economies constitute another characteristic of the database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx). Table V-2 is constructed with the WEO database to provide rates of unemployment from 2012 to 2016 for major countries and regions. In fact, unemployment rates for 2012 in Table V-2 are high for all countries: unusually high for countries with high rates most of the time and unusually high for countries with low rates most of the time. The rates of unemployment are particularly high for the countries with sovereign debt difficulties in Europe: 15.7 percent for Portugal (POT), 14.7 percent for Ireland, 24.2 percent for Greece, 25.0 percent for Spain and 10.6 percent for Italy, which is lower but still high. The G7 rate of unemployment is 7.4 percent. Unemployment rates are not likely to decrease substantially if slow growth persists in advanced economies.

Table V-2, IMF World Economic Outlook Database Projections of Unemployment Rate as Percent of Labor Force

	% Labor Force 2012	% Labor Force 2013	% Labor Force 2014	% Labor Force 2015	% Labor Force 2016
World	NA	NA	NA	NA	NA
G7	7.4	7.3	7.3	7.0	6.6
Canada	7.3	7.2	7.1	7.0	6.9
France	10.3	11.0	11.1	10.9	10.5
DE	5.5	5.6	5.5	5.5	5.5
Italy	10.7	12.5	12.4	12.0	11.2
Japan	4.4	4.2	4.3	4.3	4.3
UK	8.0	7.7	7.5	7.3	7.0
US	8.1	7.6	7.4	6.9	6.4
Euro Area	11.4	12.3	12.2	12.0	11.5
DE	5.5	5.6	5.5	5.5	5.5
France	10.3	11.0	11.1	10.9	10.5
Italy	10.7	12.5	12.4	12.0	11.2
POT	15.7	17.4	17.7	17.3	16.8
Ireland	14.7	13.7	13.3	12.8	12.4
Greece	24.2	27.0	26.1	24.0	21.0
Spain	25.0	26.9	26.7	26.5	26.2
EMDE	NA	NA	NA	NA	NA
Brazil	5.5	5.8	6.0	6.5	6.5
Russia	6.0	5.7	5.7	5.5	5.5
India	NA	NA	NA	NA	NA
China	4.1	4.1	4.1	4.1	4.1

Notes; DE: Germany; EMDE: Emerging and Developing Economies (150 countries)

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

Table V-3 provides the latest available estimates of GDP for the regions and countries followed in this blog from IQ2012 to IIQ2013 available now for all countries. There are preliminary estimates for all countries for IIIQ2013. Growth is weak throughout most of the world. Japan’s GDP increased 0.9 percent in IQ2012 and 3.5 percent relative to a year earlier but part of the jump could be the low level a year earlier because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan is experiencing difficulties with the overvalued yen because of worldwide capital flight originating in zero interest rates with risk aversion in an environment of softer growth of world trade. Japan’s GDP fell 0.5 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 2.0 percent, which is much lower than 3.5 percent in IQ2012. Growth of 3.2 percent in IIQ2012 in Japan relative to IIQ2011 has effects of the low level of output because of Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Japan’s GDP contracted 0.8 percent in IIIQ2012 at the SAAR of minus 3.2 percent and decreased 0.2 percent relative to a year earlier. Japan’s GDP grew 0.1 percent in IVQ2012 at the SAAR of 0.6 percent and decreased 0.3 percent relative to a year earlier. Japan grew 1.1 percent in IQ2013 at the SAAR of 4.5 percent and 0.1 percent relative to a year earlier. Japan’s GDP increased 0.9 percent in IIQ2013 at the SAAR of 3.6 percent and increased 1.2 percent relative to a year earlier. Japan’s GDP grew 0.3 percent in IIIQ2013 at the SAAR of 1.1 percent and increased 2.4 pecent relative to a year earlier. China grew at 2.1 percent in IIQ2012, which annualizes to 8.7 percent and 7.6 percent relative to a year earlier. China grew at 2.0 percent in IIIQ2012, which annualizes at 8.2 percent and 7.4 percent relative to a year earlier. In IVQ2012, China grew at 1.9 percent, which annualizes at 7.8 percent, and 7.9 percent in IVQ2012 relative to IVQ2011. In IQ2013, China grew at 1.5 percent, which annualizes at 6.1 percent and 7.7 percent relative to a year earlier. In IIQ2013, China grew at 1.8 percent, which annualizes at 7.4 percent and 7.5 percent relative to a year earlier. China grew at 2.2 percent in IIIQ2013, which annualizes at 9.1 percent and 7.8 percent relative to a year earlier. China grew at 1.8 percent in IVQ2013, which annualized to 7.4 percent and 7.7 percent relative to a year earlier. There is decennial change in leadership in China (http://www.xinhuanet.com/english/special/18cpcnc/index.htm). Growth rates of GDP of China in a quarter relative to the same quarter a year earlier have been declining from 2011 to 2013. GDP fell 0.1 percent in the euro area in IQ2012 and decreased 0.2 in IQ2012 relative to a year earlier. Euro area GDP contracted 0.3 percent IIQ2012 and fell 0.5 percent relative to a year earlier. In IIIQ2012, euro area GDP fell 0.2 percent and declined 0.7 percent relative to a year earlier. In IVQ2012, euro area GDP fell 0.5 percent relative to the prior quarter and fell 1.0 percent relative to a year earlier. In IQ2013, the GDP of the euro area fell 0.2 percent and decreased 1.2 percent relative to a year earlier. The GDP of the euro area increased 0.3 percent in IIQ2013 and fell 0.6 percent relative to a year earlier. In IIIQ2013, euro area GDP increased 0.1 percent and fell 0.3 percent relative to a year earlier. Germany’s GDP increased 0.7 percent in IQ2012 and 1.8 percent relative to a year earlier. In IIQ2012, Germany’s GDP decreased 0.1 percent and increased 0.6 percent relative to a year earlier but 1.1 percent relative to a year earlier when adjusted for calendar (CA) effects. In IIIQ2012, Germany’s GDP increased 0.2 percent and 0.4 percent relative to a year earlier. Germany’s GDP contracted 0.5 percent in IVQ2012 and increased 0.0 percent relative to a year earlier. In IQ2013, Germany’s GDP increased 0.0 percent and fell 1.6 percent relative to a year earlier. In IIQ2013, Germany’s GDP increased 0.7 percent and 0.9 percent relative to a year earlier. The GDP of Germany increased 0.3 percent in IIIQ2013 and 1.1 percent relative to a year earlier. Growth of US GDP in IQ2012 was 0.9 percent, at SAAR of 3.7 percent and higher by 3.3 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.2 percent at SAAR and 2.8 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.7 percent, 2.8 percent at SAAR and 3.1 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 2.0 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.1 percent SAAR, 0.3 percent relative to the prior quarter and 1.3 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 2.5 percent in SAAR, 0.6 percent relative to the prior quarter and 1.6 percent relative to IIQ2012. US GDP grew at 4.1 percent in SAAR in IIIQ2013, 1.0 percent relative to the prior quarter and 2.0 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html) with weak hiring (http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html). In IVQ2013, US GDP grew 0.8 percent at 3.2 percent SAAR and 2.7 percent relative to a year earlier. In IQ2012, UK GDP changed 0.0 percent, increasing 0.6 percent relative to a year earlier. UK GDP fell 0.4 percent in IIQ2012 and changed 0.0 percent relative to a year earlier. UK GDP increased 0.8 percent in IIIQ2012 and increased 0.2 percent relative to a year earlier. UK GDP fell 0.1 percent in IVQ2012 relative to IIIQ2012 and increased 0.2 percent relative to a year earlier. UK GDP increased 0.5 percent in IQ2013 and 0.7 percent relative to a year earlier. UK GDP increased 0.8 percent in IIQ2013 and 2.0 percent relative to a year earlier. In IIIQ2013, UK GDP increased 0.8 percent and 1.9 percent relative to a year earlier. UK GDP increased 0.7 percent in IVQ2013 and 2.8 percent relative to a year earlier. Italy has experienced decline of GDP in nine consecutive quarters from IIIQ2011 to IIIQ2013. Italy’s GDP fell 1.1 percent in IQ2012 and declined 1.8 percent relative to IQ2011. Italy’s GDP fell 0.6 percent in IIQ2012 and declined 2.6 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.5 percent and declined 2.8 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 3.0 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.6 percent and fell 2.5 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and 2.2 percent relative to a year earlier. The GDP of Italy changed 0.0 percent in IIIQ2013 and declined 1.8 percent relative to a year earlier. France’s GDP changed 0.0 percent in IQ2012 and increased 0.4 percent relative to a year earlier. France’s GDP decreased 0.3 percent in IIQ2012 and increased 0.1 percent relative to a year earlier. In IIIQ2012, France’s GDP increased 0.2 percent and changed 0.0 percent relative to a year earlier. France’s GDP fell 0.2 percent in IVQ2012 and declined 0.3 percent relative to a year earlier. In IQ2013, France GDP fell 0.1 percent and declined 0.4 percent relative to a year earlier. The GDP of France increased 0.6 percent in IIQ2013 and 0.5 percent relative to a year earlier. France’s GDP contracted 0.1 percent in IIIQ2013 and increased 0.2 percent relative to a year earlier.

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

	IQ2012/IVQ2011	IQ2012/IQ2011
United States	QOQ: 0.9        SAAR: 3.7	3.3
Japan	QOQ: 0.9 SAAR: 3.5	3.1
China	1.4	8.1
Euro Area	-0.1	-0.2
Germany	0.7	1.8
France	0.0	0.4
Italy	-1.1	-1.8
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3         SAAR: 1.2	2.8
Japan	QOQ: -0.5 SAAR: -2.0	3.2
China	2.1	7.6
Euro Area	-0.3	-0.5
Germany	-0.1	0.6 1.1 CA
France	-0.3	0.1
Italy	-0.6	-2.6
United Kingdom	-0.4	0.0
	IIIQ2012/ IIQ2012	IIIQ2012/ IIIQ2011
United States	QOQ: 0.7  SAAR: 2.8	3.1
Japan	QOQ: –0.8 SAAR: –3.2	-0.2
China	2.0	7.4
Euro Area	-0.2	-0.7
Germany	0.2	0.4
France	0.2	0.0
Italy	-0.5	-2.8
United Kingdom	0.8	0.2
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	2.0
Japan	QOQ: 0.1 SAAR: 0.6	-0.3
China	1.9	7.9
Euro Area	-0.5	-1.0
Germany	-0.5	0.0
France	-0.2	-0.3
Italy	-0.9	-3.0
United Kingdom	-0.1	0.2
	IQ2013/IVQ2012	IQ2013/IQ2012
United States	QOQ: 0.3 SAAR: 1.1	1.3
Japan	QOQ: 1.1 SAAR: 4.5	0.1
China	1.5	7.7
Euro Area	-0.2	-1.2
Germany	0.0	-1.6
France	-0.1	-0.4
Italy	-0.6	-2.5
UK	0.5	0.7
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.6 SAAR: 2.5	1.6
Japan	QOQ: 0.9 SAAR: 3.6	1.2
China	1.8	7.5
Euro Area	0.3	-0.6
Germany	0.7	0.9
France	0.6	0.5
Italy	-0.3	-2.2
UK	0.8	2.0
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.0 SAAR: 4.1	2.0
Japan	QOQ: 0.3 SAAR: 1.1	2.4
China	2.2	7.8
Euro Area	0.1	-0.3
Germany	0.3	1.1
France	-0.1	0.2
Italy	0.0	-1.8
UK	0.8	1.9
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.8 SAAR: 3.2	2.7
China	1.8	7.7
UK	0.7	2.8

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

Source: Country Statistical Agencies http://www.census.gov/aboutus/stat_int.html

Table V-4 provides two types of data: growth of exports and imports in the latest available months and in the past 12 months; and contributions of net trade (exports less imports) to growth of real GDP. Japan provides the most worrisome data (http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations_8763.html http://cmpass ocregulationblog.blogspot.com/2013/08/interest-rate-risks-duration-dumping.html and earlier http://cmpassocregulationblog.blogspot.com/2013/07/duration-dumping-steepening-yield-curve.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and_4699.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/05/united-states-commercial-banks-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/united-states-commercial-banks-assets.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html and earlier http://cmpassocregulationblog.blogspot.com/2012/11/contraction-of-united-states-real_25.html and for GDP http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html and earlier http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocreulationblog.blogspot.com/2013/02/recovery-without-hiring-united-states.html). In Dec 2013, Japan’s exports grew 15.3 percent in 12 months while imports increased 24.7 percent. The second part of Table V-4 shows that net trade deducted 1.3 percentage points from Japan’s growth of GDP in IIQ2012, deducted 2.1 percentage points from GDP growth in IIIQ2012 and deducted 0.6 percentage points from GDP growth in IVQ2012. Net trade added 0.4 percentage points to GDP growth in IQ2012, 1.6 percentage points in IQ2013 and 0.6 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.9 percentage points from GDP growth in Japan. In Dec 2013, China exports increased 4.3 percent relative to a year earlier and imports increased 8.3 percent. Germany’s exports decreased 0.9 percent in the month of Dec 2013 and increased 4.6 percent in the 12 months ending in Dec 2013. Germany’s imports decreased 0.6 percent in the month of Dec and increased 2.0 percent in the 12 months ending in Dec. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.2 percentage points in IQ2012 and added 0.3 percentage points in IIQ2013. Net traded deducted 0.4 percentage points from Germany’s GDP growth in IIIQ2013. Net trade deducted 0.8 percentage points from UK value added in IQ2012, deducted 0.8 percentage points in IIQ2012, added 0.7 percentage points in IIIQ2012 and subtracted 0.5 percentage points in IVQ2012. In IQ2013, net trade added 0.5 percentage points to UK’s growth of value added and contributed 0.2 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.2 percentage points from UK GDP growth. France’s exports increased 3.5 percent in Dec 2013 while imports increased 1.9 percent. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.1 percentage points in IIQ2013, deducting 0.6 percentage points in IIIQ2013. US exports decreased 1.8 percent in Dec 2013 and goods exports increased 2.1 percent in Jan-Dec 2013 relative to a year earlier but net trade deducted 0.03 percentage points from GDP growth in IIIQ2012 and added 0.68 percentage points in IVQ2012. Net trade deducted 0.28 percentage points from US GDP growth in IQ2013 and deducted 0.07 percentage points in IIQ2013. Net traded added 0.14 percentage points to US GDP growth in IIIQ2013. Net trade added 1.33 percentage points to US GDP growth in IVQ2013. Industrial production increased 0.3 percent in Dec 2013 after increasing 1.0 percent in Nov 2013 and increasing 0.3 percent in Oct 2013, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production rose 0.3 percent in December, its fifth consecutive monthly increase. For the fourth quarter as a whole, industrial production advanced at an annual rate of 6.8 percent, the largest quarterly increase since the second quarter of 2010; gains were widespread across industries. Following increases of 0.6 percent in each of the previous two months, factory output rose 0.4 percent in December and was 2.6 percent above its year-earlier level. The production of mines moved up 0.8 percent; the index has advanced 6.6 percent over the past 12 months. The output of utilities fell 1.4 percent after three consecutive monthly gains. At 101.8 percent of its 2007 average, total industrial production in December was 3.7 percent above its year-earlier level and 0.9 percent above its pre-recession peak in December 2007. Capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent, a rate 1.0 percentage point below its long-run (1972–2012) average.”

In the six months ending in Dec 2013, United States national industrial production accumulated increase of 2.7 percent at the annual equivalent rate of 5.5 percent, which is higher than growth of 3.2 percent in the 12 months ending in Dec 2013. Excluding growth of 1.0 percent in Nov 2013, growth in the remaining five months from Jul 2012 to Dec 2013 accumulated to 1.1 percent or 2.2 percent annual equivalent. Industrial production fell in one of the past six months. Business equipment accumulated growth of 1.7 percent in the six months from Jun to Nov 2013 at the annual equivalent rate of 4.2 percent, which is higher than growth of 3.7 percent in the 12 months ending in Dec 2013. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent, a rate 1.0 percentage point below its long-run (1972–2012) average.” United States industry apparently decelerated to a lower growth rate with possible acceleration in the past few months.

Manufacturing increased 0.4 percent in Dec 2013 after increasing 0.6 percent in Nov 2013 and increasing 0.6 percent in Oct 2013 seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months ending in Nov 2013, as shown in Table I-2. Manufacturing grew cumulatively 2.0 percent in the six months ending in Dec 2013 or at the annual equivalent rate of 4.1 percent. Excluding the increase of 0.7 percent in Aug 2013, manufacturing accumulated growth of 1.3 percent from Aug 2013 to Dec 2013 or at the annual equivalent rate of 3.2 percent. Excluding decline of 0.5 percent in Jul 2013, manufacturing grew 2.5 percent from Aug to Dec 2013 or at the annual equivalent rate of 6.2 percent. Table I-2 provides a longer perspective of manufacturing in the US. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 into more recent months as shown by 12 months rates of growth. Growth rates appeared to be increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.2 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession but the pace of manufacturing fell steadily in the past six months with some strength at the margin.

Manufacturing fell 21.9 percent from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.6 percent from the trough in Apr 2009 to Dec 2013. Manufacturing output in Dec 2013 is 6.6 percent below the peak in Jun 2007.

Table V-4, Growth of Trade and Contributions of Net Trade to GDP Growth, ∆% and % Points

	Exports M ∆%	Exports 12 M ∆%	Imports M ∆%	Imports 12 M ∆%
USA	-1.8 Dec	2.1 Jan-Dec	0.3 Dec	-0.3 Jan-Dec
Japan		Dec 2013 15.3 Nov 2013 18.4 Oct 2013 18.6 Sep 2013 11.5 Aug 2013 14.7 Jul 2013 12.2 Jun 2013 7.4 May 2013 10.1 Apr 2013 3.8 Mar 2013 1.1 Feb 2013 -2.9 Jan 2013 6.4 Dec -5.8 Nov -4.1 Oct -6.5 Sep -10.3 Aug -5.8 Jul -8.1		Dec 2013 24.7 Nov 2013 21.1 Oct 2013 26.1 Sep 2013 16.5 Aug 2013 16.0 Jul 2013 19.6 Jun 2013 11.8 May 2013 10.0 Apr 2013 9.4 Mar 2013 5.5 Feb 2013 7.3 Jan 2013 7.3 Dec 1.9 Nov 0.8 Oct -1.6 Sep 4.1 Aug -5.4 Jul 2.1
China		2013 4.3 Dec 12.7 Nov 5.6 Oct -0.3 Sep 7.2 Aug 5.1 Jul -3.1 Jun 1.0 May 14.7 Apr 10.0 Mar 21.8 Feb 25.0 Jan		2013 8.3 Dec 5.3 Nov 7.6 Oct 7.4 Sep 7.0 Aug 10.9 Jul -0.7 Jun -0.3 May 16.8 Apr 14.1 Mar -15.2 Feb 28.8 Jan
Euro Area	-2.2 12-M Nov	0.5 Jan-Nov	-5.5 12-M Nov	-3.6 Jan-Nov
Germany	-0.9 Dec CSA	4.6 Dec	-0.6 Nov CSA	2.0 Dec
France Dec	3.5	-0.5	1.9	-1.3
Italy Nov	-1.9	-3.4	-2.2	-6.9
UK	2.1 Dec	-0.1 Oct-Dec 13 /Dec-Oct 12	-3.8 Dec	-0.4 Oct-Dec 13/Oct-Dec 12
Net Trade % Points GDP Growth	% Points
USA	IVQ2013 1.33 IIIQ2013 0.14 IIQ2013 -0.07 IQ2013 -0.28 IVQ2012 +0.68 IIIQ2012 -0.03 IIQ2012 +0.10 IQ2012 +0.44
Japan	0.4 IQ2012 -1.3 IIQ2012 -2.1 IIIQ2012 -0.6 IVQ2012 1.6 IQ2013 0.6 IIQ2013 -1.9 IIIQ2013
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.2 IIQ2013 0.3 IIIQ2013 -0.4
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.1 IIQ2013 -0.6 IIIQ2013
UK	-0.8 IQ2012 -0.8 IIQ2012 +0.7 IIIQ2012 -0.5 IVQ2012 0.5 IQ2013 0.2 IIQ2013 -1.2 IIIQ2013

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table V-5 for Dec 2013. The share of Asia in Japan’s trade is more than one-half for 55.0 percent of exports and 43.6percent of imports. Within Asia, exports to China are 19.9 percent of total exports and imports from China 21.6 percent of total imports. While exports to China increased 34.4 percent in the 12 months ending in Dec 2013, imports from China increased 29.2 percent. The second largest export market for Japan in US 2013 is the US with share of 18.5 percent of total exports, which is almost equal to that of China, and share of imports from the US of 7.3 percent in total imports. Western Europe has share of 11.1 percent in Japan’s exports and of 10.4 percent in imports. Rates of growth of exports of Japan in Dec 2013 are relatively high for several countries and regions with growth of 13.0 percent for exports to the US, 17.9 percent for exports to Brazil and 28.9 percent for exports to Germany. Comparisons relative to 2011 may have some bias because of the effects of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Deceleration of growth in China and the US and threat of recession in Europe can reduce world trade and economic activity. Growth rates of imports in the 12 months ending in Dec 2013 are positive for all trading partners. Imports from Asia increased 23.0 percent in the 12 months ending in Dec 2013 while imports from China increased 29.2 percent. Data are in millions of yen, which may have effects of recent depreciation of the yen relative to the United States dollar (USD).

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

Dec 2013	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	6,110,510	15.3	7,412,623	24.7
Asia	3,359,323	16.0	3,229,984	23.0
China	1,216,540	34.4	1,600,018	29.2
USA	1,130,094	13.0	538,484	12.1
Canada	69,480	11.8	95,207	24.9
Brazil	41,941	17.9	91,397	32.2
Mexico	80,305	10.0	34,642	10.7
Western Europe	680,244	21.1	772,932	32.8
Germany	178,763	28.9	243,003	61.2
France	62,457	46.7	89,445	15.3
UK	108,821	14.9	55,278	19.6
Middle East	241,152	22.8	1,520,673	21.5
Australia	124,598	-4.6	450,442	26.6

Source: Japan, Ministry of Finance

http://www.customs.go.jp/toukei/info/index_e.htm

World trade projections of the IMF are in Table V-6. There is increasing growth of the volume of world trade of goods and services from 2.9 percent in 2013 to 5.4 percent in 2015 and 5.1 percent on average from 2013 to 2018. World trade would be slower for advanced economies while emerging and developing economies (EMDE) experience faster growth. World economic slowdown would more challenging with lower growth of world trade.

Table V-6, IMF, Projections of World Trade, USD Billions, USD/Barrel and ∆%

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

Notes: Commodity Price Index includes Fuel and Non-fuel Prices; Commodity Industrial Inputs Price includes agricultural raw materials and metal prices; Oil price is average of WTI, Brent and Dubai

Source: International Monetary Fund World Economic Outlook databank

http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, increased to 53.9 in Jan from 53.8 in Dec, indicating expansion at almost unchanged rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/2dbfcfb799994f3fb94f1a224708ae76). This index has remained above the contraction territory of 50.0 during 54 consecutive months. The employment index decreased from 52.2 in Dec to 51.9 in Jn with input prices rising at a faster rate, new orders increasing at slower rate and output increasing at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/2dbfcfb799994f3fb94f1a224708ae76). David Hensley, Director of Global Economics Coordination at JP Morgan finds expectations of continuing growth in 2014 with world GDP expanding quarter-on-quarter at a rate above 3.0 percent in annual equivalent (http://www.markiteconomics.com/Survey/PressRelease.mvc/2dbfcfb799994f3fb94f1a224708ae76). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was almost unchanged at 52.9 in Jan from 53.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/2abe878b5055447b89a369e17c8f4b8b). New export orders expanded at the lowest rate since Sep 2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2abe878b5055447b89a369e17c8f4b8b). David Hensley, Director of Global Economic Coordination at JP Morgan finds continuing growth of output and new orders at rates above average in the expansion period (http://www.markiteconomics.com/Survey/PressRelease.mvc/2abe878b5055447b89a369e17c8f4b8b). The HSBC Brazil Composite Output Index, compiled by Markit, decreased from 51.7 in Dec to 49.9 in Jan, indicating unchanged activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/30abb6a91285494d98cf5a24e2cad184). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased from 51.7 in Dec to 49.6 in Jan, indicating contraction of services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/30abb6a91285494d98cf5a24e2cad184). André Loes, Chief Economist, Brazil, at HSBC, finds slower services activity together with faster inflation of inputs and outputs (http://www.markiteconomics.com/Survey/PressRelease.mvc/30abb6a91285494d98cf5a24e2cad184). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased marginally from 50.5 in Dec to 50.8 in Jan, indicating marginal improvement in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/5dd1bda2fcb741929f8b24b035b07cef). André Loes, Chief Economist, Brazil at HSBC, finds improvement with slower growth of production compensated by stronger growth of new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/5dd1bda2fcb741929f8b24b035b07cef).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted decreased to 53.7 in Jan from 55.0 in Dec, which is slightly higher than the average at 53.5 in 2013, indicating moderate growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/bda141f5c50642788bf2733f4522f28c). New export orders registered 48.9 in Jan, falling from 51.4 in Dec, indicating marginal contraction. Chris Williamson, Chief Economist at Markit, finds that manufacturing output is growing at 2.0 percent per quarter with positive effects on employment (http://www.markiteconomics.com/Survey/PressRelease.mvc/bda141f5c50642788bf2733f4522f28c). The Markit Flash US Services PMI™ Business Activity Index increased from 55.7 in Dec to 56.6 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/979201249645452086dde674d0d375e0). Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with growth of jobs at monthly rate of 200,000 (http://www.markiteconomics.com/Survey/PressRelease.mvc/979201249645452086dde674d0d375e0). The Markit US Composite PMI™ Output Index of Manufacturing and Services increased marginally to 56.2 in Jan from 56.1 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c3bb316dbb44b348a768fcc4a9713cc). The Markit US Services PMI™ Business Activity Index increased marginally from 55.7 in Dec to 56.7 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c3bb316dbb44b348a768fcc4a9713cc). Chris Williamson, Chief Economist at Markit, finds monthly growth of jobs around 200,000 with 10,000 in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/2c3bb316dbb44b348a768fcc4a9713cc). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) decreased to 53.7 in Jan from 55.0 in Dec, which indicates expansion at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/5519007b6dce46c9929b534d255298fd). The index of new exports orders decreased from 51.4 in Dec to 48.4 in Jan while total new orders decreased from 56.1 in Dec to 53.9 in Jan. Chris Williamson, Chief Economist at Markit, finds that the index suggests slowest growth in three months with respondents mentioning weather but underlying strength with no effects on the economy from Fed tapering of quantitative easing (http://www.markiteconomics.com/Survey/PressRelease.mvc/5519007b6dce46c9929b534d255298fd). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® decreased 5.2 percentage points from 56.5 in Dec to 51.3 in Jan, which indicates growth at a slower rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 3.0 percentage points from 60.6 in Oct to 63.6 in Nov. The index of exports decreased 13.2 percentage point from 64.4 in Dec to 51.2 in Nov, growing at a slower rate. The Non-Manufacturing ISM Report on Business^® PMI increased 1.0 percentage points from 53.0 in Dec to 54.0 in Jan, indicating growth of business activity/production during 54 consecutive months, while the index of new orders increased 0.5 percentage points from 50.4 in Dec to 50.9 in Jan (http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=12943). Table USA provides the country economic indicators for the US.

Table USA, US Economic Indicators

Consumer Price Index	Dec 12 months NSA ∆%: 1.5; ex food and energy ∆%: 1.7 Dec month SA ∆%: 0.3; ex food and energy ∆%: 0.1 Blog 1/19/14
Producer Price Index	Dec 12-month NSA ∆%: 1.2; ex food and energy ∆% 1.4 Dec month SA ∆% = 0.4; ex food and energy ∆%: 0.3 Blog 1/19/14
PCE Inflation	Dec 12-month NSA ∆%: headline 1.1; ex food and energy ∆% 1.2 Blog 2/2/14
Employment Situation	Household Survey: Dec Unemployment Rate SA 6.6% Blog calculation People in Job Stress Dec: 30.3 million NSA, 18.5% of Labor Force Establishment Survey: Jan Nonfarm Jobs +113,000; Private +142,000 jobs created  Dec 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.4 Blog 2/9/14
Nonfarm Hiring	Nonfarm Hiring fell from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million Private-Sector Hiring Nov 2013 4.097 million lower by 0.804 million than 4.901 million in Nov 2007 Blog 1/26/14
GDP Growth	BEA Revised National Income Accounts IQ2012/IQ2011 ∆%: 3.3 IIQ2012/IIQ2011 2.8 IIIQ2012/IIIQ2011 3.1 IVQ2012/IVQ2011 2.0 IQ2013/IQ2012 1.3 IIQ2013/IIQ2012 1.6 IIIQ2013/IIIQ2012 2.0 IVQ2013/IVQ2012 2.7 IQ2012 SAAR 3.7 IIQ2012 SAAR 1.2 IIIQ2012 SAAR 2.8 IVQ2012 SAAR 0.1 IQ2013 SAAR 1.1 IIQ2013 SAAR 2.5 IIIQ2013 SAAR 4.1 IVQ2013 SAAR 3.2 Blog 2/2/14
Real Private Fixed Investment	SAAR IIIQ2013 0.9 ∆% IVQ2007 to IIIQ2013: minus 3.4% Blog 2/2/14
Personal Income and Consumption	Dec month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% minus 0.2 Real Personal Consumption Expenditures (RPCE): 0.2 12-month Dec NSA ∆%: RDPI: minus 2.7; RPCE ∆%: 2.5 Blog 2/2/14
Quarterly Services Report	IIIQ13/IIQ12 NSA ∆%: Information 4.9 Financial & Insurance 0.6 Blog 12/15/13
Employment Cost Index	Compensation Private IVQ2013 SA ∆%: 0.5 Dec 12 months ∆%: 1.9 Blog 2/9/14
Industrial Production	Dec month SA ∆%: 0.3 Dec 12 months SA ∆%: 3.7 Manufacturing Dec SA ∆% 0.4 Dec 12 months SA ∆% 2.6, NSA 2.5 Capacity Utilization: 79.0 Blog 1/19/14
Productivity and Costs	Nonfarm Business Productivity IVQ2013∆% SAAE 3.3; IVQ2013/IVQ2012 ∆% 1.7; Unit Labor Costs SAAE IVQ2013 ∆% -1.6; IVQ2013/IVQ2012 ∆%: -1.3 Blog 2/9/2014
New York Fed Manufacturing Index	General Business Conditions From Dec 2.22 to Jan 12.51 New Orders: From Dec minus 1.69 to Jan 10.98 Blog 1/19/14
Philadelphia Fed Business Outlook Index	General Index from Dec 6.4 to Jan 9.4 New Orders from Dec 12.9 to Jan 5.1 Blog 1/19/14
Manufacturing Shipments and Orders	New Orders SA Dec ∆% -1.5 Ex Transport 0.2 Jan-Dec NSA New Orders ∆% 2.5 Ex transport 1.5 Blog 2/9/14
Durable Goods	Dec New Orders SA ∆%: minus 4.3; ex transport ∆%: minus 1.6 Jan-Dec 13/Jan-Dec 12 New Orders NSA ∆%: 3.4; ex transport ∆% 4.9 Blog 2/2/14
Sales of New Motor Vehicles	Jan 2014 1,012,582; Jan 2013 1,044,655. Jan 14 SAAR 15.24 million, Dec 13 SAAR 15.40 million, Jan 2013 SAAR 15.23 million Blog 2/9/14
Sales of Merchant Wholesalers	Jan-Nov 2013/Jan-Nov 2012 NSA ∆%: Total 3.7; Durable Goods: 3.9; Nondurable Goods: 3.6 Blog 1/12/14
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Nov 13/Nov 12-M NSA ∆%: Sales Total Business 2.5; Manufacturers 1.7 Retailers 3.4; Merchant Wholesalers 2.4 Blog 1/19/14
Sales for Retail and Food Services	Jan-Dec 2013/Jan-Dec 2012 ∆%: Retail and Food Services 4.2; Retail ∆% 4.2 Blog 1/19/14
Value of Construction Put in Place	Dec SAAR month SA ∆%: 0.1 Dec 12-month NSA: 3.1 Jan-Dec 2013 ∆% 4.8 Blog 2/9/14
Case-Shiller Home Prices	Nov 2013/Nov 2012 ∆% NSA: 10 Cities 13.8; 20 Cities: 13.7 ∆% Nov SA: 10 Cities 0.9 ; 20 Cities: 0.9 Blog 2/2/14
FHFA House Price Index Purchases Only	Nov SA ∆% 0.1; 12 month NSA ∆%: 7.6 Blog 2/2/14
New House Sales	Dec 2013 month SAAR ∆%: minus 7.0 Jan-Dec 2013/Jan-Dec 2012 NSA ∆%: 16.4 Blog 2/2/14
Housing Starts and Permits	Dec Starts month SA ∆% -9.8; Permits ∆%: -3.0 Jan-Dec 2013/Jan-Dec 2012 NSA ∆% Starts 18.3; Permits  ∆% 17.5 Blog 1/19/14
Trade Balance	Balance Nov SA -$24,252 million versus Oct -$39,328 million Exports Dec SA ∆%: -1.8 Imports Dec SA ∆%: 0.3 Goods Exports Jan-Dec 2013/2012 NSA ∆%: 2.1 Goods Imports Jan-Dec 2013/2012 NSA ∆%: -0.3 Blog 2/9/14
Export and Import Prices	Dec 12-month NSA ∆%: Imports -1.3; Exports -1.0 Blog 1/19/14
Consumer Credit	Nov ∆% annual rate: Total 4.8; Revolving 0.6; Nonrevolving 6.4 Blog 1/12/14
Net Foreign Purchases of Long-term Treasury Securities	Nov Net Foreign Purchases of Long-term US Securities: -$29.3 billion Major Holders of Treasury Securities: China $1317 billion; Japan $1186 billion; Total Foreign US Treasury Holdings Nov $5717 billion Blog 1/19/14
Treasury Budget	Fiscal Year 2014/2013 ∆% Dec: Receipts 8.0; Outlays minus 7.8; Individual Income Taxes -1.9 Deficit Fiscal Year 2011 $1,296 billion Deficit Fiscal Year 2012 $1,089 billion Blog 1/19/2014
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt 11,281 B 70.1% GDP 2013 Deficit $642 B, Debt 12,036 B 72.5% GDP Blog 8/26/12 11/18/12 2/10/13 9/22/13
Commercial Banks Assets and Liabilities	Dec 2013 SAAR ∆%: Securities 11.7 Loans 3.7 Cash Assets -9.0 Deposits 9.4 Blog 1/26/14
Flow of Funds	IIIQ2013 ∆ since 2007 Assets +$8554.2 MM Nonfinancial -$1228.7 MM Real estate -$1838.9 MM Financial +9782.9 MM Net Worth +$9269.0 MM Blog 12/29/13
Current Account Balance of Payments	IIIQ2013 -110,055 MM %GDP 2.2 Blog 12/22/13

Links to blog comments in Table USA:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html

1/12/14 http://cmpassocregulationblog.blogspot.com/2014/01/twenty-nine-million-unemployed-or.html

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

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

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

2/10/13 http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html

The Bureau of Labor Statistics (BLS) of the US Department of Labor provides the quarterly employment cost index (ECI). The ECI is highly useful in several ways including: (1) how costs of employees may affect hiring decisions and thus the overall economy; (2) impact of employment costs on inflation and thus monetary policy; and (3) relation of employee costs to inflation on issues such as welfare of the working population and their ability to consume that could affect economic growth. The BLS estimates total compensation composed of wages and salaries, which are about 70 percent of total compensation, and benefits, accounting for the remaining 30 percent (http://www.bls.gov/news.release/pdf/eci.pdf 1). There is vast theoretical and empirical literature on how benefits interact with wage determination. The ECI is considered initially with current data in Table VA-1 and subsequently with charts of the BLS on evolution over the past decade. The BLS provides data for the entire civilian population, the private sector and state/local government. The data are available quarterly and for the 12 months of the ending month of the quarter. Total compensation 12-month percentage changes have moderated for the entire civilian population, the private sector and state and local government. In the 12 months ending in Dec 2013, total compensation increased 1.8 percent for the private sector, which is marginally higher than inflation of 1.5 percent in the 12 months ending in Dec 2013 (http://www.bls.gov/cpi/data.htm), 1.9 percent for the entire civilian population and 1.9 percent for state and local government. Wages and salaries in the 12 months ending in Dec 2013 increased at relatively subdued rates of 1.7 percent for the private sector, which is slightly above inflation of 1.5 percent in the 12 months ending in Dec 2013 (http://www.bls.gov/cpi/data.htm), 1.7 percent for the entire civilian population and only 1.1 percent for state/local workers. Wages have been losing or gaining slightly relative to headline CPI inflation of 1.5 percent in the 12 months ending in Dec 2013 (http://www.bls.gov/cpi/data.htm). Compensation benefits of the private sector increased at 2.0 percent in the 12 months ending in Dec 2013, which is close to 1.7 percent for wages and salaries.

Table VA-1, Employment Cost Index Quarterly and 12- Month Changes %

	IIIQ13 SA	IVQ13 SA	12 M Dec 12 NSA	12 M Mar 13 NSA	12 M  Jun 13 NSA	12 M  Sep 13 NSA	12 M Dec 13 NSA
Civilian
Comp	0.4	0.5	1.9	1.9	1.9	1.9	2.0
Wages/ Salaries	0.3	0.6	1.7	1.6	1.7	1.6	1.9
Benefits	0.7	0.6	2.4	2.4	2.2	2.2	2.2
Private
Comp	0.4	0.5	1.8	1.9	1.9	1.9	2.0
Wages/ Salaries	0.3	0.6	1.7	1.7	1.9	1.8	2.1
Benefits	0.6	0.5	2.0	2.0	1.9	2.0	1.9
State local Govt
Comp	0.4	0.7	1.9	1.9	1.8	1.7	1.9
Wages/ Salaries	0.3	0.5	1.1	1.0	1.0	0.9	1.1
Benefits	0.5	1.1	3.4	3.5	3.3	2.9	3.3

Notes: Civilian includes private industry plus state and local government; SA: seasonally adjusted; NSA: not seasonally adjusted; Comp: compensation; Govt: government

Source: US Bureau of Labor Statistics http://www.bls.gov/ncs/ect/

A series of charts of the BLS provides evolution of the ECI during the past decade. Percentage changes in 12 months of total civilian compensation in Chart VA-1 were in a range of around 3 to 4 percent before the global recession, declining to less than 2 percent with the contraction and increasing above 2 percent in the expansion. Recently, rates have fallen, stagnated, fell again, recovered and stabilized.

Chart VA-1, US, ECI, Total Compensation, All Civilian, 12-Month Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Chart VA-2 provides 12 months percentage rates of change of wages and salaries for the entire civilian population. The rates collapsed with the global recession and have flattened around 1.5 percent since 2010 while inflation has accelerated and decelerated following world inflation waves (http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html).

Chart VA-2, US, ECI, Wages and Salaries, All Civilian 12-Month Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Twelve-month percentage changes of benefits of the total civilian population in Chart VA-3 were much higher in the first part of the 2000s, surpassing relatively subdued inflation but declined to less than 2 percent with the global recession. After 2010, there is a clear rising trend of benefit above 3 percent with decline in recent months of 2011 and then stagnation and declines in 2012-2013.

Chart VA-3, US, ECI, Total Benefits, All Civilian 12 Months Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

ECI total compensation 12-months percentage changes from 2001 to 2013 for the private sector are shown in Chart VA-4. Behavior is similar as for total civilian compensation. Private-sector compensation had stabilized around 2 percent with inflation rising to 2.7 percent in the 12 months ending in Mar 2012. Compensation increase of 1.9 percent in the 12 months ending in Mar 2013 exceeded 12-month inflation of 1.5 percent. Compensation increased 1.9 percent in the 12 months ending in Jun 2013, almost equal to 12-month CPI inflation of 1.8 percent. Compensation at 1.9 percent in Sep 2013 exceeded 12-month CPI inflation of 1.2 percent. Compensation of 2.0 percent in the 12 months ending in Dec 2013 exceeded CPI inflation of 1.5 percent.

Chart VA-4, US, ECI, Total Compensation, Private Industry 12 Months Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

There is different behavior of 12 months percentage rates of private-sector wages and salaries in Chart VA-5. Rates fell in the first part of the decade and then rose into 2007. Rates of change in 12 months of wages and salaries in the private sector fell during the global contraction to barely above 1 percent and have not rebounded sufficiently while inflation has returned in waves.

Chart VA-5, US, ECI, Wages and Salaries, Private Industry, 12 Months Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Chart VA-6 provides 12-month percentage rates of change of the consumer price index of the US. Inflation has risen sharply into 2011 with 3.0 percent in the 12 months ending in Dec while wage and salary increases in the private sector have risen by 1.6 percent in the 12 months ending in Dec. Wages and salaries rose 1.8 percent in the 12 months ending in Mar 2012 while inflation was 2.7 percent in the 12 months ending in Mar 2012. Wage and salaries of the private sector increased 1.8 percent in the 12 months ending in Jun 2012, which is almost equal to inflation of 1.7 percent. Wages and salaries increased 1.8 percent in the 12 months ending in Sep 2012 while inflation was 2.0 percent. Wages and salaries increased 1.7 percent in Dec 2012 while inflation was 1.7 percent. Wages and salaries increased 1.7 percent in the 12 months ending in Mar 2013 while inflation was 1.5 percent. Wages and salaries increased 1.9 percent in the 12 months ending in Jun 2013 while inflation was 1.8 percent. The increase of wages and salaries of 1.8 percent in the 12 months ending in Sep 2013 exceeded inflation of 1.2 percent. Wages and salaries increased 2.1 percent in the 12 months ending in Dec 2013, exceeding CPI inflation of 1.5 percent in the 12 months ending in Dec 2013.

Chart VA-6, US, Consumer Price Index, 12-Month Percentage Change, NSA, 2001-2013

Source: US Bureau of Labor Statistics

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

Growth of benefits has been more dynamic than total compensation and wages and salaries, as shown in Chart VA-7. In 2004, the 12 month rate of change exceeded 7 percent. Rates of increase of benefits costs then fell even before the global recession, touching 1 percent in late 2010, rose sharply above 3 percent in 2011 and have fallen in recent months to around 2 percent.

Chart VA-7, US, ECI, Total Benefits, Private Industry, 12 Months Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Behavior at the margin is provided by rates of change in a quarter relative to the prior quarter, as shown in Chart VA-8. Quarterly rates of change of total civilian compensation were high in the early 2000s, fell sharply with the global recession, recovered mildly and stagnated in recent quarters.

Chart VA-8, US, Employment Cost Index All Civilian Total Compensation Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Chart VA-9 provides the quarterly rates of change of wages and salaries of the entire civilian population. The rates of change sank below 0.5 percent per quarter and have remained subdued since the global recession.

Chart VA-9, US, ECI, Wages and Salaries, All Civilian, Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Quarterly rates of change of benefits of the total civilian population in Chart VA-10 had declined before the global recession. The rate collapsed in recent quarters.

Chart VA-10, US, ECI, Total Benefits, All Civilian, Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Quarterly rates of change of total compensation of the private sector in Chart VA-11 have not returned to the levels before the contraction except with sporadic jump in 2011 followed by contraction and stagnation in recent quarters.

Chart VA-11, US, ECI, Total Compensation, Private Industry, Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Quarterly rates of change of wages and salaries of the private sector in Chart VA-12 show significant fluctuation. Quarterly rates of change have fallen below 0.5 percent in the current expansion.

Chart VA-12, US, ECI, Wages and Salaries, Private Industry, Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

The three-month rates of change of benefits of private industry in Chart VA-13 have fluctuated widely with the only negative change in 2007. The 12-month rate of private-sector benefits fell in past months.

VA-13, US, ECI, Total Benefits, Private Industry, Three-Month % Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

The Bureau of Labor Statistics (BLS) of the Department of Labor provides the quarterly report on productivity and costs. The operational definition of productivity used by the BLS is (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.” The BLS has revised the estimates for productivity and unit costs. Table VA-2 provides the new estimate for IVQ2013 and revised data for nonfarm business sector productivity and unit labor costs for IIIQ2013 and IIQ2013 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 4.9 percent and of 1.7 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 3.2 percent in IVQ2013, as shown in column 2 “IVQ2013 SAEE.” The increase of labor productivity from IVQ2012 to IVQ2013 was 1.7 percent, reflecting increases in output of 3.3 percent and of hours worked of 1.6 percent, as shown in column 3 “IVQ2013 YoY.” Hours worked increased from 1.4 percent in IIQ2013 in SAAE to 1.7 percent in IIIQ2013 and 1.7 percent in IVQ2013 while output growth increased from 3.3 percent in IIQ2013 to 5.4 percent in IIIQ2013 and 4.9 percent in IVQ2013. The BLS defines unit labor costs as (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.” Unit labor costs increased at the SAAE rate of 1.5 percent in IVQ2013 and rose 0.4 percent in IVQ2013 relative to IVQ2012. Hourly compensation increased at the SAAE rate of 1.5 percent in IVQ2013, which deflating by the estimated consumer price increase SAAE rate in IVQ2013 results in increase of real hourly compensation at 0.6 percent. Real hourly compensation decreased 0.9 percent in IVQ2013 relative to IVQ2012.

Table VA-2, US, Nonfarm Business Sector Productivity and Costs %

	IVQ 2013 SAAE	IVQ 2013 YoY	IIIQ 2013 SSAE	IIIQ 2013 YOY	IIQ 2013 SAAE	IIQ 2013 YoY
Productivity	3.2	1.7	3.6	0.5	1.8	0.2
Output	4.9	3.3	5.4	2.3	3.3	1.9
Hours	1.7	1.6	1.7	1.8	1.4	1.7
Hourly Comp.	1.5	0.4	1.6	2.4	3.8	2.2
Real Hourly Comp.	0.6	-0.9	-1.0	0.8	3.9	0.7
Unit Labor Costs	-1.6	-1.3	-2.0	1.9	2.0	2.0
Unit Nonlabor Payments	4.6	4.7	8.4	0.3	-0.7	0.1
Implicit Price Deflator	1.1	1.3	2.4	1.2	0.8	1.2

Notes: SAAE: seasonally adjusted annual equivalent; Comp.: compensation; YoY: Quarter on Same Quarter Year Earlier

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

The analysis by Kydland (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2004/kydland-facts.html) and Prescott (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2004/prescott-bio.html) (1977, 447-80, equation 5) uses the “expectation augmented” Phillips curve with the natural rate of unemployment of Friedman (1968) and Phelps (1968), which in the notation of Barro and Gordon (1983, 592, equation 1) is:

U_t = Uⁿ_t – α(π_t – π^e) α > 0 (1)

Where U_t is the rate of unemployment at current time t, Uⁿ_t is the natural rate of unemployment, π_t is the current rate of inflation and π^e is the expected rate of inflation by economic agents based on current information. Equation (1) expresses unemployment net of the natural rate of unemployment as a decreasing function of the gap between actual and expected rates of inflation. The system is completed by a social objective function, W, depending on inflation, π, and unemployment, U:

W = W(π_t, U_t) (2)

The policymaker maximizes the preferences of the public, (2), subject to the constraint of the tradeoff of inflation and unemployment, (1). The total differential of W set equal to zero provides an indifference map in the Cartesian plane with ordered pairs (π_t, U_t - Uⁿ) such that the consistent equilibrium is found at the tangency of an indifference curve and the Phillips curve in (1). The indifference curves are concave to the origin. The consistent policy is not optimal. Policymakers without discretionary powers following a rule of price stability would attain equilibrium with unemployment not higher than with the consistent policy. The optimal outcome is obtained by the rule of price stability, or zero inflation, and no more unemployment than under the consistent policy with nonzero inflation and the same unemployment. Taylor (1998LB) attributes the sustained boom of the US economy after the stagflation of the 1970s to following a monetary policy rule instead of discretion (see Taylor 1993, 1999). It is not uncommon for effects of regulation differing from those intended by policy. Professors Edward C. Prescott and Lee E. Ohanian (2014Feb), writing on “US productivity growth has taken a dive,” on Feb 3, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303942404579362462611843696?KEYWORDS=Prescott), argue that impressive productivity growth over the long-term constructed US prosperity and wellbeing. Prescott and Ohanian (2014Feb) measure US productivity growth at 2.5 percent per year since 1948. Average US productivity growth has been only 1.1 percent on average since 2011. Prescott and Ohanian (2014Feb) argue that living standards in the US increased at 28 percent in a decade but with current slow growth of productivity will only increase 12 percent by 2024. There may be collateral effects on productivity growth from policy design similar to those in Kydland and Prescott (1977). The Bureau of Labor Statistics important report on productivity and costs released on Feb 6, 2014 (http://www.bls.gov/lpc/) supports the argument of decline of productivity in the US analyzed by Prescott and Ohanian (2014Feb). Table VA-3 provides the annual percentage changes of productivity, real hourly compensation and unit labor costs for the entire economic cycle from 2007 to 2013. The data confirm the argument of Prescott and Ohanian (2014Feb): productivity increased cumulatively 2.6 percent from 2011 to 2013 at the average annual rate of 0.9 percent. The situation is direr by excluding growth of 1.5 percent in 2012, which leaves an average of 0.55 percent for 2011 and 2013. Average productivity growth for the entire economic cycle from 2007 to 2013 is only 1.6 percent. The argument by Prescott and Ohanian (2014Feb) is proper in choosing the tail of the business cycle because the increase in productivity in 2009 of 3.2 percent and 3.3 percent in 2013 consisted on reducing labor hours.

Table VA-3, US, Revised Nonfarm Business Sector Productivity and Costs Annual Average, ∆% Annual Average 

	2013 ∆%	2012 ∆%	2011 ∆%	2010 ∆%	2009 ∆%	2008  ∆%	2007 ∆%
Productivity	0.6	1.5	0.5	3.3	3.2	0.8	1.6
Real Hourly Compensation	0.2	0.5	-0.7	0.4	1.5	-1.1	1.4
Unit Labor Costs	1.0	1.2	2.0	-1.2	-2.0	2.0	2.6

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

Productivity jumped in the recovery after the recession from Mar IQ2001 to Nov IVQ2001 (http://www.nber.org/cycles.html). Table VA-4 provides quarter on quarter and annual percentage changes in nonfarm business output per hour, or productivity, from 1999 to 2013. The annual average jumped from 2.7 percent in 2001 to 4.3 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 9.5 percent in the first quarter after the recession in IQ2002. Productivity increases decline later in the expansion period. Productivity increases were mediocre during the recession from Dec IVQ2007 to Jun IIIQ2009 (http://www.nber.org/cycles.html) and increased during the first phase of expansion from IIQ2009 to IQ2010, trended lower and collapsed in 2011 and 2012 with sporadic jumps and declines. Productivity increased at 3.2 percent in IVQ2013.

Table VA-4, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	4.5	0.8	3.5	6.8	3.5
2000	-1.4	8.7	0.1	3.9	3.3
2001	-1.2	6.8	2.3	4.9	2.7
2002	9.5	0.3	3.1	-0.7	4.3
2003	4.0	5.7	9.1	3.7	3.7
2004	0.0	4.1	1.1	1.2	3.1
2005	4.6	-0.3	2.9	0.1	2.1
2006	2.6	-0.3	-1.8	3.2	0.9
2007	0.4	2.7	4.7	1.8	1.6
2008	-3.9	4.0	0.9	-2.6	0.8
2009	3.2	8.2	5.9	4.7	3.2
2010	1.9	1.5	2.4	2.1	3.3
2011	-3.2	1.9	0.0	2.9	0.5
2012	1.5	1.2	2.5	-1.7	1.5
2013	-1.7	1.8	3.6	3.2	0.6

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

http://www.bls.gov/lpc/

Chart VA-14 of the Bureau of Labor Statistics (BLS) provides SAAE rates of nonfarm business productivity from 1999 to 2013. There is a clear pattern in both episodes of economic cycles in 2001 and 2007 of rapid expansion of productivity in the transition from contraction to expansion followed by more subdued productivity expansion. Part of the explanation is the reduction in labor utilization resulting from adjustment of business to the sudden shock of collapse of revenue. Productivity rose briefly in the expansion after 2009 but then collapsed and moved to negative change with some positive changes recently at lower rates.

Chart VA-14, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Percentage changes from prior quarter at SAAE rates and annual average percentage changes of nonfarm business unit labor costs are provided in Table VA-5. Unit labor costs fell during the contractions with continuing negative percentage changes in the early phases of the recovery. Weak labor markets partly explain the decline in unit labor costs. As the economy moves toward full employment, labor markets tighten with increase in unit labor costs. The expansion beginning in IIIQ2009 has been characterized by high unemployment and underemployment. Table VA-4 shows continuing subdued increases in unit labor costs in 2011 but with increase of 7.4 percent in IQ2012 followed by increase of 0.7 percent in IIQ2012, decline of 1.8 percent in IIIQ2012 and increase of 11.8 percent in IVQ2012. Unit labor costs decreased at 3.5 percent in IQ2013 and increased 2.0 percent in IIQ2013. Unit labor costs decreased at 1.0 percent in IIIQ2013 and at 1.6 percent in IVQ2013.

Table VA-5, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	2.0	0.1	-0.1	1.7	0.7
2000	17.4	-6.8	8.2	-1.6	4.0
2001	11.4	-5.4	-1.7	-1.3	1.6
2002	-6.7	3.3	-1.1	1.8	-1.9
2003	-1.4	1.5	-2.7	1.7	0.1
2004	-0.6	3.7	5.8	0.6	1.4
2005	-1.5	2.5	2.1	2.4	1.5
2006	6.0	0.4	2.3	4.0	3.0
2007	9.8	-2.7	-3.2	2.6	2.6
2008	8.2	-3.6	2.5	7.3	2.0
2009	-12.3	1.9	-2.9	-2.2	-2.0
2010	-4.4	3.5	-0.1	-0.1	-1.2
2011	10.2	-2.9	3.0	-7.3	2.0
2012	7.4	0.7	-1.8	11.8	1.2
2013	-3.5	2.0	-2.0	-1.6	1.0

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-15 provides percentage change from prior quarter at annual rate of nonfarm business real hourly compensation from 1999 to 2013. There are significant fluctuations in quarterly percentage changes oscillating between positive and negative. There is no clear pattern in the two contractions in the 2000s.

Chart VA-15, US, Nonfarm Business Unit Labor Costs, Percent Change from Prior Quarter at Annual Rate 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Table VA-6 provides percentage change from prior quarter at annual rates for nonfarm business real hourly worker compensation. The expansion after the contraction of 2001 was followed by strong recovery of real hourly compensation. Real hourly compensation increased at the rate of 2.1 percent in IQ2011 but fell at annual rates of 5.4 percent in IIQ2011 and 5.9 percent in IVQ2011. Real hourly compensation increased at 6.5 percent in IQ2012 and at 0.9 percent in IIQ2012, declining at 1.3 percent in IIIQ2012 and increasing at 7.5 percent in IVQ2012. Real hourly compensation fell 0.7 percent in 2011 and increased 0.5 percent in 2012. Real hourly compensation fell at 6.6 percent in IQ2013 and increased at 3.9 percent in IIQ2013, falling at 1.0 percent in IIIQ2013. Real hourly compensation increased at 0.6 percent in IVQ2013.

Table VA-6, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2013

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	5.1	-1.9	0.3	5.5	2.1
2000	11.5	-1.8	4.4	-0.5	3.9
2001	6.0	-1.8	-0.7	4.0	1.5
2002	0.7	0.4	-0.2	-1.4	0.7
2003	-1.5	8.0	3.0	3.9	1.5
2004	-3.9	4.8	4.2	-2.5	1.8
2005	1.2	-0.6	-1.1	-1.2	0.3
2006	6.5	-3.3	-3.4	9.2	0.6
2007	6.0	-4.5	-1.2	-0.5	1.4
2008	-0.5	-4.7	-2.7	14.7	-1.1
2009	-7.1	8.2	-0.8	-0.8	1.5
2010	-3.3	5.3	0.9	-1.0	0.4
2011	2.1	-5.4	0.0	-5.9	-0.7
2012	6.5	0.9	-1.3	7.5	0.5
2013	-6.6	3.9	-1.0	0.6	0.2

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

Chart VA-16 provides percentage change from prior quarter at annual rate of nonfarm business real hourly compensation. There have been multiple negative percentage quarterly changes in the current cycle from IvQ2007.

Chart VA-16, US, Nonfarm Business Real Hourly Compensation, Percent Change from Prior Quarter at Annual Rate 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-17 provides percentage change of nonfarm business output per hour in a quarter relative to the same quarter a year earlier. As in most series of real output, productivity increased sharply in 2010 but the momentum was lost after 2011 as with the rest of the real economy.

Chart VA-17, US, Nonfarm Business Output per Hour, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-18 provides percentage changes of nonfarm business unit labor costs relative to the same quarter a year earlier. Softening of labor markets caused relatively high yearly percentage changes in the recession of 2001 repeated in the recession in 2009. Recovery was strong in 2010 but then weakened.

Chart VA-18, US, Nonfarm Business Unit Labor Costs, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Chart VA-19 provides percentage changes in a quarter relative to the same quarter a year earlier for nonfarm business real hourly compensation. Labor compensation eroded sharply during the recession with brief recovery in 2010 and another fall until recently.

Chart VA-19, US, Nonfarm Business Real Hourly Compensation, Percent Change from Same Quarter a Year Earlier 1999-2013

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

In the analysis of Hansen (1939, 3) of secular stagnation, economic progress consists of growth of real income per person driven by growth of productivity. The “constituent elements” of economic progress are “(a) inventions, (b) the discovery and development of new territory and new resources, and (c) the growth of population” (Hansen 1939, 3). Secular stagnation originates in decline of population growth and discouragement of inventions. According to Hansen (1939, 2), US population grew by 16 million in the 1920s but grew by one half or about 8 million in the 1930s with forecasts at the time of Hansen’s writing in 1938 of growth of around 5.3 million in the 1940s. Hansen (1939, 2) characterized demography in the US as “a drastic decline in the rate of population growth. Hansen’s plea was to adapt economic policy to stagnation of population in ensuring full employment. In the analysis of Hansen (1939, 8), population caused half of the growth of US GDP per year. Growth of output per person in the US and Europe was caused by “changes in techniques and to the exploitation of new natural resources.” In this analysis, population caused 60 percent of the growth of capital formation in the US. Declining population growth would reduce growth of capital formation. Residential construction provided an important share of growth of capital formation. Hansen (1939, 12) argues that market power of imperfect competition discourages innovation with prolonged use of obsolete capital equipment. Trade unions would oppose labor-savings innovations. The combination of stagnating and aging population with reduced innovation caused secular stagnation. Hansen (1939, 12) concludes that there is role for public investments to compensate for lack of dynamism of private investment but with tough tax/debt issues.

The current application of Hansen’s (1938, 1939, 1941) proposition argues that secular stagnation occurs because full employment equilibrium can be attained only with negative real interest rates between minus 2 and minus 3 percent. Professor Lawrence H. Summers (2013Nov8) finds that “a set of older ideas that went under the phrase secular stagnation are not profoundly important in understanding Japan’s experience in the 1990s and may not be without relevance to America’s experience today” (emphasis added). Summers (2013Nov8) argues there could be an explanation in “that the short-term real interest rate that was consistent with full employment had fallen to -2% or -3% sometime in the middle of the last decade. Then, even with artificial stimulus to demand coming from all this financial imprudence, you wouldn’t see any excess demand. And even with a relative resumption of normal credit conditions, you’d have a lot of difficulty getting back to full employment.” The US economy could be in a situation where negative real rates of interest with fed funds rates close to zero as determined by the Federal Open Market Committee (FOMC) do not move the economy to full employment or full utilization of productive resources. Summers (2013Oct8) finds need of new thinking on “how we manage an economy in which the zero nominal interest rates is a chronic and systemic inhibitor of economy activity holding our economies back to their potential.”

Former US Treasury Secretary Robert Rubin (2014Jan8) finds three major risks in prolonged unconventional monetary policy of zero interest rates and quantitative easing: (1) incentive of delaying action by political leaders; (2) “financial moral hazard” in inducing excessive exposures pursuing higher yields of risker credit classes; and (3) major risks in exiting unconventional policy. Rubin (2014Jan8) proposes reduction of deficits by structural reforms that could promote recovery by improving confidence of business attained with sound fiscal discipline.

Professor John B. Taylor (2014Jan01, 2014Jan3) provides clear thought on the lack of relevance of Hansen’s contention of secular stagnation to current economic conditions. The application of secular stagnation argues that the economy of the US has attained full-employment equilibrium since around 2000 only with negative real rates of interest of minus 2 to minus 3 percent. At low levels of inflation, the so-called full-employment equilibrium of negative interest rates of minus 2 to minus 3 percent cannot be attained and the economy stagnates. Taylor (2014Jan01) analyzes multiple contradictions with current reality in this application of the theory of secular stagnation:

• Secular stagnation would predict idle capacity, in particular in residential investment when fed fund rates were fixed at 1 percent from Jun 2003 to Jun 2004. Taylor (2014Jan01) finds unemployment at 4.4 percent with house prices jumping 7 percent from 2002 to 2003 and 14 percent from 2004 to 2005 before dropping from 2006 to 2007. GDP prices doubled from 1.7 percent to 3.4 percent when interest rates were low from 2003 to 2005.
• Taylor (2014Jan01, 2014Jan3) finds another contradiction in the application of secular stagnation based on low interest rates because of savings glut and lack of investment opportunities. Taylor (2009) shows that there was no savings glut. The savings rate of the US in the past decade is significantly lower than in the 1980s.
• Taylor (2014Jan01, 2014Jan3) finds another contradiction in the low ratio of investment to GDP currently and reduced investment and hiring by US business firms.
• Taylor (2014Jan01, 2014Jan3) argues that the financial crisis and global recession were caused by weak implementation of existing regulation and departure from rules-based policies.
• Taylor (2014Jan01, 2014Jan3) argues that the recovery from the global recession was constrained by a change in the regime of regulation and fiscal/monetary policies.

The analysis by Kydland (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2004/kydland-facts.html) and Prescott (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2004/prescott-bio.html) (1977, 447-80, equation 5) uses the “expectation augmented” Phillips curve with the natural rate of unemployment of Friedman (1968) and Phelps (1968), which in the notation of Barro and Gordon (1983, 592, equation 1) is:

U_t = Uⁿ_t – α(π_t – π^e) α > 0 (1)

Where U_t is the rate of unemployment at current time t, Uⁿ_t is the natural rate of unemployment, π_t is the current rate of inflation and π^e is the expected rate of inflation by economic agents based on current information. Equation (1) expresses unemployment net of the natural rate of unemployment as a decreasing function of the gap between actual and expected rates of inflation. The system is completed by a social objective function, W, depending on inflation, π, and unemployment, U:

W = W(π_t, U_t) (2)

The policymaker maximizes the preferences of the public, (2), subject to the constraint of the tradeoff of inflation and unemployment, (1). The total differential of W set equal to zero provides an indifference map in the Cartesian plane with ordered pairs (π_t, U_t - Uⁿ) such that the consistent equilibrium is found at the tangency of an indifference curve and the Phillips curve in (1). The indifference curves are concave to the origin. The consistent policy is not optimal. Policymakers without discretionary powers following a rule of price stability would attain equilibrium with unemployment not higher than with the consistent policy. The optimal outcome is obtained by the rule of price stability, or zero inflation, and no more unemployment than under the consistent policy with nonzero inflation and the same unemployment. Taylor (1998LB) attributes the sustained boom of the US economy after the stagflation of the 1970s to following a monetary policy rule instead of discretion (see Taylor 1993, 1999). It is not uncommon for effects of regulation differing from those intended by policy. Professors Edward C. Prescott and Lee E. Ohanian (2014Feb), writing on “US productivity growth has taken a dive,” on Feb 3, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303942404579362462611843696?KEYWORDS=Prescott), argue that impressive productivity growth over the long-term constructed US prosperity and wellbeing. Prescott and Ohanian (2014Feb) measure US productivity growth at 2.5 percent per year since 1948. Average US productivity growth has been only 1.1 percent on average since 2011. Prescott and Ohanian (2014Feb) argue that living standards in the US increased at 28 percent in a decade but with current slow growth of productivity will only increase 12 percent by 2024. There may be collateral effects on productivity growth from policy design similar to those in Kydland and Prescott (1977). The Bureau of Labor Statistics important report on productivity and costs released on Feb 6, 2014 (http://www.bls.gov/lpc/) supports the argument of decline of productivity in the US analyzed by Prescott and Ohanian (2014Feb). Table VA-3 provides the annual percentage changes of productivity, real hourly compensation and unit labor costs for the entire economic cycle from 2007 to 2013. The data confirm the argument of Prescott and Ohanian (2014Feb): productivity increased cumulatively 2.6 percent from 2011 to 2013 at the average annual rate of 0.9 percent. The situation is direr by excluding growth of 1.5 percent in 2012, which leaves an average of 0.55 percent for 2011 and 2013. Average productivity growth for the entire economic cycle from 2007 to 2013 is only 1.6 percent. The argument by Prescott and Ohanian (2014Feb) is proper in choosing the tail of the business cycle because the increase in productivity in 2009 of 3.2 percent and 3.3 percent in 2013 consisted on reducing labor hours.

In revealing research, Edward P. Lazear and James R. Spletzer (2012JHJul22) use the wealth of data in the valuable database and resources of the Bureau of Labor Statistics (http://www.bls.gov/data/) in providing clear thought on the nature of the current labor market of the United States. The critical issue of analysis and policy currently is whether unemployment is structural or cyclical. Structural unemployment could occur because of (1) industrial and demographic shifts and (2) mismatches of skills and job vacancies in industries and locations. Consider the aggregate unemployment rate, Y, expressed in terms of share s_i of a demographic group in an industry i and unemployment rate y_i of that demographic group (Lazear and Spletzer 2012JHJul22, 5-6):

Y = ∑_is_iy_i (1)

This equation can be decomposed for analysis as (Lazear and Spletzer 2012JHJul22, 6):

∆Y = ∑_i∆s_iy*_i + ∑_i∆y_is*_i (2)

The first term in (2) captures changes in the demographic and industrial composition of the economy ∆s_i multiplied by the average rate of unemployment y*_i , or structural factors. The second term in (2) captures changes in the unemployment rate specific to a group, or ∆y_i, multiplied by the average share of the group s*_i, or cyclical factors. There are also mismatches in skills and locations relative to available job vacancies. A simple observation by Lazear and Spletzer (2012JHJul22) casts intuitive doubt on structural factors: the rate of unemployment jumped from 4.4 percent in the spring of 2007 to 10 percent in October 2009. By nature, structural factors should be permanent or occur over relative long periods. The revealing result of the exhaustive research of Lazear and Spletzer (2012JHJul22) is:

“The analysis in this paper and in others that we review do not provide any compelling evidence that there have been changes in the structure of the labor market that are capable of explaining the pattern of persistently high unemployment rates. The evidence points to primarily cyclic factors.”

The theory of secular stagnation cannot explain sudden collapse of the US economy and labor markets. The theory of secular stagnation departs from an aggregate production function in which output grows with the use of labor, capital and technology (see Pelaez and Pelaez, Globalization and the State, Vol. I (2008a), 11-6). Simon Kuznets (1971) analyzes modern economic growth in his Lecture in Memory of Alfred Nobel:

“The major breakthroughs in the advance of human knowledge, those that constituted dominant sources of sustained growth over long periods and spread to a substantial part of the world, may be termed epochal innovations. And the changing course of economic history can perhaps be subdivided into economic epochs, each identified by the epochal innovation with the distinctive characteristics of growth that it generated. Without considering the feasibility of identifying and dating such economic epochs, we may proceed on the working assumption that modern economic growth represents such a distinct epoch - growth dating back to the late eighteenth century and limited (except in significant partial effects) to economically developed countries. These countries, so classified because they have managed to take adequate advantage of the potential of modern technology, include most of Europe, the overseas offshoots of Western Europe, and Japan—barely one quarter of world population.”

Chart VA-20 provides nonfarm-business labor productivity, measured by output per hour, from 1947 to 2013. The rate of productivity increase continued in the early part of the 2000s but then softened and fell during the global recession. The interruption of productivity increases occurred exclusively in the current business cycle. Lazear and Spletzer (2012JHJul22) find “primarily cyclic” factors in explaining the frustration of currently depressed labor markets in the United States. Stagnation of productivity is another cyclic event and not secular trend. The theory and application of secular stagnation to current US economic conditions is void of reality.

Chart VA-20, US, Nonfarm Business Labor Productivity, Output per Hour, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Table VA-3A expands Table VA-3 providing more complete measurements of the Productivity and Cost research of the Bureau of Labor Statistics. The proper emphasis of Prescott and Ohanian (2014Feb) is on the low productivity increases from 2011 to 2013. Labor productivity increased 3.3 percent in 2010 and 3.2 percent in 2009. There is much stronger yet not sustained performance in 2010 with productivity growing 3.3 percent because of growth of output of 3.2 percent with decline of hours worked of 0.1 percent. Productivity growth of 3.2 percent in 2009 consists of decline of output by 4.3 percent while hours worked collapsed 7.2 percent, which is not a desirable route to progress. The expansion phase of the economic cycle concentrated in one year, 2010, with underperformance in the remainder of the expansion from 2011 to 2013 of productivity growth at average 0.9 percent per year.

VA-3A, US, Productivity and Costs, Annual Percentage Changes 2007-2013

	2013	2012	2011	2010	2009	2008	2007
Productivity	0.6	1.5	0.5	3.3	3.2	0.8	1.6
Output	2.3	3.7	2.5	3.2	-4.3	-1.3	2.3
Hours Worked	1.6	2.2	2.0	-0.1	-7.2	-2.0	0.7
Employment	1.8	2.0	1.5	-1.2	-5.7	-1.5	0.9
Average Weekly Hours Worked	-0.1	0.2	0.5	1.1	-1.6	-0.5	-0.2
Hourly Compensation	1.6	2.6	2.5	2.1	1.1	2.7	4.3
Consumer Price Inflation	1.5	2.1	3.2	1.6	-0.4	3.8	2.8
Real Hourly Compensation	0.2	0.5	-0.7	0.4	1.4	-1.1	1.4
Non-labor Payments	3.9	6.5	4.0	7.3	-0.1	-0.4	3.4
Output per Job	0.5	1.7	1.0	4.4	1.5	0.2	1.4

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

Productivity growth can bring about prosperity while productivity regression can jeopardize progress. 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 USD 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 Japan and France within the G7 in the second half of the 1990s but significantly lower than the acceleration of 1.3 percentage points per year in the US. Table V-3B provide average growth rates of indicators in the research of productivity and growth of the US Bureau of Labor Statistics. There is dramatic decline of productivity growth in the whole cycle from 2.2 percent per year on average from 1947 to 2013 to 1.6 percent per year on average from 2007 and 2013. There is profound drop in the average rate of output growth from 3.4 percent on average from 1947 to 2013 to 1.2 percent from 2007 to 2013. Real hourly compensation collapsed from average 1.6 percent per year from 1947 to 2013 to 0.3 percent per year from 2007 to 2013. The antithesis of secular stagnation is cyclical slow growth. The policy design deserves consideration of Kydland and Prescott (1977) and Prescott and Ohanian (2014Feb) to induce productivity growth for future progress.

Table V-3B, US, Productivity and Costs, Average Annual Percentage Changes 2007-2013 and 1947-2013

	Average Annual Percentage Rate 2007-2013	Average Annual Percentage Rate  1947-2013
Productivity	1.6	2.2
Output	1.2	3.4
Hours	0.0	1.2
Employment	0.0	1.4
Average Weekly Hours	0.0	NA
Hourly Compensation	2.4	5.1
Consumer Price Inflation	2.1	3.6
Real Hourly Compensation	0.3	1.6
Non-labor Payments	3.5	3.4
Output per Job	1.5	2.0

Source: US Bureau of Labor Statistics

http://www.bls.gov/lpc/

Unit labor costs increased sharply during the Great Inflation from the late 1960s to 1981 as shown by sharper slope in Chart VA-21. Unit labor costs continued to increase but at a lower rate because of cyclic factors and not because of imaginary secular stagnation.

Chart VA-21, US, Nonfarm Business, Unit Labor Costs, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Real hourly compensation increased at relatively high rates after 1947 to the early 1970s but reached a plateau that lasted until the early 1990s, as shown in Chart VA-22. There were rapid increases until the global recession. Cyclic factors and not alleged secular stagnation explain the interruption of increases in real hourly compensation.

Chart VA-22, US, Nonfarm Business, Real Hourly Compensation, 1947-2013, Index 2005=100

Source: US Bureau of Labor Statistics http://www.bls.gov/lpc/

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-7 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Jan 2014, light vehicle sales accumulated to 1,012,582, which is lower by 3.1 percent relative to 1,044,655 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 15.24 million in Jan 2014, lower than 15.40 million in Dec 2013 and higher than 15.23 million in Jan 2013 (http://motorintelligence.com/m_frameset.html).

Table VA-7, US, New Motor Vehicle Sales and Car Production, Thousand Units

	New Motor Vehicle Sales	New Car Sales and Leases	New Truck Sales and Leases	Domestic Car Production
1990	14,137	9,300	4,837	6,231
1991	12,725	8,589	4,136	5,454
1992	13,093	8,215	4,878	5,979
1993	14,172	8,518	5,654	5,979
1994	15,397	8,990	6,407	6,614
1995	15,106	8,536	6,470	6,340
1996	15,449	8,527	6,922	6,081
1997	15,490	8,273	7,218	5,934
1998	15,958	8,142	7,816	5,554
1999	17,401	8,697	8,704	5,638
2000	17,806	8,852	8,954	5,542
2001	17,468	8,422	9,046	4,878
2002	17,144	8,109	9,036	5,019
2003	16,968	7,611	9,357	4,510
2004	17,298	7,545	9,753	4,230
2005	17,445	7,720	9,725	4,321
2006	17,049	7,821	9,228	4,367
2007	16,460	7,618	8,683	3,924
2008	13,494	6,814	6.680	3,777
2009	10,601	5,456	5,154	2,247
2010	11,772	5,729	6,044	2,840

Source: US Census Bureau http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart VA-23 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2013. Output virtually stagnated since the late 1990s.

Chart VA-23, US, Motor Vehicles and Parts Output, 1972-2013

Source: Board of Governors of the Federal Reserve System

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

Manufacturers’ shipments decreased 0.2 percent in Dec 2013 and increased 0.8 percent in Nov 2013 after increasing 0.1 percent in Oct 2013. New orders decreased 1.5 percent in Dec 2013, after increasing 1.5 percent in Nov 2013 and decreasing 0.5 percent in Oct 2013, as shown in Table VA-8. These data are very volatile. Volatility is illustrated by increase of 2642.2 percent of new orders of nondefense aircraft in Sep 2012 following decline by 97.2 percent in Aug. New orders excluding transportation equipment increased 0.2 percent in Dec 2013 after increasing 0.3 percent in Nov 2013 and increasing 0.1 percent in Oct 2013. Capital goods new orders, indicating investment, decreased 6.1 percent in Dec 2013 after increasing 7.4 percent in Nov 2013 and decreasing 2.6 percent in Oct 2013. New orders of nondefense capital goods decreased 4.4 percent in Dec 2013 after increasing 8.2 percent in Nov 2013 and decreasing 0.8 percent in Oct 2013. Excluding more volatile aircraft, capital goods orders decreased 0.6 percent in Dec 2013 after increasing 3.0 percent in Nov 2013 and decreasing 0.6 percent in Oct 2013.

Table VA-8, US, Value of Manufacturers’ Shipments and New Orders, SA, Month ∆%

	Dec 2013 ∆%	Nov 2013  ∆%	Oct 2013  ∆%
Total
S	-0.2	0.8	0.1
NO	-1.5	1.5	-0.5
Excluding Transport
S	0.7	0.7	-0.1
NO	0.2	0.3	0.1
Excluding Defense
S	0.1	0.6	0.2
NO	-1.1	1.5	0.0
Durable Goods
S	-1.7	1.4	0.6
NO	-4.2	2.7	-0.7
Machinery
S	0.1	3.6	0.3
NO	1.3	3.2	0.9
Computers & Electronic Products
S	1.1	2.4	-1.8
NO	-6.3	0.8	2.4
Computers
S	-8.0	9.8	-9.8
NO	-6.6	8.3	-2.8
Transport Equipment
S	-5.5	1.6	1.6
NO	-9.7	8.1	-3.5
Automobiles
S	-11.9	-2.9	2.4
Motor Vehicles
S	-1.8	1.5	0.5
NO	-1.5	2.1	0.1
Nondefense Aircraft
S	4.5	-8.3	1.8
NO	-17.5	21.1	-5.3
Capital Goods
S	0.1	2.1	-0.2
NO	-6.1	7.4	-2.6
Nondefense Capital Goods
S	1.5	1.0	-0.1
NO	-4.4	8.2	-0.8
Capital Goods ex Aircraft
S	0.6	2.4	-0.2
NO	-0.6	3.0	-0.6
Nondurable Goods
S	1.1	0.4	-0.3
NO	1.1	-0.4	-0.3

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

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Chart VA-24 of the US Census Bureau provides new orders of manufacturers from Jan 2013 to Dec 2013. There is significant volatility that prevents discerning clear trends.

Chart VA-24, US, Manufacturers’ New Orders 2012-2013 Seasonally Adjusted, Month ∆%

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr022.html

Chart VA-25 of the US Census Bureau provides total value of manufacturers’ new orders, seasonally adjusted, from 1992 to 2013. Seasonal adjustment reduces sharp oscillations. The series dropped nearly vertically during the global recession but rose along a path even steeper than in the high-growth period before the recession. The final segment suggests deceleration but similar segments occurred in earlier periods followed with continuing growth and stability currently.

Chart VA-25, US, Value of Total Manufacturers’ New Orders, Seasonally Adjusted, 1992-2013

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Additional perspective on manufacturers’ shipments and new orders is provided by Table VA-9. Values are cumulative millions of dollars in Jan-Dec 2013 not seasonally adjusted (NSA). Shipments of all manufacturing industries in Jan-Dec 2013 total $5835.1 billion and new orders total $5820.9 billion, growing respectively by 1.8 percent and 2.5 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 0.9 percent and new orders increased 1.5 percent. Excluding defense, shipments grew 1.8 percent and new orders grew 3.1 percent. Durable goods shipments reached $2763.1 billion in Jan-Dec 2013, or 47.4 percent of the total, growing by 3.4 percent, and new orders $2748.9 billion, or 47.2 percent of the total, growing by 4.9 percent. Important information in Table VA-2 is the large share of nondurable goods with shipments of $3071.9 billion or 52.8 percent of the total, growing by 0.3 percent. Capital goods have relatively high value of $1004.4 billion for shipments, growing 2.2 percent, and new orders $1067.7 billion, increasing 4.8 percent, which could be an indicator of future investment. Excluding aircraft, capital goods shipments reached $790.3 billion, growing 1.6 percent, and new orders $810.8 billion, increasing 4.5 percent. There is no suggestion in these data that the US economy is close to recession but manufacturing accounts for 10.8 percent of US national income in IIIQ2013. These data are not adjusted for inflation.

Table VA-9, US, Value of Manufacturers’ Shipments and New Orders, NSA, Millions of Dollars 

Jan-Dec 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/ 2012
Total	5,835,104	1.8	5,820,905	2.5
Excluding Transport	5,012,178	0.9	4,951,300	1.5
Excluding Defense	5,689,164	1.8	5,694,098	3.1
Durable Goods	2,763,129	3.4	2,748,930	4.9
Machinery	411,206	3.0	417,087	7.9
Computers & Electronic Products	332,923	-3.0	256,303	-2.4
Computers	6,191	-28.7	6,364	-30.6
Transport Equipment	822,926	7.7	869,605	7.9
Automobiles	126,253	18.0
Motor Vehicles	233,947	5.8	233,593	6.1
Nondefense Aircraft	136,505	7.8	200,725	24.9
Capital Goods	1,004.387	2.2	1,067,682	4.8
Nondefense Capital Goods	885,801	2.4	966,154	8.4
Capital Goods ex Aircraft	790,290	1.6	810,849	4.5
Nondurable Goods	3,071,975	0.3	3,071,975	0.3
Food Products	747,182	2.7
Petroleum Refineries	826,199	-1.4
Chemical Products	765,556	-0.2

Note: Transport: transportation Source: US Census Bureau

Source: US Census Bureau

http://www.census.gov/manufacturing/m3

Chart VA-26 of the US Census Bureau provides value of manufacturer’s new orders not seasonally adjusted from Jan 1992 to Dec 2013. Fluctuations are evident, which are smoothed by seasonal adjustment in the earlier Chart VA-25. The series drops nearly vertically during the global contraction and then resumes growth in a steep upward trend, flattening recently.

Chart VA-26, US, Value of Total Manufacturers’ New Orders, Not Seasonally Adjusted, 1992-2013

Source: US Census Bureau

http://www.census.gov/manufacturing/m3/

Construction spending at seasonally adjusted annualized rate (SAAR) reached $930.5 billion in Dec 2013, which was higher by 0.1 percent than in the prior month of Nov 2013, as shown in Table VA-10. Residential investment, with $357.4 billion accounting for 38.4 percent of total value of construction, increased 2.4 percent in Dec and nonresidential investment, with $573.1 billion accounting for 61.6 percent of the total, decreased 1.3 percent. Public construction decreased 2.3 percent while private construction increased 1.0 percent. Data in Table VA-10 show that nonresidential construction at $573.1 billion is much higher in value than residential construction at $357.4 billion while total private construction at $663.9 billion is much higher than public construction at $266.6 billion, all in SAAR. Residential and nonresidential construction contributed positively to growth of GDP in the US in all quarters in 2012. Nonresidential investment deducted 0.57 percentage points from GDP growth in IQ2013 while residential construction added 0.34 percentage points. Nonresidential construction added 0.56 percentage points to GDP growth in IIQ2013 with residential construction adding 0.40 percentage points. Nonresidential construction added 0.58 percentage points to GDP growth in IIIQ2013 while residential construction added 0.31 percentage points. Nonresidential construction added 0.46 percentage points to GDP growth in IVQ2013 while residential construction deducted 0.32 percentage points. In 2012, residential construction added 0.32 percentage points to GDP growth and added 0.01 percentage points in 2011. Residential construction added 0.33 percentage points to GDP growth in 2013. Nonresidential construction added 0.85 percentage points to GDP growth in 2012 and 0.84 percentage points in 2011. Nonresidential construction added 0.32 percentage points to GDP growth in 2013. (http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html).

Table VA-10, Construction Put in Place in the United States Seasonally Adjusted Annual Rate Million Dollars and Month and 12-Month ∆%  

Dec 2013	Dec 2013   SAAR  $ Millions	Month ∆%	12-Month ∆%
Total	930,493	0.1	5.3
Residential	357,423	2.4	17.5
Nonresidential	573,070	-1.3	-1.1
Total Private	663,926	1.0	8.0
Private Residential	352,605	2.6	18.3
New Single Family	181,742	3.4	21.6
New Multi-Family	35,620	0.5	27.3
Private Nonresidential	311.320	-0.7	-1.7
Total Public	266,567	-2.3	-0.7
Public Residential	4,818	-11.5	-20.2
Public Nonresidential	261,749	-2.1	-0.3

SAAR: seasonally adjusted annual rate; B: billions

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

Further information on construction spending is provided in Table VA-11. The original monthly estimates not-seasonally adjusted (NSA) and their 12-month rates of change are provided in the first two columns while the SAARs and their monthly changes are provided in the final two columns. There has been improvement in construction in the US. There are only four declines in the monthly rate from Dec 2011 to Dec 2013. Growth in 12 months fell from 9.5 percent in Dec 2012 to 3.1 percent in Dec 2013.

Table VA-11, US, Value and Percentage Change in Value of Construction Put in Place, Dollars Millions and ∆%

	Value NSA Month $ Millions	12-Month ∆% NSA	Value SAAR $ Millions	Month ∆% SA*
Dec 2013	70,278	3.1	930,493	0.1
Nov	77,578	0.6	929,927	0.8
Oct	85,193	4.5	922,898	0.7
Sep	85,383	5.7	916,520	1.4
Aug	85,677	4.9	903,786	0.1
Jul	83,104	5.3	902,854	0.6
Jun	81,722	4.9	897,113	0.1
May	77,327	7.0	896,134	2.0
Apr	70,535	6.5	878,396	1.1
Mar	64,036	5.3	869,164	-0.1
Feb	58,395	4.3	869,909	0.8
Jan	59,143	6.2	863,136	-2.3
Dec 2012	68,136	9.5	883,550	0.1
Nov	77,091	12.0	882,685	2.3
Oct	81,520	9.8	863,065	-1.2
Sep	80,812	7.2	873,259	2.2
Aug	81,712	6.0	854,048	-0.3
Jul	78,897	9.4	856,348	0.1
Jun	77,876	6.9	855,779	1.3
May	72,240	9.8	844,709	1.4
Apr	66,223	7.8	833,243	0.8
Mar	60,796	7.5	826,641	0.4
Feb	55,981	10.8	823,331	0.7
Jan	55,671	9.3	817,616	0.0
Dec 2011	62,242	3.4	817,569	1.0

SAAR: Seasonally Adjusted Annual Rate

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

The sharp contraction of the value of construction in the US is revealed by Table II-3. Construction spending in Jan-Dec 2013, not seasonally adjusted, reached $898.4 billion, which is higher by 4.8 percent than $856.9 billion in the same period in 2012. The depth of the contraction is shown by the decline of construction spending from $1103.9 billion in Jan-Dec 2006 to only $898.4 billion in the same period in 2013, or decline by minus 24.6 percent. The decline in inflation-adjusted terms is much higher. The all-items not seasonally adjusted CPI (consumer price index) increased from 201.8 in Dec 2006 to 233.049 in Dec 2013 (http://www.bls.gov/cpi/data.htm) or by 15.5 percent. The comparable decline from Jan-Dec 2005 to Jan-Dec 2013 is minus 21.4 percent. Construction spending in Jan-Dec 2013 decreased by 1.9 percent relative to the same period in 2003. Construction spending is lower by 1.0 percent in Jan-Dec 2013 relative to the same period in 2009. Construction has been weaker than the economy as a whole.

Table VA-12, US, Value of Construction Put in Place in the United States, Not Seasonally Adjusted, $ Millions and ∆%

Jan-Dec 2013 $ MM	898,372
Jan-Dec 2012	856,953
∆% to 2013	4.8
Jan-Dec 2011 $ MM	778,238
∆% to 2013	15.4
Jan-Dec 2010 $ MM	803,621
∆% to 2013	11.8
Jan-Dec 2009 $MM	907,784
∆% to 2013	-1.0
Jan-Dec 2006 $ MM	1,192,238
∆% to 2013	-24.6
Jan-Dec 2005 $ MM	1,143,655
∆% to 2013	-21.4
Jan-Dec 2003 $ MM	915,742
∆% to 2013	-1.9

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

Chart VA-27 of the US Census Bureau provides value of construction spending in the US not seasonally adjusted from 2002 to 2013. There are wide oscillations requiring seasonal adjustment to compare adjacent data. There was sharp decline during the global recession followed in recent periods by a stationary series that may be moving upward again with vacillation in the final segment.

Chart VA-27, Value of Construction Spending not Seasonally Adjusted, Millions of Dollars, 2002-2013

Source: US Census Bureau

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

Monthly construction spending in the US in May-Oct not seasonally adjusted is shown in Table VA-13 for the years between 2002 and 2013. The value of $70.3 billion in Dec 2013 is higher by 3.1 percent than $68.1 billion in Dec 2012. Construction fell by 20.3 percent from the peak of $88.2 billion in Dec 2005 to $70.3 billion in Dec 2013. The data are not adjusted for inflation or changes in quality.

Table VA-13, US, Value of Construction Spending Not Seasonally Adjusted, Millions of Dollars

Year	Aug	Sep	Oct	Nov	Dec
2002	79,460	76,542	75,710	71,362	63,984
2003	85,191	83,841	83,133	77,915	71,050
2004	96,164	92,538	90,582	86,394	77,733
2005	106,706	103,269	102,339	97,549	88,172
2006	110,434	104,191	101,582	95,339	86,436
2007	110,430	105,150	103,847	94,822	84,218
2008	99,786	96,755	95,612	86,067	76,645
2009	84,368	81,213	79,949	71,906	64,098
2010	75,834	74,764	73,470	68,019	60,202
2011	77,104	75,372	74,222	68,809	62,242
2012	81,712	80,812	81,520	77,091	68,136
2013	85,677	85,383	85,193	77,578	70,278

Source: US Census Bureau

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

Chart VA-28 of the US Census Bureau shows SAARs of construction spending for the US since 1993. Construction spending surged in nearly vertical slope after the stimulus of 2003 combining near zero interest rates together with other housing subsidies and subsequent slow adjustment in 17 doses of increases by 25 basis points between Jun 2004 and Jun 2006. Construction spending collapsed after subprime mortgages defaulted with the fed funds rate increasing from 1.00 percent in Jun 2004 to 5.25 percent in Jun 2006. Subprime mortgages were programmed for refinancing in two years after increases in homeowner equity in the assumption that fed funds rates would remain low forever or increase in small increments (Gorton 2009EFM see http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Price declines of houses or even uncertainty prevented refinancing of subprime mortgages that defaulted, causing the financial crisis that eventually triggered the global recession. Chart VA-28 shows a trend of increase in the final segment but it is difficult to assess if it is sustainable.

Chart VA-28, US, Construction Expenditures SAAR 1993-2013

Source: US Census Bureau

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

Construction spending at SAARs in the four months Sep to Dec is shown in Table VA-14 for the years between 2002 and 2013. There is a peak in 2005 to 2007 with subsequent collapse of SAARs and rebound in 2012-2013.

Table VA-14, US, Value of Construction Spending SAAR Millions of Dollars

Year	Sep	Oct	Nov	Dec
2002	832,134	839,690	844,697	855,921
2003	911,589	925,732	925,985	948,491
2004	1,012,290	1,015,562	1,023,210	1,037,684
2005	1,131,739	1,145,663	1,156,977	1,178,305
2006	1,151,104	1,139,292	1,137,488	1,153,491
2007	1,165,162	1,152,511	1,127,558	1,108,958
2008	1,056,666	1,050,690	1,029,211	993,515
2009	880,259	869,374	850,732	832,565
2010	798,916	800,266	798,328	779,895
2011	805,519	806,514	809,089	817,569
2012	873,259	863,065	882,685	883,550
2013	916,520	922,898	929,927	930,493

Source: US Census Bureau

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

Chart VA-29 of the US Census Bureau provides SAARs of value of construction from 2002 to 2013. There is clear acceleration after 2003 when fed funds rates were fixed at 1.0 percent from Jun 2003 until Jun 2004. Construction peaked in 2005-2006, stabilizing in 2007 at a lower level and then collapsed in a nearly vertical drop until 2011 with increases into 2012 and marginal drop in Jan 2013 followed by increase in Feb 2013 and decline in Mar 2013 followed by continuing increase in Apr-May 2013. Construction stabilized in Jun 2013 and increased in Jul-Aug 2013. Construction declined in Sep 2013 and increased in Oct-Dec 2013.

Chart VA-29, US, Construction Expenditures SAAR 2002-2013

Source: US Census Bureau

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

Chart VA-30 of the US Census Bureau provides monthly residential construction in the US not seasonally adjusted from 2002 to 2013. There was steep increase until 2006 followed by sharp contraction. The series stabilized at the bottom and increased in the final segment with subsequent stability.

Chart VA-30, US, Residential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

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

Chart VA-31 of the US Census Bureau provides monthly nonresidential construction in the US not seasonally adjusted. There is similar acceleration until 2006 followed by milder contraction than for residential construction. The final segment is stationary.

Chart VA-31, US, Nonresidential Construction, Not Seasonally Adjusted, Millions of Dollars, 2002-2013

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

Annual available data for the value of construction put in place in the US between 1993 and 2013 are provided in Table VA-32. Data from 1993 to 2001 are available for public and private construction with breakdown in residential and nonresidential only for private construction. Data beginning in 2002 provide aggregate residential and nonresidential values. Total construction value put in place in the US increased 85.0 percent between 1993 and 2013 but most of the growth, 65.3 percent, was concentrated in 1993 to 2000 with increase of 11.9 percent between 2000 and 2013. Total value of construction increased 6.0 percent between 2002 and 2013 with value of nonresidential construction increasing 26.0 percent while value of residential construction fell 16.3 percent. Value of total construction fell 18.6 percent between 2005 and 2013, with value of residential construction declining 45.5 percent while value of nonresidential construction rose 15.4 percent. Value of total construction fell 23.0 percent between 2006 and 2013, with value of nonresidential construction increasing 2.6 percent while value of residential construction fell 45.7 percent. In 2002, nonresidential construction had share of 52.6 percent in total construction while the share of residential construction was 47.4 percent. In 2013, the share of nonresidential construction in total value rose to 62.5 percent while that of residential construction fell to 37.5 percent.

Table VA-32, Annual Value of Construction Put in Place 1993-2012, Millions of Dollars and ∆% 

	Total	Private Nonresidential	Private Residential
1993	485,548	150,006	208,180
1994	531,892	160,438	241,033
1995	548,666	180,534	228,121
1996	599,693	195,523	257,495
1997	631,853	213,720	264,696
1998	688,515	237,394	296,343
1999	744,551	249,167	326,302
2000	802,756	275,293	346,138
2001	840,249	273,922	364,414
	Total	Total Nonresidential	Total Residential
2002	847,874	445,914	401,960
2003	891,497	440,246	451,251
2004	991,356	452,948	538,408
2005	1,104,136	486,629	617,507
2006	1,167,222	547,408	619,814
2007	1,152,351	651,883	500,468
2008	1,067,564	709,818	357,746
2009	903,201	649,273	253,928
2010	804,561	555,449	249,112
2011	788,014	535,357	252,657
2012	856,953	570,429	286,524
2013	898,372	561,790	336,582
∆% 1993-2013	85.0
∆% 1993-2000	65.3
∆% 2000-2013	11.9
∆% 2002-2013	6.0	26.0	-16.3
∆% 2005-2013	-18.6	15.4	-45.5
∆% 2006-2013	-23.0	2.6	-45.7

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

VB Japan. Table VB-BOJF provides the forecasts of economic activity and inflation in Japan by the majority of members of the Policy Board of the Bank of Japan, which is part of their Outlook for Economic Activity and Prices (http://www.boj.or.jp/en/announcements/release_2013/k130711a.pdf). For fiscal 2013, the forecast is of growth of GDP between 2.5 and 2.9 percent, with the all items CPI less fresh food of 0.7 to 0.9 percent (http://www.boj.or.jp/en/announcements/release_2014/k140122a.pdf). The critical difference is forecast of the CPI excluding fresh food of 2.9 to 3.6 percent in 2014 and 1.7 to 2.9 percent in 2015. Consumer price inflation in Japan excluding fresh food was 0.0 percent in Nov 2013 and 1.2 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
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
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
Jan 2014	+0.9 to 1.5 [+1.4]	+2.9 to +3.6 [+3.3]	+0.9 to +1.6 [+1.3]
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
Jan 2014	+1.2 to +1.8 [+1.5]	+1.7 to +2.9 [+2.6]	+1.0 to +2.2 [+1.9]
Oct 2013	+1.3 to +1.8 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]

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

Source: Policy Board, Bank of Japan

http://www.boj.or.jp/en/mopo/outlook/gor1310b.pdf

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index increasing from 54.0 in Dec to 54.1 in Jan, indicating strong growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/cad438c99cbe46cb87a9d4c4467a6d58). 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/cad438c99cbe46cb87a9d4c4467a6d58). The Markit Business Activity Index of Services decreased from the record of 51.8 in Nov to 52.1 in Dec and 51.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/cad438c99cbe46cb87a9d4c4467a6d58). Claudia Tillbrooke, Economist at Markit and author of the report, finds growth in services diverging from manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/cad438c99cbe46cb87a9d4c4467a6d58). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, increased from 55.2 in Dec to 55.6 in Jan, which is the highest level since Feb 2006 (http://www.markiteconomics.com/Survey/PressRelease.mvc/1c224403252848b1be511ebfc5f94cc2). New orders grew at a high rate for the eleventh consecutive month at the fastest since Feb 2006. New export orders increased for the fifth consecutive month at the slowest pace in this sequence. 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 expanding (http://www.markiteconomics.com/Survey/PressRelease.mvc/1c224403252848b1be511ebfc5f94cc2).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	Dec ∆% 0.3 12 months ∆% 2.5 Blog 1/19/14
Consumer Price Index	Dec NSA ∆% 0.1; Dec 12 months NSA ∆% 1.6 Blog 2/2/14
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	Dec Unemployed 2.25 million Change in unemployed since last year: minus 340 thousand Unemployment rate: 3.7 % Blog 2/2/14
All Industry Indices	Nov month SA ∆% 0.3 12-month NSA ∆% 1.7 Blog 1/26/14
Industrial Production	Dec SA month ∆%: 1.1 12-month NSA ∆% 7.3 Blog 2/2/14
Machine Orders	Total Nov ∆% 5.8 Private ∆%: -1.3 Nov ∆% Excluding Volatile Orders 9.3 Blog 1/19/14
Tertiary Index	Nov month SA ∆% 0.6 Nov 12 months NSA ∆% 0.4 Blog 1/19/14
Wholesale and Retail Sales	Dec 12 months: Total ∆%: 2.9 Wholesale ∆%: 3.1 Retail ∆%: 2.6 Blog 2/2/14
Family Income and Expenditure Survey	Dec 12-month ∆% total nominal consumption 2.7, real 0.7 Blog 2/2/14
Trade Balance	Exports Dec 12 months ∆%: 15.3 Imports Nov 12 months ∆% 24.8 Blog 2/2/14

Links to blog comments in Table JPY:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.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, easing to 53.4 in Jan 2014. 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, easing to 50.9 in Jan 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Jan 2014	53.4	50.9	54.5	50.1	58.1
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. The index fell to 43.4 in Jan 2014.

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 fell to 50.5 in Jan 2014. 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. The index fell to 53.0 in Jan 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
Jan 2014	50.5	53.0	50.9	47.8	48.2	49.8
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. The index fell to 50.5 in Jan 2014.

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 IVQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDP. Secondary industry accounts for 43.9 percent of GDP in IVQ2013. In IVQ2013, industry alone accounts for 37.0 percent in IVQ2013 and construction with the remaining 6.9 percent in the four quarters of 2013. Tertiary industry accounts for 46.1 percent of cumulative GDP in IVQ2013 and primary industry for 10.0 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 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.1 percent and to 7.4 percent in IIQ2013, rebounding to 9.1 percent in IIIQ2013. Annual equivalent growth was 7.4 percent in IVQ2013.

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	56,884.5	7.7
Primary Industry	5,695.7	4.0
Farming	5,695.7	4.0
Secondary Industry	24,968.4	7.8
Industry	21,068.9	7.6
Construction	3899.5	9.5
Tertiary Industry	26,220.4	8.3
Transport, Storage, Post	2728.3	7.2
Wholesale, Retail Trades	5,567.2	10.3
Hotel & Catering Services	1149.4	5.3
Financial Intermediation	3353.5	10.1
Real Estate	3329.5	6.6
Other	10,092.5	7.7
Growth in Quarter Relative to Prior Quarter	∆% on Prior Quarter	∆% Annual Equivalent
2013
IVQ2013	1.8	7.4
IIIQ2013	2.2	9.1
IIQ2013	1.8	7.4
IQ2013	1.5	6.1
2012
IVQ2012	1.9	7.8
IIIQ2012	2.0	8.2
IIQ2012	2.1	8.7
IQ2012	1.4	5.7
2011
IVQ2011	1.8	7.4
IIIQ2011	2.2	9.1
IIQ2011	2.5	10.4
IQ2011	2.3	9.5

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

Growth of China’s GDP in IVQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDPA. Secondary industry accounts for 43.9 percent of GDP of which industry alone for 37.0 percent in cumulative IVQ2013 and construction with the remaining 6.9 percent in the four quarters of 2013. Tertiary industry accounts for 45.1 percent of GDP in the cumulative to IVQ2013 and primary industry for 10.0 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. GDP grew 7.7 percent in IVQ2013 relative to a year earlier and 1.8 percent relative to IIIQ2013, which is equivalent to 7.4 percent per year.

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

	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013
GDP	7.7	7.5	7.8	7.7
Primary Industry	3.4	3.0	3.4	4.0
Secondary Industry	7.8	7.6	7.8	7.8
Tertiary Industry	8.3	8.3	8.4	8.3
GDP ∆% Relative to a Prior Quarter	1.5	1.8	2.2	1.8
	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	2.5	2.2	1.8	1.4	2.1	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/a5d1371973e1486d93f290b9dfe5fe22) is slowing. The overall Flash HSBC China Manufacturing PMI^™ decreased from 50.5 in Dec to 49.6 in Jan, which is moderately below the contraction frontier of 50.0, while the Flash HSBC China Manufacturing Output Index decreased from 51.4 in Dec to 51.3 in Jan, remaining in moderate expansion territory. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the index is consistent with softening domestic demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/a5d1371973e1486d93f290b9dfe5fe22). 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 49.5 in Jan from 50.5 in Dec, indicating marginally deteriorating manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7b61a78e6454a91a38a5ab84e9846df). New export orders decreased for the second month with uncganged growth of total new orders. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds soft manufacturing in China with weakness in export orders and decelerating domestic demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7b61a78e6454a91a38a5ab84e9846df). 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	Dec month ∆%: 0.71 Jan-Dec 2013/Jan-Dec 2012 ∆%: 9.7 Dec 12-Month ∆%: 9.7 Blog 1/26/14
GDP Growth Rate	Year IVQ2013 ∆%: 7.7 Quarter IVQ2013 AE ∆%: 7.4 Blog 1/26/14
Investment in Fixed Assets	Total Jan-Dec 2013 ∆%: 19.6 Real estate development: 19.8 Blog 1/26/14
Retail Sales	Dec month ∆%: 1.24 Dec 12 month ∆%: 13.6 Jan-Dec ∆%: 13.1 Blog 1/26/14
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:

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/12/14 http://cmpassocregulationblog.blogspot.com/2014/01/twenty-nine-million-unemployed-or.html

VD Euro Area. Table VD-EUR provides yearly growth rates of the combined GDP of the members of the European Monetary Union (EMU) or euro area since 1996. Growth was very strong at 3.3 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*	1.4	12.1	-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 52.1 in Dec to 53.2 in Jan, which is a high in 31 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/9265238f7fd24e47ae4c056350e1944c). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with growth of GDP of 0.4 to 0.5 percent in IQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9265238f7fd24e47ae4c056350e1944c). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 52.1 in Dec to 52.9 in Jan, which is the second highest since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/8234c73e83714049a57e79337b91f438). Chris Williamson, Chief Economist at Markit, finds growth of GDP at 0.5 percent in IQ2014 if Jan activity is sustained (http://www.markiteconomics.com/Survey/PressRelease.mvc/8234c73e83714049a57e79337b91f438). The Markit Eurozone Services Business Activity Index increased from 52.1 in Dec to 52.9 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/8234c73e83714049a57e79337b91f438). The Markit Eurozone Manufacturing PMI^® increased to 54.0 in Jan from 52.7 in Dec with the reading at the highest since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa8005f424084e018d665383c341ef75). New orders increased and export orders grew at the fastest rate since Apr 2011. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at a quarterly rate exeeding 1.0 percent. (http://www.markiteconomics.com/Survey/PressRelease.mvc/fa8005f424084e018d665383c341ef75). 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	Dec 2013: 12.0 % unemployment rate; Dec 2013: 19.010 million unemployed Blog 2/2/14
HICP	Dec month ∆%: 0.3 12 months Dec ∆%: 0.8 Blog 1/19/14
Producer Prices	Euro Zone industrial producer prices Dec ∆%: 0.2 Nov 12-month ∆%: -0.8 Blog 2/9/14
Industrial Production	Nov month ∆%: 1.8; Nov 12 months ∆%: 3.0 Blog 1/19/14
Retail Sales	Dec month ∆%: minus 1.6 Dec 12 months ∆%: minus 1.0 Blog 2/9/14
Confidence and Economic Sentiment Indicator	Sentiment 100.9 Jan 2014 Consumer minus 11.7 Jan 2014 Blog 2/2/14
Trade	Jan-Nov 2013/Jan-Nov 2012 Exports ∆%: 0.5 Imports ∆%: -3.6 Nov 2013 12-month Exports ∆% -2.2 Imports ∆% -5.5 Blog 1/19/14

Links to blog comments in Table EUR:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html

1/12/14 http://cmpassocregulationblog.blogspot.com/2014/01/twenty-nine-million-unemployed-or.html

Advanced economies are experiencing weak demand. Table VD-1 provides month and 12-month percentage changes of the volume of retail sales in the euro zone from Jan 2011 to Dec 2013. Retail sales decreased 1.6 percent in Dec 2013 and decreased 1.0 percent in 12 months. The 12-month rates of growth became negative since Mar 2011 with exception of 0.6 percent in Apr 2011, 0.0 percent in Mar 2013 and 1.3 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 0.3 percent in 2009 and 1.9 percent in 2008 and fell again by 1.9 percent in 2011 and 2.7 percent in 2012. Retail sales fell 1.0 percent in 2013.

Table VD-1, Euro Zone, Volume of Retail Sales, Deflated ∆%

	Month ∆%	12-Month CA ∆%
Dec 2013	-1.6	-1.0
Nov	0.9	1.3
Oct	-0.4	-0.4
Sep	-0.7	-0.2
Aug	0.5	-0.3
Jul	0.4	-0.9
Jun	-0.8	-1.6
May	1.1	-0.2
Apr	0.0	-1.3
Mar	-0.2	-2.4
Feb	-0.3	-2.1
Jan	0.6	-2.1
Dec 2012	-0.1	-2.7
Nov	-0.2	-1.8
Oct	-0.3	-3.2
Sep	-1.3	-1.9
Aug	0.2	-0.8
Jul	-0.2	-1.5
Jun	0.3	-1.0
May	0.5	-0.6
Apr	-1.5	-3.5
Mar	0.2	0.0
Feb	-0.1	-2.2
Jan	-0.1	-1.1
Dec 2011	0.3	-1.9
Nov	-0.8	-1.5
Oct	0.3	-0.8
Sep	-0.2	-1.4
Aug	-0.1	-0.3
Jul	0.0	-0.6
Jun	0.8	-0.9
May	-1.8	-1.9
Apr	1.2	0.6
Mar	-1.5	-1.5
Feb	0.6	1.2
Jan	-1.0	0.6
Dec ∆%
2013		-1.0
2012		-2.7
2011		-1.9
2010		-0.6
2009		-0.3
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-2. Total sales decreased 1.6 percent in Dec 2013 and decreased 1.0 percent in the 12 months ending in Dec 2013. Food sales decreased 1.4 percent in Dec 2013 and 1.6 percent in 12 months and nonfood products decreased 1.8 percent in Dec and decreased 0.4 percent in 12 months. Sales of automotive fuel stores decreased 1.2 percent in Dec and decreased 2.1 percent in 12 months.

Table VD-2, Euro Zone, Volume of Retail Sales by Products, ∆%

Dec 2013	Month ∆%	12-Month ∆%
Total	-1.6	-1.0
Food, Drinks, Tobacco	-1.4	-1.6
Nonfood Products ex Automotive Fuel	-1.8	-0.4
Automotive Fuel in Specialized Stores	-1.2	-2.1

Source: EUROSTAT

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

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

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 Dec 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 0.4 percent for France and 3.7 percent Ireland. The 12-month percentage change for the UK, which is not a member of the euro zone, was 3.0 percent. The European Union’s 12-month percentage change was 0.1 percent.

Table VD-3, Euro Zone, Volume of Retail Sales by Member Countries, ∆%

Dec 2013	Month ∆%	12-Month ∆%
Euro Zone	-1.6	-1.0
Germany	-2.5	-2.4
France	-1.0	0.4
Netherlands	0.0*	-1.7*
Finland	-0.5	-1.3
Belgium	-0.3	-1.9
Portugal	-5.8	-1.0
Ireland	1.4	3.7
Italy	0.1*	-0.4*
Greece	1.8*	2.9*
Spain	-3.6	-1.2
UK	2.6	3.0
European Union	-0.8	0.1

*Nov 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. Growth decelerated to 0.4 percent in 2013.

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
2013	0.4	0.5
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

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_016_811.html

https://www.destatis.de/DE/PresseService/Presse/Pressekonferenzen/2014/BIP2013/Pressebroschuere_BIP2013.html

The Flash Germany Composite Output Index of the Markit Flash Germany PMI^®, combining manufacturing and services, increased from 55.0 in Dec to 55.9 in Jan. The index of manufacturing output reached 60.4 in Jan, for a 33-month high, from 57.9 in Dec, while the index of services increased to 53.6 in Jan from 53.5 in Dec. The overall Flash Germany Manufacturing PMI^® increased from 54.3 in Dec to 56.3 in Jan, which is a 32-month high (http://www.markiteconomics.com/Survey/PressRelease.mvc/cf093f72c48b48159b0c25f222a80354). New export work volumes increased at the fastest pace since Apr 2011 for the sixth consecutive month. Tim Moore, Senior Economist at Markit, finds expansion of Germany’s private sector at the fastest rate since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/cf093f72c48b48159b0c25f222a80354). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 55.0 in Dec to 55.5 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/2705803f88894a45939f4c46a6b60727). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improving expectations by German private sector companies with activity at the highest since Jun 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/2705803f88894a45939f4c46a6b60727). The Germany Services Business Activity Index decreased from 53.5 in Dec to 53.1 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/2705803f88894a45939f4c46a6b60727). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 54.3 in Dec to 56.5 in Jan, in the best reading in thirty two months (http://www.markiteconomics.com/Survey/PressRelease.mvc/73deb353a6e84484975bd015f3774e0f). New export orders increased for the seventh consecutive month at accelerated rate with demand from Asia and the US. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds the highest growth of manufacturing production and new orders in three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/73deb353a6e84484975bd015f3774e0f).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 1/26/14
Consumer Price Index	Dec month NSA ∆%: 0.4 Dec 12-month NSA ∆%: 1.4 Blog 1/19/14
Producer Price Index	Dec month ∆%: 0.1 CSA, 0.2 12-month NSA ∆%: -0.5 Blog 1/26/14
Industrial Production	MFG Dec month CSA ∆%: minus 0.5 12-month NSA: 5.2 Blog 2/9/14
Machine Orders	MFG Dec month ∆%: -0.5 Dec 12-month ∆%: 7.9 Blog 2/9/14
Retail Sales	Nov Month ∆% 0.8 12-Month ∆% 1.1 Blog 2/2/14
Employment Report	Unemployment Rate SA Dec 5.1% Blog 2/2/14
Trade Balance	Exports Dec 12-month NSA ∆%: 4.6 Imports Dec 12 months NSA ∆%: 2.0 Exports Dec month CSA ∆%: minus 0.9; Imports Dec month SA minus 0.6 Blog 2/9/14

Links to blog comments in Table DE:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.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 0.5 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 0.6 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 2.1 percent in Jun 2013 and fell 0.6 percent in 12 months. In Jul 2013, the production industries index fell 0.9 percent and increased 1.9 percent in 12 months. The production industries index increased 1.5 percent in Aug 2013 and fell 2.7 percent in 12 months. In Sep 2013, the production index fell 0.7 percent and increased 4.2 percent in 12 months. In Oct 2013, the production index of Germany fell 1.1 percent and increased 1.2 percent in 12 months. The index of production industries increased 2.4 percent in Nov 2013 and 0.4 percent in 12 months. The index of production industries decreased 0.6 percent in Dec 2013 and increased 4.8 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
Dec 2013	4.8	-0.6
Nov	0.4	2.4
Oct	1.2	-1.1
Sep	4.2	-0.7
Aug	-2.7	1.5
Jul	1.9	-0.9
Jun	-0.6	2.1
May	-4.5	-1.3
Apr	7.3	1.0
Mar	-9.0	0.6
Feb	-5.0	0.6
Jan	-1.4	-0.5
Dec 2012	-9.4	0.4
Nov	-2.9	-0.3
Oct	4.1	-1.5
Sep	-6.7	1.0
Aug	-0.6	-0.6
Jul	2.4	1.2
Jun	4.2	-0.8
May	-6.3	1.4
Apr	-0.6	-2.3
Mar	-0.1	2.3
Feb	2.4	-0.6
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	-1.0
Jul	5.8	3.1
Jun	-0.8	-1.5
May	18.2	0.8
Apr	5.3	-0.2
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
Dec 2001	-8.8
Dec 2000	0.2
Dec 1999	6.4
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: 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 May to Dec 2013. The index decreased 0.6 percent in Dec 2013 with decreases of 0.5 percent in industry, 0.5 percent in manufacturing, 2.5 percent in capital goods and 2.6 percent in energy. The index increased 2.4 percent in Nov 2013 with increases in all segments. The index fell 1.1 percent in Oct 2013 with all segments declining with exception of 0.7 percent for intermediate goods and 0.4 percent for nondurable goods.

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

	Dec 2013	Nov	Oct	Sep	Aug	Jul	Jun	May
Production Industries	-0.6	2.4	-1.1	-0.7	1.5	-0.9	2.1	-1.3
Industry	-0.5	3.0	-1.1	-1.0	2.2	-1.4	1.9	-1.3
Mfg	-0.5	3.0	-1.1	-1.0	2.2	-1.4	1.9	-1.3
Intermediate Goods	1.0	1.2	0.7	0.3	0.2	-0.5	0.3	0.5
Capital Goods	-2.5	5.1	-2.8	-2.5	4.6	-2.6	3.7	-3.2
Durable Goods	0.1	1.9	-3.2	1.7	-2.2	-2.8	9.2	-3.8
Nondurable Goods	1.1	1.2	0.4	-0.6	0.9	-0.1	-0.8	0.9
Energy	-2.6	-1.0	-2.0	1.9	-1.9	0.3	4.5	-1.9

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 were 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. All segments increased in Dec 2013. 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
Dec	5.3	5.2	7.6	4.3	5.2	3.2	0.5
Nov	1.1	1.1	1.1	1.5	0.0	-0.3	-1.5
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 Dec 2013. There are fluctuations in both monthly rates and in the past 12 months. In Jan 2013, manufacturing fell 0.7 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 0.8 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 1.9 percent in the month but decline of 0.3 percent in 12 months. Manufacturing fell 1.4 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 4.5 percent in 12 months. Manufacturing increased 3.0 percent in Nov 2013 and 1.1 percent in 12 months. In Dec 2013, manufacturing fell 0.5 percent and increased 5.2 percent in 12 months.

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

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Dec 2013	5.2	-0.5
Nov	1.1	3.0
Oct	1.5	-1.1
Sep	4.5	-1.0
Aug	-2.8	2.2
Jul	1.4	-1.4
Jun	-0.3	1.9
May	-4.4	-1.3
Apr	8.1	0.8
Mar	-8.7	0.4
Feb	-4.9	0.8
Jan	-0.6	-0.7
Dec 2012	-9.4	1.0
Nov	-3.1	-0.1
Oct	3.8	-1.6
Sep	-7.5	-1.4
Aug	-1.0	-0.6
Jul	2.0	1.6
Jun	3.7	-1.1
May	-6.8	1.9
Apr	-1.1	-2.1
Mar	-0.4	1.1
Feb	3.3	0.2
Jan	5.6	0.7
Dec 2011	1.4	-1.6
Nov	4.5	-0.4
Oct	0.7	1.0
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	0.3
Mar	11.2	0.7
Feb	17.1	1.3
Jan	16.9	0.1
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 Dec 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 decreased 0.5 percent in Dec 2013 and increased 7.9 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
Dec	7.9	-0.5	10.1	0.4	4.9	-1.6
Nov	4.1	2.4	6.5	2.3	1.2	2.6
Oct	2.0	-2.2	2.1	-2.4	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	-1.0	3.5	-2.9
Mar	-5.9	2.1	-4.9	2.5	-7.3	1.8
Feb	-3.1	2.1	-2.0	2.0	-4.6	2.1
Jan	-1.0	-1.5	0.5	-2.6	-2.7	0.2
2012
Dec	-9.1	1.2	-6.7	1.8	-12.6	0.2
Nov	-0.9	-2.6	2.4	-4.4	-5.1	0.0
Oct	4.5	3.7	7.0	6.2	1.3	0.4
Sep	-8.9	-1.7	-6.6	-2.5	-11.7	-0.6
Aug	-4.4	-1.0	-2.1	-0.3	-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	-1.9	-4.4	-2.8	-3.1	-0.7
Mar	-2.2	2.4	-1.2	3.3	-3.3	1.4
Feb	-4.3	0.3	-4.7	1.1	-3.8	-0.7
Jan	-2.6	-1.6	-4.6	-2.8	-0.2	-0.1
2011
Dec	0.0	2.3	-0.3	4.7	0.5	-0.6
Nov	-4.8	-2.8	-8.2	-5.0	-0.3	0.0
Oct	0.1	1.2	2.1	2.4	-2.1	-0.1
Sep	2.2	-3.0	1.9	-3.4	2.6	-2.3
Aug	7.1	-1.0	5.2	0.0	9.4	-2.3
Jul	4.9	-1.9	4.6	-5.8	5.4	3.2
Jun	3.5	-0.7	7.8	8.2	-2.0	-10.6
May	23.1	2.7	16.0	-3.6	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	4.2	26.1	4.1	18.2	4.3
2010
Dec	21.8	-2.7	26.8	-3.8	15.4	-1.3
Nov	21.4	5.6	27.1	8.9	15.0	1.7
Oct	14.2	0.1	18.2	-0.5	10.0	0.9
Sep	13.9	-0.9	15.6	-2.8	11.9	1.5
Aug	22.2	2.2	29.7	4.3	14.5	-0.3
Jul	14.1	-0.5	21.4	-0.5	6.4	-0.6
Jun	27.6	2.2	30.6	2.7	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	4.9	25.8	4.8
Feb	24.0	-0.2	28.7	0.2	18.6	-0.7
Jan	17.0	4.1	23.8	4.8	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 1.0 percent in Dec 2013 and increased 10.3 percent in 12 months. Domestic orders decreased 2.5 percent in Dec and foreign orders increased 2.9 percent. There has been deceleration from 2010 and 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
Dec	10.3	1.0	13.7	2.9	3.5	-2.5
Nov	6.5	3.6	8.7	3.8	2.4	3.5
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-5 shows non-adjusted total orders in manufacturing and trend. There was sharp recovery from the global recession with subsequent decline. Trend reversed upwardly.

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

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 3.5 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 1.1 percent in the 12 months ending in Nov 2013 and imports fell 1.6 percent. Exports increased 4.6 percent in the 12 months ending in Dec 2013 while imports increased 2.0 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 1.5 percent in the 12 months ending in Oct 2013. Imports fell 1.6 percent in the 12 months ending in Nov 2013 and increased 2.0 percent in the 12 months ending in Dec 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 ∆%
Dec 2013	82.2	4.6	68.0	2.0
Nov	94.7	1.1	75.6	-1.6
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	3.5	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-6 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-6, Germany, Exports Original Value and Trend 2009-2012

Source: Statistisches Bundesamt Deutschland

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

Chart VE-7 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-7, Germany, Imports 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 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-8, 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 decreased 0.9 percent in Dec 2013 calendar and seasonally adjusted (CSA) and imports decreased 0.6 percent. Export growth had been relatively strong from Dec 2012 to Apr 2013 with only one monthly decline of 1.1 percent in Feb 2013. Exports fell 1.8 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
Dec 2013	-0.9	-0.6
Nov	0.7	-2.3
Oct	0.3	3.0
Sep	1.4	-1.9
Aug	1.0	0.1
Jul	-0.8	0.2
Jun	0.7	-0.4
May	-1.8	0.9
Apr	1.5	1.4
Mar	0.4	0.4
Feb	-1.1	-2.8
Jan	1.1	2.8
Dec 2012	0.5	-1.2
Nov	-2.3	-3.9
Oct	0.3	2.6
Sep	-2.7	-0.5
Aug	1.6	-0.1
Jul	0.6	0.2
Jun	-1.3	-1.9
May	4.2	4.3
Apr	-1.0	-4.2
Mar	-0.4	1.1
Feb	1.1	3.4
Jan	2.4	-0.2
Dec 2011	-2.6	-1.7
Nov	3.0	-0.4
Oct	-3.5	-0.4
Sep	1.4	0.1
Aug	2.6	-0.1
Jul	-1.2	0.2
Jun	-0.4	0.7
May	2.4	0.9
Apr	-3.2	-0.6
Mar	4.6	1.9
Feb	1.2	2.5
Jan	0.7	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 Dec 2013. German exports to other European Union (EU) members are 56.6 percent of total exports in Dec 2013 and 57.0 percent in cumulative Jan-Dec 2013. Exports to the euro area are 36.7 percent of the total in Dec and 36.7 percent cumulative in Jan-Dec. Exports to third countries are 43.4 percent of the total in Dec and 43.0 percent cumulative in Jan-Dec. There is similar distribution for imports. Exports to non-euro countries are increasing 9.0 percent in the 12 months ending in Dec 2013, increasing 2.6 percent cumulative in Jan-Dec 2013 while exports to the euro area are increasing 5.4 percent in the 12 months ending in Dec 2013 and decreasing 1.2 percent cumulative in Jan-Dec 2013. Exports to third countries, accounting for 43.4 percent of the total in Dec 2013, are increasing 2.1 percent in the 12 months ending in Dec 2013 and decreasing 0.5 percent cumulative in Jan-Dec 2013, accounting for 43.0 percent of the cumulative total in Jan-Dec 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 ∆%

	Dec 2013  € Billions	Dec 12-Month ∆%	Cumulative Jan-Dec 2012 € Billions	Cumulative Jan-Dec 2013/ Jan-Nov 2012 ∆%
Total Exports	82.2	4.6	1,093.9	-0.2
A. EU Members	46.5 % 56.6	6.7	623.5 % 57.0	0.1
Euro Area	30.2 % 36.7	5.4	401.9 % 36.7	-1.2
Non-euro Area	16.3 % 19.8	9.0	221.6 % 20.3	2.6
B. Third Countries	35.7 % 43.4	2.1	470.4 % 43.0	-0.5
Total Imports	68.0	2.0	895.0	-1.2
C. EU Members	44.8 % 65.9	6.9	577.6 % 64.5	0.8
Euro Area	31.2 % 45.9	6.3	401.2 % 44.8	-0.2
Non-euro Area	13.5 % 19.9	8.3	176.4 % 19.7	3.0
D. Third Countries	23.2 % 34.1	-6.2	317.4 % 35.5	-4.6

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

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/02/PE14_040_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 increased from 47.3 in Dec to 48.5 in Jan for a three-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/228631c479cf456f8a42312cc0864fd1). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing economic weakness in the French private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/228631c479cf456f8a42312cc0864fd1). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, increased from 47.3 in Dec to 48.9 in Jan, indicating milder contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa120777f894df7a50f2fa2ddbe02c4). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds continuing weakness with log business confidence (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa120777f894df7a50f2fa2ddbe02c4). The Markit France Services Activity index decreased from 48.0 in Nov to 47.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/faa120777f894df7a50f2fa2ddbe02c4). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 49.3 in Jan from 47.0 in Dec for the highest reading in four months (http://www.markiteconomics.com/Survey/PressRelease.mvc/dc5e49104c5147e089d08e7351a59309). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds slower decline of output (http://www.markiteconomics.com/Survey/PressRelease.mvc/dc5e49104c5147e089d08e7351a59309). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Dec month ∆% 0.3 12 months ∆%: 0.7 1/19/14
PPI	Dec month ∆%: 0.2 Dec 12 months ∆%: -0.1 Blog 2/2/14
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 Dec ∆%: 0.4 Dec 12-Month Manufactured Goods ∆%: 1.6 Blog 2/2/14
Employment	Unemployment Rate: IIIQ2013 10.5% Blog 12/8/13
Trade Balance	Dec Exports ∆%: month 3.5, 12 months -0.5 Dec Imports ∆%: month 1.9, 12 months -1.3 Blog 2/9/14
Confidence Indicators	Historical averages 100 Jan Mfg Business Climate 100 Blog 1/26/14

Links to blog comments in Table FR:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html

1/12/14 http://cmpassocregulationblog.blogspot.com/2014/01/twenty-nine-million-unemployed-or.html

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

France has been running a trade deficit fluctuating around €5,000 million as shown in Table VF-1. Exports increased 3.5 percent in Dec 2013 while imports increased 1.9 percent. The trade deficit decreased from revised €5673 million in Nov 2013 to €5207 million in Dec 2013.

Table VF-1, France, Exports, Imports and Trade Balance, € Millions 

	Exports	Imports	Trade Balance
Dec 2013	36,913	42,120	-5,207
Nov	35,664	41,337	-5,673
Oct	36,396	41,219	-4,823
Sep	36,531	42,266	-5,735
Aug	36,331	41,063	-4,732
Jul	36,444	41,764	-5,320
Jun	36,024	40,931	-4,907
May	35,872	41,624	-5,752
Apr	38,276	42,034	-3,758
Mar	36,057	40,703	-4,646
Feb	35,643	41,513	-5,870
Jan	36,462	42,005	-5,543
Dec 2012	37,091	42,677	-5,586
Nov	36,629	41,433	-4,804
Oct	37,222	42,477	-5,255
Sep	37,092	42,194	-5,102
Aug	38,348	44,275	-5,927
Jul	36,560	41,093	-4,533
Jun	36,377	42,557	-6,180
May	37,690	42,956	-5,266
Apr	36,521	42,589	-6,068
Mar	36,350	42,480	-6,130
Feb	37,168	43,621	-6,453
Jan	36,555	42,284	-5,729
Dec 2011	35,869	41,235	-5,366
Dec 2010	33,731	39,347	-5,616

Source: France, Direction générale des douanes et droits indirects

http://lekiosque.finances.gouv.fr/AppChiffre/Portail_default.asp

Table VF-2 provides month and 12-month percentage changes of France’s exports and imports. Exports increased 3.5 percent in Dec 2013 and decreased 0.5 percent in the 12 months ending in Dec 2013. Imports increased 1.9 percent in Dec 2013 and decreased 1.3 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-2, France, Exports and Imports, Month and 12-Month ∆%

	Exports Month ∆%	Exports 12-Month ∆%	Imports Month ∆%	Imports 12-Month ∆%
Dec 2013	3.5	-0.5	1.9	-1.3
Nov	-2.0	-2.6	0.3	-0.2
Oct	-0.4	-2.2	-2.5	-3.0
Dec 2012		3.4		3.5
Dec 2011		6.3		4.8
Dec 2010		13.1		14.6
Dec 2009		-9.4		-2.0
Dec 2008		-6.9		-10.9
Dec 2007		5.8		7.9
Dec 2006		6.2		6.5
Dec 2005		11.8		15.6
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-3. France’s trade balance deteriorated sharply from 2007 to 2011 with the deficit increasing from €42,494 million in 2007 to €74,165 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 €67,241 million with growth of exports of 3.1 percent and of imports of 1.5 percent. The trade deficit declined to €61,190 in 2013 with decline of exports of 1.3 percent and of 2.3 percent for imports.

Table VF-3, France, Exports, Imports and Balance Year € Millions and ∆%

	Exports € Millions	∆%	Imports € Millions	∆%	Balance € Millions
Dec 2013 12 Months	435,641		496,831		-61,190
Year
2013	435,641	-1.3	496,831	-2.3	-61,190
2012	441,401	3.1	508,642	1.2	-67,241
2011	428,234	8.4	502,399	12.3	-74,165
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 47.9 in Dec to 49.4 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/5f7e4ddd86a940cf8aacf02d30fb724a). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index suggesting services is not restraining overall activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/5f7e4ddd86a940cf8aacf02d30fb724a). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased marginally from 53.3 in Dec to 53.1 in Jan for continuing growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/96b0cc2204e6440b8bf31f7575c03bd8). New export orders grew around the trend of 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 continuing concern on the margins of sales prices relative to input costs (http://www.markiteconomics.com/Survey/PressRelease.mvc/96b0cc2204e6440b8bf31f7575c03bd8). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Jan month ∆%: 0.2 Jan 12-month ∆%: 0.7 Blog 2/9/14
Producer Price Index	Dec month ∆%: -0.1 Dec 12-month ∆%: -2.1 Blog 2/2/14
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	Dec 2013 Participation rate 63.5% Employment ratio 55.3% Unemployment rate 12.7% Youth Unemployment 41.6% Blog 2/2/14
Industrial Production	Nov month ∆%: 0.3 12 months CA ∆%: 1.4 Blog 1/19/14
Retail Sales	Dec month ∆%: 0.0 Dec 12-month ∆%: 0.1 Blog 1/26/13
Business Confidence	Mfg Jan 97.7, Sep 96.8 Construction Jan 76.5, Sep 79.0 Blog 2/2/14
Trade Balance	Balance Nov SA €2993 million versus Oct €2957 Exports Nov month SA ∆%: -1.9; Imports Nov month ∆%: -2.2 Exports 12 months Nov NSA ∆%: -3.4 Imports 12 months NSA ∆%: -6.9 Blog 1/19/14

Links to blog comments in Table IT:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.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

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 0.3 percent in 2012. Growth increased to 1.9 percent in 2013. 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 2013, which is relatively high for an advanced economy. The growth rate of GDP between 2000 and 2007 is higher at 3.0 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 2013 was lower by 1.2 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	0.3
2013	1.9
Average Growth Rates ∆% per Year
1948-2013	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*	-3.0
2007-2013*	-1.2
2000-2013	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q4-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 58.8 in Dec to 58.3 in Jan, which is still close to high historical levels and above long-term trend (http://www.markiteconomics.com/Survey/PressRelease.mvc/06f532c69fb148b9a4f74c23bf3d1f27). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at 0.8 percent in IVQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/06f532c69fb148b9a4f74c23bf3d1f27). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) decreased to 56.7 in Jan from 57.2 in Dec with continuing strength close to the highest reading since Feb 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/1961e83a75274808a59a2fdff2cf4579). New export orders increased for the tenth consecutive month at the highest rate of growth in about three years. New orders increased from North America, Europe, Asia, Brazil, Scandinavia and the Middle East. 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 the unemployment rate possibly falling below 7 percent (http://www.markiteconomics.com/Survey/PressRelease.mvc/1961e83a75274808a59a2fdff2cf4579). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Dec month ∆%: 0.4 Dec 12-month ∆%: 2.0 Blog 1/19/14
Output/Input Prices	Output Prices: Dec 12-month NSA ∆%: 1.0; excluding food, petroleum ∆%: 1.0 Input Prices: Dec 12-month NSA ∆%: -1.2 Excluding ∆%: -1.6 Blog 1/19/14
GDP Growth	IVQ2013 prior quarter ∆% 0.7; year earlier same quarter ∆%: 2.8 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 2/2/14
Industrial Production	Dec 2013/Dec 2012 ∆%: Production Industries 1.8; Manufacturing 1.5 Blog 2/9/14
Retail Sales	Dec month ∆%: 2.6 Dec 12-month ∆%: 5.3 Blog 1/19/14
Labor Market	Sep-Nov Unemployment Rate: 7.1%; Claimant Count 3.7%; Earnings Growth 0.9% Blog 1/26/14 LMGDP 12/22/13
GDP and the Labor Market	IIIQ2013 Weekly Hours 101.4, GDP 98.0, Employment 101.5 IQ2008 =100 GDP IVQ14 98.7 IQ2008=100 Blog 2/2/14
Trade Balance	Balance SA Dec minus ₤1026 million Exports Dec ∆%: 2.1; Oct-Dec ∆%: -0.1 Imports Dec ∆%: -3.8 Oct-Dec ∆%: -0.4 Blog 2/9/14

Links to blog comments in Table UK:

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html

1/19/14 http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html

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 Dec 2013. Manufacturing accounts for 68.4 percent of the production industries of the UK and increased 1.5 percent in the 12 months ending in Dec 2013. Capital goods industries decreased 0.6 percent in the 12 months ending in Dec 2013, increasing 2.3 percent in the 12 months ending in Nov 2013. Capital goods industries fell 2.0 percent in the 12 months ending in May 2013, grew 2.8 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 13.1 percent in the 12 months ending in Oct 2013 and 2.6 percent in the 12 months ending in Dec 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 output. 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. Manufacturing fell 0.6 percent in 2013.

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
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
2013	-0.3	-1.8	-0.6	-1.9	-0.9	1.3	-3.1

	PROD IND	MNG	MFG	CON DUR	NCONS	CAP	ENGY
2011
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	-3.2	-5.7	-4.1	-1.2	-5.9	-0.2	-3.3
Feb	-2.2	-5.9	-2.4	-3.9	-5.2	2.9	-6.6
Mar	-1.8	-10.4	-1.7	0.9	-4.4	2.1	-3.0
Apr	-1.3	-5.0	-1.1	-1.5	0.3	2.8	-4.0
May	-2.2	-0.4	-3.2	-3.9	0.1	-2.0	-2.9
Jun	1.5	-2.2	1.7	1.6	2.6	2.1	-4.6
Jul	-1.3	-6.9	-1.0	1.1	0.5	1.0	-6.2
Aug	-1.6	-9.3	-0.8	-2.8	-2.3	0.3	-7.4
Sep	2.0	11.4	0.3	-2.0	-1.0	1.3	2.9
Oct	2.9	13.1	2.1	-5.0	0.9	3.8	1.3
Nov	2.1	2.4	2.2	-3.2	1.5	2.3	-1.5
Dec	1.8	2.6	1.5	-3.0	2.7	-0.6	-0.3

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/december-2013/index.html

Percentage changes in the production industries and major components in a month relative to the prior month are shown in Table VH-2. The index of production increased 0.4 percent in Dec 2013 with manufacturing increasing 0.3 percent. Mining and quarrying increased 2.9 percent in Dec 2013 and capital goods fell 0.9 percent. Energy increased 2.2 percent. The index of production fell 0.1 percent in Nov 2013 with manufacturing decreasing 2.1 percent while capital goods fell 0.7 percent. The index of production increased 0.2 percent in Oct 2013, with manufacturing increasing 0.2 percent, consumer durable goods decreasing 0.6 percent and capital goods increasing 1.2 percent. All segments increased in Sep 2013 with exception of decline of 0.5 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 2.3 percent in Jan 2013 and increased 1.4 percent in Mar and 2.9 percent in Jun while manufacturing fell 1.5 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
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	-	1.2	0.3	-1.0	-1.6
Feb	-	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	-0.9	0.9	-1.5	-0.7	0.7	-2.3	0.8
Feb	1.0	2.3	0.4	-3.9	-0.2	0.3	0.6
Mar	0.1	-4.5	1.2	5.1	0.6	1.4	-0.5
Apr	-0.1	1.8	-0.3	-0.8	1.9	-0.4	-
May	-	3.6	-0.9	-2.5	-0.4	-2.5	1.1
Jun	1.3	0.7	2.0	2.4	1.0	2.9	-2.1
Jul	0.1	-0.7	0.2	2.9	-0.5	1.8	0.1
Aug	-1.0	-1.1	-1.1	-5.8	-2.6	-3.1	-0.9
Sep	0.8	0.4	1.2	1.8	1.7	1.7	-0.5
Oct	0.2	-1.3	0.2	-0.6	-0.9	1.2	-1.4
Nov	-0.1	-2.1	-0.1	-0.9	-0.4	-0.7	0.3
Dec	0.4	2.9	0.3	0.6	1.6	-0.9	2.2

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/december-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 1.8 percent was driven by positive contribution of 0.30 percentage points by mining and quarrying. Manufacturing added 1.06 percentage points. The contribution of manufacturing is strong because of its share of 68.4 percent in the production index with growth of 1.5 percent in 12 months. The contributions do not add exactly because of rounding. Manufacturing increased 0.3 percent in Dec 2013, adding 0.23 percentage points. Mining increased 2.9 percent in Dec 2013, adding 0.33 percentage points. Electricity decreased 1.3 percent in Dec, deducting 0.10 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 Dec 2013	% Point Contrib.	Volume Month ∆% Dec 2013	% Point Contrib.
PROD IND	100.0	1.8	1.8	0.4	0.4
MNG	15.1	2.6	0.30	2.9	0.33
Division 06	12.4	-1.0	-0.09	4.7	0.38
MFG	68.4	1.5	1.06	0.3	0.23
ELEC	8.6	-3.0	-0.25	-1.3	-0.10
WATER & SEW	7.9	7.9	0.69	-0.2	-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/december-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	Quarter on previous quarter growth (%)	Contribution to production (% points)
IoP	Index of Production	100.0	0.5	0.5
B	Total Mining & Quarrying	15.1	-1.9	-0.23
C	Total Manufacturing	68.4	0.7	0.50
CA	Food, beverages and tobacco	10.9	-1.3	-0.15
CB	Textiles and leather products	2.1	-0.3	-0.01
CC	Wood, paper and printing	5.5	-1.4	-0.07
CD	Coke and petroleum	1.7	-1.3	-0.02
CE	Chemical Products	4.2	1.7	0.07
CF	Pharmaceutical Products	6.4	4.0	0.20
CG	Rubber and plastic products	5.7	2.5	0.14
CH	Metal products	7.7	2.2	0.18
CI	Computer, electronic & optical	4.3	-2.5	-0.11
CJ	Electrical equipment	2.1	-0.1	0.00
CK	Machinery and equipment	5.0	1.8	0.09
CL	Transport equipment	7.7	2.0	0.20
CM	Other manufacturing & repair	5.4	-0.4	-0.02
D	Total Electricity & Gas	8.6	1.8	0.14
E	Total Water	7.9	0.8	0.07

Sector	Summary Description	% of production	Month on same month a year ago growth (%)	Contribution to production (% points)
IoP	Index of Production	100.0	1.8	1.8
B	Total Mining & Quarrying	15.1	2.6	0.30
C	Total Manufacturing	68.4	1.5	1.06
CA	Food, beverages and tobacco	10.9	0.3	0.04
CB	Textiles and leather products	2.1	-4.3	-0.09
CC	Wood, paper and printing	5.5	6.5	0.32
CD	Coke and petroleum	1.7	13.2	0.19
CE	Chemical Products	4.2	-0.7	-0.03
CF	Pharmaceutical Products	6.4	4.5	0.23
CG	Rubber and plastic products	5.7	3.0	0.17
CH	Metal products	7.7	3.2	0.26
CI	Computer, electronic & optical	4.3	-7.6	-0.35
CJ	Electrical equipment	2.1	-5.9	-0.14
CK	Machinery and equipment	5.0	-12.2	-0.72
CL	Transport equipment	7.7	7.6	0.73
CM	Other manufacturing & repair	5.4	8.2	0.45
D	Total Electricity & Gas	8.6	-3.0	-0.25
E	Total Water	7.9	7.9	0.69

Source: UK Office for National Statistics

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

The UK’s trade account is shown in Table VH-5. In Dec 2013, the UK ran a deficit in trade of goods and services (total trade) of ₤1026 million. The deficit in trade of goods was ₤7717 million and ₤7207 million in goods excluding oil. A surplus in services of ₤6691 million contributed to the smaller overall deficit in goods and services (-₤7717 million plus ₤6691 million equal to -₤1026 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 2.1 percent in Dec 2013 and decreased 0.1 percent in the quarter Oct-Dec 2013 relative to the same quarter a year earlier with imports decreasing 3.8 percent in Dec and decreasing 0.4 percent in Oct-Dec 2013 relative to the same quarter a year earlier. Excluding oil, UK exports of goods increased 0.4 percent in Dec 2013 and increased 0.2 percent in Oct-Dec 2013 relative to a year earlier while imports decreased 4.9 percent in Dec and increased 1.4 percent in Oct-Dec 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 2.4 percent in Dec and increased 0.3 percent in Oct-Dec 2013 relative to a year earlier and imports fell 1.0 percent in Dec and increased 2.4 percent in Oct-Dec 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 Dec 2013	Month ∆%    Dec 2013	Oct-Dec 2013 ∆% Oct-Dec 2012
Total Trade
Exports	41,554	2.1	-0.1
Imports	42,580	-3.8	-0.4
Balance	-1,026
Trade in Goods
Exports	25,034	1.9	-0.3
Imports	32,751	-4.7	-1.2
Balance	-7,717
Trade in Goods Excluding Oil
Exports	21,943	0.4	0.2
Imports	29,150	-4.9	1.4
Balance	-7,207
Trade in Services
Exports	16,520	2.4	0.3
Imports	9,829	-1.0	2.4
Balance	6,691

Source: UK Office for National Statistics

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

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