Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend, Financial Turmoil, Stagnating Real Disposable Income, United States Housing Collapse, World Economic Slowdown and Global Recession Risk: Part IV

 

Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend, Financial Turmoil, Stagnating Real Disposable Income, United States Housing Collapse, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

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

Executive Summary

I Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend

IA Mediocre Cyclical United States Economic Growth

IA1 Contracting Real Private Fixed Investment

IB Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

II United States Housing Collapse

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 (Section I 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 (Section I 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 increased 0.2 percent in the month of Nov 2013 and increased 1.0 percent in the 12 months ending in Nov 2013. Germany’s imports decreased 1.1 percent in the month of Nov and decreased 0.4 percent in the 12 months ending in Nov. 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 decreased 2.1 percent in Nov 2013 while imports increased 0.2. 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 increased 0.9 percent in Nov 2013 and goods exports increased 2.4 percent in Jan-Nov 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	0.9 Nov	2.4 Jan-Nov	-1.4 Nov	-0.6 Jan-Nov
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	0.2 Nov CSA	1.0 Nov	-1.1 Nov CSA	-0.4 Nov
France Nov	-2.1	-2.6	0.2	-0.1
Italy Nov	-1.9	-3.4	-2.2	-6.9
UK	1.2 Nov	0.5 Sep-Nov 13 /Sep-Nov 12	0.6 Nov	2.1 Sep-Nov 13/Sep-Nov 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, decreased to 54.0 in Dec from 54.2 in Nov, indicating expansion at almost unchanged rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/ebfdf95d51b2401aae0936330ea3bd7e). This index has remained above the contraction territory of 50.0 during 53 consecutive months. The employment index increased from 51.3 in Nov to 52.4 in Dec with input prices rising at a slower rate, new orders increasing at faster rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/ebfdf95d51b2401aae0936330ea3bd7e). David Hensley, Director of Global Economics Coordination at JP Morgan finds expectations of continuing growth in 2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/ebfdf95d51b2401aae0936330ea3bd7e). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, was higher at 53.3 in Dec from 53.1 in Nov, which is the highest reading since May 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/7757ef12fcdf458ab9f3e1c2d7c0811a). New export orders expanded for the sixth consecutive months (http://www.markiteconomics.com/Survey/PressRelease.mvc/7757ef12fcdf458ab9f3e1c2d7c0811a). David Hensley, Director of Global Economic Coordination at JP Morgan finds acceleration of global manufacturing with output at the highest rate in about three years (http://www.markiteconomics.com/Survey/PressRelease.mvc/7757ef12fcdf458ab9f3e1c2d7c0811a). The HSBC Brazil Composite Output Index, compiled by Markit, decreased marginally from 51.8 in Nov to 51.7 in Dec, indicating moderate expansion of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/8e4e1a9551684016a6014835860005eb). The HSBC Brazil Services Business Activity index, compiled by Markit, decreased marginally from 52.3 in Nov to 51.7 in Dec, indicating continuing improvement in business activity at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/8e4e1a9551684016a6014835860005eb). André Loes, Chief Economist, Brazil, at HSBC, finds slower growth with decreasing confidence but slower rate of increase of prices (http://www.markiteconomics.com/Survey/PressRelease.mvc/8e4e1a9551684016a6014835860005eb). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) increased from 49.7 in Nov to 50.5 in Dec, indicating marginal improvement in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/22c84c0c32a1483db57c2ec93cfb5ebc). André Loes, Chief Economist, Brazil at HSBC, finds improvement with growth of production and new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/22c84c0c32a1483db57c2ec93cfb5ebc).

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 55.9 in Nov to 56.0 in Dec with the average at 53.7l, which is the lowest quarterly average in 2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a3f2275774ad43e3b0e1b72f6b0b7b8b). Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with growth at around 3 percent per year in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/a3f2275774ad43e3b0e1b72f6b0b7b8b). The Markit US Composite PMI™ Output Index of Manufacturing and Services fell marginally to 56.1 in Dec from 56.2 in Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/546ebdb0665349ea89f47dc9955c4d91). The Markit US Services PMI™ Business Activity Index fell marginally from 55.9 in Nov to 55.7 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/546ebdb0665349ea89f47dc9955c4d91). Chris Williamson, Chief Economist at Markit, finds renewed optimism by business (http://www.markiteconomics.com/Survey/PressRelease.mvc/546ebdb0665349ea89f47dc9955c4d91). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 55.0 in Dec from 54.7 in Nov, which indicates solid expansion (http://www.markiteconomics.com/Survey/PressRelease.mvc/3c6c524ef8474099a853c9cc449b5f1c). The index of new exports orders was unchanged from 51.4 in Nov to 51.4 in Dec while total new orders decreased from 56.2 in Dec to 56.1 in Dec. Chris Williamson, Chief Economist at Markit, finds that the index suggests growth of production at 3.0 percent annual rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/3c6c524ef8474099a853c9cc449b5f1c). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 0.9 percentage points from 56.4 in Oct to 57.3 in Nov, which indicates growth at a higher 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 increased 2.5 percentage point from 57.0 in Oct to 59.5 in Nov, growing at a faster rate. The Non-Manufacturing ISM Report on Business^® PMI decreased 0.9 percentage points from 53.9 in Nov to 53.0 in Dec, indicating growth of business activity/production during 53 consecutive months, while the index of new orders decreased 7.0 percentage points from 56.4 in Nov to 49.4 in Dec (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 6.7% Blog calculation People in Job Stress Dec: 29.3 million NSA, 18.0% of Labor Force Establishment Survey: Dec Nonfarm Jobs +74,000; Private +87,000 jobs created  Nov 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.8 Blog 1/12/14
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 IIIQ2013 SA ∆%: 0.4 Sep 12 months ∆%: 1.9 Blog 11/24/13
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 IIIQ2013∆% SAAE 3.0; IIIQ2013/IIIQ2012 ∆% 0.3; Unit Labor Costs SAAE IIIQ2013 ∆% -1.4; IIIQ2013/IIIQ2012 ∆%: 2.1 Blog 12/22/2013
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 Nov ∆% 1.8 Ex Transport 0.6 Jan-Nov NSA New Orders 2.4 Ex transport 1.4 Blog 1/12/14
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-Dec 2013 15,600,199; Jan-Dec 2012 14,491,873. Dec 13 SAAR 16.40 million, Nov 13 SAAR 16.41 million, Dec 2012 SAAR 15.24 million Blog 1/5/14
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	Nov SAAR month SA ∆%: 1.0 Nov 12-month NSA: 1.1 Jan-Nov 2013 ∆% 5.0 Blog 1/5/14
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 Nov SA ∆%: 0.9 Imports Nov SA ∆%: -1.4 Goods Exports Jan-Nov 2013/2012 NSA ∆%: 2.4 Goods Imports Jan-Nov 2013/2012 NSA ∆%: -0.6 Blog 1/12/14
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:

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

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

Manufacturers’ shipments of durable goods decreased 1.9 percent in Dec 2013, increasing 1.3 percent in Nov 2013 and 0.6 percent in Oct 2013. New orders decreased 4.3 percent in Dec 2013 after increasing 2.6 percent in Nov 2013 and decreasing 0.7 percent in Oct 2013, as shown in Table VA-1. These data are very volatile. Volatility is illustrated by decrease of 12.9 percent in Nov 2012 after increase of orders for nondefense aircraft of 2642.2 percent in Sep 2012 after decrease of 97.2 percent in Aug and increases of 51.1 percent in Jul 2012 and 32.5 percent in Jun 2012. Nondefense aircraft new orders decreased 17.5 percent in Dec 2013 after increasing 21.1 percent in Nov 2013 and decreasing 5.3 percent in Oct 2013. New orders excluding transportation equipment decreased 1.6 percent in Dec 2013, increased 0.1 percent in Nov 2013 and 0.7 percent in Oct 2013. Capital goods new orders, indicating investment, decreased 6.5 percent in Dec 2013, increasing 7.1 percent in Nov 2013 but falling 2.6 percent in Oct 2013. New orders of nondefense capital goods decreased 5.0 percent in Dec 2013, after increasing 7.8 percent in Nov 2013 and decreasing 0.8 percent in Oct 2013. Capital goods orders excluding volatile aircraft decreased 1.3 percent in Dec 2013, increasing 2.6 percent in Nov 2013 and decreasing 0.6 percent in Oct 2013.

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

	Dec 2013 ∆%	Nov 2013  ∆%	Oct 2013 ∆%
Total
S	-1.9	1.3	0.6
NO	-4.3	2.6	-0.7
Excluding Transport
S	-0.3	1.2	0.2
NO	-1.6	0.1	0.7
Excluding Defense
S	-1.3	0.9	0.8
NO	-3.7	2.7	0.2
Machinery
S	-0.4	3.6	0.3
NO	0.8	3.0	0.9
Computers & Electronic Products
S	0.2	1.8	-1.8
NO	-7.8	0.1	2.4
Computers
S	-4.9	3.4	-9.8
NO	-7.7	3.2	-8.4
Transport Equipment
S	-5.7	1.6	1.6
NO	-9.5	7.9	-3.5
Motor Vehicles
S	-5.9	2.0	2.5
NO	-5.8	2.3	2.3
Nondefense Aircraft
S	4.5	-8.3	1.8
NO	-17.5	21.1	-5.3
Capital Goods
S	-0.7	2.0	-0.2
NO	-6.5	7.1	-2.6
Nondefense Capital Goods
S	0.8	0.9	-0.1
NO	-5.0	7.8	-0.8
Capital Goods ex Aircraft
S	-0.2	2.3	-0.2
NO	-1.3	2.6	-0.6

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

Source: US Census Bureau

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

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

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

Source: US Census Bureau

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

Additional perspective on manufacturers’ shipments and new orders of durable goods is in Table VA-2. Values are cumulative millions of dollars in Jan-Dec 2013 not seasonally adjusted (NSA) and without adjustment for inflation. Shipments of all manufacturing industries in Jan-Dec 2013 total $2761.8 billion and new orders total $2747.5 billion, growing respectively by 3.4 percent and 4.9 percent relative to the same period in 2012. Excluding transportation equipment, shipments grew 1.7 percent and new orders increased 3.5 percent. Excluding defense, shipments grew 3.6 percent and new orders grew 6.5 percent. Important information not in Table VA-2 is the large share of nondurable goods: with shipments of $3 trillion in 2012, growing by 2.0 percent, and new orders of $3 trillion, growing by 2.0 percent, in part driven by higher prices for food and energy. Durable goods were lower in value in 2012, with shipments of $2.7 trillion, growing by 7.0 percent, and new orders of $2.6 trillion, growing by 4.1 percent. Capital goods have relatively high value of $909.6 billion for shipments, growing 2.0 percent, and new orders $954.9 billion, growing 5.7 percent. Excluding aircraft, capital goods shipments reached $1003.3 billion, growing by 2.1 percent, and new orders $1066.4 billion, growing 4.7 percent. Data weakened in 2013 with effects of lower inflation on nominal values with recovery later in the year.

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

Jan-Dec 2013	Shipments	∆% 2013/ 2012	New Orders	∆% 2013/  2012
Total	2,761,834	3.4	2,747,453	4.9
Excluding Transport	1,939,179	1.7	1,878,032	3.5
Excluding Defense	2,616,038	3.6	2,620,420	6.5
Machinery	411,018	2.9	416,748	7.8
Computers & Electronic Products	332,022	-3.2	255,321	-2.8
Computers & Related Products	27,508	-8.0	27,610	-9.2
Transport Equipment	822,655	7.7	869,421	7.9
Motor Vehicles	541,757	10.1	541,381	10.2
Nondefense Aircraft	136,502	7.8	200,722	24.9
Capital Goods	1,003,280	2.1	1,066,447	4.7
Nondefense Capital Goods	884,838	2.3	964,693	8.3
Capital Goods ex Aircraft	789,327	1.5	809,388	4.3

Note: Transport: transportation

Source: US Census Bureau

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

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

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

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

Source: Board of Governors of the Federal Reserve System

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

Manufacturing jobs increased 9,000 in Dec 2013 relative to Nov 2013, seasonally adjusted. Manufacturing jobs not seasonally adjusted increased 89,000 from Dec 2012 to Dec 2013 or at the average monthly rate of 7,417. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. 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, as shown in Table I-1, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production 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 Dec 2013. 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. 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 declined by 21.9 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 VA-3 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.8 percent in IIIQ2013. Most of US national income is in the form of services. In Dec 2013, there were 137.753 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 115.542 million NSA in Dec 2013 accounted for 83.9 percent of total nonfarm jobs of 137.753 million, of which 12.028 million, or 10.4 percent of total private jobs and 8.7 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 96.883 million NSA in Dec 2013, or 70.3 percent of total nonfarm jobs and 83.9 percent of total private-sector jobs. Manufacturing has share of 10.8 percent in US national income in IIIQ2013, as shown in Table VA-3. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

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

	SAAR IIQ2013	% Total	SAAR IQ2013	% Total
National Income WCCA	14,495.5	100.0	14,643.3	100.0
Domestic Industries	14,248.7	98.3	14,380.3	98.2
Private Industries	12,568.6	86.7	12,705.2	86.8
Agriculture	220.3	1.5	225.2	1.5
Mining	254.3	1.8	256.4	1.8
Utilities	216.5	1.5	221.2	1.5
Construction	629.0	4.3	639.1	4.4
Manufacturing	1558.9	10.8	1577.7	10.8
Durable Goods	888.1	6.1	910.1	6.2
Nondurable Goods	670.1	4.6	667.6	4.6
Wholesale Trade	874.4	6.0	884.0	6.0
Retail Trade	995.8	6.9	1000.2	6.8
Transportation & WH	436.3	3.0	443.6	3.0
Information	507.2	3.5	497.5	3.4
Finance, Insurance, RE	2448.1	16.9	2521.0	17.2
Professional, BS	2004.7	13.8	2004.0	13.7
Education, Health Care	1438.9	9.9	1439.2	9.8
Arts, Entertainment	577.1	4.0	585.2	4.0
Other Services	409.7	2.8	410.8	2.8
Government	1680.1	11.6	1675.1	11.4
Rest of the World	246.8	1.7	262.9	1.8

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

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

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

http://www.boj.or.jp/en/announcements/release_2014/k140122a.pdf

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

Table JPY, Japan, Economic Indicators

Historical GDP and CPI	1981-2010 Real GDP Growth and CPI Inflation 1981-2010 Blog 8/9/11 Table 26
Corporate Goods Prices	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 12/29/13
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:

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

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

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

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

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

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

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

In Dec 2013, industrial production in Japan increased 1.1 percent and increased 7.3 percent in the 12 months ending in Dec 2013, as shown in Table VB-1. Decline of 3.1 percent in Jun interrupted four consecutive monthly increases from Feb through May 2013. Another interruption occurred in Aug with decrease of 0.9 percent and decline of 0.4 percent in 12 months. There was a third interruption with decline of 0.1 percent in Nov 2013 but increase of 4.8 percent in 12 months. Japan’s industrial production is strengthening with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.1 percent in Mar 2013, 0.9 percent in Apr 2013, 1.9 percent in May 2013, 3.4 percent in Jul 2013, 1.3 percent in Sep 2013, 1.0 percent in Oct 2013 and 1.1 percent in Dec 2013. Growth in 12 months improved from minus 10.1 percent in Feb 2013 to 7.3 percent in Dec 2013. Industrial production fell 21.9 percent in 2009 after falling 3.4 percent in 2008 but recovered by 15.6 percent in 2010. The annual average in calendar year 2011 fell 2.8 percent largely because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Industrial production increased 0.6 percent in 2012 and fell 0.8 percent in 2013.

Table VB-1, Japan, Industrial Production ∆%

	∆% Month SA	∆% 12 Months NSA
Dec 2013	1.1	7.3
Nov	-0.1	4.8
Oct	1.0	5.4
Sep	1.3	5.1
Aug	-0.9	-0.4
Jul	3.4	1.8
Jun	-3.1	-4.6
May	1.9	-1.1
Apr	0.9	-3.4
Mar	0.1	-7.2
Feb	0.9	-10.1
Jan	-0.6	-6.0
Dec 2012	1.4	-7.6
Nov	-1.0	-5.5
Oct	0.3	-4.7
Sep	-2.2	-7.6
Aug	-1.4	-4.1
Jul	-0.5	0.1
Jun	-0.8	-0.6
May	-1.8	7.6
Apr	-0.5	15.1
Mar	0.2	16.6
Calendar Year
2013		-0.8
2012		0.6
2011		-2.8
2010		15.6

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

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

The employment report for Japan in Dec 2013 is in Table VB-2. The rate of unemployment seasonally adjusted decreased to 4.2 percent in Sep 2012 from 4.3 percent in Jul 2012 and remained at 4.2 percent in Oct 2012, declining to 4.1 percent in Nov 2012, increasing to 4.2 percent in Dec 2012, stabilizing at 4.2 percent in Jan 2013 and increasing to 4.3 percent in Feb 2013. The seasonally adjusted rate of unemployment fell to 4.1 percent in Apr and May 2013. The rate of unemployment not seasonally adjusted stood at 4.1 percent in Apr 2013 and 0.3 percentage points lower from a year earlier. The rate of unemployment fell to 3.9 percent in Jun 2013 seasonally and not seasonally adjusted. In Jul 2013, the rate of unemployment fell to 3.8 percent seasonally adjusted and remained at 3.9 percent not seasonally adjusted. The rate of unemployment rose to 4.1 percent in Aug 2013 and fell to 4.0 percent seasonally adjusted in Sep 2013. The rate of unemployment stabilized at 4.0 percent in Oct 2013 and 4.0 percent in Nov 2013. The rate of unemployment fell to 3.7 percent in Dec 2013. The employment rate stood at 57.0 percent in Dec 2013 and increased 0.9 percentage points from a year earlier.

Table VB-2, Japan, Employment Report Dec 2013 

Dec 2013 Unemployed	2.25 million
Change since last year	-340 thousand; ∆% –13.1
Unemployment rate	3.7% SA -0.3; NSA 3.4%, -0.6 from earlier year
Population ≥ 15 years	110.85 million
Change since last year	∆% -0.1
Labor Force	65.44 million
Change since last year	∆% 0.9
Employed	63.19 million
Change since last year	∆% 1.5
Labor force participation rate	59.0
Change since last year	0.5
Employment rate	57.0%
Change since last year	0.9

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

Chart VB-1 of Japan’s Statistics Bureau at the Ministry of Internal Affairs and Communications provides the unemployment rate of Japan from 2010 to 2013. The sharp decline in Sep 2011 was the best reading in 2011 but the rate increased in the final quarter of the year, declining in Feb 2012 and stabilizing in Mar 2012 but increasing to 4.6 percent in Apr 2012 and declining again to 4.4 percent in May 2012 and 4.3 percent in both Jun and Jul 2012 with further decline to 4.2 percent in Aug, Sep and Oct 2012, 4.1 percent in Nov 2012, 4.2 percent in Dec 2012, 4.2 percent in Jan 2013, 4.3 percent in Feb 2013 and 4.1 percent in Mar-May 2013. The rate of unemployment fell to 3.9 percent in Jun 2013 and 3.8 percent in Jul 2013. The rate of unemployment rose to 4.1 percent in Aug 2013, falling to 4.0 percent in Sep 2013. The rate of unemployment stabilized at 4.0 percent in Oct 2013 and 4.0 percent in Nov 2013. The rate of unemployment fell to 3.7 percent in Dec 2013.

Chart VB-1, Japan, Unemployment Rate, Seasonally Adjusted

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

During the “lost decade” of the 1990s from 1991 to 2002 (Pelaez and Pelaez, The Global Recession Risk (2007), 82-3), Japan’s GDP grew at the average yearly rate of 1.0 percent, the CPI at 0.1 percent and the implicit deflator at minus 0.8 percent. Japan’s growth rate from the mid 1970s to 1992 was 4 percent (Ito 2004). Table VB-3 provides Japan’s rates of unemployment, participation in labor force and employment for 1968, 1975, 1980 and 1985 and yearly from 1990 to 2013. The rate of unemployment jumped from 2.1 percent in 1991 to 5.4 percent in 2002, which was a year of global economic weakness. The participation rate dropped from 64.0 percent in 1992 to 61.2 percent in 2002 and the employment rate fell from 62.6 percent in 1992 to 57.9 percent in 2002. The rate of unemployment rose from 3.9 percent in 2007 to 5.1 percent in 2010, falling to 4.6 percent in 2011, 4.3 percent in 2012 and 4.0 percent in 2013. The participation rate fell from 60.4 percent in 2007 to 59.6 percent in 2010, falling to 59.3 percent in 2011 and 59.1 in 2012 and increasing to 59.3 percent in 2013. The employment rate fell from 58.1 in percent in 2007 to 56.6 percent in 2010 and 56.5 percent in 2011 and 2012, increasing to 56.9 percent in 2013. The global recession adversely affected labor markets in advanced economies.

Table VB-3, Japan, Rates of Unemployment, Participation in Labor Force and Employment, %

	Participation Rate	Employment Rate	Unemployment Rate
1953	70.0	68.6	1.9
1960	69.2	68.0	1.7
1965	65.7	64.9	1.2
1970	65.4	64.6	1.1
1975	63.0	61.9	1.9
1980	63.3	62.0	2.0
1985	63.0	61.4	2.6
1990	63.3	61.9	2.1
1991	63.8	62.4	2.1
1992	64.0	62.6	2.2
1993	63.8	62.2	2.5
1994	63.6	61.8	2.9
1995	63.4	61.4	3.2
1996	63.5	61.4	3.4
1997	63.7	61.5	3.4
1998	63.3	60.7	4.1
1999	62.9	59.9	4.7
2000	62.4	59.5	4.7
2001	62.0	58.9	5.0
2002	61.2	57.9	5.4
2003	60.8	57.6	5.3
2004	60.4	57.6	4.7
2005	60.4	57.7	4.4
2006	60.4	57.9	4.1
2007	60.4	58.1	3.9
2008	60.2	57.8	4.0
2009	59.9	56.9	5.1
2010	59.6	56.6	5.1
2011	59.3	56.5	4.6
2012	59.1	56.5	4.3
2013	59.3	56.9	4.0

Source: Japan, Statistics Bureau, Ministry of Internal Affairs and Communications

http://www.stat.go.jp/english/data/roudou/results/month/index.htm

The survey of household income and consumption of Japan in Table VB-4 is showing noticeable improvement in recent months relative to earlier months. Table VB-4 shows growth of nominal consumption of 2.7 percent in the 12 months ending in Dec 2013 and 0.7 percent in real terms. There are multiple segments of increasing real consumption: housing increasing 7.6 percent in nominal terms and 7.8 percent in real terms and transportation/communications increasing 7.9 percent in real terms and 10.2 percent in nominal terms. Clothing and footwear increased 1.2 percent in nominal terms and 0.6 percent in real terms. Education decreased 4.7 percent in real terms and 15.4 percent in nominal terms. Fuel, light and water charges increased 4.8 percent in nominal terms and decreased 0.9 percent in real terms. Real household income decreased 1.7 percent; real disposable income decreased 2.1 percent; and real consumption expenditures decreased 2.3 percent.

Table VB-4, Japan, Family Income and Expenditure Survey, 12-month ∆% Relative to a Year Earlier

Dec 2013	Nominal	Real
Households of Two or More Persons
Total Consumption	2.7	0.7
Excluding Housing, Vehicles & Remittance		-0.3
Food	3.1	0.9
Housing	7.6	7.8
Fuel, Light & Water Charges	2.2	-3.1
Furniture & Household Utensils	5.7	5.4
Clothing & Footwear	1.2	0.6
Medical Care	3.4	3.8
Transport and Communications	10.2	7.9
Education	-4.7	-5.4
Culture & Recreation	-0.3	-1.9
Other Consumption Expenditures	-1.0	-2.9*
Workers’ Households
Income	0.3	-1.7
Disposable Income	-0.1	-2.1
Consumption Expenditures	-0.3	-2.3

*Real: nominal deflated by CPI excluding imputed rent

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Chart VB-2 of the Ministry of Internal Affairs and Communication provides year-on-year change of real consumption expenditures. There is improvement followed by deterioration in the final segment with wide oscillations. There was deterioration in Nov 2011, renewed strength in Dec 2011, another decline in Jan 2012 and increase in Feb and Mar 2012 with stabilization in Apr and May 2012 but sharp decline into Jun 2012. Recovery in Jul and Aug 2012 was interrupted in Sep-Oct 2012 and new increases in Nov 2012, Jan 2013, Feb 2013, Mar 2013 and Apr 2013 (http://www.stat.go.jp/english/data/kakei/156.htm). Total consumption decreased 1.6 percent in real terms in May 2013 and decreased 1.9 percent in nominal terms relative to a year earlier. Real consumption fell 0.4 percent in Jun 2013 and nominal consumption declined 0.1 percent. Consumption rebounded in Jul 2013 with increase of real consumption by 0.1 percent and nominal consumption by 1.0 percent. In Aug 2013, real consumption fell 1.6 percent relative to a year earlier and 0.5 percent in nominal terms. There was marked improvement in Sep 2013 with growth of nominal consumption of 5.2 percent in 12 months and 3.7 percent in real consumption. Nominal consumption increased 2.1 in Nov 2013 and real consumption increased 0.2 percent. Nominal consumption increased 2.7 percent in Dec 2013 and real consumption increased 0.7 percent.

Chart VB-2, Japan, Real Percentage Change of Consumption Year-on-Year

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Percentage changes in 12 months of nominal and real consumption expenditures in Japan are provided in Table VB-5. Real consumption expenditures increased 0.7 percent in the 12 months ending in Dec 2013 and nominal consumption expenditures increased 2.7 percent. Real consumption expenditures increased 0.2 percent in the 12 months ending in Nov 2013 and nominal consumption expenditures increased 2.1 percent. Real consumption expenditures increased 0.9 percent in the 12 months ending in Oct 2013 and nominal consumption expenditures increased 2.3 percent. Real consumption expenditures increased 3.7 percent in the 12 months ending in Sep 2013 and nominal consumption expenditures 5.2 percent. Real consumption expenditures fell 1.6 percent in Aug 2013 relative to a year earlier and nominal consumption expenditures fell 0.5 percent. There is recovery in Jul 2013 with real consumption expenditures increasing 0.1 percent and nominal consumption expenditures increasing 1.0 percent. Real consumption expenditures decreased 0.4 percent in the 12 months ending in Jun 2013 and 0.1 percent in nominal terms. Declines in May and Jun 2013 interrupted growth from Jan to Apr 2013. There was sharp decline in nominal consumption of 8.8 percent in Mar 2011 and 8.2 percent in real consumption because of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Dec was the first month in 2011 with increases in 12 months in both nominal and real consumption expenditures followed by Feb 2012 through Aug 2012. Nominal and real consumption fell in both Sep and Oct 2012 and increased in Nov 2012. Real consumption fell 0.7 percent in the 12 months ending in Dec 2012 and nominal consumption fell 0.8 percent. Real consumption expenditures increased 2.4 percent in the 12 months ending in Jan 2013 and 2.1 percent in nominal terms. Nominal consumption increased 0.8 percent in Feb 2013 and nominal consumption increased 0.1 percent. Real consumption increased 5.2 percent in the 12 months ending in Mar 2013 and nominal consumption 4.1 percent. Consumption was an important driver of GDP growth in Japan in IQ2012. Real GDP grew at the seasonally adjusted annual rate (SAAR) of 3.5 percent in IQ2012 with private consumption contributing 1.0 percentage points for the highest contribution to growth (Table VB-2 at http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html). There was deceleration in IIQ2012 with growth of GDP at SAAR of minus 2.0 percent and contribution of 0.9 percentage points of personal consumption. In IIIQ2012, Japan’s GDP contracted at the SAAR of 3.2 percent and personal consumption deducted 1.2 percentage points. Japan’s GDP grew at the SAAR of 0.6 percent in IVQ2012 with personal consumption contributing 1.4 percentage points. Japan’s GDP growth in IQ2013 was at 4.5 percent SAAR with highest contribution of 2.4 percentage points by personal consumption expenditures. In IIQ2013, Japan’s GDP grew at 3.6 percent SAAR with personal consumption expenditures contributing 1.6 percentage points. Japan’s GDP grew at 1.1 percent SAAR in IIIQ2013 with personal consumption expenditures contributing 0.5 percentage points.

Table VB-5, Japan, Family Income and Expenditure Survey 12-months ∆% Relative to a Year Earlier

	Nominal Consumption Expenditures ∆% Relative to a Year Earlier	Real Consumption Expenditures ∆% Relative to a Year Earlier
Dec 2013	2.7	0.7
Nov	2.1	0.2
Oct	2.3	0.9
Sep	5.2	3.7
Aug	-0.5	-1.6
Jul	1.0	0.1
Jun	-0.1	-0.4
May	-1.9	-1.6
Apr	0.8	1.5
Mar	4.1	5.2
Feb	0.1	0.8
Jan	2.1	2.4
Dec 2012	-0.8	-0.7
Nov	0.1	0.2
Oct	-0.5	-0.1
Sep	-1.2	-0.9
Aug	1.4	1.8
Jul	1.2	1.7
Jun	1.5	1.6
May	4.3	4.0
Apr	3.2	2.6
Mar	4.1	3.4
Feb	2.7	2.3
Jan	-2.1	-2.3
Dec 2011	0.3	0.5
Nov	-3.8	-3.2
Oct	-0.6	-0.4
Sep	-1.9	-1.9
Aug	-3.9	-4.1
Jul	-1.8	-2.1
Jun	-3.9	-3.5
May	-1.6	-1.2
Apr	-2.5	-2.0
Mar	-8.8	-8.2
Feb	-0.1	0.5
Jan	-0.9	-0.3
Dec 2010	-3.2	-3.3
Dec 2009	0.3	2.1

Source:

Source: Ministry of Internal Affairs and Communications, Statistics Bureau, Director General for Policy Planning and Statistical Research and Training Institute

http://www.stat.go.jp/english/data/kakei/156.htm

Japan is experiencing weak internal demand as in most advanced economies, interrupted by strong growth in IQ2012 but renewed weakening at the end of IIQ2012, beginning of IIIQ2012 with recovery in IVQ2012, IQ2013, IIQ2013 and IIIQ2013. Table VB-6 provides Japan’s wholesale and retail sales. There is strong performance in May 2013 with growth of 0.8 percent for retail sales followed by 1.6 percent in Jun 2013. Retail sales fell 0.3 percent in Jul 2013, rebounding 1.1 percent in Aug 2013. Retail sales increased 3.0 percent in the 12 months ending in Sep 2013 and 2.4 percent in the 12 months ending in Oct 2013. Retail sales increased 4.1 percent in the 12 months ending in Nov 2013 and 2.6 percent in the 12 months ending in Dec 2013. Retail sales are recovering from deep drops in Mar and Apr 2011 following the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Retail sales have been increasing in 12-month percentage changes from Dec 2011 through May 2012. Retail sales fell again by 1.3 percent in Jul 2012, increasing 1.3 percent in Aug 2012 and 0.4 percent in Sep 2012 but declining 1.2 percent in Oct 2012, rebounding by 0.9 percent in Nov 2012 and only 0.2 percent in Dec 2012 but contracting 1.1 percent in Jan 2013 and 2.2 percent in Feb 2013. In May 2013, retail sales increased 0.8 percent relative to a year earlier and 1.6 percent in Jun 2013 followed by decline of 0.3 percent in Jul 2013. Retail sales rebounded 1.1 percent in Aug 2013, 3.0 percent in Sep 2013 and 2.4 percent in Oct 2013. Retail sales grew 4.1 percent in the 12 months ending in Nov 2013 and 2.6 percent in the 12 months ending in Dec 2013.

Table VB-6, Japan, Wholesale and Retail Sales 12 Month ∆%

	Total	Wholesale	Retail
Dec 2013	2.9	3.1	2.6
Nov	2.9	2.4	4.1
Oct	2.0	1.8	2.4
Sep	2.8	2.7	3.0
Aug	0.6	0.4	1.1
Jul	1.3	2.0	-0.3
Jun	0.5	0.1	1.6
May	0.6	0.5	0.8
Apr	-0.1	-0.1	-0.2
Mar	-1.3	-1.8	-0.3
Feb	-1.6	-1.3	-2.2
Jan	-0.3	0.1	-1.1
Dec 2012	-1.7	-2.5	0.2
Nov	-0.9	-1.6	0.9
Oct	-1.6	-1.8	-1.2
Sep	-3.6	-5.1	0.4
Aug	-2.7	-4.4	1.3
Jul	-3.1	-4.0	-1.3
Jun	-2.6	-3.6	-0.2
May	2.7	2.6	3.0
Apr	1.8	0.4	5.0
Mar	3.2	0.9	9.3
Feb	-0.1	-1.3	3.1
Jan	-2.1	-3.8	1.6
Dec 2011	-0.8	-2.0	2.5
Nov	-2.3	-2.4	-2.2
Oct	1.1	0.8	1.9
Sep	0.3	0.8	-1.1
Aug	3.1	5.2	-2.6
Jul	2.3	3.0	0.6
Jun	3.1	3.8	1.2
May	1.3	2.3	-1.3
Apr	-2.6	-1.7	-4.8
Mar	-1.3	1.2	-8.3
Feb	5.3	7.2	0.1
Jan	3.3	4.6	0.1
Dec 2010	3.5	5.7	-2.1
Calendar Year
2012	-0.9	-2.0	1.8
2011	1.0	1.9	-1.0
2010	2.4	2.3	2.6
2009	-20.5	-25.6	-2.3
2008	1.2	1.5	0.3

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

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

The structure of exports and imports of Japan is in Table VB-5. Japan imports all types of raw materials and fuels at rapidly increasing prices caused by the carry trade from zero interest rates to commodities, oscillating under shocks of risk aversion. Mineral fuels account for 36.6 percent of Japan’s imports and increased 24.2 percent in the 12 months ending in Dec 2013 because of alternating carry trades into commodity futures in accordance with risk aversion together with yen devaluation. Weakness of world demand depresses prices of industrial goods. Manufactured products contribute 13.1 percent of Japan’s exports with increase of 14.0 percent in the 12 months ending in Dec 2013. Machinery contributes 20.3 percent of Japan’s exports with increase of 17.3 percent in the 12 months ending in Dec 2013. Electrical machinery contributes 17.2 percent of Japan’s exports with increase of 10.9 percent in the 12 months ending in Dec 2013. Exports of transport equipment with share of 22.5 percent in total exports increased 17.1 percent in the 12 months ending in Dec 2013 but had been increasing sharply largely because of the low level after the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. The breakdown of transport equipment in Table VB-5 shows increase of the major categories of motor vehicles of 18.3 percent: cars increased 21.7 percent with increase of 9.7 percent in the minor category of buses and trucks, increase of 17.3 percent for parts of motor vehicles, increase of 31.1 percent for motorcycles and decrease of 11.1 percent for ships. The result of rising commodity prices and stable or declining prices of industrial products is pressure on Japan’s terms of trade with oscillations when risk aversion causes reversal of carry trades from zero interest rates to commodity prices. Data in Table VB-5 are in millions of yen that have been affected by recent depreciation of the yen relative to the USD with invoicing of many products in dollars.

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

Dec 2013	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	6,110,510	100.0	15.3	15.3
Foodstuffs	47,559	0.8	26.8	0.2
Raw Materials	101,177	1.7	-0.3	0.0
Mineral Fuels	108,762	1.8	40.0	0.6
Chemicals	672,289	11.0	20.0	2.1
Manufactured Goods	801,801	13.1	14.0	1.9
Machinery	1,239,773	20.3	17.3	3.5
Electrical Machinery	1,052,129	17.2	10.9	1.9
Transport Equipment	1,373,079	22.5	17.1	3.8
Motor Vehicles	907,364	14.8	18.3	2.6
Cars	777,780	12.7	21.7	2.6
Buses & Trucks	120,520	2.0	9.7	0.2
Parts of Motor Vehicles	308,530	5.0	17.3	0.9
Motorcycles	32,125	0.5	31.1	0.1
Ships	58,639	1.0	-11.1	-0.1
Other	713,941	11.7	11.6	1.4
Imports	7,412,623	100.0	24.7	24.7
Foodstuffs	573,362	7.7	15.6	1.3
Raw Materials	435,586	5.9	25.3	1.5
Mineral Fuels	2,711,285	36.6	24.2	8.9
Chemicals	540,946	7.3	16.7	1.3
Manufactured Goods	554,925	7.5	29.1	2.1
Machinery	553,000	7.5	33.3	2.3
Electrical Machinery	926,134	12.5	35.7	4.1
Transport Equipment	250,552	3.4	31.9	1.0
Other	866,832	11.7	17.5	2.2

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

Table VB-6 provides Japan’s exports, imports and trade balance in five-year intervals from 1950 to 1975 and then yearly from 1979 to 2013. Exports grew at the average yearly rate of 3.4 percent while imports grew at 3.6 percent per year in the years from 1979 to 2013. Abstracting from the global recession and the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011, exports grew at the average annual rate of 4.8 percent between 1979 and 2007 and imports at 4.0 percent. The global recession had a brutal impact on Japan’s trade. Exports fell 35.5 percent from 2007 to 2009 while imports fell 29.6 percent. Japan had the first trade deficit in 2011 since 1980 and the highest deficits in 2012 and 2013.

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

Years	Exports	Imports	Balance
1950	298	348	-50
1955	723	889	-166
1960	1,459	1,616	-157
1965	3,042	2,940	102
1970	6,954	6,797	157
1975	16,545	17,170	-625
1979	22,531	24,245	-1,714
1980	29,382	31,995	-2,613
1981	33,468	31,464	2,004
1982	34,432	32,656	1,776
1983	34,909	30,014	4,895
1984	40,325	32,321	8,004
1985	41,955	31,084	10,871
1986	35,289	21,550	13,739
1987	33,315	21,736	11,579
1988	33,939	24,006	9,933
1989	37,822	28,978	8,844
1990	41,456	33,855	7,601
1991	42,359	31,900	10,459
1992	43,012	29,527	13,485
1993	40,202	26,826	13,376
1994	40,497	28,104	12,393
1995	41,530	31,548	9,982
1996	44,731	37,993	6,738
1997	50,937	40,956	9,981
1998	50,645	36,653	13,992
1999	47,547	35,268	12,279
2000	51,654	40,938	10,716
2001	48,979	42,415	6,564
2002	52,108	42,227	9,881
2003	54,548	44,362	10,186
2004	61,169	49,216	11,953
2005	65,656	56,949	8,707
2006	75,246	67,344	7,902
2007	83,931	73,135	10,796
2008	81,018	78,955	2,063
2009	54,170	51,499	2,671
2010	67,399	60,764	6,635
2011	65,546	68,111	-2,565
2012	63,748	70,689	-6,941
2013	69,788	81,262	-11,475

Source: Japan, Ministry of Finance

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

The geographical breakdown of exports and imports of Japan with selected regions and countries is provided in Table VB-7 for 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 VB-7, 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

Table VB-8 provides the trade balance of Japan by countries and regions in Dec 2013. The significantly large deficits of JPY 1,279,521 million with the Middle East, JPY 383,478 million with China, JPY 325,844 million with Australia and JPY 92,688 million with Western Europe do not compensate surpluses of JPY 591,610 million with the US, JPY 45,663 million with Mexico and JPY 53,543 million with the UK.

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

Dec 2013	Millions of Yen
Total	-1,302,113
Asia	129,339
China	-383,478
USA	591,610
Canada	-25,727
Brazil	-49,456
Mexico	45,663
Western Europe	-92,688
Germany	-64,240
France	-26,988
UK	53,543
Middle East	-1,279,521
Australia	-325,844

Source: Japan, Ministry of Finance

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

Long-term economic growth in Japan significantly improved by increasing competitiveness in world markets. Net trade of exports and imports is an important component of the GDP accounts of Japan. Table VB-3 provides quarterly data for net trade, exports and imports of Japan. Net trade had strong positive contributions to GDP growth in Japan in all quarters from IQ2007 to IIQ2009 with exception of IVQ2008, IIIQ2008 and IQ2009. The US recession is dated by the National Bureau of Economic Research (NBER) as beginning in IVQ2007 (Dec) and ending in IIQ2009 (Jun) (http://www.nber.org/cycles/cyclesmain.html). Net trade contributions helped to cushion the economy of Japan from the global recession. Net trade deducted from GDP growth in seven of the nine quarters from IVQ2010 IQ2012. The only strong contribution of net trade was 3.9 percent in IIIQ2011. Net trade added 1.6 percentage points to GDP growth in IQ2013 and 0.6 percentage points in IIQ2013 but deducted 1.9 percentage points in IIIQ2013. Private consumption assumed the role of driver of Japan’s economic growth but should moderate as in most mature economies.

Table VB-3, Japan, Contributions to Changes in Real GDP, Seasonally Adjusted Annual Rates (SAAR), %

	Net Trade	Exports	Imports
2013
I	1.6	2.2	-0.7
II	0.6	1.7	-1.1
III	-1.9	-0.4	-1.5
2012
I	0.4	1.6	-1.2
II	-1.3	-0.3	-1.0
III	-2.1	-2.3	0.2
IV	-0.6	-1.8	1.2
2011
I	-1.2	-0.5	-0.7
II	-4.3	-4.7	0.4
III	3.9	5.8	-1.9
IV	-3.1	-1.9	-1.2
2010
I	2.1	3.4	-1.3
II	0.1	2.7	-2.6
III	0.5	1.4	-0.9
IV	-0.5	0.1	-0.5
2009
I	-4.4	-16.4	12.0
II	7.4	4.7	2.7
III	2.2	5.2	-3.0
IV	2.7	4.1	-1.4
2008
I	1.1	2.1	-1.0
II	0.5	-1.6	2.1
III	0.0	0.2	-0.1
IV	-11.5	-10.2	-1.3
2007
I	1.1	1.7	-0.5
II	0.8	1.6	-0.8
III	2.0	1.4	0.6
IV	1.4	2.1	-0.7

Source: Japan Economic and Social Research Institute, Cabinet Office

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

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

There was milder increase in Japan’s export corporate goods price index during the global recession in 2008 but similar sharp decline during the bank balance sheets effect in late 2008, as shown in Chart IV-7 of the Bank of Japan. Japan exports industrial goods whose prices have been less dynamic than those of commodities and raw materials. As a result, the export CGPI on the yen basis in Chart IV-7 trends down with oscillations after a brief rise in the final part of the recession in 2009. The export corporate goods price index on the yen basis fell from 104.9 in Jun 2009 to 94.0 in Jan 2012 or minus 10.4 percent and increased to 110.2 in Dec 2013 for a gain of 17.2 percent relative to Jan 2012 and 5.1 percent relative to Jun 2009. The choice of Jun 2009 is designed to capture the reversal of risk aversion beginning in Sep 2008 with the announcement of toxic assets in banks that would be withdrawn with the Troubled Asset Relief Program (TARP) (Cochrane and Zingales 2009). Reversal of risk aversion in the form of flight to the USD and obligations of the US government opened the way to renewed carry trades from zero interest rates to exposures in risk financial assets such as commodities. Japan exports industrial products and imports commodities and raw materials.

Chart IV-7, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart IV-7A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 97.9 in Jun 2009 to 103.1 in Apr 2012 or 5.3 percent but dropped to 100.2 in Apr 2013 or minus 2.8 percent relative to Apr 2012 and gained 1.0 percent to 98.9 in Dec 2013 relative to Jun 2009.

Chart IV-7A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

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

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-8 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. More careful measurement should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan. The import corporate goods price index on the yen basis increased from 93.5 in Jun 2009 to 113.1 in Apr 2012 or 21.0 percent and to 128.8 in Dec 2013 or gain of 13.9 percent relative to Apr 2012 and 37.8 percent relative to Jun 2009.

Chart IV-8, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2013

Source: Bank of Japan

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

Chart IV-8A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 86.2 in Jun 2009 to 119.5 in Apr 2012 or 38.6 percent and to 113.6 in Dec 2013 or minus 4.9 percent relative to Apr 2012 and gain of 31.8 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 1.0 percent from Jun 2009 to Dec 2013 while the import corporate goods price index increased 31.8 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-8A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2013

Source: Bank of Japan

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

Table IV-8 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Dec 2013. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Dec 2013, the export index on the contract currency basis decreased 0.3 percent and decreased 4.6 percent on the yen basis. For the entire period from Jan 2008 to Dec 2013, the import index increased 12.8 percent on the contract currency basis and increased 8.2 percent on the yen basis. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-8, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

Month	Exports Contract Currency	Exports Yen	Imports Contract Currency	Imports Yen
2008/01	99.2	115.5	100.7	119.0
2008/02	99.8	116.1	102.4	120.6
2008/03	100.5	112.6	104.5	117.4
2008/04	101.6	115.3	110.1	125.2
2008/05	102.4	117.4	113.4	130.4
2008/06	103.5	120.7	119.5	140.3
2008/07	104.7	122.1	122.6	143.9
2008/08	103.7	122.1	123.1	147.0
2008/09	102.7	118.3	117.1	137.1
2008/10	100.2	109.6	109.1	121.5
2008/11	98.6	104.5	97.8	105.8
2008/12	97.9	100.6	89.3	93.0
2009/01	98.0	99.5	85.6	88.4
2009/02	97.5	100.1	85.7	89.7
2009/03	97.3	104.2	85.2	93.0
2009/04	97.6	105.6	84.4	93.0
2009/05	97.5	103.8	84.0	90.8
2009/06	97.9	104.9	86.2	93.5
2009/07	97.5	103.1	89.2	95.0
2009/08	98.3	104.4	89.6	95.8
2009/09	98.3	102.1	91.0	94.7
2009/10	98.0	101.2	91.0	94.0
2009/11	98.4	100.8	92.8	94.8
2009/12	98.3	100.7	95.4	97.5
2010/01	99.4	102.2	97.0	100.0
2010/02	99.7	101.6	97.6	99.8
2010/03	99.7	101.8	97.0	99.2
2010/04	100.5	104.6	99.9	104.6
2010/05	100.7	102.9	101.7	104.9
2010/06	100.1	101.6	100.0	102.3
2010/07	99.4	99.0	99.9	99.8
2010/08	99.1	97.3	99.5	97.5
2010/09	99.4	97.0	100.0	97.2
2010/10	100.1	96.4	100.5	95.8
2010/11	100.7	97.4	102.6	98.2
2010/12	101.2	98.3	104.4	100.6
2011/01	102.1	98.6	107.2	102.6
2011/02	102.9	99.5	109.0	104.3
2011/03	103.5	99.6	111.8	106.3
2011/04	104.1	101.7	115.9	111.9
2011/05	103.9	99.9	118.8	112.4
2011/06	103.8	99.3	117.5	110.5
2011/07	103.6	98.3	118.3	110.2
2011/08	103.6	96.6	118.6	108.1
2011/09	103.7	96.1	117.0	106.2
2011/10	103.0	95.2	116.6	105.6
2011/11	101.9	94.8	115.4	105.4
2011/12	101.5	94.5	116.1	106.2
2012/01	101.8	94.0	115.0	104.2
2012/02	102.4	95.8	115.8	106.4
2012/03	102.9	99.2	118.3	112.9
2012/04	103.1	98.7	119.5	113.1
2012/05	102.3	96.3	118.1	109.8
2012/06	101.4	95.0	115.2	106.7
2012/07	100.6	94.0	112.0	103.5
2012/08	100.9	94.1	112.4	103.6
2012/09	101.0	94.1	114.7	105.2
2012/10	101.1	94.8	113.8	105.2
2012/11	100.9	95.9	113.2	106.5
2012/12	100.7	98.0	113.4	109.5
2013/01	101.0	102.4	113.8	115.4
2013/02	101.5	105.9	114.8	120.2
2013/03	101.3	106.6	115.1	122.0
2013/04	100.2	107.5	114.1	123.8
2013/05	99.6	109.1	112.6	125.3
2013/06	99.2	106.1	112.0	121.2
2013/07	99.0	107.4	111.6	122.9
2013/08	98.9	106.0	111.7	121.3
2013/09	98.9	107.1	112.9	123.9
2013/10	99.1	106.6	112.9	122.7
2013/11	99.0	107.9	112.9	124.7
2013-12	98.9	110.2	113.6	128.8

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

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

Chart IV-9 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2013. Japan also experienced sharp increase in inflation during the 1970s as in the episode of the Great Inflation in the US. Monetary policy focused on accommodating higher inflation, with emphasis solely on the mandate of promoting employment, has been blamed as deliberate or because of model error or imperfect measurement for creating the Great Inflation (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html). A remarkable similarity with US experience is the sharp rise of the CGPI of Japan in 2008 driven by carry trades from policy interest rates rapidly falling to zero to exposures in commodity futures during a global recession. Japan had the same sharp waves of consumer price inflation during the 1970s as in the US (see Chart IV-18 and associated table at http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/12/exit-risks-of-zero-interest-rates-world_1.html and earlier http://cmpassocregulationblog.blogspot.com/2013/10/twenty-eight-million-unemployed-or_561.html and at http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk_1.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real_09.html).

Chart IV-9, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2013

Source: Bank of Japan

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

The producer price index of the US from 1970 to 2013 in Chart IV-10 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-10, US, Producer Price Index Finished Goods, Monthly, 1970-2013

Source: US Bureau of Labor Statistics

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

Further insight into inflation of the corporate goods price index (CGPI) of Japan is provided in Table IV-9. Petroleum and coal with weight of 5.7 percent increased 1.9 percent in Dec 2013 and increased 12.1 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 3.1 percent, decreased 0.8 percent in Dec 2013 and decreased 1.1 percent in 12 months. In general, most manufactured products have been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen.

Table IV-9, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Dec 2013	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.3	2.5
Food, Beverages, Tobacco, Feedstuffs	137.5	-0.1	0.6
Petroleum & Coal	57.4	1.9	12.1
Production Machinery	30.8	-0.8	-1.1
Electronic Components	31.0	-0.2	-2.5
Electric Power, Gas & Water	52.7	-0.5	10.6
Iron & Steel	56.6	0.5	5.2
Chemicals	92.1	0.4	3.6
Transport Equipment	136.4	0.1	-0.3

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1312.pdf

ercentage point contributions to change of the corporate goods price index (CGPI) in Dec 2013 are provided in Table IV-10 divided into domestic, export and import segments. In the domestic CGPI, increasing 0.3 percent in Dec 2013, the energy shock is evident in the contribution of 0.14 percentage points by petroleum and coal products in new carry trades of exposures in commodity futures. The exports CGPI decreased 0.1 percent on the basis of the contract currency with deduction of 0.08 percentage points by metals and related products. The imports CGPI increased 0.6 percent on the contract currency basis. Petroleum, coal and natural gas products contributed 0.55 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table IV-10, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Dec 2013	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  0.3%
Petroleum & Coal Products	0.14
Agriculture, Forestry & Fishery Products	0.05
Nonferrous Metals	0.04
Chemicals & Related Products	0.04
Iron & Steel	0.03
Scrap & Waste	0.02
Electric Power, Gas & Water	-0.03
B. Export Price Index	Monthly Change:   -0.1 % contract currency
Metals & Related Products	-0.08
Electric & Electronic Products	-0.03
Transportation Equipment	-0.02
Chemicals & Related Products	-0.02
Other Primary Products & Manufactured Goods	0.07
C. Import Price Index	Monthly Change: 0.6% contract currency basis
Petroleum, Coal & Natural Gas	0.55
Chemicals & Related Products	0.05
Wood, Lumber & Related Products	0.02
Metals & Related Products	-0.03

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1312.pdf

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Jan 2011 to Jan 2014. The index of current prices paid or costs of inputs increased from 16.13 in Dec 2012 to 36.59 in Jan 2014 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 13.41 in Jan 2014. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or of inputs at 36.59 in Jan 2014 are expanding more rapidly than prices received or of sales of products at 13.41. The index of future prices paid or expectations of costs of inputs in the next six months fell from 51.61 in Dec 2012 to 44.12 in Jan 2014 while the index of future prices received or expectation of sales prices in the next six months decreased from 25.81 in Dec 2012 to 23.17 in Jan 2014. Priced paid or of inputs are expected to increase at a faster pace in the next six months than prices received or prices of sales products. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Six Months Prices Paid	Six Months Prices Received
Jan 2014	36.59	13.41	45.12	23.17
Dec 2013	15.66	3.61	48.19	27.71
Nov	17.11	-3.95	42.11	17.11
Oct	21.69	2.41	45.78	25.30
Sep	21.51	8.60	39.78	24.73
Aug	20.48	3.61	40.96	19.28
Jul	17.39	1.09	28.26	11.96
Jun	20.97	11.29	45.16	17.74
May	20.45	4.55	29.55	14.77
Apr	28.41	5.68	44.32	14.77
Mar	25.81	2.15	50.54	23.66
Feb	26.26	8.08	44.44	13.13
Jan	22.58	10.75	38.71	21.51
Dec 2012	16.13	1.08	51.61	25.81
Nov	14.61	5.62	39.33	15.73
Oct	17.20	4.30	44.09	24.73
Sep	19.15	5.32	40.43	23.40
Aug	16.47	2.35	31.76	14.12
Jul	7.41	3.70	35.80	16.05
Jun	19.59	1.03	34.02	17.53
May	37.35	12.05	57.83	22.89
Apr	45.78	19.28	50.60	22.89
Mar	50.62	13.58	66.67	32.10
Feb	25.88	15.29	62.35	34.12
Jan	26.37	23.08	53.85	30.77
Dec 2011	24.42	3.49	56.98	36.05
Nov	18.29	6.10	36.59	25.61
Oct	22.47	4.49	40.45	17.98
Sep	32.61	8.70	53.26	22.83
Aug	28.26	2.17	42.39	15.22
Jul	43.33	5.56	51.11	30.00
Jun	56.12	11.22	55.10	19.39
May	69.89	27.96	68.82	35.48
Apr	57.69	26.92	56.41	38.46
Mar	53.25	20.78	71.43	36.36
Feb	45.78	16.87	55.42	27.71
Jan	35.79	15.79	60.00	42.11

Source: http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are provided in Table IV-6. As inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html), indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the levels in the beginning of 2011 because of risk aversion frustrating carry trades even under zero interest rates. The index of prices paid or prices of inputs decreased from 20.6 in Dec 2012 to 18.6 in Jan 2014. The index of current prices received was minus 7.2 in Apr 2013, indicating decrease of prices received. The index of current prices received increased from 10.9 in Dec 2012 to 5.1 in Jan 2014. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 18.1 in Jan 2014 indicates faster increase than the index of current prices received or sales prices of production at 5.1. The index of future prices paid decreased to 35.3 in Jan 2014 from 41.9 in Dec 2012 while the index of future prices received decreased from 27.3 in Dec 2012 to 11.8 in Jan 2014. Expectations are incorporating faster increases in prices of inputs or costs of production, 35.3 in Jan 2014, than of sales prices of produced goods, 11.8 in Jan 2014, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourage investment and hiring.

Table IV-6, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA

	Current Price Paid	Current Prices Received	Future Prices Paid	Future Prices Received
10-Dec	42.6	6.0	56.8	25.7
11-Jan	47.9	12.1	58.7	34.1
11-Feb	61.1	13.2	62.6	30.7
11-Mar	57.6	17	62.1	32.4
11-Apr	50.9	20.8	55.3	33.7
11-May	49.3	20.5	54.6	28.5
11-Jun	38.9	7.7	41.6	6.8
11-Jul	35.6	6.3	48.3	16.7
11-Aug	24.6	-4	45.2	23.4
11-Sep	32	7.1	40.9	22.2
11-Oct	24.3	2.8	42.9	27.8
11-Nov	22.8	6.3	35.4	28.3
11-Dec	25	7	43.1	24.7
12-Jan	25.3	8	47.5	20.8
12-Feb	31.9	9.4	43.4	24.8
12-Mar	14.1	5.3	37.8	22.6
12-Apr	18.1	6.2	35.2	20.2
12-May	7.7	0.7	39.5	9.7
12-Jun	5.5	-3.7	34.8	16.9
12-Jul	10.8	4.9	27.9	20.3
12-Aug	18	5.6	39.5	25
12-Sep	15.8	3.5	42.2	27.5
12-Oct	19.9	7.1	45.8	15.3
12-Nov	23.6	6.5	47.6	12.8
12-Dec	20.6	10.9	41.9	27.3
13-Jan	11.8	-1.6	33.9	20
13-Feb	10.6	-1.3	25.4	20.6
13-Mar	7.6	-1.3	32.4	16.8
13-Apr	5	-7.2	28.9	9.9
13-May	9.7	0.2	33.5	19.9
13-Jun	23.7	14.6	33.3	24.3
13-Jul	22.7	8	41	25.6
13-Aug	20.4	11.1	40.7	24.5
13-Sep	25.9	12.5	43	31.6
13-Oct	21	12.8	43.1	34.6
13-Nov	25.4	9	43.5	38.1
13-Dec	16.4	10.8	39.1	34.8
14-Jan	18.7	5.1	35.3	11.8

Source: Federal Reserve Bank of Philadelphia

http://www.phil.frb.org/index.cfm

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2014. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls in the final segment.

Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2014. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2014 but none of prices paid. Prices paid relative to prices received deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

Chart IV-2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

http://www.philadelphiafed.org/index.cfm

VC China. China estimates an index of nonmanufacturing purchasing managers based on a sample of 1200 nonmanufacturing enterprises across the country (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Table CIPMNM provides this index and components. The total index increased from 55.7 in Mar 2012 to 58.0 in Mar 2012, decreasing to 53.9 in Aug 2013. The index decreased from 56.0 in Nov 2013 to 54.6 in Dec 2013. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	56.3	51.6	56.1	51.4	60.5
Sep	55.4	53.4	56.7	50.6	60.1
Aug	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

Notes: Interm.: Intermediate; Subs: Subscription; Exp: Business Expectations

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.1 in Dec 2012 to 53.9 in Jun 2013. The index recovered to 56.3 in Oct 2013, decreasing marginally to 54.6 in Dec 2013.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index of new orders fell from 57.2 in Apr 2012 to 52.0 in Dec 2012. The index of new orders fell from 54.5 in Nov 2013 to 53.9 in Dec 2013.

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

	IPM	PI	NOI	INV	EMP	SDEL
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	51.4	54.4	52.5	48.6	49.2	50.8
Sep	51.1	52.9	52.8	48.5	49.1	50.8
Aug	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

IPM: Index of Purchasing Managers; PI: Production Index; NOI: New Orders Index; EMP: Employed Person Index; SDEL: Supplier Delivery Time Index

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. The index fell to 50.1 in Feb 2013 and in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 2013.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in 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 50.5 in Dec from 50.8 in Nov, indicating marginally expanding manufacturing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/c3747b7d95134930925b6676bf0db89c). New export orders increased marginally with growth of total new orders originating in domestic demand. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds China moving in the path of moderate recovery of growth into 2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c3747b7d95134930925b6676bf0db89c). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Dec 12-month ∆%: minus 1.4 Dec month ∆%: 0.0 Blog 1/12/14
Consumer Price Index	Dec month ∆%: 0.3 Dec 12 months ∆%: 2.5 Blog 1/12/14
Value Added of Industry	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 51.7 in Nov to 52.1 in Dec, which is the second highest in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). Chris Williamson, Chief Economist at Markit, finds growth in IVQ2013 at the rate of about 0.2 percent in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). The Markit Eurozone Services Business Activity Index decreased from 51.2 in Nov to 51.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/162d00afdcc44cbb8228f2a76264c624). The Markit Eurozone Manufacturing PMI^® increased to 52.7 in Dec from 51.6 in Nov with the reading for IVQ2013 at the highest level in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2dfe04a4c1e4e71802d7338b698602f). New orders increased for the sixth consecutive month with foreign orders at the highest in more than two-and-a-half years. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at a quarterly rate of 1.0 percent. (http://www.markiteconomics.com/Survey/PressRelease.mvc/b2dfe04a4c1e4e71802d7338b698602f). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IIIQ2013 ∆% 0.1; IIIQ2013/IIIQ2012 ∆% -0.3 Blog 1/12/14
Unemployment	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 Nov ∆%: -0.1 Nov 12-month ∆%: -1.2 Blog 1/12/14
Industrial Production	Nov month ∆%: 1.8; Nov 12 months ∆%: 3.0 Blog 1/19/14
Retail Sales	Nov month ∆%: minus 1.4 Nov 12 months ∆%: minus 1.6 Blog 1/12/14
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:

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

EUROSTAT estimates the rate of unemployment in the euro area at 12.0 percent in Dec 2013, as shown in Table VD-1. The number of unemployed in Dec 2013 was 19.010 million, which was 0.130 million higher than 18.880 million in Dec 2012. The rate of unemployment jumped from 11.9 percent in Dec 2012 to 12.1 percent in Dec 2013.

Table VD-1, Euro Area, Unemployment Rate and Number of Unemployed, % and Millions, SA 

	Unemployment Rate %	Number Unemployed Millions
Dec 2013	12.0	19.010
Nov	12.0	19.139
Oct	12.0	19.155
Sep	12.1	19.251
Aug	12.1	19.237
Jul	12.1	19.212
Jun	12.1	19.195
May	12.1	19.197
Apr	12.1	19.179
Mar	12.0	19.143
Feb	12.0	19.139
Jan	12.0	19.110
Dec 2012	11.9	18.880
Nov	11.8	18.766
Oct	11.7	18.682
Sep	11.6	18.426
Aug	11.5	18.269
Jul	11.5	18.208
Jun	11.4	18.107
May	11.3	17.886
Apr	11.2	17.738
Mar	11.0	17.466
Feb	10.9	17.240
Jan	10.7	17.030
Dec 2011	10.7	16.918
Nov	10.6	16.815
Oct	10.4	16.515
Sep	10.3	16.334
Aug	10.2	16.087
Jul	10.1	15.930
Jun	10.0	15.716
May	9.9	15.652
Apr	9.8	15.500
Mar	9.9	15.589
Feb	9.9	15.611
Jan	10.0	15.697
Dec 2010	10.1	15.807

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

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

Table VD-2 shows the disparity in rates of unemployment in the euro area with 12.0 percent for the region as a whole and 19.010 million unemployed but 5.1 percent in Germany and 2.156 million unemployed. At the other extreme is Spain with rate of unemployment of 25.8 percent and 5.838 million unemployed. The rate of unemployment of the European Union in Dec 2013 is 10.7 percent with 26.200 million unemployed.

Table VD-2, Unemployed and Unemployment Rate in Countries and Regions, Millions and %

Dec 2013	Unemployment Rate %	Unemployed Millions
Euro Zone	12.0	19.010
Germany	5.1	2.156
France	10.8	3.196
Netherlands	7.0	0.628
Finland	8.4	0.225
Portugal	15.4	0.819
Ireland	12.1	0.261
Italy	12.7	3.229
Greece	27.8*	1.388*
Spain	25.8	5.838
Belgium	8.4	0.414
European Union	10.7	26.200

*Oct 2013

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

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

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

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

Source: EUROSTAT

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

The Economic Sentiment Indicator of the European Economic Commission, Economic and Financial Affairs, provides correlation with the economic cycle since 1990, capturing all three recessions in the period and even the threat of recession from 1994 to 1995. The latest chart of this index accessible in the link in parenthesis shows trend of decline in 2011 and 2012 that has punctured the historical average of 100 and resumed downward trend in 2012 followed by recovery moving closer to the average (http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm). Table VD-3 provides the index increasing from 90.8 in Feb 2013 to 100.9 in Jan 2014. The index is above the minimum value of 70.0 reached in Mar 2009, surpassing the average of 100.

Table VD-3, Euro Area, Indicators of Confidence and Economic Sentiment SA

	ESI	IND	SERV	CON	RET	CONS
Historical Average	100.0	-7.0	9.1	-13.3	-9.2	-18.0
Maximum	118.6 05-00	7.9 04-07	35.4     08-98	2.4 05-00	5.2 06-90	6.0 02-90
Minimum	70.1 03-09	-38.1 03-09	-26.1 03-09	-34.3 03-09	-24.8 01-93	-46.0 09-93
Jan 2014	100.9	-3.9	2.3	-11.7	-3.4	-30.1
Dec 2013	100.4	-3.4	0.4	13.5	-5.0	-26.4
Nov	98.8	-3.9	-0.8	-15.3	-7.7	-30.4
Oct	98.1	-5.0	-3.6	-14.4	-7.7	-29.1
Sep	97.3	-6.6	-3.2	-14.8	-6.8	-28.3
Aug	95.7	-7.8	-5.1	-15.5	-10.5	-32.6
Jul	92.9	-10.6	-7.7	-17.3	-13.9	-32.1
Jun	91.7	-11.2	-9.5	-18.7	-14.5	-31.2
May	89.8	-13.0	-9.2	-21.7	-16.7	-32.5
Apr	89.0	-13.8	-11.1	-22.1	-18.4	-30.7
Mar	90.5	-12.2	-7.0	-23.3	-17.0	-29.5
Feb	90.8	-11.1	-8.4	-23.4	-16.0	-28.9

ESI: Economic Sentiment Index; IND: Industry; SERV: Services; CON: Consumer; RET: Retail Trade; CONS: Construction

Source: European Commission Services

http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.0 percent in 2010, 3.3 percent in 2011 and 0.7 percent in 2012. 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, decreased from 55.4 in Nov to 55.0 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). Tim Moore, Senior Economist at Markit and author of the report, finds improving expectations by German private sector companies (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). The Germany Services Business Activity Index decreased from 55.7 in Nov to 53.5 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/8990b59b325c4908ab9750fb9e59b018). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, increased from 52.7 in Nov to 54.3 in Dec, in the best reading in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/13f1cfefa2034863a31e87812f389789). New export orders increased for the sixth consecutive month at the highest rate in two-and-a-half years. Tim Moore, Senior Economist at Markit and author of the report, finds the highest growth of manufacturing in two-and-a-half years (http://www.markiteconomics.com/Survey/PressRelease.mvc/13f1cfefa2034863a31e87812f389789.

Table DE, 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 Nov month CSA ∆%: minus 3.1 12-month NSA: 1.1 Blog 1/12/14
Machine Orders	MFG Nov month ∆%: 2.1 Nov 12-month ∆%: 3.7 Blog 1/12/14
Retail Sales	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 Nov 12-month NSA ∆%: 1.0 Imports Nov 12 months NSA ∆%: -0.4 Exports Nov month CSA ∆%: 0.3; Imports Nov month SA minus 1.1 Blog 1/12/14

Links to blog comments in Table DE:

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

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

Retail sales in Germany adjusted for inflation are provided in Table VE-1. There have been sharp fluctuations in monthly and 12 months percentage changes. In Nov 2013, retail sales increased 0.8 percent and increased 1.1 percent in 12 months. Retail sales decreased 0.7 percent in Oct 2013 and increased 0.2 percent in 12 months. Retail sales rebounded in Jan 2013 with monthly increase of 2.9 percent and 2.7 percent in 12 months. Retail sales declined in four out of eleven months in 2013.

Table VE-1, Retail Sales in Germany Adjusted for Inflation

	12-Month ∆% NSA	Month ∆% SA and Calendar Adjusted
Nov 2013	1.1	0.8
Oct	0.2	-0.7
Sep	0.6	0.1
Aug	0.5	0.4
Jul	3.4	0.0
Jun	-2.6	-1.0
May	0.5	0.8
Apr	2.9	0.3
Mar	-2.9	-0.5
Feb	-2.8	-0.7
Jan	2.7	2.9
Dec 2012	-3.1	-1.6
Nov	0.5	0.5
Oct	1.4	-0.5
Sep	-3.1	-0.1
Aug	0.0	0.4
Jul	-1.0	-1.0
Jun	4.6	0.4
May	-0.6	0.3
Apr	-4.7	-0.6
Mar	4.2	0.8
Feb	2.4	0.9
Jan	2.0	-1.8
Dec 2011	0.8	0.9
Nov	0.9	-0.9
Oct	-0.4	0.5
Sep	1.2	0.2
Aug	3.4	-0.6
Jul	-2.4	0.6
Jun	-2.0	2.1
May	4.5	-1.7
Apr	4.8	1.0
Mar	-2.9	-2.8
Feb	3.0	1.4
Jan	3.3	0.8
Dec 2010	-0.2	0.3
Dec 2009	-2.2
Dec 2008	3.4
Dec 2007	-6.2
Dec 2006	1.3

Source: Statistisches Bundesamt Deutschland (Destatis)

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

Chart VE-1 of the Statistisches Bundesamt Deutschland, Federal Statistical Office of Germany, shows retail sales at constant prices from 2009 to 2013. There appear to be fluctuations without trend.

Chart VE-1, Germany, Turnover in Retail Trade at Constant Prices 2005=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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

Chart VE-2 of the Federal Statistical Office of Germany provides retail sales at current prices. The final segment suggests a trend of increase.

Chart VE-2, Germany, Turnover in Retail Sales at Current Prices, Original Values, 2005=100

Source: Statistisches Bundesamt Deutschland (Destatis), Federal Statistical Office of Germany

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

Germany’s labor market continues to show strength not found in most of the advanced economies, as shown in Table VE-2. The number unemployed, not seasonally adjusted, decreased from 2.24 million in Dec 2012 to 2.10 million in Dec 2013, or 6.3 percent, while the unemployment rate fell from 5.3 percent in Dec 2012 to 4.9 percent in Dec 2013. The number of persons in employment, not seasonally adjusted, increased from 40.25 million in Dec 2012 to 40.51 million in Dec 2013, or 0.6 percent, while the employment rate increased from 63.8 percent in Dec 2012 to 64.4 percent in Dec 2013. The number unemployed, seasonally adjusted, fell from 2.18 million in Nov 2013 to 2.16 million in Dec 2013, while the unemployment rate remained at 5.1 percent in Dec 2013 relative to 5.1 percent in Nov 2013. The number of persons in employment, seasonally adjusted, increased from 40.48 million in Nov 2013 to 40.53 million in Dec 2013, or 0.1 percent. The employment rate seasonally adjusted increased from 64.3 in Nov 2013 to 64.4 in Dec 2013.

Table VE-2, Germany, Unemployment Labor Force Survey

	Dec 2013	Nov 2013	Dec 2012
NSA
Number Unemployed Millions	2.10 ∆% Dec 2013 /Nov 2013: -1.4 ∆% Dec 2013/Dec 2012: -6.3	2.13	2.24
% Rate Unemployed	4.9	5.0	5.3
Persons in Employment Millions	40.51 ∆% Dec 2013/Nov 2013: -0.6 ∆% Dec 2013/Dec 2012: 0.6	40.77	40.25
Employment Rate	64.4	64.8	63.8
SA
Number Unemployed Millions	2.16 ∆% Dec 2013/Nov  2013: -0.9 ∆% Dec 2013/Dec 2012: –5.7	2.18	2.29
% Rate Unemployed	5.1	5.1	5.4
Persons in Employment Millions	40.53 ∆% Dec 2013/Nov 2013: 0.1 ∆% Dec 2013/Dec 2012: 1.0	40.48	40.11
Employment Rate	64.4	64.3	63.5

NSA: not seasonally adjusted; SA: seasonally adjusted

Source: Statistisches Bundesamt Deutschland

https://www.destatis.de/EN/PressServices/Press/pr/2014/01/PE14_032_132.html

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

Table VE-3, Germany, Unemployment Rate in Percent of Labor Force

	Percent of Labor Force
Jan 2014	7.3
Dec 2013	6.7
Nov	6.5
Oct	6.5
Sep	6.6
Aug	6.8
Jul	6.8
Jun	6.6
May	6.8
Apr	7.1
Mar	7.3
Feb	7.4
Jan	7.4
Dec 2012	6.7
Nov	6.5
Oct	6.5
Sep	6.5
Aug	6.8
Jul	6.8
Jun	6.6
May	6.7
Apr	7.0
Mar	7.2
Feb	7.4
Jan	7.3
Dec 2011	6.6
Nov	6.4
Oct	6.5
Sep	6.6
Aug	7.0
Jul	7.0
Jun	6.9
May	7.0
Apr	7.3
Mar	7.6
Feb	7.9
Jan	7.9
Dec 2010	7.1
Dec 2009	7.8
Dec 2008	7.4
Dec 2007	8.1
Dec 2006	9.6
Dec 2005	11.1

Source: Statistisches Bundesamt Deutschland

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

Chart VE-6 of Statistisches Bundesamt Deutschland, or Federal Statistical Office of Germany, shows the long-term decline of the rate of unemployment in Germany from more than 12 percent in early 2005 to 6.6 percent in Dec 2011, increasing to 6.7 percent in Dec 2012, 6.8 percent in Apr 2013 and 6.6 percent in May 2013. The unemployment rate rose slightly to 6.8 percent in Aug 2013, falling to 6.6 percent in Sep 2013 and 6.5 percent in Oct 2013. The rate remained at 6.5 percent in Nov 2013, increasing to 6.7 percent in Dec 2013 and 7.3 in Jan 2014.

Chart VE-3, Germany, Unemployment Rate, Unadjusted, Percent

Source: Statistisches Bundesamt Deutschland

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

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

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

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

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=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, fell from 48.0 in Nov to 47.3 in Nov, indicating sharper contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds continuing weak demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). The Markit France Services Activity index decreased from 48.0 in Nov to 47.9 in Dec (http://www.markiteconomics.com/Survey/PressRelease.mvc/dae24bc1c4b74ffda157de48b9511a5b). The Markit France Manufacturing Purchasing Managers’ Index^® decreased to 47.0 in Dec from 48.4 in Nov for the lowest reading in seven months (http://www.markiteconomics.com/Survey/PressRelease.mvc/45fadf38ca6745b1b423f91ecb61df83). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds sharper decline of output and new orders with weak internal demand (http://www.markiteconomics.com/Survey/PressRelease.mvc/45fadf38ca6745b1b423f91ecb61df83). Table FR provides the country data table for France.

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	Nov Exports ∆%: month -2.1, 12 months -2.6 Nov Imports ∆%: month 0.2, 12 months -0.1 Blog 1/12/14
Confidence Indicators	Historical averages 100 Jan Mfg Business Climate 100 Blog 1/26/14

Links to blog comments in Table FR:

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

The monthly report of household expenditures in consumption goods for France is in Table VF-1. Total consumption decreased 0.1 percent in Dec 2013 after increasing 1.4 percent in Nov 2013 and changing 0.0 percent in Oct 2013. Consumption of manufactured products increased 0.4 percent in Dec 2013 after increasing 0.3 percent in Nov 2013 and 0.8 percent in Oct 2013. Total consumption increased 1.4 percent in Dec 2013 relative to Dec 2012 and consumption of manufactured goods increased 1.6 percent in Dec 2013 relative to Dec 2012. Consumption of energy decreased 1.4 percent in Dec 2013 and increased 2.5 percent in 12 months. Internal demand is weak throughout most advanced economies.

Table VF-1, France, Household Expenditures in Consumption Goods, Month ∆% Chained Billion Euros Trading-Days SA

	Total	Food	Eng. Goods	Energy	Mfg Goods
Dec 2013	-0.1	0.1	0.2	-1.4	0.4
Dec 2013/Dec 2012	1.4	1.2	1.3	2.5	1.6
Nov 2013	1.4	-0.5	0.8	7.0	0.3
Oct	0.0	1.5	0.4	-4.1	0.8
Sep	-0.1	-0.1	0.2	-0.7	-0.1
Aug	-0.3	-0.6	0.2	-0.9	-0.2
Jul	0.4	0.6	0.1	0.4	0.6
Jun	-0.6	-0.3	0.8	-4.6	-0.4
May	0.7	1.5	-0.1	1.1	0.9
Apr	-0.7	-3.2	1.0	0.3	-0.6
Mar	1.4	2.8	-0.7	3.5	1.2
Feb	-0.4	-1.0	-0.8	1.6	-0.8
Jan	-0.1	0.5	-1.0	0.8	-0.4
Dec 2012	0.0	0.3	0.9	-2.7	0.3
Nov	-0.1	-0.3	-0.5	1.5	-0.3
Oct	-0.1	-0.8	0.1	0.7	0.0
Sep	0.1	-0.2	0.1	0.6	0.0
Aug	-0.6	0.2	-0.5	-2.2	-0.7
Jul	0.0	-0.3	0.4	0.0	0.1
Jun	0.6	1.3	-0.2	1.2	0.6
May	0.1	-0.4	1.8	-2.8	1.0
Apr	0.1	0.0	-3.1	9.1	-1.6
Mar	-3.0	-2.0	1.1	-13.9	-0.8
Feb	2.7	1.7	-0.3	12.2	1.1
Jan	0.2	0.8	-0.5	1.0	0.1
Dec 2011	-0.4	-0.7	-0.3	0.1	-0.7
Nov	-0.3	0.3	-0.1	-2.3	-0.2
Oct	-0.2	-0.8	0.3	-0.4	-0.2
Sep	-0.4	0.4	-0.1	-2.9	-0.3
Aug	0.9	0.6	0.6	2.5	1.0
Jul	-0.2	-0.1	-0.5	0.6	-0.3
Jun	0.3	-0.4	0.4	1.5	0.4
May	0.3	-0.5	-0.3	4.2	-0.6
Apr	-2.2	0.5	-2.9	-6.2	-1.6
Mar	-0.7	-0.4	-0.8	-1.1	-0.9
Feb	0.8	0.8	1.8	-2.0	1.3
Jan	-0.9	-0.8	0.9	-5.4	0.0
Dec 2010	0.7	0.5	-0.4	4.2	0.1

Eng. Goods: Engineered Goods

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20140131

Chart VF-3 of the Institut National de la Statistique et des Études Économiques of France provides consumption of manufactured goods in France in volumes of chained 2005 billion euro from Jan 1980 to Dec 2013. Consumption of manufactured goods increased above the level before the global recession but shows declining trend in recent months with possible stabilization.

Chart VF-1, France, Consumption of Manufactured Goods, Volume Chained 2005 Billion, Seasonally and Working Day Adjusted, Jan 1980 to Dec 2013

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20140131

Chart VF-4 of Institut National de la Statistique et des Études Économiques of France provides growth of total consumption in France. Internal demand is not supporting higher rates of economic growth. There is downward trend of monthly consumption with fluctuations and stability in the final segment followed by another drop in Jan-Feb 2013 and increase in Mar 2013 but renewed decrease in Apr 2013. Consumption rose again in May 2013 and fell in Jun 2013. Consumption increased in Jul 2013 and fell in Aug-Oct 2013. Consumption rose in Nov 2013 driven by electricity and fell marginally in Dec 2013.

Chart VF-2, France, Total Consumption of Goods, Billions of Euros Trading and Seasonally Adjusted and Quarterly ∆%

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=19&date=20140131

VG Italy. Table VG-IT provides percentage changes in a quarter relative to the same quarter a year earlier of Italy’s expenditure components in chained volume measures. GDP has been declining at sharper rates from minus 0.6 percent in IVQ2011 to minus 3.0 percent in IVQ2012, minus 2.5 percent in IQ2013, minus 2.2 percent in IIQ2013 and minus 1.8 percent in IIIQ2013. The aggregate demand components of consumption and gross fixed capital formation (GFCF) have been declining at faster rates. The rates of decline of GDP, consumption and GFCF were somewhat milder in IIIQ2013, IIQ2013 than in IQ2013 and the final three quarters of 2012.

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

	GDP	Imports	Consumption	GFCF	Exports
2013
IIIQ	-1.8	-1.2	-1.5	-5.1	0.0
IIQ	-2.2	-4.7	-2.5	-5.8	0.2
IQ	-2.5	-4.8	-2.6	-7.3	-0.6
2012
IVQ	-3.0	-6.9	-4.0	-8.1	0.8
IIIQ	-2.8	-7.5	-4.1	-8.7	1.8
IIQ	-2.6	-7.3	-3.6	-8.8	2.1
IQ	-1.8	-8.2	-3.4	-8.1	2.8
2011
IVQ	-0.6	-6.8	-2.0	-3.8	3.5
IIIQ	0.5	0.5	-1.0	-2.4	6.0
IIQ	1.1	3.7	0.4	-0.7	7.5
IQ	1.4	9.1	0.7	0.6	11.0
2010
IVQ	2.3	15.6	1.1	1.3	13.4
IIIQ	1.8	13.2	1.3	2.4	12.1
IIQ	1.8	13.4	0.8	0.9	12.0
IQ	0.9	7.0	1.0	-2.4	7.1
2009
IVQ	-3.5	-6.3	0.2	-8.2	-9.3
IIIQ	-5.0	-12.2	-0.8	-12.6	-16.4
IIQ	-6.6	-17.9	-1.4	-13.6	-21.4
IQ	-6.9	-17.2	-1.8	-12.4	-22.8
2008
IVQ	-3.0	-8.2	-0.9	-8.3	-10.3
IIIQ	-1.9	-5.0	-0.8	-4.5	-3.9
IIQ	-0.2	-0.1	-0.3	-1.5	0.4
IQ	0.5	1.7	0.1	-1.0	2.9

GFCF: Gross Fixed Capital Formation

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/106657

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

Table IT, Italy, Economic Indicators

Consumer Price Index	Dec month ∆%: 0.2 Dec 12-month ∆%: 0.7 Blog 1/19/14
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:

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

Data on Italy’s labor market since 2004 are provided in Table VG-1. The unemployment rate has risen from 6.2 percent in Dec 2006 to 12.7 percent in Dec 2013. The rate of youth unemployment for ages 15 to 24 years increased from 20.2 percent in Dec 2006 to 41.6 percent in Dec 2013. As in other advanced economies, unemployment has reached high levels.

Table VG-1, Italy, Labor Report

	Participation Rate %	Employment Ratio %	Unemployment Rate %	Unemployment Rate 15-24 Years %
Dec 2013	63.5	55.3	12.7	41.6
Nov	63.6	55.4	12.8	41.7
Oct	63.6	55.5	12.5	41.6
Sep	63.5	55.4	12.5	41.0
Aug	63.5	55.5	12.4	40.6
Jul	63.4	55.6	12.1	39.8
Jun	63.4	55.6	12.1	39.4
May	63.4	55.6	12.2	38.6
Apr	63.4	55.7	12.0	39.4
Mar	63.6	55.9	11.9	39.1
Feb	63.7	56.0	11.8	38.6
Jan	63.7	56.0	11.9	38.5
Dec 2012	63.7	56.3	11.5	37.4
Nov	63.7	56.4	11.3	37.5
Oct	63.8	56.5	11.4	36.4
Sep	63.6	56.6	10.9	36.2
Aug	63.6	56.7	10.7	34.6
Jul	63.8	56.8	10.8	35.3
Jun	63.8	56.8	10.8	34.7
May	63.7	57.0	10.4	35.6
Apr	63.8	56.9	10.6	34.8
Mar	63.5	56.9	10.3	35.0
Feb	63.4	57.0	10.0	33.6
Jan	63.2	57.0	9.5	32.2
Dec 2011	63.0	56.9	9.5	31.9
Nov	62.7	56.8	9.3	31.9
Oct	62.6	57.0	8.8	30.4
Sep	62.5	56.8	8.9	30.5
Aug	62.4	57.0	8.5	29.3
Jul	62.2	57.0	8.3	28.7
Jun	62.0	57.0	8.0	27.9
May	62.1	57.0	8.1	27.7
Apr	61.8	56.9	7.7	27.3
Mar	62.1	57.1	7.9	27.8
Feb	61.8	56.8	7.9	27.6
Jan	62.0	56.9	8.0	28.3
Dec 2010	62.1	56.9	8.2	28.3
Dec 2009	62.4	57.1	8.4	26.6
Dec 2008	62.5	58.2	6.8	22.7
Dec 2007	63.1	58.9	6.5	21.6
Dec 2006	62.4	58.5	6.2	20.2
Dec 2005	62.6	57.8	7.6	23.4
Dec 2004	62.5	57.5	7.9	23.7

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/111031

Table VG-2 provides more detail on the labor report for Italy in Dec 2012. The level of employment decreased 25,000 from Nov to Dec 2013 and fell 424,000 from Dec 2012 to Dec 2013. Unemployment decreased 32,000 in Dec 2013 and increased 293,000 from a year earlier. A dramatic aspect found in most advanced economies is the high rate of unemployment of youth at 41.6 percent in Dec 2013 for ages 15 to 24 years.

Table VG-2, Italy, Labor Report, NSA

Dec 2013	1000s	Change from Prior Month 1000s	∆% from Prior Month	Change from Prior Year 1000s	∆% from Prior Year
EMP	22,270	-25	-0.1	-424	-1.9
UNE	3,229	-32	-1.0	293	10.0
INA   15-64	14,408	51	0.4	46	0.3
EMP 15-24	943	7	0.7	-100	-9.6
UNE 15-24	671	3	0.4	48	7.7
INA 15-24	4,338	-13	-0.3	23	0.5
EMP %	55.3		-0.1		-1.0
UNE %	12.7		-0.1		1.2
Youth UNE %  15-24	41.6		-0.1		4.2
INA % 15-64	36.5		0.1		0.2

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

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/111031

Chart VG-1 of the Istituto Nazionale di Statistica provides the rate of unemployment in Italy. The rate increased from 11.5 percent in Dec 2012 to 12.7 percent in Dec 2013.

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

Source: Istituto Nazionale di Statistica

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

Chart VG-2 of the Istituto Nazionale di Statistica provides the total number of employed persons in Italy. The level of employment dropped from 22.694 million in Dec 2012 to 22.270 million in Dec 2013.

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

Source: Istituto Nazionale di Statistica

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

Italy’s index of business confidence in manufacturing and construction is provided in Table VG-3. There has been improvement of manufacturing confidence below the historical average of 100 from 96.8 in Sep 2013 to 98.2 in Dec 2013 with decline to 97.7 in Jan 2014. Order books improved from minus 28 in Sep 2013 to minus 27 in Dec 2013 and minus 27 in Jan 2014. There is oscillation in construction with the index moving from 79.0 in Sep 2013 to 82.2 in Dec 2013, declining to 76.5 in Jan 2014.

Table VG-3, Italy, Index of Business Confidence in Manufacturing and Construction 2005=100

	Jan      2014	Dec       2013	Nov     2013	Oct      2013	Sep  2013
Mfg Confidence	97.7	98.2	98.0	97.3	96.8
Order Books	-27	-27	-25	-27	-28
Stocks Finished Products	-1	-4	-1	-2	-1
Production Expectation	5	4	5	4	4
Construction Confidence	76.5	82.2	80.0	81.0	79.0
Order Books	-49	-42	-45	-46	-48
Employment	-23	-21	-21	-19	-16

Mfg: manufacturing

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/110786

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

Table UK, UK Economic Indicators

CPI	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	Nov 2013/Nov 2012 ∆%: Production Industries 2.5; Manufacturing 2.8 Blog 1/12/14
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 Nov minus ₤3238 million Exports Nov ∆%: 1.2; Sep-Nov ∆%: 0.5 Imports Nov ∆%: 0.6 Sep-Nov ∆%: 2.2 Blog 1/12/14

Links to blog comments in Table UK:

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

12/22/13 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 important analysis of the relation of GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--december-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--november-gdp-update/sum-nov-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market-update/index.html

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

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--january-gdp-update/sum-jan13.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2012-q4--february-labour-market-update/sum-2012-q4---february-labour-update.html). The UK economy grew 0.7 percent in IVQ2013 but output is still 1.3 percent below the level before the global recession in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--december-gdp-update/sum-dec-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html). Chart VH-1 of the UK Office for National Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) shows weakening output but relatively faster increases in employment and hours worked. Output growth and labor market improvement are converging.

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

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-L1 of the UK Office for national Statistics (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--december-gdp-update/sum-dec-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--november-gdp-update/sum-nov-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q3-2013--october-gdp-update/sum-october-gdp.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q2--august-labour-market update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-gdp-update/index.html http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/2013-q1--may-labour-market-update/sum-may13-labour.html) provides total weekly hours, output and employment quarterly from 2008 to 2013. Improving output has been accompanied recently by improvements in hours worked and employment. From IQ2008 to IIIQ2013, employment increased 1.5 percent and hours worked 1.4 percent while GDP is still 2.0 percent lower.

Table VH-L1, UK, Indices of Quarterly Employment Ages 16 and Over, Total Hours Worked and GDP, 2008-2013

	GDP, CVM	Employment, Aged 16 +	Total weekly hours, Aged 16 +	Output per Hour
	ABMI	MGRZ	YBUS	LZVB
2008 Q1	100.0	100.0	100.0	100.0
Q2	99.1	100.1	98.9	99.6
Q3	97.6	99.6	98.9	98.6
Q4	95.6	99.4	98.3	96.4
2009 Q1	93.2	98.9	96.7	95.7
Q2	92.8	97.9	96.3	95.1
Q3	92.8	97.8	95.8	95.6
Q4	93.2	97.9	95.8	94.5
2010 Q1	93.7	97.6	95.7	97.1
Q2	94.6	98.2	96.5	96.4
Q3	95.0	98.9	97.0	96.8
Q4	94.8	98.7	97.4	96.1
2011 Q1	95.3	99.0	97.4	96.5
Q2	95.4	99.0	96.3	97.9
Q3	95.9	98.5	97.1	97.7
Q4	95.8	98.8	97.3	97.4
2012 Q1	95.7	99.2	98.0	96.6
Q2	95.4	99.9	98.5	95.7
Q3	96.1	100.2	99.6	95.5
Q4	96.0	100.8	99.8	95.1
2013 Q1	96.5	100.7	100.1	95.4
Q2	97.3	100.9	100.4	95.8
Q2	98.0	101.5	101.4	95.6
Q4	98.7
Source: ONS

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Chart VH-2 of the UK Office for National Statistics provides comparison of output performance during four cycles in the 1970s, 1980s, 1990s and 2000s. Output is indexed to the pre-recession peak. For example, the index for the current economic cycles is 100 for IQ2008. Output performance was stronger in the earlier economic cycles.

Chart VH-2, UK, Index of Output in Economic Cycles

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-L2 provides output in the four economic cycles. Output increased 8.8 percent in the cycle of the early 1970s, 11.7 percent in the cycle of the 1980s and 15.8 percent in the cycle of the 1990s. Output is 1.3 percent below the pre-recession peak in IQ2008.

Table VH-L2, Index of Output in Economic Cycles, Pre-Contraction = 100

Early 70s (1973 Q2=100)	Early 80s (1979 Q4=100)	Early 90s (1990 Q2=100)	Latest (2008 Q1=100)
ABMI	ABMI	ABMI	ABMI
100.0	100.0	100.0	100.0
99.1	99.0	99.1	99.1
99.1	97.3	98.4	97.6
96.8	97.1	98.3	95.6
98.6	95.8	97.9	93.2
99.5	95.4	97.6	92.8
98.4	95.4	97.9	92.8
98.6	96.6	98.4	93.2
97.2	96.6	98.6	93.7
97.0	97.1	99.4	94.6
98.4	98.3	100.3	95.0
100.0	98.3	101.4	94.8
99.1	99.0	102.1	95.3
100.0	100.4	103.2	95.4
102.1	101.3	104.1	95.9
102.3	102.5	105.5	95.8
101.8	103.8	107.1	95.7
102.5	104.8	108.7	95.4
104.1	104.2	109.6	96.1
104.6	104.6	110.1	96.0
105.5	106.3	110.9	96.5
106.7	107.5	112.3	97.3
107.6	109.2	112.9	98.0
106.7	109.2	114.2	98.7
111.3	110.1	114.8
108.8	111.7	115.8

Source: ONS

UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html

Table VH-1 provides quarter on quarter chained value measures of GDP since 1998 in the first estimate for IVQ2013 (http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q4-2013/index.html). GDP grew 0.7 percent in IVQ2013 relative to IIIQ2013. Growth of 0.8 percent in IIIQ2012 interrupted three consecutive quarters of weakness in GDP growth. Most advanced economies are underperforming relative to the period before the global recession. The UK Office for National Statistics analyzes that the decline in the impulse of growth in the UK originated in weakness in markets in the UK and worldwide. The UK Office for National Statistics estimates that GDP in IVQ2013 is lower by 1.3 percent relative to the peak in IQ2008 (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--january-gdp-update/index.html). The UK Office for National Statistics estimates the contraction of 7.2 percent from peak to trough (http://www.ons.gov.uk/ons/rel/naa2/quarterly-national-accounts/q3-2013/index.html), which is roughly equal at 7.1 percent to compounding the quarterly rates in Table VH-1 from IIQ2008 to IIQ2009.

Table VH-1, UK, Percentage Change of GDP from Prior Quarter, Chained Value Measures ∆%

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

Source: UK Office for National Statistics

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

There are four periods in growth of GDP in a quarter relative to the same quarter a year earlier in the UK in the years from 2000 to the present as shown in Table VH-2. (1) Growth rates were quite high from 2000 to 2007. (2) There were six consecutive quarters of contraction of GDP from IIIQ2008 to IVQ2009. Contractions relative to the quarter a year earlier were quite sharp with the highest of 4.3 percent in IVQ2008, 6.8 percent in IQ2009, 6.3 percent in IIQ2009 and 5.0 percent in IIIQ2009. (3) The economy bounced strongly with 2.0 percent in IIQ2010, 2.4 percent in IIIQ2010 and 1.8 percent in IVQ2010. (4) Recovery in 2011 did not continue at rates comparable to those in 2000 to 2007 and even relative to those in the final three quarters of 2010. Growth relative to the same quarter a year earlier fell from 1.8 percent in IVQ2010 to 1.7 percent in IQ2011, 0.8 percent in IIQ2011, 1.0 percent in IIIQ2011 and 1.1 percent in IVQ2011 but only 0.6 percent in IQ2012, change of 0.0 percent in IIQ2012 relative to IQ2011, increase of 0.2 percent in IIIQ2012 and 0.2 percent in IVQ2012. Growth increased to 0.7 percent in IQ2013 relative to a year earlier and 0.5 percent in IQ2013 relative to IVQ2012. GDP increased 0.8 percent in IIQ2013 relative to IQ2013 and 2.0 percent in IIQ2013 relative to IIQ2012. GDP increased 0.8 percent in IIIQ2013 and 1.9 percent relative to a year earlier. GDP increased 0.7 percent in IVQ2013 and 2.8 percent relative to a year earlier. In IQ2012, GDP changed 0.0 percent and increased 0.6 percent relative to a year earlier. In IIQ2012, GDP fell 0.4 percent relative to IQ2012 and changed 0.0 percent relative to a year earlier. In IIIQ2012, GDP increased 0.8 percent and increased 0.2 percent relative to the same quarter a year earlier. In IVQ2012, GDP fell 0.1 percent and increased 0.2 percent relative to a year earlier. Fiscal consolidation in an environment of weakening economic growth is much more challenging. In IIQ2013, GDP increased 0.8 percent and 2.0 percent relative to a year earlier. GDP increased 0.8 percent in IIIQ2013 and 1.9 percent relative to a year earlier. GDP increased 0.7 percent in IVQ2013 and 2.8 percent relative to a year earlier.

Table VH-2, UK, Percentage Change of GDP from Same Quarter a Year Earlier, Chained Value Measures ∆%

	IQ	IIQ	IIIQ	IV
2013	0.7	2.0	1.9	2.8
2012	0.6	0.0	0.2	0.2
2011	1.7	0.8	1.0	1.1
2010	0.5	2.0	2.4	1.8
2009	-6.8	-6.3	-5.0	-2.5
2008	2.8	0.6	-2.1	-4.3
2007	2.4	3.3	4.3	3.7
2006	4.0	3.0	2.3	1.8
2005	2.0	2.8	3.7	4.4
2004	4.7	3.7	2.5	1.9
2003	3.2	3.8	4.3	4.5
2002	1.8	1.9	2.3	3.2
2001	2.4	2.1	2.2	2.0
2000	4.7	5.7	4.1	3.0
1999	2.8	2.1	3.2	3.6
1998	4.0	3.5	3.4	3.4

Source: UK Office for National Statistics

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

Table VH-3 provides annual percentage changes of gross value added and key components. Production fell 9.5 percent in 2009 and its most important component manufacturing fell 10.2 percent. Services fell 3.9 percent in 2009. Services grew in all years from 2010 to 2013 while manufacturing fell 1.7 percent in 2012 and 0.1 percent in 2013.

Table VH-3, UK, Gross Value Added by Components, ∆% on Prior Year

	TP	MF	CONST	SERV	GDP MKT PRICES	GVA EX
2010 Weights	152	104	63	778	1000	981
2009	-9.5	-10.2	-13.3	-3.9	-5.2	-5.4
2010	2.8	4.2	8.3	0.8	1.7	1.8
2011	-1.2	1.8	2.3	1.5	1.1	1.6
2012	-2.5	-1.7	-7.5	1.3	0.3	0.5
2013	-0.1	-0.1	1.8	1.9	1.9	2.0

TP: Total Production; MFG: Manufacturing; CONST: Construction; SERV: Total Services; GVA BP: Gross Value Added at Basic prices; GDP MKT PRICES: GDP at Market Prices; GVA EX: Gross Value Added Excluding Oil and Gas

Source: UK Office for National Statistics

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

Percentage changes of gross value added and components are in Table VH-4A. Gross value added increased 0.7 percent in IVQ2013 with growth of services of 0.8 percent and production of 0.7 percent while manufacturing expanded 0.9 percent.

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

		TP	MFG	CONS	SERV	GDP MKT PRICES	GVA EX
2010 Weights		152	104	63	778	1000	981
2010	Q2	1.7	2.0	5.9	0.4	1.0	1.0
	Q3	0.1	1.2	1.7	0.5	0.4	0.6
	Q4	0.7	0.8	-2.2	-0.3	-0.2	-0.2
2011	Q1	-1.0	0.2	1.6	0.5	0.5	0.5
	Q2	-1.1	0.2	1.0	0.4	0.1	0.4
	Q3	-0.3	-0.4	-1.1	1.0	0.6	0.7
	Q4	-0.6	-0.4	-0.6	-	-0.1	-
2012	Q1	-0.5	-0.1	-3.7	0.3	-	-
	Q2	-1.0	-1.3	-3.5	-0.1	-0.4	-0.4
	Q3	0.1	0.5	-2.0	1.0	0.8	0.8
	Q4	-2.0	-1.7	1.4	-0.1	-0.1	0.1
2013	Q1	0.6	-	-0.4	0.5	0.5	0.5
	Q2	0.8	0.8	2.6	0.6	0.8	0.8
	Q3	0.6	0.8	2.6	0.8	0.8	0.8
	Q4	0.7	0.9	-0.3	0.8	0.7	0.7

TP: Total Production; MFG: Manufacturing; CONST: Construction; SERV: Total Services; GVA BP: Gross Value Added at Basic prices; GDP MKT PRICES: GDP at Market Prices; GVA EX: Gross Value Added Excluding Oil and Gas

Source: UK Office for National Statistics

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

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