Interest Rate Risks, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation, Unresolved US Balance of Payments Deficits and Fiscal Imbalance Threatening Risk Premium on Treasury Securities, United States Industrial Production, World Cyclical Slow Growth and Global Recession Risk: Part V

 

Interest Rate Risks, World Inflation Waves, Squeeze of Economic Activity by Carry Trades Induced by Zero Interest Rates, Collapse of United States Dynamism of Income Growth and Employment Creation, Unresolved US Balance of Payments Deficits and Fiscal Imbalance Threatening Risk Premium on Treasury Securities, United States Industrial Production, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

Executive Summary

I World Inflation Waves

IA Appendix: Transmission of Unconventional Monetary Policy

IB1 Theory

IB2 Policy

IB3 Evidence

IB4 Unwinding Strategy

IB United States Inflation

IC Long-term US Inflation

ID Current US Inflation

IE Theory and Reality of Economic History, Cyclical Slow Growth Not Secular Stagnation and Monetary Policy Based on Fear of Deflation

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

IIA Unresolved US Balance of Payments Deficits and Fiscal Imbalance Threatening Risk

Premium on Treasury Securities

IIA1 United States Unsustainable Deficit/Debt

IIA2 Unresolved US Balance of Payments Deficits

IIB United States Industrial Production

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 IVQ2013. Growth is weak throughout most of the world.

• Japan. The GDP of Japan increased 0.9 percent in IQ2012 and 3.2 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 0.4 percent in IIQ2012 at the seasonally adjusted annual rate (SAAR) of minus 1.7 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 changed 0.0 percent in IVQ2012 at the SAAR of minus 0.1 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 changed 0.0 percent relative to a year earlier. Japan’s GDP increased 1.1 percent in IIQ2013 at the SAAR of 4.1 percent and increased 1.2 percent relative to a year earlier. Japan’s GDP grew 0.2 percent in IIIQ2013 at the SAAR of 0.9 percent and increased 2.3 percent relative to a year earlier. In IVQ2013, Japan’s GDP increased 0.2 percent at the SAAR of 0.7 percent, increasing 2.6 percent relative to a year earlier.
• China. The GDP of 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.
• Euro Area. 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. The GDP of the euro area increased 0.3 percent in IVQ2013 and increased 0.5 percent relative to a year earlier.
• Germany. The GDP of Germany 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. In IVQ2013, Germany’s GDP increased 0.4 percent and 1.3 percent relative to a year earlier.
• United States. Growth of US GDP in IQ2012 was 0.9 percent, at SAAR of 3.7 percent and higher by 3.3 percent relative to IQ2011. US GDP increased 0.3 percent in IIQ2012, 1.2 percent at SAAR and 2.8 percent relative to a year earlier. In IIIQ2012, US GDP grew 0.7 percent, 2.8 percent at SAAR and 3.1 percent relative to IIIQ2011. In IVQ2012, US GDP grew 0.0 percent, 0.1 percent at SAAR and 2.0 percent relative to IVQ2011. In IQ2013, US GDP grew at 1.1 percent SAAR, 0.3 percent relative to the prior quarter and 1.3 percent relative to the same quarter in 2013. In IIQ2013, US GDP grew at 2.5 percent in SAAR, 0.6 percent relative to the prior quarter and 1.6 percent relative to IIQ2012. US GDP grew at 4.1 percent in SAAR in IIIQ2013, 1.0 percent relative to the prior quarter and 2.0 percent relative to the same quarter a year earlier (http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html) with weak hiring (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html). In IVQ2013, US GDP grew 0.6 percent at 2.4 percent SAAR and 2.5 percent relative to a year earlier.
• United Kingdom. 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 0.4 percent in IQ2013 and 0.6 percent relative to a year earlier. UK GDP increased 0.7 percent in IIQ2013 and 1.8 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 2.7 percent relative to a year earlier.
• Italy. 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 1.7 percent relative to IQ2011. Italy’s GDP fell 0.5 percent in IIQ2012 and declined 2.4 percent relative to a year earlier. In IIIQ2012, Italy’s GDP fell 0.4 percent and declined 2.6 percent relative to a year earlier. The GDP of Italy contracted 0.9 percent in IVQ2012 and fell 2.8 percent relative to a year earlier. In IQ2013, Italy’s GDP contracted 0.6 percent and fell 2.4 percent relative to a year earlier. Italy’s GDP fell 0.3 percent in IIQ2013 and 2.1 percent relative to a year earlier. The GDP of Italy decreased 0.1 percent in IIIQ2013 and declined 1.9 percent relative to a year earlier. Italy’s GDP increased 0.1 percent in IVQ2013 and decreased 0.9 percent relative to a year earlier.
• France. 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 changed 0.0 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 changed 0.0 percent in IIIQ2013 and increased 0.3 percent relative to a year earlier. The GDP of France increased 0.3 percent in IVQ2013 and 0.8 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	3.2
China	1.4	8.1
Euro Area	-0.1	-0.2
Germany	0.7	1.8
France	0.0	0.4
Italy	-1.1	-1.7
United Kingdom	0.0	0.6
	IIQ2012/IQ2012	IIQ2012/IIQ2011
United States	QOQ: 0.3         SAAR: 1.2	2.8
Japan	QOQ: -0.4 SAAR: -1.7	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	-0.5	-2.4
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	-0.4	-2.6
United Kingdom	0.8	0.2
	IVQ2012/IIIQ2012	IVQ2012/IVQ2011
United States	QOQ: 0.0 SAAR: 0.1	2.0
Japan	QOQ: 0.0 SAAR: 0.1	-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	-2.8
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	0.0
China	1.5	7.7
Euro Area	-0.2	-1.2
Germany	0.0	-1.6
France	0.0	-0.4
Italy	-0.6	-2.4
UK	0.4	0.6
	IIQ2013/IQ2013	IIQ2013/IIQ2012
United States	QOQ: 0.6 SAAR: 2.5	1.6
Japan	QOQ: 1.1 SAAR: 4.1	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	-2.1
UK	0.7	1.8
	IIIQ2013/IIQ2013	III/Q2013/  IIIQ2012
USA	QOQ: 1.0 SAAR: 4.1	2.0
Japan	QOQ: 0.2 SAAR: 0.9	2.3
China	2.2	7.8
Euro Area	0.1	-0.3
Germany	0.3	1.1
France	0.0	0.3
Italy	-0.1	-1.9
UK	0.8	1.9
	IVQ2013/IIIQ2013	IVQ2013/IVQ2012
USA	QOQ: 0.6 SAAR: 2.4	2.5
Japan	QOQ: 0.2 SAAR: 0.7	2.6
China	1.8	7.7
Euro Area	0.3	0.5
Germany	0.4	1.3
France	0.3	0.8
Italy	0.1	-0.9
UK	0.7	2.7

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. Japan provides the most worrisome data (Section VB and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html 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 Feb 2014, Japan’s exports grew 9.0 percent in 12 months while imports increased 9.0 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 2.2 percentage points from GDP growth in IIIQ2012 and deducted 0.5 percentage points from GDP growth in IVQ2012. Net trade added 0.4 percentage points to GDP growth in IQ2012, 1.7 percentage points in IQ2013 and 0.5 percentage points in IIQ2013. In IIIQ2013, net trade deducted 2.0 percentage points from GDP growth in Japan. Net trade ducted 2.2 percentage points from GDP growth in Japan in IVQ2013.
• China. In Feb 2014, China exports decreased 18.1 percent relative to a year earlier and imports increased 10.1 percent.
• Germany. Germany’s exports increased 2.2 percent in the month of Jan 2014 and increased 2.9 percent in the 12 months ending in Jan 2014. Germany’s imports increased 4.1 percent in the month of Jan and increased 1.5 percent in the 12 months ending in Dec. Net trade contributed 0.8 percentage points to growth of GDP in IQ2012, contributed 0.4 percentage points in IIQ2012, contributed 0.3 percentage points in IIIQ2012, deducted 0.5 percentage points in IVQ2012, deducted 0.3 percentage points in IQ2013 and added 0.3 percentage points in IIQ2013. Net traded deducted 0.3 percentage points from Germany’s GDP growth in IIIQ2013 and added 1.1 percentage points to GDP growth in IVQ2013.
• United Kingdom. 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 0.8 percentage points to UK’s growth of value added and contributed 0.0 percentage points in IIQ2013. In IIIQ2013, net trade deducted 1.1 percentage points from UK growth. Net trade contributed 0.4 percentage points to UK value added in IVQ2013.
• France. France’s exports decreased 1.8 percent in Jan 2013 while imports decreased 0.3 percent. Net traded added 0.1 percentage points to France’s GDP in IIIQ2012 and 0.1 percentage points in IVQ2012. Net trade deducted 0.1 percentage points from France’s GDP growth in IQ2013 and added 0.2 percentage points in IIQ2013, deducting 0.7 percentage points in IIIQ2013. Net trade added 0.2 percentage points to France’s GDP in IVQ2013.
• United States. US exports decreased 1.8 percent in Dec 2013 and goods exports increased 2.1 percent in Jan-Dec 2013 relative to a year earlier but net trade deducted 0.03 percentage points from GDP growth in IIIQ2012 and added 0.68 percentage points in IVQ2012. Net trade deducted 0.28 percentage points from US GDP growth in IQ2013 and deducted 0.07 percentage points in IIQ2013. Net traded added 0.14 percentage points to US GDP growth in IIIQ2013. Net trade added 0.99 percentage points to US GDP growth in IVQ2013. Industrial production increased 0.6 percent in Feb 2014 after decreasing 0.2 percent in Jan 2013 and changing 0.0 percent in Dec 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 increased 0.6 percent in February after having declined 0.2 percent in January. In February, manufacturing output rose 0.8 percent and nearly reversed its decline of 0.9 percent in January, which resulted, in part, from extreme weather. The gain in factory production in February was the largest since last August. The output of utilities edged down 0.2 percent following a jump of 3.8 percent in January, and the production at mines moved up 0.3 percent. At 101.6 percent of its 2007 average, total industrial production in February was 2.8 percent above its level of a year earlier. The capacity utilization rate for total industry increased in February to 78.8 percent, a rate that is 1.3 percentage points below its long-run (1972–2013) average.”

In the six months ending in Feb 2014, United States national industrial production accumulated increase of 2.0 percent at the annual equivalent rate of 4.1 percent, which is higher than growth of 2.9 percent in the 12 months ending in Jan 2014. Excluding growth of -0.2 percent in Jan 2014, growth in the remaining five months from Sep to Feb 2013 accumulated to 2.2 percent or 5.4 percent annual equivalent. Industrial production fell in one of the past six months. Business equipment accumulated growth of 2.3 percent in the six months from Sep 2013 to Feb 2014 at the annual equivalent rate of 4.7 percent, which is lower than growth of 2.8 percent in the 12 months ending in Feb 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The capacity utilization rate for total industry increased in February to 78.8 percent, a rate that is 1.3 percentage points below its long-run (1972–2013) average.” United States industry apparently decelerated to a lower growth rate with possible acceleration in the past few months. Manufacturing increased 0.8 percent in Feb 2014 after decreasing 0.9 percent in Jan 2014 and increasing 0.2 percent in Dec 2013 seasonally adjusted, increasing 1.9 percent not seasonally adjusted in 12 months ending in Feb 2014, as shown in Table I-2. Manufacturing grew cumulatively 1.2 percent in the six months ending in Jan 2014 or at the annual equivalent rate of 2.4 percent. Excluding the decrease of 0.9 percent in Jan 2014, manufacturing accumulated growth of 2.1 percent from Sep 2013 to Feb 2013 or at the annual equivalent rate of 5.2 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. The Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.1 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 19.1 percent from the trough in Apr 2009 to Feb 2014. Manufacturing output in Feb 2014 is 6.9 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	0.6 Jan	3.3 Jan	0.6 Jan	-0.3 Jan
Japan		Feb 2014 9.5 Jan 2014 9.5 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		Feb 2014 9.0 Jan 2014 25.0 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		2014 -18.1 Feb 10.6 Jan 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		2014 10.1 Feb 10.0 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	1.0 12-M Jan	0.8 Jan-Dec	-3.2 12-M Dec	-3.3 Jan-Dec
Germany	2.2 Jan CSA	2.9 Jan	4.1 Jan CSA	1.5 Jan
France Dec	-1.8	-0.8	-0.3	0.1
Italy Jan	-1.5	0.2	-1.6	-6.6
UK	-2.2 Feb	0.1 Dec-Feb 14 /Dec-Feb 13	2.3 Dec	-0.4 Dec-Feb 14 13/Dec-Feb 13
Net Trade % Points GDP Growth	% Points
USA	IVQ2013 0.99 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 -2.2 IIIQ2012 -0.5 IVQ2012 1.7 IQ2013 0.6 IIQ2013 -2.0 IIIQ2013 -2.1 IVQ2013
Germany	IQ2012 0.8 IIQ2012 0.4 IIIQ2012 0.3 IVQ2012 -0.5 IQ2013 -0.3 IIQ2013 0.3 IIIQ2013 -0.3 IVQ2013 1.1
France	0.1 IIIQ2012 0.1 IVQ2012 -0.1 IQ2013 0.2 IIQ2013 -0.7 IIIQ2013 0.2 IVQ2013
UK	-0.8 IQ2012 -0.8 IIQ2012 +0.7 IIIQ2012 -0.5 IVQ2012 0.8 IQ2013 0.0 IIQ2013 -1.1 IIIQ2013 0.4 IVQ2013

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 Feb 2014. The share of Asia in Japan’s trade is more than one-half for 53.5 percent of exports and 41.7 percent of imports. Within Asia, exports to China are 18.5 percent of total exports and imports from China 18.0 percent of total imports. While exports to China increased 27.7 percent in the 12 months ending in Feb 2014, imports from China increased 5.7 percent. The largest export market for Japan in Feb 2014 is the US with share of 18.3 percent of total exports, which is close to that of China, and share of imports from the US of 8.8 percent in total imports. Japan’s exports to the US grew 5.6 percent in the 12 months ending in Feb 2014 and imports from the US grew 20.8 percent. Western Europe has share of 10.8 percent in Japan’s exports and of 10.7 percent in imports. Rates of growth of exports of Japan in Jan 2014 are 5.6 percent for exports to the US, minus 0.6 percent for exports to Brazil and 21.1 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 Feb 2014 are positive for all trading partners except for declines from France and the Middle East. Imports from Asia increased 7.7 percent in the 12 months ending in Feb 2014 while imports from China increased 5.7 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

Feb 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,799,966	9.8	6,600,275	9.0
Asia	3,102,072	12.5	2,749,544	7.7
China	1,074,853	27.7	1,185,620	5.7
USA	1,063,575	5.6	579,923	20.8
Canada	68,826	-5.8	85,997	11.8
Brazil	38,879	-0.6	96,705	1.2
Mexico	83,036	16.4	36,199	24.5
Western Europe	623,929	11.7	707,309	17.6
Germany	165,864	21.1	214,308	33.0
France	50,842	13.8	80,196	-1.0
UK	87,878	-0.6	52,547	5.1
Middle East	230,990	18.7	1,328,897	-2.2
Australia	126,279	-7.3	373,453	6.3

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

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

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

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

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

Source: International Monetary Fund World Economic Outlook databank

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

The JP Morgan Global All-Industry Output Index of the JP Morgan Manufacturing and Services PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, with high association with world GDP, decreased to 53.0 in Feb from 54.0 in Jan, indicating expansion at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/90d6571ed14f442d8ac0a59d7592a77f). This index has remained above the contraction territory of 50.0 during 55 consecutive months. The employment index decreased from 51.9 in Jan to 51.4 in Feb with input prices rising at slower rate, new orders increasing at faster rate and output increasing at slower rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/90d6571ed14f442d8ac0a59d7592a77f). David Hensley, Director of Global Economics Coordination at JP Morgan finds temporary effects of services and weather with expectation of resumption of the growth impulse (http://www.markiteconomics.com/Survey/PressRelease.mvc/90d6571ed14f442d8ac0a59d7592a77f). The JP Morgan Global Manufacturing PMI^™, produced by JP Morgan and Markit in association with ISM and IFPSM, increased at 53.3 in Feb from 53.0 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/24962c60b7d34a84a661c0c2cb0ab8b8). New export orders expanded for the eighth consecutive month at a faster rate than in Jn (http://www.markiteconomics.com/Survey/PressRelease.mvc/24962c60b7d34a84a661c0c2cb0ab8b8). David Hensley, Director of Global Economic Coordination at JP Morgan finds slowing of the index from the strength at the end of 2013 even excluding the US with weather effects (http://www.markiteconomics.com/Survey/PressRelease.mvc/24962c60b7d34a84a661c0c2cb0ab8b8). The HSBC Brazil Composite Output Index, compiled by Markit, increased from 49.9 in Jan to 50.8 in Feb, indicating expanding activity of Brazil’s private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/71ab794bc85841cf85d5c0b70a6692a2). The HSBC Brazil Services Business Activity index, compiled by Markit, increased from 49.6 in Jan to 50.8 in Feb, indicating expanding services activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/71ab794bc85841cf85d5c0b70a6692a2). André Loes, Chief Economist, Brazil, at HSBC, finds improving economy in Feb with more data required to assess conditions (http://www.markiteconomics.com/Survey/PressRelease.mvc/71ab794bc85841cf85d5c0b70a6692a2). The HSBC Brazil Purchasing Managers’ Index^TM (PMI^™) decreased marginally from 50.8 in Jan to 50.4 in Feb, indicating marginal improvement in manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/46aa9d753c9f4f25b7fb307a8fa92821). André Loes, Chief Economist, Brazil at HSBC, finds slower growth of manufacturing with input prices increasing at the fastest rhythm since Nov (http://www.markiteconomics.com/Survey/PressRelease.mvc/46aa9d753c9f4f25b7fb307a8fa92821).

VA United States. The Markit Flash US Manufacturing Purchasing Managers’ Index^™ (PMI^™) seasonally adjusted increased to 56.7 in Feb from 53.7 in Jan, which is the highest rate of improvement since May 2010 (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7542a2e11a34e0eb2dc6d0da06fef6e). New export orders registered 50.9 in Feb, increasing from 48.4 in Jan, indicating marginal expansion. Chris Williamson, Chief Economist at Markit, finds that manufacturing hiring is growing with creation of about 15,000 jobs in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/c7542a2e11a34e0eb2dc6d0da06fef6e). The Markit Flash US Services PMI™ Business Activity Index increased from 55.7 in Dec to 56.6 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/979201249645452086dde674d0d375e0). Chris Williamson, Chief Economist at Markit, finds that the surveys are consistent with growth of jobs at monthly rate of 200,000 (http://www.markiteconomics.com/Survey/PressRelease.mvc/979201249645452086dde674d0d375e0). The Markit US Composite PMI™ Output Index of Manufacturing and Services decreased to 54.1 in Feb from 56.2 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/d041468211fe42bdad220ac2d97e2972). The Markit US Services PMI™ Business Activity Index decreased from 56.7 in Jan to 53.3 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/d041468211fe42bdad220ac2d97e2972). Chris Williamson, Chief Economist at Markit, finds weather effects with the indexes suggesting 1.7 percent annual growth in IQ2014 relative to 2.4 percent in IVQ2013 (http://www.markiteconomics.com/Survey/PressRelease.mvc/d041468211fe42bdad220ac2d97e2972). The Markit US Manufacturing Purchasing Managers’ Index^™ (PMI^™) increased to 57.1 in Feb from 53.7 in Jan, which indicates expansion at faster rate (http://www.markiteconomics.com/Survey/PressRelease.mvc/84b031abddba4c3e829492e8c6209db6). The index of new exports orders increased from 48.5 in Jan to 51.6 in Feb while total new orders increased from 53.9 in Jan to 59.6 in Feb. Chris Williamson, Chief Economist at Markit, finds that the index suggests the fastest improvement in US manufacturing in nearly four years (http://www.markiteconomics.com/Survey/PressRelease.mvc/84b031abddba4c3e829492e8c6209db6). The purchasing managers’ index (PMI) of the Institute for Supply Management (ISM) Report on Business^® increased 1.9 percentage points from 51.3 in Jan to 53.2 in Feb, which indicates growth at a faster rate (http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942). The index of new orders increased 3.0 percentage points from 60.6 in Oct to 63.6 in Nov. The index of exports decreased 13.2 percentage point from 64.4 in Dec to 51.2 in Nov, growing at a slower rate. The Non-Manufacturing ISM Report on Business^® PMI decreased 2.4 percentage points from 54.0 in Jan to 51.6 in Feb, indicating growth of business activity/production during 55 consecutive months, while the index of new orders increased 0.4 percentage points from 50.9 in Jan to 51.3 in Feb (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	Feb 12 months NSA ∆%: 1.1; ex food and energy ∆%: 1.6 Feb month SA ∆%: 0.1; ex food and energy ∆%: 0.1 Blog 3/23/14
Producer Price Index	Finished Goods Feb 12-month NSA ∆%: 1.3; ex food and energy ∆% 1.7 Feb month SA ∆% = 0.4; ex food and energy ∆%: 0.1 Final Demand Feb 12-month NSA ∆%: 0.9; ex food and energy ∆% 1.1 Feb month SA ∆% = -0.1; ex food and energy ∆%: -0.2 Blog 3/23/14
PCE Inflation	Jan 12-month NSA ∆%: headline 1.2; ex food and energy ∆% 1.1 Blog 3/9/14
Employment Situation	Household Survey: Feb Unemployment Rate SA 6.7% Blog calculation People in Job Stress Feb: 29.1 million NSA, 17.8% of Labor Force Establishment Survey: Feb Nonfarm Jobs +175,000; Private +162,000 jobs created  Jan 12-month Average Hourly Earnings Inflation Adjusted ∆%: 0.4 Blog 3/9/14
Nonfarm Hiring	Nonfarm Hiring fell from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million Private-Sector Hiring Jan 2014 4.383 million lower by 0.709 million than 5.092 million in Jan 2005 Blog 3/16/14
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 2.5 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 2.4 Blog 3/2/14
Real Private Fixed Investment	SAAR IVQ2013 3.8 ∆% IVQ2007 to IVQ2013: minus 2.7% Blog 3/2/14
Personal Income and Consumption	Jan month ∆% SA Real Disposable Personal Income (RDPI) SA ∆% 0.3 Real Personal Consumption Expenditures (RPCE): 0.3 12-month Jan NSA ∆%: RDPI: 2.8; RPCE ∆%: 2.2 Blog 3/9/14
Quarterly Services Report	IVQ13/IVQ12 NSA ∆%: Information 5.5 Financial & Insurance 5.6 Blog 3/16/14
Employment Cost Index	Compensation Private IVQ2013 SA ∆%: 0.5 Dec 12 months ∆%: 1.9 Blog 2/9/14
Industrial Production	Feb month SA ∆%: 0.6 Feb 12 months SA ∆%: 2.8 Manufacturing Feb SA ∆% 0.8 Feb 12 months SA ∆% 1.5, NSA 1.9 Capacity Utilization: 78.8 Blog 3/23/14
Productivity and Costs	Nonfarm Business Productivity IVQ2013∆% SAAE 1.8; IVQ2013/IVQ2012 ∆% 1.3; Unit Labor Costs SAAE IVQ2013 ∆% -0.1; IVQ2013/IVQ2012 ∆%: -0.9 Blog 3/9/2014
New York Fed Manufacturing Index	General Business Conditions From Feb 4.48 to Mar 5.61 New Orders: From Feb -0.21 to Mar 3.13 Blog 3/23/14
Philadelphia Fed Business Outlook Index	General Index from Feb -6.3 to Mar 9.0 New Orders from Feb -5.2 to Mar 5.7 Blog 3/23/14
Manufacturing Shipments and Orders	New Orders SA Jan ∆% -0.7 Ex Transport 0.2 Jan NSA New Orders ∆% 1.2 Ex transport 0.4 Blog 3/9/14
Durable Goods	Jan New Orders SA ∆%: minus 1.0; ex transport ∆%: 1.1 Jan 14/Jan 13 New Orders NSA ∆%: 3.4; ex transport ∆% 0.4 Blog 3/2/14
Sales of New Motor Vehicles	Jan-Feb 2014 2,206,454; Feb 2013 2,238,820. Feb 14 SAAR 15.34 million, Jan 14 SAAR 15.34 million, Feb 2013 SAAR 15.34 million Blog 3/9/14
Sales of Merchant Wholesalers	Jan 2014/Jan 2013 NSA ∆%: Total 3.5; Durable Goods: 5.0; Nondurable Goods: 1.5 Blog 3/16/14
Sales and Inventories of Manufacturers, Retailers and Merchant Wholesalers	Jan 14 12-M NSA ∆%: Sales Total Business 2.6; Manufacturers 1.8 Retailers 2.3; Merchant Wholesalers 3.6 Blog 3/16/14
Sales for Retail and Food Services	Jan-Feb 2014/Jan-Feb 2013 ∆%: Retail and Food Services 1.9; Retail ∆% 1.8 Blog 3/16/14
Value of Construction Put in Place	Jan SAAR month SA ∆%: 0.1 Jan 12-month NSA: 9.4 Blog 3/9/14
Case-Shiller Home Prices	Dec 2013/Dec 2012 ∆% NSA: 10 Cities 13.6; 20 Cities: 13.4 ∆% Dec SA: 10 Cities 0.8 ; 20 Cities: 0.8 Blog 3/2/14
FHFA House Price Index Purchases Only	Dec SA ∆% 0.8; 12 month NSA ∆%: 7.7 Blog 3/2/14
New House Sales	Jan 2014 month SAAR ∆%: 9.6 Jan-Dec 2013/Jan-Dec 2012 NSA ∆%: 16.4 Blog 3/2/14
Housing Starts and Permits	Feb Starts month SA ∆% minus 0.2; Permits ∆%: 7.7 Jan-Feb 2014/Jan-Feb 2013 NSA ∆% Starts -1.0; Permits  ∆% 4.4 Blog 3/23/14
Trade Balance	Balance Jan SA -$39,095 million versus Dec -$38,975 million Exports Jan SA ∆%: 0.6 Imports Jan SA ∆%: 0.6 Goods Exports Jan 2014/Jan 2013 NSA ∆%: 3.3 Goods Imports Jan 2014/Jan 2012 NSA ∆%: -0.3 Blog 3/9/14
Export and Import Prices	Feb 12-month NSA ∆%: Imports -1.2; Exports -1.3 Blog 3/16/14
Consumer Credit	Jan ∆% annual rate: Total 5.3; Revolving -0.3; Nonrevolving 7.5 Blog 3/9/14
Net Foreign Purchases of Long-term Treasury Securities	Jan Net Foreign Purchases of Long-term US Securities: $7.3 billion Major Holders of Treasury Securities: China $1274 billion; Japan $1201 billion; Total Foreign US Treasury Holdings Nov $5833 billion Blog 3/23/14
Treasury Budget	Fiscal Year 2014/2013 ∆% Feb: Receipts 9.3; Outlays minus 1.5; Individual Income Taxes 2.6 Deficit Fiscal Year 2011 $1,300 billion Deficit Fiscal Year 2012 $1,087 billion Deficit Fiscal Year 2013 $680 billion Blog 3/16/2014
CBO Budget and Economic Outlook	2012 Deficit $1087 B 6.8% GDP Debt 11,281 B 70.1% GDP 2013 Deficit $680 B, 4.1% GDP Debt 11,982 B 72.1% GDP Blog 8/26/12 11/18/12 2/10/13 9/22/13 2/16/14
Commercial Banks Assets and Liabilities	Jan 2014 SAAR ∆%: Securities 1.7 Loans 3.7 Cash Assets 24.9 Deposits 8.9 Blog 3/2/14
Flow of Funds	IVQ2013 ∆ since 2007 Assets +$12,272.6 BN Nonfinancial -$729.2 BN Real estate -$1380.6 BN Financial +13,001.7 BN Net Worth +$12,910.9 BN Blog 3/16/14
Current Account Balance of Payments	IVQ2013 -83,739 MM %GDP 2.2 Blog 3/23/14

Links to blog comments in Table USA:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/23/14 http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

2/9/14 http://cmpassocregulationblog.blogspot.com/2014/02/financial-instability-rules.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

Seasonally adjusted annual rates (SAAR) of housing starts and permits are shown in Table VA-1. Housing starts fell 0.2 percent in Feb 2014 after wide oscillations in 2013 that included decrease of 11.2 percent in Jan, increase of 22.5 percent in Nov, decline of 15.2 percent in Apr 2013 and 9.1 percent in Jun 2013. Housing starts decreased 6.4 percent from the SAAR of 969 in Feb 2013 to the SAAR of 907 in Feb 2014. Housing permits, indicating future activity, increased 7.7 percent in Feb 2014 also after significant oscillations in 2013 with increase of 6.9 percent from 952 SSAR in Jan 2013 to SSAR of 1018 in Feb 2014. While single unit houses starts decreased 1.8 percent in Feb 2014, seasonally adjusted, structures with five units or more increased 27.6 percent. Multifamily residential construction is increasing at a faster rate than single-family construction with wide monthly oscillations. Monthly rates in starts and permits fluctuate significantly as shown in Table VA-1.

Table VA-1, US, Housing Starts and Permits SSAR Month ∆%

	Housing  Starts SAAR	Month ∆%	Housing Permits SAAR	Month ∆%
Feb 2014	907	-0.2	1018	7.7
Jan	909	-11.2	945	-4.6
Dec 2013	1024	-7.0	991	-2.6
Nov	1101	22.5	1017	-2.1
Oct	899	3.0	1039	6.7
Sep	873	-1.1	974	5.2
Aug	883	-0.9	926	-2.9
Jul	891	6.7	954	3.9
Jun	835	-9.1	918	-6.8
May	919	7.9	985	-2.0
Apr	852	-15.2	1005	12.9
Mar	1005	3.7	890	-6.5
Feb	969	7.9	952	4.0
Jan	898	-8.6	915	-3.0
Dec 2012	983	16.7	943	1.1
Nov	842	-2.5	933	2.8
Oct	864	1.2	908	-1.4
Sep	854	14.0	921	11.4
Aug	749	1.1	827	-1.4
Jul	741	-2.1	839	6.9
Jun	757	6.5	785	-2.6
May	711	-5.7	806	7.6
Apr	754	6.6	749	-4.6
Mar	707	-0.8	785	6.2
Feb	713	-1.4	739	3.5
Jan	723	4.2	714	2.4
Dec 2011	694	-2.4	697	-1.3
Nov	711	16.6	706	5.2
Oct	610	-6.2	671	10.0
Sep	650	11.1	610	-5.7
Aug	585	-6.1	647	4.2
Jul	623	2.5	621	-2.4
Jun	608	8.4	636	2.9
May	561	1.3	618	6.4
Apr	554	-7.7	581	-0.3
Mar	600	16.1	583	7.6
Feb	517	-17.9	542	-5.9
Jan	630	16.9	576	-8.9
Dec 2010	539	-1.1	632	12.9
Nov	545	0.4	560	0.4
Oct	543	-8.6	558	-0.9
Sep	594	-0.8	563	-2.9

SAAR: Seasonally Adjusted Annual Rate

Source: US Census Bureau http://www.census.gov/construction/nrc/

Housing starts and permits in Jan-Feb not-seasonally adjusted are in Table VA-2. Housing starts decreased 4.4 percent in Jan-Feb 2014 relative to Jan-Feb 2013 and new permits increased 4.4 percent. Construction of new houses in the US remains at very depressed levels. Housing starts fell 58.6 percent in Jan-Feb 2014 relative to Jan-Feb 2006 and fell 57.7 percent relative to Jan-Feb 2005. Housing permits fell 55.4 percent in Jan-Feb 2014 relative to Jan-Feb 2006 and fell 52.4 percent relative to Jan-Feb 2005.

Table VA-2, US, Housing Starts and New Permits, Thousands of Units, NSA, and %

	Housing Starts	New Permits
Jan-Feb 2014	123.5	135.7
Jan-Feb 2013	124.7	130.0
∆% Jan-Feb 2014/Jan-Feb 2013	-1.0	4.4
Jan-Feb 2006	298.2	304.2
∆% Jan-Feb 2014/Jan-Feb 2006	-58.6	-55.4
Jan-Feb 2005	292.0	285.3
∆% Jan-Feb 2014/Jan-Feb 2005	-57.7	-52.4

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-1 of the US Census Bureau shows the sharp increase in construction of new houses from 2000 to 2006. Housing construction fell sharply through the recession, recovering from the trough around IIQ2009. The right-hand side of Chart VA-4 shows a mild downward trend or stagnation from mid-2010 to the present in single-family houses with a recent mild upward trend in recent months in the category of two or more units but marginal decline in recent months. While single unit houses starts decreased 0.5 percent in Jan-Feb 2014 relative to a year earlier, not seasonally adjusted, structures with two to four units decreased 12.8 percent and with five units or more increased 15.4 percent. Single unit houses were 63.2 percent of total housing starts in 2013, increasing 19.0 percent relative to 2012, while construction of five units of more were 34.0 percent, increasing 16.6 percent, and construction of two to four units were 2.8 percent of the total, increasing 2.7 percent.

Chart VA-1, US, Total and Single-Family New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr020.html

Table VA-3 provides new housing units that started in the US at seasonally adjusted annual rates (SAAR) from Aug to Dec and from Jan to Feb of the years from 2000 to 2014. SAARs have dropped from high levels around 2 million in 2005-2006 to the range of 707,000 in Mar 2012 to 983,000 in Dec 2012 and 1,005,000 in Mar 2013, which is an improvement over the range of 517,000 in Feb 2011 to 711,000 in Nov 2011.  There is improvement in Jul 2013 with SAAR of 891,000 relative to 741,000 in Jul 2012 and in Aug 2013 with 883,000 relative to 749,000 in Aug 2012. Improvement continued with 1,024,000 in Dec 2013 relative to 983,000 in Dec 2012. Housing starts remained at a relatively high level of 1,024,000 in Dec 2013 compared with 983,000 in Dec 2012. The rate of housing starts fell to 907,000 in Feb 2014 relative to 979,000 in Feb 2013.

Table VA-3, US, New Housing United Started at Seasonally Adjusted Rates, Thousand Units

	Jan	Feb	Aug	Sep	Oct	Nov	Dec
2000	1,636	1,737	1,541	1,507	1,549	1,551	1,532
2001	1,600	1,625	1,567	1,562	1,540	1,602	1,568
2002	1,698	1,829	1,633	1,804	1,648	1,753	1,788
2003	1,853	1,629	1,833	1,939	1,967	2,083	2,057
2004	1,911	1,846	2,024	1,905	2,072	1,782	2,042
2005	2,144	2,207	2,095	2,151	2,065	2,147	1,994
2006	2,273	2,119	1,650	1,720	1,491	1,570	1,649
2007	1,409	1,480	1,330	1,183	1,264	1,197	1,037
2008	1,084	1,103	844	820	777	652	560
2009	490	582	586	585	534	588	581
2010	614	604	599	594	543	545	539
2011	630	517	585	650	610	711	694
2012	723	713	749	854	864	842	983
2013	898	969	883	873	899	1,101	1,024
2014	909	907	NA	NA	NA	NA	NA

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-2 of the US Census Bureau provides construction of new housing units started in the US at seasonally adjusted annual rate (SAAR) from Jan 1959 to Feb 2014 that helps to analyze in historical perspective the debacle of US new house construction. There are three periods in the series. (1) There is stationary behavior with wide fluctuations from 1959 to the beginning of the decade of the 1970s. (2) There is sharp upward trend from the 1990s to 2006 propelled by the US housing subsidy, politics of Fannie Mae and Freddie Mac and unconventional monetary policy of near zero interest rates from Jun 2003 to Jun 2004 and suspension of the auction of 30-year Treasury bonds intended to lower mortgage rates. The financial crisis and global recession were caused by interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html  .

Chart VA-2, US, New Housing Units Started in the US, SAAR (Seasonally Adjusted Annual Rate), Thousands of Units, Jan 1959-Feb 2014

Source: US Census Bureau http://www.census.gov/construction/nrc/

Table VA-4 provides actual new housing units started in the US, not seasonally adjusted, from Aug to Dec and from Jan to Feb in the years from 2000 to 2014. The number of housing units started fell from the peak of 197.9 thousand in May 2005 to 67.6 thousand in Dec 2013 or decline of 65.8 percent in large part because of lower seasonal activity at the end of the year. The number of housing units started jumped increased from 49.7 thousand in Jan 2012 to 62.4 thousand in Feb 2014 or by 25.5 percent and increased 53.3 percent from 40.7 thousand in Feb 2010.

Table VA-4, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units

	Jan	Feb	Aug	Sep	Oct	Nov	Dec
2000	104.0	119.7	141.4	128.9	139.7	117.1	100.7
2001	106.4	108.2	141.5	133.1	139.8	121.0	104.6
2002	110.4	120.4	147.0	155.6	146.8	133.0	123.1
2003	117.8	109.7	163.8	171.3	173.5	153.7	144.2
2004	124.5	126.4	185.9	164.0	181.3	138.1	140.2
2005	142.9	149.1	192.0	187.9	180.4	160.7	136.0
2006	153.0	145.1	146.8	150.1	130.6	115.2	112.4
2007	95.0	103.1	121.2	101.5	115.0	88.8	68.9
2008	70.8	78.4	76.4	73.9	68.2	47.5	37.7
2009	31.9	39.8	52.9	52.6	44.5	42.3	36.6
2010	38.9	40.7	56.3	53.0	45.4	40.6	33.8
2011	40.2	35.4	54.5	58.8	53.2	53.0	42.7
2012	47.2	49.7	69.0	75.8	77.0	62.2	63.2
2013	58.7	66.1	80.4	78.4	78.4	83.8	67.6
2014	61.1	62.4	NA	NA	NA	NA	NA

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-3 of the US Census Bureau provides new housing units started in the US not seasonally adjusted (NSA) from Jan 1959 to Feb 2014. There is the same behavior as in Chart VA-2 SA but with sharper fluctuations in the original series without seasonal adjustment. There are the same three periods. (1) The series is virtually stationary with wide fluctuations from 1959 to the late 1980s. (2) There is downward trend during the savings and loans crisis of the 1980s. Benston and Kaufman (1997, 139) find that there was failure of 1150 US commercial and savings banks between 1983 and 1990, or about 8 percent of the industry in 1980, which is nearly twice more than between the establishment of the Federal Deposit Insurance Corporation in 1934 through 1983. More than 900 savings and loans associations, representing 25 percent of the industry, were closed, merged or placed in conservatorships (see Pelaez and Pelaez, Regulation of Banks and Finance (2008b), 74-7). The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) created the Resolution Trust Corporation (RTC) and the Savings Association Insurance Fund (SAIF) that received $150 billion of taxpayer funds to resolve insolvent savings and loans. The GDP of the US in 1989 was $4346.7 billion (http://www.bea.gov/iTable/index_nipa.cfm), such that the partial cost to taxpayers of that bailout was around 3.45 percent of GDP in a year. US GDP in 2013 is estimated at $16,797.5 billion, such that the bailout would be equivalent to cost to taxpayers of about $579.5 billion in current GDP terms. A major difference with the Troubled Asset Relief Program (TARP) for private-sector banks is that most of the costs were recovered with interest gains whereas in the case of savings and loans there was no recovery. (3) There is vertical drop of new housing construction in the US during the global recession from (Dec) IVQ2007 to (Jun) IIQ2009 (http://www.nber.org/cycles/cyclesmain.html). The final segment shows upward trend but it could be simply part of yet another fluctuation. Marginal improvement in housing in the US should not obscure the current depressed levels relative to earlier periods.

Chart VA-3, US, New Housing Units Started in the US, Not Seasonally Adjusted, Thousands of Units, Jan 1959-Feb 2014

Source: US Census Bureau http://www.census.gov/construction/nrc/

Chart VA-4 of the US Census Bureau provides single-family houses started without seasonal adjustment. There was sharp increase from 1992 to 2007 followed by sharp decline. The recovery is sluggish.

Chart VA-4, US, Single-family Houses Started, Thousands of Units, Jan-1959-Feb 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc

Chart VA-5 of the US Census Bureau provides housing units started with five units or more. Construction was stagnant before the drop in the global recession. Recovery is stronger than in the case of single-family units.

Chart VA-5, US, Housing Units Stated in Buildings with Five Units or More, Thousands of Units, Jan-1959-Feb 2014, NSA

Source: US Census Bureau http://www.census.gov/construction/nrc/

A longer perspective on residential construction in the US is provided by Table VA-5 with annual data from 1960 to 2013. Housing starts fell 55.3 percent from 2005 to 2013, 41.0 percent from 2000 to 2013 and 35.3 percent relative to the average from 1959 to 1963. Housing permits fell 54.7 percent from 2005 to 2013, 38.7 percent from 2000 to 2013 and 15.7 percent from the average of 1969-1963 to 2013. Housing starts rose 31.8 from 2000 to 2005 while housing permits grew 35.4 percent. From 1990 to 2000, housing starts increased 31.5 percent while permits increased 43.3 percent.

Table VA-5, US, Annual New Privately Owned Housing Units Authorized by Building Permits in Permit-Issuing Places and New Privately Owned Housing Units Started, Thousands

	Starts	Permits
2013	924.9	976.4
2012	780.6	829.7
∆% 2013/2012	18.5	17.7
∆% 2013/2011	51.9	56.4
∆% 2013/2010	57.6	61.5
∆% 2013/2006	-48.6	-46.9
∆% 2013/2005	-55.3	-54.7
∆% 2013/2000	-41.0	-38.7
∆% 2013/Av 1959-1963	-35.3	-15.7
2011	608.8	624.1
∆% 2012/2005	-62.3	-61.5
∆% 2012/2000	-50.2	-47.9
∆% 2012/Av 1959-1963	-45.4	-28.4
2011	608.8	624.1
2010	586.9	604.6
2009	554.0	583.0
2008	905.5	905.4
2007	1,355,0	1,398.4
2006	1,800.9	1,838.9
2005	2,068.3	2,155.3
∆% 2005/2000	31.8	35.4
2004	1,955.8	2,070.1
2003	1,847.7	1,889.2
2002	1,704.9	1,747.7
2001	1,602.7	1,636.7
2000	1,568.7	1,592.3
∆% 2000/1990	31.5	43.3
1990	1,192,7	1,110.8
1980	1,292.2	1,190.6
1970	1,433.6	1,351.5
Average 1959-63	1,429.7	1,158.2

Source: US Census Bureau

http://www.census.gov/construction/nrc/

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.
5. Bank Lending Facility and Growth Supporting Funding Facility. At the meeting on Feb 18, the Bank of Japan doubled the scale of these lending facilities to prevent their expiration in the near future (http://www.boj.or.jp/en/announcements/release_2014/k140218a.pdf).

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

Fiscal Year Date of Forecast	Real GDP	CPI All Items Less Fresh Food	Excluding Effects of Consumption Tax Hikes
2013
Jan 2014	+2.5 to +2.9 [+2.7]	+0.7 to +0.9 [+0.7]
Oct 2013	+2.6 to +3.0 [+2.7]	+0.6 to +1.0 [+0.7]
Jul 2013	+2.5 to +3.0 [+2.8]	+0.5 to +0.8 [+0.6]
2014
Jan 2014	+0.9 to 1.5 [+1.4]	+2.9 to +3.6 [+3.3]	+0.9 to +1.6 [+1.3]
Oct 2013	+0.9 to +1.5 [+1.5]	+2.8 to +3.6 [+3.3]	+0.8 to +1.6 [+1.3]
Jul 2013	+0.8 to +1.5 [+1.3]	+2.7 to +3.6 [+3.3]	+0.7 to +1.6 [+1.3]
2015
Jan 2014	+1.2 to +1.8 [+1.5]	+1.7 to +2.9 [+2.6]	+1.0 to +2.2 [+1.9]
Oct 2013	+1.3 to +1.8 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]
Jul 2013	+1.3 to +1.9 [+1.5]	+1.6 to +2.9 [+2.6]	+0.9 to +2.2 [+1.9]

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

Source: Policy Board, Bank of Japan

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

Private-sector activity in Japan expanded with the Markit Composite Output PMI^™ Index decreasing from 54.1 in Jan to 52.0 in Feb, indicating slower growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/6d69e0d951cf45b4a3f0e45809ba5b4c). Paul Smith, Director at Markit and author of the report, finds that the survey data suggest weakening conditions because of weather effects (http://www.markiteconomics.com/Survey/PressRelease.mvc/6d69e0d951cf45b4a3f0e45809ba5b4c). The Markit Business Activity Index of Services decreased from the record of 51.8 in Nov to 52.1 in Dec, 51.2 in Jan and 49.3 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/6d69e0d951cf45b4a3f0e45809ba5b4c). Paul Smith, Director at Markit and author of the report, finds concerns with the increase in sales taxes (http://www.markiteconomics.com/Survey/PressRelease.mvc/6d69e0d951cf45b4a3f0e45809ba5b4c). The Markit/JMMA Purchasing Managers’ Index^™ (PMI™), seasonally adjusted, decreased from 56.6 in Jan, which is the highest level since Feb 2006, to 55.5 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/18431136559044cfbbe099e870c915b5). New orders grew at a high rate for the twelfth consecutive month. New export orders increased for the sixth consecutive month at slow pace. Paul Smith, Economist at Markit and author of the report, finds improving manufacturing conditions with some concerns about the sales tax increase in Apr with price increases providing some compensation (http://www.markiteconomics.com/Survey/PressRelease.mvc/18431136559044cfbbe099e870c915b5).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	Feb ∆% -0.2 12 months ∆% 1.8 Blog 3/16/14
Consumer Price Index	Jan NSA ∆% -0.2; Jan 12 months NSA ∆% 1.4 Blog 3/2/14
Real GDP Growth	IVQ2013 ∆%: 0.2 on IIIQ2013;  IVQ2013 SAAR 0.7; ∆% from quarter a year earlier: 2.6 % Blog 6/16/13 8/18/13 9/15/13 11/17/13 12/15/13 2/23/14 3/16/14
Employment Report	Jan Unemployed 2.38 million Change in unemployed since last year: minus 350 thousand Unemployment rate: 3.7 % Blog 3/2/14
All Industry Indices	Jan month SA ∆% 1.0 12-month NSA ∆% 3.3 Blog 3/23/14
Industrial Production	Jan SA month ∆%: 4.0 12-month NSA ∆% 10.6 Blog 3/2/14
Machine Orders	Total Jan ∆% 12.6 Private ∆%: 18.3 Jan ∆% Excluding Volatile Orders 13.4 Blog 3/16/14
Tertiary Index	Jan month SA ∆% 0.9 Jan 12 months NSA ∆% 2.0 Blog 3/16/14
Wholesale and Retail Sales	Jan 12 months: Total ∆%: 4.1 Wholesale ∆%: 3.9 Retail ∆%: 4.4 Blog 3/2/14
Family Income and Expenditure Survey	Jan 12-month ∆% total nominal consumption 2.8, real 1.1 Blog 3/2/14
Trade Balance	Exports Feb 12 months ∆%: 9.8 Imports Feb 12 months ∆% 9.0 Blog 3/23/14

Links to blog comments in Table JPY:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/23/14 http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.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

The indices of all industry activity of Japan, which approximates GDP or economic activity, fell to levels close to the worst point of the recession, showing the brutal impact of the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. Table VB-1 with the latest revisions shows the quarterly index, which permits comparison with the movement of real GDP. The first row provides weights of the various components of the index: AG (agriculture) 1.4 percent (not shown), CON (construction) 5.7 percent, IND (industrial production) 18.3 percent, TERT (services) 63.2 percent, and GOVT (government) 11.4 percent. GDP increased 0.2 percent in IVQ2013 (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html), industry increased 1.7 percent, the tertiary sector decreased 0.3 percent, government increased 0.1 percent and construction increased 3.3 percent. The report shows that the all industry index increased 0.2 percent in IVQ2013. Industry added 0.30 percentage points to growth of the all industry index and the tertiary index deducted 0.20 percentage points. Japan had already experienced a very weak quarter in IVQ2010, with decline of GDP of 0.5 percent (Table VB-1 at http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html), when it was unexpectedly hit by the Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011. GDP fell 1.9 percent in IQ2011 and 0.6 percent in IIQ2011. GDP changed 0.0 percent in IQ2011 relative to a year earlier and fell 1.5 percent in IIQ2011 relative to a year earlier (Tables VB-1 and VB-4 at http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html). The all industry activity index fell in all quarters of 2012 with exception of growth of 0.1 percent in IQ2012. Weakness in industry was the driver of decline.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
2013
IVQ2013	3.3	1.7	-0.3	0.1	0.2	0.2
Cont to IVQ % Change	0.17	0.30	-0.20	0.01
IIIQ2013	5.4	1.8	-0.1	-0.4	0.6	0.2
IIQ2013	4.7	1.5	0.7	-0.5	1.0	1.0
IQ2013	-0.5	0.6	0.2	0.1	0.0	1.1
2012
IVQ2012	3.0	-1.8	0.3	0.1	-0.1	0.0
IIIQ	1.6	-3.3	0.0	0.0	-0.4	-0.8
IIQ	1.3	-2.1	0.0	0.0	-0.2	-0.4
IQ	2.0	1.6	0.0	0.2	0.1	0.9

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

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

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

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

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

There are more details in Table VB-2. In Jan 2014, the all industry activity index decreased 1.0 percent with industry increasing 3.8 percent and services increasing 0.9 percent while construction decreased 3.2 percent and government decreased 0.4 percent. Industry added 0.68 percentage points and services added 0.59 percentage points while construction deducted 0.17 percentage points and government deducted 0.05 percentage points. The all industry activity index is stronger in 2013 with growth of 0.5 percent in Dec 2012, 0.4 percent in Feb 2013, 0.4 percent in Mar 2013, 0.1 percent in Apr 2013 and 1.1 percent in May 2013. After decline of 0.8 percent in Jun 2013, the all industry index rose 0.4 percent in Jul 2013, 0.3 percent in Aug 2013 and 0.5 percent in Sep 2013. The index fell 0.4 percent in Oct 2013 but increased 0.5 percent in Nov 2013. The index fell 0.3 percent in Dec 2013. Industry is recovering with growth of 1.4 percent in Dec 2012, 0.9 percent in Feb 2013, 0.1 percent in Mar 2013, 0.9 percent in Apr 2013 and 1.9 percent in May 2013. After decline of 3.0 percent in Jun 2003, industry grew 3.4 percent in Jul 2013 and declined 0.9 percent in Aug 2013. Industry rebounded with 1.3 percent in Sep 2013 and 1.0 percent in Oct 2013. Industry fell 0.1 percent in Nov 2013 and increased 1.0 percent in Dec 2013. The highest risk to Japan is if weakening world growth would affect Japanese exports.

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

	CON	IND	TERT	GOVT	ALL IND
Jan 2014	-3.2	3.8	0.9	-0.4	1.0
Cont to Dec % Change	-0.17	0.68	0.59	-0.05
Dec 2013	-1.2	1.0	-0.5	0.5	-0.3
Nov	2.6	-0.1	0.8	-1.1	0.5
Oct	1.1	1.0	-1.0	1.0	-0.4
Sep	1.3	1.3	0.1	-0.3	0.5
Aug	0.0	-0.9	0.6	-0.2	0.3
Jul	0.7	3.4	-0.4	-0.2	0.4
Jun	3.9	-3.0	-0.7	0.1	-0.8
May	5.2	1.9	1.2	-0.1	1.1
Apr	-0.1	0.9	-0.5	0.2	0.1
Mar	0.6	0.1	0.2	-0.9	0.4
Feb	-1.3	0.9	1.3	-0.2	0.4
Jan	-1.4	-0.7	-0.8	0.6	-0.7
Dec 2012	0.9	1.4	0.2	-0.3	0.5
Nov	3.0	-0.9	-0.1	0.3	-0.2
Oct	-0.1	0.3	0.2	0.2	0.2
Sep	1.2	-2.2	0.0	-0.3	-0.4
Aug	0.1	-1.4	0.2	0.1	0.0
Jul	-1.0	-0.5	-0.3	-0.1	-0.3
Jun	1.7	-0.9	0.0	0.1	0.1
May	3.0	-1.8	0.5	0.0	-0.1
Apr	-1.1	-0.4	-0.2	0.0	-0.1
Mar	-0.5	-0.2	-0.3	0.1	-0.2
Feb	0.7	-0.2	0.2	-0.2	0.1
Jan	2.6	0.8	-0.8	0.4	-0.7

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

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

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

Percentage changes from a year earlier in calendar years and relative to the same quarter a year earlier of the all industry activity indices are provided in Table VB-3. The first row shows that services contribute 63.2 percent of the total index and industry contributes 18.3 percent for joint contribution of 81.5 percent. The all industry activity index increased 1.8 percent in IVQ2013 relative to a year earlier and GDP increased 2.6 percent relative to a year earlier (Table VB-4 at http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/theory-and-reality-of-secular.html). Industry increased 5.7 percent relative to a year earlier while the tertiary sector increased 0.5 percent, adding combined 1.30 percentage points to growth of the all industry activity index of 1.8 percent while construction added 0.69 percentage points and government deducted 0.07 percentage points. The fall of industrial production in 2009 was by a catastrophic 21.9 percent. Japan emerged from the crisis with industrial growth of 16.4 percent in 2010. Quarterly data show that industry is the most dynamic sector of the Japanese economy. The all-industry index increased 0.7 percent in 2013 and real GDP increased 1.5 percent. Industry decreased 0.9 percent, deducting 0.15 percentage points, while the tertiary sector increased 0.6 percent, adding 0.40 percentage points. The Tōhoku or Great East Earthquake and Tsunami of Mar 11, 201, declining world trade and revaluation of the yen in fear of world financial risks interrupted the recovery of the Japanese economy from the global recession.

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

	CON	IND	TERT	GOVT	ALL IND	REAL GDP
Weight %	5.7	18.3	63.2	11.4	100.0
Calendar Year
2013	10.4	-0.9	0.6	-0.3	0.7	1.5
Cont to 2013 % Change	0.48	-0.15	0.40	-0.04
2012	3.2	0.1	1.4	0.3	1.2	1.4
2011	-2.0	-2.3	0.1	-0.2	-0.5	-0.5
2010	-7.0	16.4	1.3	-0.7	3.1	4.7
2009	-5.6	-21.9	-5.2	0.1	-7.7	-5.5
2008	-7.6	-3.4	-1.0	-1.4	-1.9	-1.0
2013
IVQ	13.4	5.7	0.5	-0.6	1.8	2.6
Cont to IVQ % Change	0.69	0.97	0.33	-0.07
IIIQ	13.0	2.2	1.1	-0.8	1.6	2.3
IIQ	8.8	-3.1	1.2	-0.3	0.5	1.2
IQ2013	5.4	-7.8	-0.2	0.7	-1.2	0.0
2012
IVQ	6.7	-5.9	0.7	-0.1	-0.3	-0.3
IIIQ	3.1	-4.2	0.5	0.4	-0.2	-0.2
IIQ	4.9	5.5	2.1	0.6	2.6	3.2
IQ	-1.1	6.2	2.4	0.3	2.6	3.2

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

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

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

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

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

Percentage changes of a month relative to the same month a year earlier for the indices of all industry activity of Japan are shown in Table VB-4. The all industry activity index increased 3.3 percent in Jan 2014 relative to Jan 2013. Industry increased 10.3 percent in Jan 2014 relative to a year earlier, adding 1.72 percentage points to growth of the all industry activity index. The tertiary sector increased 2.0 percent, adding 1.33 percentage points. Construction added 0.47 percentage points to the index and government deducted 0.20 percentage points.

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

	CON	IND	TERT	GOVT	ALL IND
Jan 2014	9.9	10.3	2.0	-1.6	3.3
Cont to Nov % Change	0.47	1.72	1.33	-0.20
Dec 2013
Nov	14.2	4.8	0.5	-0.8	1.9
Oct	14.4	5.3	0.1	0.0	1.7
Sep	12.8	5.1	1.4	-1.2	2.3
Aug	13.0	-0.5	0.7	-0.1	0.9
Jul	13.2	1.8	1.3	-1.1	1.5
Jun	11.2	-4.6	0.5	0.3	0.0
May	8.9	-1.0	1.7	-0.4	1.2
Apr	6.3	-3.4	1.3	-0.9	0.4
Mar	5.4	-7.1	0.7	0.1	-0.7
Feb	4.3	-10.1	-1.6	1.9	-2.4
Jan	6.8	-6.1	0.1	-0.1	-0.7
Dec 2012	8.7	-7.5	-0.1	0.6	-0.9
Nov	7.6	-5.7	1.0	0.3	0.0
Oct	3.5	-4.7	1.3	-1.1	0.1
Sep	2.9	-7.7	0.1	0.7	-1.2
Aug	2.6	-4.4	0.6	0.9	-0.1
Jul	3.8	-0.2	0.8	-0.3	0.6
Jun	6.7	-1.5	0.8	0.9	0.6
May	5.3	6.1	3.1	-0.4	3.3
Apr	2.6	13.6	2.4	1.3	4.1
Mar	3.0	16.2	4.2	0.5	5.8
Feb	-2.5	2.8	2.4	-0.7	1.8
Jan	-3.4	-1.6	0.4	0.4	-0.1

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

Source: 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 37.2 percent of Japan’s imports and increased 4.2 percent in the 12 months ending in Feb 2014 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 12.7 percent of Japan’s exports with increase of 3.4 percent in the 12 months ending in Feb 2014. Machinery contributes 20.1 percent of Japan’s exports with increase of 14.1 percent in the 12 months ending in Feb 2014. Electrical machinery contributes 16.3 percent of Japan’s exports with increase of 10.7 percent in the 12 months ending in Feb 2014. Exports of transport equipment with share of 23.9 percent in total exports increased 6.6 percent in the 12 months ending in Feb 2014 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 4.0 percent: cars increased 4.5 percent with increase of 4.3 percent in the minor category of buses and trucks, increase of 4.7 percent for parts of motor vehicles, increase of 25.5 percent for motorcycles and decrease of 1.4 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

Feb 2014	Value JPY Millions	% of Total	12 Months ∆%	Contribution Degree %
Exports	5,799,966	100.0	9.8	9.8
Foodstuffs	34,221	0.6	20.6	0.1
Raw Materials	93,954	1.6	-8.1	-0.2
Mineral Fuels	126,922	2.2	76.1	1.0
Chemicals	660,286	11.4	16.5	1.8
Manufactured Goods	734,992	12.7	3.4	0.5
Machinery	1,163,076	20.1	14.1	2.7
Electrical Machinery	947,247	16.3	10.7	1.7
Transport Equipment	1,385,570	23.9	6.6	1.6
Motor Vehicles	858,506	14.8	4.0	0.6
Cars	740,132	12.8	4.5	0.6
Buses & Trucks	111,121	1.9	4.3	0.1
Parts of Motor Vehicles	281,263	4.8	4.7	0.2
Motorcycles	37,156	0.6	25.5	0.1
Ships	124,875	2.2	-1.4	0.0
Other	653,696	11.3	4.1	0.5
Imports	6,600,275	100.0	9.0	9.0
Foodstuffs	443,935	6.7	-5.6	-0.4
Raw Materials	434,741	6.6	12.4	0.8
Mineral Fuels	2,455,157	37.2	4.2	1.6
Chemicals	498,090	7.5	0.7	0.1
Manufactured Goods	472,668	7.2	18.0	1.2
Machinery	501,801	7.6	23.4	1.6
Electrical Machinery	841,197	12.7	22.2	2.5
Transport Equipment	245,720	3.7	49.3	1.3
Other	706,965	10.7	2.9	0.3

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 1950-2013 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	69,774	81,243	-11,469

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 Feb 2014. The share of Asia in Japan’s trade is more than one-half for 53.5 percent of exports and 41.7 percent of imports. Within Asia, exports to China are 18.5 percent of total exports and imports from China 18.0 percent of total imports. While exports to China increased 27.7 percent in the 12 months ending in Feb 2014, imports from China increased 5.7 percent. The largest export market for Japan in Feb 2014 is the US with share of 18.3 percent of total exports, which is close to that of China, and share of imports from the US of 8.8 percent in total imports. Japan’s exports to the US grew 5.6 percent in the 12 months ending in Feb 2014 and imports from the US grew 20.8 percent. Western Europe has share of 10.8 percent in Japan’s exports and of 10.7 percent in imports. Rates of growth of exports of Japan in Jan 2014 are 5.6 percent for exports to the US, minus 0.6 percent for exports to Brazil and 21.1 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 Feb 2014 are positive for all trading partners except for declines from France and the Middle East. Imports from Asia increased 7.7 percent in the 12 months ending in Feb 2014 while imports from China increased 5.7 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

Feb 2014	Exports Millions Yen	12 months ∆%	Imports Millions Yen	12 months ∆%
Total	5,799,966	9.8	6,600,275	9.0
Asia	3,102,072	12.5	2,749,544	7.7
China	1,074,853	27.7	1,185,620	5.7
USA	1,063,575	5.6	579,923	20.8
Canada	68,826	-5.8	85,997	11.8
Brazil	38,879	-0.6	96,705	1.2
Mexico	83,036	16.4	36,199	24.5
Western Europe	623,929	11.7	707,309	17.6
Germany	165,864	21.1	214,308	33.0
France	50,842	13.8	80,196	-1.0
UK	87,878	-0.6	52,547	5.1
Middle East	230,990	18.7	1,328,897	-2.2
Australia	126,279	-7.3	373,453	6.3

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 Feb 2014. The significantly large deficits of JPY 1,097,907 million with the Middle East, JPY 110,767 million with China, JPY 247,174 million with Australia and JPY 83,380 million with Western Europe do not compensate surpluses of JPY 483,652 million with the US, JPY 46,837 million with Mexico and JPY 35,331 million with the UK.

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

Feb 2014	Millions of Yen
Total	-800,309
Asia	352,528
China	-110,767
USA	483,652
Canada	-17,171
Brazil	-57,826
Mexico	46,837
Western Europe	-83,380
Germany	-48,444
France	-29,354
UK	35,331
Middle East	-1,097,907
Australia	-247,174

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 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 3.8 percent in IIIQ2011. Net trade added 1.7 percentage points to GDP growth in IQ2013 and 0.6 percentage points in IIQ2013 but deducted 2.0 percentage points in IIIQ2013 and deducted 2.1 percentage points in IVQ2013. 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	1.7	2.4	-0.7
II	0.6	1.7	-1.2
III	-2.0	-0.4	-1.6
IV	-2.1	0.2	-2.4
2012
I	0.4	1.7	-1.3
II	-1.3	-0.3	-0.9
III	-2.2	-2.5	0.2
IV	-0.5	-1.7	1.3
2011
I	-1.1	-0.4	-0.7
II	-4.4	-4.7	0.3
III	3.8	5.7	-1.9
IV	-3.0	-1.9	-1.1
2010
I	2.1	3.5	-1.3
II	0.1	2.6	-2.6
III	0.5	1.4	-0.9
IV	-0.4	0.1	-0.5
2009
I	-4.4	-16.4	12.0
II	7.4	4.7	2.7
III	2.2	5.3	-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	0.1	0.2	-0.1
IV	-11.5	-10.2	-1.2
2007
I	1.1	1.7	-0.5
II	0.7	1.6	-0.8
III	2.1	1.5	0.6
IV	1.4	2.0	-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-3 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-5 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 109.2 in Feb 2014 for a gain of 16.2 percent relative to Jan 2012 and 4.1 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-5, Japan, Export Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

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

Chart IV-5A 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 Feb 2014 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

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-6 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 (for the relation of terms of trade and growth see Pelaez (1979, 1976a)). 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 127.8 in Feb 2014 or gain of 13.0 percent relative to Apr 2012 and 36.7 percent relative to Jun 2009.

Chart IV-6, Japan, Import Corporate Goods Price Index, Monthly, Yen Basis, 2008-2014

Source: Bank of Japan

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

Chart IV-6A 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 113.9 in Feb 2014 or minus 4.7 percent relative to Apr 2012 and gain of 32.1 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency increased 1.0 percent from Jun 2009 to Feb 2014 while the import corporate goods price index increased 32.1 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.6 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2014

Source: Bank of Japan

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

Table IV-6 provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Feb 2014. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Feb 2014, the export index on the contract currency basis decreased 0.2 percent and decreased 4.3 percent on the yen basis. For the entire period from Jan 2008 to Feb 2014, the import price index increased 13.5 percent on the contract currency basis and increased 9.2 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-6, 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	113.0	122.8
2013/11	99.0	107.9	113.1	124.8
2013-12	98.9	110.2	113.8	129.0
2014-01	99.1	110.6	114.4	130.1
2014-02	98.9	109.2	113.9	127.8

Source: Bank of Japan

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

Chart IV-7 provides the monthly corporate goods price index (CGPI) of Japan from 1970 to 2014. 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-B and associated table at http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html 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-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1970-2014

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-8 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-8, 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-7. Petroleum and coal with weight of 5.7 percent decreased 1.4 percent in Feb 2014 and increased 5.8 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 0.4 percent in Feb 2014 and increased 0.3 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-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Feb 2014	Weight	Month ∆%	12 Month ∆%
Total	1000.0	-0.2	1.8
Food, Beverages, Tobacco, Feedstuffs	137.5	0.0	0.6
Petroleum & Coal	57.4	-1.4	5.8
Production Machinery	30.8	-0.4	0.3
Electronic Components	31.0	-0.5	-2.9
Electric Power, Gas & Water	52.7	0.4	11.9
Iron & Steel	56.6	0.1	5.8
Chemicals	92.1	-0.1	2.1
Transport Equipment	136.4	0.0	-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/cgpi1402.pdf

Percentage point contributions to change of the corporate goods price index (CGPI) in Feb 2014 are provided in Table IV-8 divided into domestic, export and import segments. In the domestic CGPI, decreasing 0.2 percent in Feb 2014, the energy shock is evident in the deduction of 0.19 percentage points by petroleum and coal products in reversal of carry trades of exposures in commodity futures. The exports CGPI decreased 0.2 percent on the basis of the contract currency with deduction of 0.08 percentage points by electric and electronic products. The imports CGPI decreased 0.4 percent on the contract currency basis. Petroleum, coal and natural gas products deducted 0.46 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-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Feb 2014	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change:  -0.2%
Petroleum & Coal Products	-0.11
Scrap & Waste	-0.03
Nonferrous Metals	-0.02
Electronic Components & Devices	-0.01
Electric Power, Gas & Water	0.03
Agriculture, Forestry & Fishery Products	0.02
B. Export Price Index	Monthly Change:    -0.2 % contract currency
Other Primary Products & Manufactured Goods	-0.08
Electric & Electronic Products	-0.08%
Chemicals & Related Products	-0.03
General Purpose, Production & Business Oriented Machinery	0.02
C. Import Price Index	Monthly Change: -0.4% contract currency basis
Petroleum, Coal & Natural Gas	-0.46
Chemicals & Related Products	-0.02
Other Primary Products & Manufactured Goods	-0.02
Foodstuffs & Feedstuffs	0.05

Source: Bank of Japan

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

http://www.boj.or.jp/en/statistics/pi/cgpi_release/cgpi1402.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 Mar 2014. The index of current prices paid or costs of inputs increased from 16.13 in Dec 2012 to 21.18 in Mar 2014 while the index of current prices received or sales prices increased from 1.08 in Dec 2012 to 2.35 in Mar 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 21.18 in Mar 2014 are expanding at faster pace than prices received or of sales of products at 2.35. 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 43.54 in Mar 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 25.88 in Mar 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
Mar 2014	21.18	2.35	43.53	25.88
Feb	25.00	15.00	40.00	23.75
Jan	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 2011	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 in Table IV-6. As inflation waves throughout the world (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.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 intensity 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 13.9 in Mar 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 decreased from 10.9 in Dec 2012 to 4.3 in Mar 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 13.9 in Mar 2014 indicates faster increase than the index of current prices received or sales prices of production at 4.3. The index of future prices paid decreased to 29.4 in Mar 2014 from 41.9 in Dec 2012 while the index of future prices received decreased from 27.3 in Dec 2012 to 15.9 in Mar 2014. Expectations are incorporating faster increases in prices of inputs or costs of production, 29.4 in Mar 2014, than of sales prices of produced goods, 15.9 in Mar 2014, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages 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 Prices 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	1.1	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
14-Feb	14.2	7.6	18.2	16.3
14-Mar	13.9	4.3	29.4	15.9

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 but there are no episodes of contraction after 2009.

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, easing to 53.4 in Jan 2014. The total index increased to 55.0 in Feb 2014. The index of new orders increased from 52.2 in Jan 2012 to 54.3 in Dec 2012 but fell to 50.1 in May 2013, barely above the neutral frontier of 50.0. The index of new orders stabilized at 51.0 in Nov-Dec 2013, easing to 50.9 in Jan 2014. The index of new orders increased to 51.4 in Feb 2014.

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

	Total Index	New Orders	Interm. Input Prices	Subs Prices	Exp
Feb 2014	55.0	51.4	52.1	49.0	59.9
Jan	53.4	50.9	54.5	50.1	58.1
Dec 2013	54.6	51.0	56.9	52.0	58.7
Nov	56.0	51.0	54.8	49.5	61.3
Oct	56.3	51.6	56.1	51.4	60.5
Sep	55.4	53.4	56.7	50.6	60.1
Aug	53.9	50.9	57.1	51.2	62.9
Jul	54.1	50.3	58.2	52.4	63.9
Jun	53.9	50.3	55.0	50.6	61.8
May	54.3	50.1	54.4	50.7	62.9
Apr	54.5	50.9	51.1	47.6	62.5
Mar	55.6	52.0	55.3	50.0	62.4
Feb	54.5	51.8	56.2	51.1	62.7
Jan	56.2	53.7	58.2	50.9	61.4
Dec 2012	56.1	54.3	53.8	50.0	64.6
Nov	55.6	53.2	52.5	48.4	64.6
Oct	55.5	51.6	58.1	50.5	63.4
Sep	53.7	51.8	57.5	51.3	60.9
Aug	56.3	52.7	57.6	51.2	63.2
Jul	55.6	53.2	49.7	48.7	63.9
Jun	56.7	53.7	52.1	48.6	65.5
May	55.2	52.5	53.6	48.5	65.4
Apr	56.1	52.7	57.9	50.3	66.1
Mar	58.0	53.5	60.2	52.0	66.6
Feb	57.3	52.7	59.0	51.2	63.8
Jan	55.7	52.2	58.2	51.1	65.3

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

Source: National Bureau of Statistics of China

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

Chart CIPMNM provides China’s nonmanufacturing purchasing managers’ index. The index fell from 56.1 in Dec 2012 to 53.9 in Jun 2013. The index recovered to 56.3 in Oct 2013, decreasing marginally to 54.6 in Dec 2013. The index fell to 53.4 in Jan 2014, increasing to 55.0 in Feb 2014.

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

Source: National Bureau of Statistics of China

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

Table CIPMMFG provides the index of purchasing managers of manufacturing seasonally adjusted of the National Bureau of Statistics of China. The general index (IPM) rose from 50.5 in Jan 2012 to 53.3 in Apr 2012, falling to 49.2 in Aug 2012, rebounding to 50.6 in Dec 2012. The index fell to 50.1 in Jun 2013, barely above the neutral frontier at 50.0, recovering to 51.4 in Nov 2013 but falling to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014 and 50.2 in Feb 2014. The index of new orders fell from 57.2 in Apr 2012 to 52.0 in Dec 2012. The index of new orders fell from 54.5 in Nov 2013 to 53.9 in Dec 2013. The index fell to 53.0 in Jan 2014 and 52.6 in Feb 2014.

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

	IPM	PI	NOI	INV	EMP	SDEL
Feb 2014	50.2	52.6	50.5	47.4	48.0	49.9
Jan	50.5	53.0	50.9	47.8	48.2	49.8
Dec 2013	51.0	53.9	52.0	47.6	48.7	50.5
Nov	51.4	54.5	52.3	47.8	49.6	50.6
Oct	51.4	54.4	52.5	48.6	49.2	50.8
Sep	51.1	52.9	52.8	48.5	49.1	50.8
Aug	51.0	52.6	52.4	48.0	49.3	50.4
Jul	50.3	52.4	50.6	47.6	49.1	50.1
Jun	50.1	52.0	50.4	47.4	48.7	50.3
May	50.8	53.3	51.8	47.6	48.8	50.8
Apr	50.6	52.6	51.7	47.5	49.0	50.8
Mar	50.9	52.7	52.3	47.5	49.8	51.1
Feb	50.1	51.2	50.1	49.5	47.6	48.3
Jan	50.4	51.3	51.6	50.1	47.8	50.0
Dec 2012	50.6	52.0	51.2	47.3	49.0	48.8
Nov	50.6	52.5	51.2	47.9	48.7	49.9
Oct	50.2	52.1	50.4	47.3	49.2	50.1
Sep	49.8	51.3	49.8	47.0	48.9	49.5
Aug	49.2	50.9	48.7	45.1	49.1	50.0
Jul	50.1	51.8	49.0	48.5	49.5	49.0
Jun	50.2	52.0	49.2	48.2	49.7	49.1
May	50.4	52.9	49.8	45.1	50.5	49.0
Apr	53.3	57.2	54.5	48.5	51.0	49.6
Mar	53.1	55.2	55.1	49.5	51.0	48.9
Feb	51.0	53.8	51.0	48.8	49.5	50.3
Jan	50.5	53.6	50.4	49.7	47.1	49.7

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

Source: National Bureau of Statistics of China

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

China estimates the manufacturing index of purchasing managers on the basis of a sample of 820 enterprises (http://www.stats.gov.cn/english/pressrelease/t20121009_402841094.htm). Chart CIPMMFG provides the manufacturing index of purchasing managers. The index fell to 50.1 in Feb 2013 and in Jun 2013. The index decreased from 51.4 in Nov 2013 to 51.0 in Dec 2013. The index fell to 50.5 in Jan 2014 and 50.2 in Feb 2014.

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

Source: National Bureau of Statistics of China

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

Cumulative growth of China’s GDP in IVQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDP. Secondary industry accounts for 43.9 percent of GDP in IVQ2013. In IVQ2013, industry alone accounts for 37.0 percent in IVQ2013 and construction with the remaining 6.9 percent in the four quarters of 2013. Tertiary industry accounts for 46.1 percent of cumulative GDP in IVQ2013 and primary industry for 10.0 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). The bottom block of Table VC-GDP provides quarter-on-quarter growth rates of GDP and their annual equivalent. China’s GDP growth decelerated significantly from annual equivalent 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 5.7 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.1 percent and to 7.4 percent in IIQ2013, rebounding to 9.1 percent in IIIQ2013. Annual equivalent growth was 7.4 percent in IVQ2013.

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

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

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

Growth of China’s GDP in IVQ2013 relative to the same period in 2012 was 7.7 percent, as shown in Table VC-GDPA. Secondary industry accounts for 43.9 percent of GDP of which industry alone for 37.0 percent in cumulative IVQ2013 and construction with the remaining 6.9 percent in the four quarters of 2013. Tertiary industry accounts for 45.1 percent of GDP in the cumulative to IVQ2013 and primary industry for 10.0 percent. China’s growth strategy consisted of rapid increases in productivity in industry to absorb population from agriculture where incomes are lower (Pelaez and Pelaez, The Global Recession Risk (2007), 56-80). GDP growth decelerated from 12.1 percent in IQ2010 and 11.2 percent in IIQ2010 to 7.7 percent in IQ2013, 7.5 percent in IIQ2013 and 7.8 percent in IIIQ2013. GDP grew 7.7 percent in IVQ2013 relative to a year earlier and 1.8 percent relative to IIIQ2013, which is equivalent to 7.4 percent per year.

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

	IQ 2013	IIQ 2013	IIIQ 2013	IVQ 2013
GDP	7.7	7.5	7.8	7.7
Primary Industry	3.4	3.0	3.4	4.0
Secondary Industry	7.8	7.6	7.8	7.8
Tertiary Industry	8.3	8.3	8.4	8.3
GDP ∆% Relative to a Prior Quarter	1.5	1.8	2.2	1.8
	IQ 2011	IIQ 2011	IIIQ 2011	IVQ 2011	IQ  2012	IIQ 2012	IIIQ 2012	IVQ 2012
GDP	9.7	9.5	9.1	8.9	8.1	7.6	7.4	7.9
Primary Industry	3.5	3.2	3.8	4.5	3.8	4.3	4.2	4.5
Secondary Industry	11.1	11.0	10.8	10.6	9.1	8.3	8.1	8.1
Tertiary Industry	9.1	9.2	9.0	8.9	7.5	7.7	7.9	8.1
GDP ∆% Relative to a Prior Quarter	2.3	2.5	2.2	1.8	1.4	2.1	2.0	1.9
	IQ 2010	IIQ 2010	IIIQ 2010	IVQ 2010
GDP	12.1	11.2	10.7	12.1
Primary Industry	3.8	3.6	4.0	3.8
Secondary Industry	14.5	13.3	12.6	14.5
Tertiary Industry	10.5	9.9	9.7	10.5

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

Chart VC-GDP of the National Bureau of Statistics of China provides annual value and growth rates of GDP. China’s GDP growth in 2013 is still high at 7.7 percent but at the lowest rhythm in five years.

Chart VC-GDP, China, Gross Domestic Product, Million Yuan and ∆%, 2009-2013

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

Chart VC-FXR provides China’s foreign exchange reserves. FX reserves grew from $2399.2 billion in 2009 to $3821.3 billion in 2013 driven by high growth of China’s trade surplus.

Chart VC-FXR, China, Foreign Exchange Reserves, 2009-2013

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

Chart VC-Trade provides China’s imports and exports. Exports exceeded imports with resulting large trade balance surpluses that increased foreign exchange reserves.

Chart VC-Trade, China, Imports and Exports of Goods, 2009-2013, $100 Million US Dollars

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/f7b00646382b4353a878a645cbbebf9c) is slowing. The overall Flash HSBC China Manufacturing PMI^™ decreased from 49.5 in Jan to 48.3 in Jan, which is the lowest in seven months, while the Flash HSBC China Manufacturing Output Index decreased from 50.8 in Jan to 49.2 in Feb, indicating moderate contraction. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds that the index is consistent with weakening manufacturing with policy required to maintain growth in the rest of the year (http://www.markiteconomics.com/Survey/PressRelease.mvc/f7b00646382b4353a878a645cbbebf9c). The HSBC China Services PMI^™, compiled by Markit, shows marginal deterioration in business activity in China with the HSBC Composite Output, combining manufacturing and services, decreasing from 50.8 in Jan to 49.8 in Feb, indicating standstill (http://www.markiteconomics.com/Survey/PressRelease.mvc/593829170f8f412a91d70e6be09de93a). Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds need of policies to prevent decelerating growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/593829170f8f412a91d70e6be09de93a). The HSBC Business Activity index decreased from 50.7 in Jan to 51.0 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/593829170f8f412a91d70e6be09de93a). Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, finds that services could stabilize at low levels of activity (http://www.markiteconomics.com/Survey/PressRelease.mvc/593829170f8f412a91d70e6be09de93a). The HSBC Purchasing Managers’ Index^™ (PMI^™), compiled by Markit, increased marginally to 48.5 in Feb from 49.5 in Jan, indicating marginally deteriorating manufacturing (http://www.markiteconomics.com/Survey/PressRelease.mvc/0226a44496724665886d4d265e64cfb0). New export orders decreased moderately with moderate contraction of total new orders. Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, finds soft manufacturing in China, posing risks to GDP growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/0226a44496724665886d4d265e64cfb0). Table CNY provides the country data table for China.

Table CNY, China, Economic Indicators

Price Indexes for Industry	Feb 12-month ∆%: minus 2.0 Feb month ∆%: -0.2 Blog 3/16/14
Consumer Price Index	Feb month ∆%: 0.5 Feb 12 months ∆%: 2.0 Blog 3/16/14
Value Added of Industry	Feb month ∆%: 0.61 Jan-Feb 2014/Jan-Feb 2013 ∆%: 8.6 Jan-Feb ∆%: 8.6 Blog 3/16/14
GDP Growth Rate	Year IVQ2013 ∆%: 7.7 Quarter IVQ2013 AE ∆%: 7.4 Blog 1/26/14
Investment in Fixed Assets	Total Jan-Feb 2013 ∆%: 17.9 Real estate development: 19.3 Blog 3/16/14
Retail Sales	Feb month ∆%: 0.71 Dec 12 month ∆%: 13.6 Jan-Feb ∆%: 11.8 Blog 3/16/14
Trade Balance	Feb balance minus $22.98 billion Exports 12M ∆% minus 18.1 Imports 12M ∆% 10.1 Cumulative Jan-Feb: $8.89 billion Blog 3/16/14

Links to blog comments in Table CNY:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

1/26/14 http://cmpassocregulationblog.blogspot.com/2014/01/capital-flows-exchange-rates-and.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	-0.5
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*	-0.5	0.4	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, decreased from 52.9 in Jan to 52.7 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/61e35865d2de4a309411277f211a1046). Chris Williamson, Chief Economist at Markit, finds that the Markit Flash Eurozone PMI index suggests that the index is consistent with growth of GDP as high as 0.5 percent in IQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/61e35865d2de4a309411277f211a1046). The Markit Eurozone PMI^® Composite Output Index, combining services and manufacturing activity with close association with GDP, increased from 52.9 in Jan to 53.3 in Feb, which is the second highest since the first half 2011 (http://www.markiteconomics.com/Survey/PressRelease.mvc/655b401c3aa2488f91f124a1d03ba66c). Chris Williamson, Chief Economist at Markit, finds growth of GDP at 0.4 to 0.5 percent in IQ2014 if Jan-Feb activity is sustained (http://www.markiteconomics.com/Survey/PressRelease.mvc/655b401c3aa2488f91f124a1d03ba66c). The Markit Eurozone Services Business Activity Index increased from 51.6 in Jan to 52.6 in Feb, which is a high in 32 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/655b401c3aa2488f91f124a1d03ba66c). The Markit Eurozone Manufacturing PMI^® decreased to 53.2 in Feb from 54.0 in Jan (http://www.markiteconomics.com/Survey/PressRelease.mvc/cad8aed8211d4e59aaca92f8d31a36e9). New orders and export orders increased. Chris Williamson, Chief Economist at Markit, finds industrial growth in the euro area at a quarterly rate around 1.0 percent. (http://www.markiteconomics.com/Survey/PressRelease.mvc/cad8aed8211d4e59aaca92f8d31a36e9). Table EUR provides the data table for the euro area.

Table EUR, Euro Area Economic Indicators

GDP	IVQ2013 ∆% 0.3; IVQ2013/IVQ2012 ∆% 0.5 Blog 3/9/14
Unemployment	Jan 2014: 12.0 % unemployment rate; Jan 2014: 19.056 million unemployed Blog 3/2/14
HICP	Feb month ∆%: 0.3 12 months Feb ∆%: 0.7 Blog 3/23/14
Producer Prices	Euro Zone industrial producer prices Jan ∆%: -0.3 Jan 12-month ∆%: -1.4 Blog 3/9/14
Industrial Production	Jan month ∆%: -0.2; Jan 12 months ∆%: 2.1 Blog 3/16/14
Retail Sales	Jan month ∆%: 1.6 Jan 12 months ∆%: 1.3 Blog 3/9/14
Confidence and Economic Sentiment Indicator	Sentiment 101.2 Feb 2014 Consumer minus 12.7 Jan 2014 Blog 3/2/14
Trade	Jan-Dec 2013/Jan-Dec 2012 Exports ∆%: 0.8 Imports ∆%: -3.3 Jan 2014 12-month Exports ∆% 1.0 Imports ∆% -3.2 Blog 3/23/14

Links to blog comments in Table EUR:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

Growth of euro zone trade continues to be relatively resilient as shown in Table VD-1 but with deceleration at the margin. Exports grew at 0.8 percent and imports fell 3.3 percent in Jan-Dec 2013 relative to Jan-Dec 2012. The 12-month rate of growth of exports was minus 1.0 percent in Jan 2014 while imports decreased 3.2 percent. In Dec 2013, exports increased 3.7 percent in 12 months and imports increased 1.0 percent. At the margin, rates of growth of trade are declining in part because of moderation of commodity prices.

Table VD-1, Euro Zone, Exports, Imports and Trade Balance, Billions of Euros and Percent, NSA

	Exports	Imports
Jan-Dec 2013	1,890.2	1,738.4
Jan-Dec 2012	1,875.1	1,797.3
∆%	0.8	-3.3
Jan 2014	147.7	146.8
Jan 2013	146.3	151.7
∆%	1.0%	-3.2
Dec 2013	148.9	135.2
Dec 2012	143.6	133.9
∆%	3.7	1.0
Trade Balance	Jan-Dec 2013	Jan-Dec 2012
€ Billions	77.8	151.7

Source: EUROSTAT

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

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

The structure of trade of the euro zone in Jan-Dec 2013 is provided in Table VD-9. Data are still not available for trade structure for Jan 2014. Manufactured exports increased 1.1 percent in Jan-Dec 2013 relative to Jan-Dec 2012 while imports decreased 1.6 percent. The trade surplus in manufactured products was higher than the trade deficit in primary products in Jan-Dec 2013 but only marginally higher in Jan-Dec 2012 partly because of the commodity shock caused by carry trades.

Table VD-2, Euro Zone, Structure of Exports, Imports and Trade Balance, € Billions, NSA, ∆%

	Primary	Manufactured	Other	Total
Exports
Jan-Dec 2013 € B	301.2	1,536.0	52.9	1,890.2
Jan-Dec 2012 € B	300.7	1,520.0	54.4	1,875.1
∆%	0.2	1.1	-2.8	0.8
Imports
Jan-Dec 2013 € B	628.5	1,076.7	33.3	1,738.4
Jan-Dec 2012  € B	669.8	1,093.7	33.8	1,797.3
∆%	-6.2	-1.6	-1.5	-3.3
Trade Balance € B
Jan-Dec 2013	-327.3	459.4	19.7	151.7
Jan-Dec 2012	-369.1	426.3	20.6	77.8

Note: there are minor rounding errors

Note: there are minor rounding errors

Source: EUROSTAT

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

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

VE Germany. Table VE-DE provides yearly growth rates of the German economy from 1992 to 2012, price adjusted chain-linked and price and calendar-adjusted chain-linked. Germany’s GDP fell 5.1 percent in 2009 after growing below trend at 1.1 percent in 2008. Recovery has been robust in contrast with other advanced economies. The German economy grew at 4.0 percent in 2010, 3.3 percent in 2011 and 0.7 percent in 2012. Growth decelerated to 0.4 percent in 2013.

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

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

Table VE-DE, Germany, GDP Year ∆%

	Price Adjusted Chain-Linked	Price- and Calendar-Adjusted Chain Linked
2013	0.4	0.5
2012	0.7	0.9
2011	3.3	3.4
2010	4.0	3.8
2009	-5.1	-5.1
2008	1.1	0.8
2007	3.3	3.4
2006	3.7	3.9
2005	0.7	0.8
2004	1.2	0.7
2003	-0.4	-0.4
2002	0.0	0.0
2001	1.5	1.6
2000	3.1	3.3
1999	1.9	1.8
1998	1.9	1.7
1997	1.7	1.8
1996	0.8	0.8
1995	1.7	1.8
1994	2.5	2.5
1993	-1.0	-1.0
1992	1.9	1.5

Source: Statistisches Bundesamt Deutschland (Destatis)

https://www.destatis.de/EN/PressServices/Press/pr/2014/02/PE14_048_811.html

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 55.5 in Jan to 56.1 in Feb for a 32-month high. The index of manufacturing output reached 657.6 in Feb, declining from a 33-month high of 60.4 in Jan, while the index of services increased to 55.4 in Feb from 53.1 in Jan. The overall Flash Germany Manufacturing PMI^® decreased from 56.5 in Jan, which is a 32-month high, to 54.7 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/b85e0a161b9f4998be8a2378f57ab4af). New export work volumes increased at the second fastest pace in about three years with business originating in the US, Asia, Middle East, Poland and Russia. Oliver Kolodseike, Economist at Markit, finds expansion of Germany’s private sector at the fastest rate in 32 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/b85e0a161b9f4998be8a2378f57ab4af). The Markit Germany Composite Output Index of the Markit Germany Services PMI^®, combining manufacturing and services with close association with Germany’s GDP, increased from 55.5 in Dec to 56.4 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/4eb457ed6b1d48efba316e6bc71a1b0f). Oliver Kolodseike, Senior Economist at Markit and author of the report, finds improving activity by the German private sector (http://www.markiteconomics.com/Survey/PressRelease.mvc/4eb457ed6b1d48efba316e6bc71a1b0f). The Germany Services Business Activity Index increased from 53.1 in Jan to 55.9 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/4eb457ed6b1d48efba316e6bc71a1b0f). The Markit/BME Germany Purchasing Managers’ Index^® (PMI^®), showing close association with Germany’s manufacturing conditions, decreased from 5.5 in Jan to 54.8 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/83b8290ad0914aa099bc0641cc917a1b). New export orders increased for the eighth consecutive month with demand from the US and emerging markets. Oliver Kolodseike, Senior Economist at Markit and author of the report, finds continuing growth with strength in new orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/83b8290ad0914aa099bc0641cc917a1b).Table DE provides the country data table for Germany.

Table DE, Germany, Economic Indicators

GDP	IVQ2013 0.4 ∆%; IV/Q2013/IVQ2012 ∆% 1.3 2013/2012: 0.4% GDP ∆% 1992-2013 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 2/16/14 3/2/14
Consumer Price Index	Feb month NSA ∆%: 0.5 Feb 12-month NSA ∆%: 1.2 Blog 3/16/14
Producer Price Index	Feb month ∆%: 0.0 CSA, minus 0.0 12-month NSA ∆%: -0.9 Blog 3/23/14
Industrial Production	MFG Jan month CSA ∆%: 0.3 12-month NSA: 3.0 Blog 3/9/14
Machine Orders	MFG Jan month ∆%: 1.2 Jan 12-month ∆%: 7.1 Blog 3/9/14
Retail Sales	Nov Month ∆% 0.8 12-Month ∆% 1.1 Blog 2/2/14
Employment Report	Unemployment Rate SA Jan 5.0% Blog 3/2/14
Trade Balance	Exports Jan 12-month NSA ∆%: 2.9 Imports Jan 12 months NSA ∆%: 1.5 Exports Jan month CSA ∆%: 2.2; Imports Jan month SA minus 4.1 Blog 3/16/14

Links to blog comments in Table DE:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

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

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

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

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 ∆%
1949-2013	3.2
2000-2013	1.0
2000-2012	1.0
2000-2007	1.7
1990-1999	1.9
1980-1989	2.5
1970-1979	3.8
1960-1969	5.7
1950-1959	4.2

Source: Institut National de la Statistique et des Études Économiques

http://www.insee.fr/en/themes/info-rapide.asp?id=26&date=20140214

The Markit Flash France Composite Output Index decreased from 48.9 in Jan to 47.6 in Feb for a two-month low (http://www.markiteconomics.com/Survey/PressRelease.mvc/585c6448d40f4edc9370242b2832df48). Jack Kennedy, Senior Economist at Markit and author of the report, finds continuing economic weakness in the French private sector with favorable growth in manufacturing but moderate increase in new export orders (http://www.markiteconomics.com/Survey/PressRelease.mvc/585c6448d40f4edc9370242b2832df48). The Markit France Composite Output Index, combining services and manufacturing with close association with French GDP, decreased from 48.9 in Jan to 47.9 in Feb, indicating faster contraction (http://www.markiteconomics.com/Survey/PressRelease.mvc/27f0badb834f41eaad07e33201a393ba). Jack Kennedy, Senior Economist at Markit and author of the France Services PMI^®, finds continuing weakness with marginally improving confidence (http://www.markiteconomics.com/Survey/PressRelease.mvc/27f0badb834f41eaad07e33201a393ba). The Markit France Services Activity index decreased from 48.9 in Jan to 47.9 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/27f0badb834f41eaad07e33201a393ba). The Markit France Manufacturing Purchasing Managers’ Index^® increased to 49.7 in Feb from 49.3 in Jan for the highest reading in four months (http://www.markiteconomics.com/Survey/PressRelease.mvc/7c80a28d4c7b44918b8ffc8e952f27b5). Jack Kennedy, Senior Economist at Markit and author of the France Manufacturing PMI^®, finds stabilizing manufacturing conditions (http://www.markiteconomics.com/Survey/PressRelease.mvc/7c80a28d4c7b44918b8ffc8e952f27b5). Table FR provides the country data table for France.

Table FR, France, Economic Indicators

CPI	Feb month ∆% 0.6 12 months ∆%: 0.9 3/16/14
PPI	Jan month ∆%: -0.6 Jan 12 months ∆%: -1.2 Blog 3/2/14
GDP Growth	IVQ2013/IIIQ2013 ∆%:0.3 IVQ2013/IVQ2012 ∆%: 0.8 Blog 3/31/13 5/19/12 6/30/13 9/29/13 11/17/13 12/29/13 2/16/14
Industrial Production	Jan ∆%: Manufacturing 0.7 12-Month ∆%: Manufacturing 1.4 Blog 3/16/14
Consumer Spending	Manufactured Goods Jan ∆%: -1.5 Dec 12-Month Manufactured Goods ∆%: 0.6 Blog 3/2/14
Employment	Unemployment Rate: IVQ2013 9.8% Blog 3/9/13
Trade Balance	Jan Exports ∆%: month -1.8, 12 months -0.8 Jan Imports ∆%: month -0.3, 12 months 0.1 Blog 3/9/14
Confidence Indicators	Historical average 100 Feb Mfg Business Climate 100 Blog 3/2/14

Links to blog comments in Table FR:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html

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

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 2.8 percent in IVQ2012, minus 2.4 percent in IQ2013, minus 2.1 percent in IIQ2013 and minus 1.9 percent in IIIQ2013. GDP fell 0.9 percent in IVQ2013 relative to a year earlier. 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 and IVQ2013 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
IVQ	-0.9	-0.1	-1.1	-2.4	1.0
IIIQ	-1.9	-2.0	-1.8	-4.4	-0.4
IIQ	-2.1	-4.4	-2.8	-5.0	0.0
IQ	-2.4	-5.0	-2.9	-6.6	-0.7
2012
IVQ	-2.8	-6.5	-4.1	-7.4	1.0
IIIQ	-2.6	-7.1	-3.9	-8.3	2.0
IIQ	-2.4	-6.9	-3.4	-8.5	2.2
IQ	-1.7	-7.9	-3.2	-8.0	3.0
2011
IVQ	-0.6	-6.8	-1.9	-3.8	3.5
IIIQ	0.4	0.6	-1.1	-2.4	6.1
IIQ	1.1	3.6	0.3	-1.0	7.5
IQ	1.4	9.1	0.6	0.6	11.0
2010
IVQ	2.2	15.6	1.0	1.3	13.4
IIIQ	1.8	13.2	1.2	2.3	12.1
IIQ	1.8	13.4	0.8	1.0	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/114963

The Markit/ADACI Business Activity Index increased from 49.4 in Jan to 52.9 in Feb (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b17493de9e44c38ab7dff3365122111). Phil Smith, Economist at Markit and author of the Italy Services PMI^®, finds the index suggesting strong growth of services with the highest rate of increase of new orders in about four years (http://www.markiteconomics.com/Survey/PressRelease.mvc/6b17493de9e44c38ab7dff3365122111). The Markit/ADACI Purchasing Managers’ Index^® (PMI^®), decreased from 53.1 in Jan to 52.3 in Feb for continuing growth (http://www.markiteconomics.com/Survey/PressRelease.mvc/e8afa393e01a401f969fdefd9c391ea0). New export orders grew around the trend of the fastest rate in 32 months in Nov and Dec and continued growing in Feb 2014. Phil Smith, Economist at Markit and author of the Italian Manufacturing PMI^®, finds continuing growth with new export orders from neighbor countries (http://www.markiteconomics.com/Survey/PressRelease.mvc/e8afa393e01a401f969fdefd9c391ea0). Table IT provides the country data table for Italy.

Table IT, Italy, Economic Indicators

Consumer Price Index	Feb month ∆%: -0.1 Feb 12-month ∆%: 0.5 Blog 3/16/14
Producer Price Index	Jan month ∆%: -0.2 Jan 12-month ∆%: -1.7 Blog 3/9/14
GDP Growth	IVQ2013/IIIQ2013 SA ∆%: 0.1 IVQ2013/IVQ2012 NSA ∆%: minus 0.9 Blog 3/17/13 6/16/13 8/11/13 9/15/13 11/17/13 12/15/13 2/16/14 3/16/14
Labor Report	Jan 2014 Participation rate 63.6% Employment ratio 55.3% Unemployment rate 12.9% Youth Unemployment 42.4% Blog 3/2/14
Industrial Production	Jan month ∆%: 1.0 12 months CA ∆%: 1.4 Blog 3/16/14
Retail Sales	Dec month ∆%: -0.3 Dec 12-month ∆%: -2.6 Blog 3/2/13
Business Confidence	Mfg Feb 99.1, Oct 97.4 Construction Feb 77.1, Oct 80.9 Blog 3/2/14
Trade Balance	Balance Jan SA €3689 million versus Dec €3701 Exports Jan month SA ∆%: -1.5; Imports Jan month ∆%: -1.6 Exports 12 months Jan NSA ∆%: 0.2 Imports 12 months NSA ∆%: -6.6 Blog 3/23/14

Links to blog comments in Table IT:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/9/14 http://cmpassocregulationblog.blogspot.com/2014/03/rules-discretionary-authorities-and.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/16/14 http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.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

Exports and imports of Italy and monthly growth rates SA are in Table VG-1. There have been significant fluctuations. Seasonally adjusted exports decreased 1.5 percent in Jan 2014 while imports decreased 1.6 percent. The SA trade balance decreased from surplus of €3701 million in Dec 2013 to surplus of €3689 million in Jan 2014.

Table VG-1, Italy, Exports, Imports and Trade Balance SA Million Euros and Month SA ∆%

	Exports	∆%	Imports	∆%	Balance
2012
IQ2012	96,246	0.9	96,870	-0.9	-624
IIQ2012	97,778	1.6	96,198	-0.7	1,580
IIIQ2012	99,162	1.4	96,060	-0.1	3,102
IVQ2012	98,111	-1.1	92,928	-3.3	5,183
2013
IQ2013	97,654	-0.5	91,461	-1.6	6,193
IIQ2013	97,894	0.2	89,237	-2.4	8,657
IIIQ2013	97,923	0.0	91,116	2.1	6,807
IVQ2013	98,850	0.9	89,122	-2.2	9,728
2012
Jan	31,786	-2.6	32,357	1.0	-571
Feb	32,056	0.8	32,672	1.0	-616
Mar	32,404	1.1	31,841	-2.5	563
Apr	32,435	0.1	32,632	2.5	-197
May	33,058	1.9	32,818	0.6	240
Jun	32,285	-2.3	30,748	-6.3	1,537
Jul	32,934	2.0	31,930	3.8	1,004
Aug	33,566	1.9	33,002	3.4	564
Sep	32,662	-2.7	31,128	-5.7	1,534
Oct	32,827	0.5	31,419	0.9	1,408
Nov	33,012	0.6	31,053	-1.2	1,959
Dec	32,272	-2.2	30,456	-1.9	1,816
2013
Jan	33,108	2.6	31,207	2.5	1,901
Feb	32,090	-3.1	30,094	-3.6	1,996
Mar	32,456	1.1	30,160	0.2	2,296
Apr	32,384	-0.2	29,709	-1.5	2,675
May	32,569	0.6	29,548	-0.5	3,021
Jun	32,941	1.1	29,980	1.5	2,961
Jul	32,269	-2.0	30,019	0.1	2,250
Aug	32,720	1.4	30,447	1.4	2,273
Sep	32,934	0.7	30,650	0.7	2,284
Oct	32,752	-0.6	29,812	-2.7	2,940
Nov	32,204	-1.7	29,117	-2.3	3,087
Dec	33,894	5.2	30,193	3.7	3,701
2014
Jan	33,390	-1.5	29,701	-1.6	3,689

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/115726

Italy’s trade account not seasonally adjusted is in Table VG-2. Values are different because the data are original and not adjusted. Exports increased 0.2 percent in the 12 months ending inJan 2014 while imports fell 6.6 percent. Exports increased 5.1 percent in the 12 months ending in Dec 2013 while imports increased 0.8 percent with actual trade surplus of €3610 million. Twelve-month rates of growth picked up again in Aug 2011 with 15.2 percent for exports and 12.6 percent for imports. In Sep 2011, exports grew 10.2 percent relative to a year earlier while imports grew only 3.6 percent. In Oct 2011, exports grew 4.5 percent while imports fell 0.2 percent. In Nov 2011, exports grew 6.5 percent in 12 months while imports grew 0.5 percent. Exports continued to growth of 7.9 percent in the 12 months ending in Aug 2012 while imports fell 1.8 percent. The actual or not seasonally adjusted trade balance deficit fell from €2948 million in Aug 2011 to surplus of €1407 million in Dec 2011 but turned into deficit of €4691 million in Jan 2012. The deficit improved to lower deficit of €1311 million in Feb 2012 and surplus of €1831 million in Mar 2012, returning to deficit of €421 million in Apr and surplus of €833 million in May. In Jun 2012, the actual surplus was €2681 million and then €4673 million in Jul 2012, which was the highest in 2012 but deteriorated to actual deficit of €535 million in Aug 2012. Exports fell 20.9 percent and imports 22.1 percent during the global recession in 2009. Growth of exports of 12.2 percent in the 12 months ending in Oct 2012 while imports increased 1.4 percent, increasing the trade surplus to €2337 million. The trade surplus was €2314 million in Dec 2012 with growth of exports of minus 4.5 percent in 12 months while imports fell 7.8 percent. The trade balance deteriorated to deficit of €1810 million in Jan 2013 even with growth of exports of 8.9 percent in 12 months while imports fell 1.4 percent. The trade balance returned to surplus of €1045 million in Feb 2013 with decline of exports by 2.9 percent and decrease of exports by 9.9 percent. The surplus widened to €3081 million in Mar 2013 with exports declining 6.1 percent and imports falling 10.1 percent. The surplus shrank to €2006 million in Apr 2013 with growth of exports of 4.4 and decline of imports of 3.5 percent. The surplus increased to €3893 million in May 2013 with declines of exports of 1.9 percent and of imports of 10.8 percent. The surplus declined to €3542 million in Jun 2013 with decline of exports of 3.3 percent in 12 months and of imports of 6.3 percent.

Table VG-2, Italy, Exports, Imports and Trade Balance NSA Million Euros and Year-on-Year ∆%

	Exports	∆%	Imports	∆%	Balance
2011	375,904	11.4	401,428	9.3	-25,524
2012	390,182	3.8	380,292	-5.3	9,890
2013	389,854	-0.1	359,454	-5.5	30,400
2011
IQ2011	90,128	18.1	103,760	21.7	-13,632
IIQ2011	97,274	13.4	104,303	22.4	-7,029
IVQ2011	92,567	9.8	96,138	12.8	-3,571
IVQ2011	95,935	5.5	97,227	-2.7	-1,292
2012
IQ2012	95,398	5.8	99,568	-4.0	-4,170
IIQ2012	100,172	3.0	97,079	-6.9	3,093
IIIQ2012	94,938	2.6	90,670	-5.7	4,268
IVQ2012	99,674	3.9	92,975	-4.4	6,699
2013
IQ2013	94,695	-0.7	92,379	-7.2	2,316
IIQ2013	99,724	-0.4	90,283	-7.0	9,441
IIIQ2013	95,094	0.2	87,209	-3.8	7,885
IVQ2013	100,341	0.7	89,584	-3.6	10,758
2012
Jan	27,476	5.0	32,167	-1.2	-4,691
Feb	31,817	7.4	33,128	1.4	-1,311
Mar	36,105	5.1	34,274	-11.0	1,831
Apr	30,548	-1.7	30,969	-8.8	-421
May	35,232	5.0	34,399	-4.1	833
Jun	34,392	5.3	31,711	-8.0	2,681
Jul	37,190	5.3	32,517	-4.5	4,673
Aug	26,166	7.9	26,701	-1.8	-535
Sep	31,583	-4.3	31,452	-9.8	131
Oct	36,037	12.2	33,700	1.4	2,337
Nov	33,688	3.8	31,641	-7.0	2,047
Dec	29,948	-4.5	27,634	-7.8	2,314
2013
Jan	29,913	8.9	31,723	-1.4	-1,810
Feb	30,884	-2.9	29,839	-9.9	1,045
Mar	33,897	-6.1	30,816	-10.1	3,081
Apr	31,878	4.4	29,873	-3.5	2,006
May	34,576	-1.9	30,682	-10.8	3,893
Jun	33,270	-3.3	29,728	-6.3	3,542
Jul	38,136	2.5	32,156	-1.1	5,980
Aug	24,741	-5.4	23,667	-11.4	1,074
Sep	32,217	2.0	31,386	-0.2	831
Oct	36,330	0.8	32,271	-4.2	4,060
Nov	32,538	-3.4	29,450	-6.9	3,088
Dec	31,473	5.1	27,863	0.8	3,610
2014
Jan	29,986	0.2	29,621	-6.6	365

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/115726

Growth rates of Italy’s trade and major products are in Table VG-3 for the period Jan 2014 relative to Jan 2013. Growth rates of cumulative imports relative to a year earlier are negative for energy with minus 18.8 percent. Exports of durable goods grew minus 1.9 percent and exports of capital goods increased 2.3 percent. The higher rate of growth of exports of 0.2 percent in Jan 2014/Jan 2013 relative to imports of minus 6.6 percent may reflect weak demand in Italy with GDP declining during nine consecutive quarters from IIIQ2011 through IIIQ2013 together with softening commodity prices. GDP increased marginally 0.1 percent in IVQ2013.

Table VG-3, Italy, Exports and Imports % Share of Products in Total and ∆%

	Exports Share %	Exports ∆% Jan 2014/ Jan 2013	Imports Share %	Imports ∆% Jan 2014/ Jan 2013
Consumer Goods	31.0	1.8	27.3	0.1
Durable	6.0	-1.2	2.9	4.7
Non-Durable	25.1	2.4	24.4	-0.4
Capital Goods	32.3	2.3	20.3	-6.6
Inter- mediate Goods	32.3	-2.5	32.5	-3.9
Energy	4.4	-3.6	19.9	-18.8
Total ex Energy	95.6	0.4	80.1	-3.2
Total	100.0	0.2	100.0	-6.6

Note: % Share for 2012 total trade.

Source: Istituto Nazionale di Statistica http://www.istat.it/it/archivio/115726

Table VG-4 provides Italy’s trade balance by product categories in Jan 2014 and cumulative Jan 2014. Italy’s trade balance excluding energy, generated surplus of €4664 million in Jan 2014 and €4664 million cumulative in Jan 2014 but the energy trade balance created deficit of €4299 million in Jan 2014 and cumulative €4299 million in Jan 2014. The overall surplus in Jan 2014 was €365 million with cumulative surplus of €365 million in Jan 2014. Italy has significant competitiveness in various economic activities in contrast with some other countries with debt difficulties.

Table VG-4, Italy, Trade Balance by Product Categories, € Millions

	Jan 2014	Cumulative Jan 2014
Consumer Goods	1,143	1,143
Durable	744	744
Nondurable	398	398
Capital Goods	3,518	3,518
Intermediate Goods	4	4
Energy	-4,299	-4,299
Total ex Energy	4,664	4,664
Total	365	365

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/115726

Resolution of the European sovereign debt crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would assure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness.

Professors Ricardo Caballero and Francesco Giavazzi (2012Jan15) find that the resolution of the European sovereign crisis with survival of the euro area would require success in the restructuring of Italy. Growth of the Italian economy would ensure that success. A critical problem is that the common euro currency prevents Italy from devaluing the exchange rate to parity or the exchange rate that would permit export growth to promote internal economic activity, which could generate fiscal revenues for primary fiscal surpluses that ensure creditworthiness. Fiscal consolidation and restructuring are important but of long-term gestation. Immediate growth of the Italian economy would consolidate the resolution of the sovereign debt crisis. Caballero and Giavazzi (2012Jan15) argue that 55 percent of the exports of Italy are to countries outside the euro area such that devaluation of 15 percent would be effective in increasing export revenue. Newly available data in Table VG-5 providing Italy’s trade with regions and countries supports the argument of Caballero and Giavazzi (2012Jan15). Italy’s exports to the European Monetary Union (EMU), or euro area, are only 39.8 percent of the total in Jan 2014. Exports to the non-European Union area with share of 46.3 percent in Italy’s total exports are growing at minus 2.7 percent in Jan 2014 relative to Jan 2013 while those to EMU are growing at 1.7 percent.

Table VG-5, Italy, Exports and Imports by Regions and Countries, % Share and 12-Month ∆%

Dec 2013	Exports % Share	∆% Jan 2014/ Jan 2013	Imports % Share	∆% Jan 2014/ Jan 2013
EU	53.7	2.6	55.3	-1.6
EMU 18	39.8	1.7	44.3	-2.4
France	10.8	-1.8	8.4	-2.8
Germany	12.4	3.2	14.7	-0.4
Spain	4.4	0.0	4.5	0.0
UK	5.0	2.4	2.7	-1.5
Non EU	46.3	-2.7	44.7	-11.9
Europe non EU	13.0	-11.5	12.1	-14.9
USA	6.9	7.1	3.2	-1.4
China	2.5	11.4	6.4	0.2
OPEC	6.0	-15.5	8.1	-42.0
Total	100.0	0.2	100.0	-6.6

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/115726

Table VG-6 provides Italy’s trade balance by regions and countries. Italy had trade surplus of €168 million with the 17 countries of the euro zone (EMU 17) in Jan 2014 and cumulative surplus of €168 million in Jan 2014. Depreciation to parity could permit greater competitiveness in improving the trade deficit of €897 million in Jan 2014 with Europe non-European Union, the trade surplus of €899 million with the US and trade deficit with non-European Union of €897 million in Jan 2014. There is significant rigidity in the trade deficits in Jan 2014 of €1557 million with China and €388 million with members of the Organization of Petroleum Exporting Countries (OPEC). Higher exports could drive economic growth in the economy of Italy that would permit less onerous adjustment of the country’s fiscal imbalances, raising the country’s credit rating.

Table VG-6, Italy, Trade Balance by Regions and Countries, Millions of Euro 

Regions and Countries	Trade Balance Jan 2014 Millions of Euro	Trade Balance Cumulative Jan 2014 Millions of Euro
EU	1,262	1,262
EMU 18	168	168
France	1,000	1,000
Germany	-125	-125
Spain	155	155
UK	754	754
Non EU	-897	-897
Europe non EU	-43	-43
USA	899	899
China	-1,557	-1,557
OPEC	-388	-388
Total	365	365

Notes: EU: European Union; EMU: European Monetary Union (euro zone)

Source: Istituto Nazionale di Statistica

http://www.istat.it/it/archivio/115726

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	1.8
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*	-1.3
2000-2013	1.5

*Absolute change from 2007 to 2012

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q4-2013/index.html

The Business Activity Index of the Markit/CIPS UK Services PMI^® decreased from 58.3 in Jan to 58.2 in Feb, which is still close to high historical levels and above long-term trend (http://www.markiteconomics.com/Survey/PressRelease.mvc/9996492c13d04da5b922b471ceb3bc33). Chris Williamson, Chief Economist at Markit, finds the combined indices consistent with the UK economy growing at 0.7 percent in IQ2014 (http://www.markiteconomics.com/Survey/PressRelease.mvc/9996492c13d04da5b922b471ceb3bc33). The Markit/CIPS UK Manufacturing Purchasing Managers’ Index^® (PMI^®) increased to 56.9 in Feb from 56.6 in Jan with job creation at the highest pace in 33 months (http://www.markiteconomics.com/Survey/PressRelease.mvc/e798f00cca5b44a783d568ee8ed7845b). New export orders increased for the eleventh consecutive month. New orders increased from the US Africa, China and the Middle East. Rob Dobson, Senior Economist at Markit that compiles the Markit/CIPS Manufacturing PMI^®, finds that manufacturing conditions continue above trend (http://www.markiteconomics.com/Survey/PressRelease.mvc/e798f00cca5b44a783d568ee8ed7845b). Table UK provides the economic indicators for the United Kingdom.

Table UK, UK Economic Indicators

CPI	Jan month ∆%: -0.6 Jan 12-month ∆%: 1.9 Blog 2/23/14
Output/Input Prices	Output Prices: Jan 12-month NSA ∆%: 0.9; excluding food, petroleum ∆%: 1.2 Input Prices: Jan 12-month NSA ∆%: -3.1 Excluding ∆%: -2.8 Blog 2/23/14
GDP Growth	IVQ2013 prior quarter ∆% 0.7; year earlier same quarter ∆%: 2.7 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 3/2/14
Industrial Production	Jan 2014/Jan 2013 ∆%: Production Industries 2.9; Manufacturing 3.3 Blog 3/16/14
Retail Sales	Jan month ∆%: -1.5 Jan 12-month ∆%: 4.3 Blog 2/23/14
Labor Market	Nov-Jan Unemployment Rate: 7.2%; Claimant Count 3.5%; Earnings Growth 1.4% Blog 3/23/14 LMGDP 3/23/14
GDP and the Labor Market	IVQ2013 Weekly Hours 101.8, GDP 98.6, Employment 102.2 IQ2008 =100 GDP IVQ13 98.6 IQ2008=100 Blog 3/2/14 3/23/14
Trade Balance	Balance SA Feb minus ₤2565 million Exports Feb ∆%: -2.2; Dec-Feb ∆%: 0.1 Imports Feb ∆%: 2.3 Dec-Feb ∆%: -0.4 Blog 3/16/14

Links to blog comments in Table UK:

3/16/2014 http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html

3/2/14 http://cmpassocregulationblog.blogspot.com/2014/03/financial-risks-slow-cyclical-united.html

2/23/14 http://cmpassocregulationblog.blogspot.com/2014/02/squeeze-of-economic-activity-by-carry.html

2/2/14 http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.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--february-labour-market-update/index.html

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 1.4 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--february-gdp-update/index.html

Table VH-L1 of the UK Office for national Statistics provides the data for GDP and the labor market (http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-gdp-update/index.html

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

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 IVQ2013, employment increased 2.2 percent and hours worked 1.8 percent while GDP is still 1.4 percent lower.

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

			Index, Q1 2008 =100
	GDP, CVM	Employment, Aged 16 +	Total weekly hours, Aged 16 +
	ABMI	MGRZ	YBUS
2008 Q1	100.0	100.0	100.0
Q2	99.1	100.1	98.9
Q3	97.7	99.6	98.9
Q4	95.6	99.4	98.3
2009 Q1	93.2	98.9	96.7
Q2	92.8	97.9	96.3
Q3	92.8	97.8	95.8
Q4	93.2	97.9	95.8
2010 Q1	93.7	97.6	95.7
Q2	94.7	98.2	96.5
Q3	95.0	98.9	97.0
Q4	94.8	98.7	97.4
2011 Q1	95.3	99.0	97.4
Q2	95.4	99.0	96.3
Q3	95.9	98.5	97.1
Q4	95.8	98.8	97.3
2012 Q1	95.8	99.2	98.0
Q2	95.4	99.9	98.5
Q3	96.2	100.2	99.6
Q4	96.0	100.8	99.8
2013 Q1	96.4	100.7	100.1
Q2	97.1	100.9	100.4
Q2	97.9	101.5	101.4
Q4	98.6	102.2	101.8

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/elmr/gdp-and-the-labour-market/q4-2013--february-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

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

Labor market statistics of the UK for the quarter Nov 2013-Jan 2014 are provided in Table VH-L2. The unemployment rate stabilized at 7.2 percent and the number unemployed decreased 191,000 in the year, reaching 2.326 million. The employment rate is 72.3 percent. Earnings growth including bonuses increased 1.4 percent over the earlier year. The claimant count or those receiving unemployment benefits stands at 3.5 percent, down 0.1 percentage points on the month and down 1.1 percentage points on the year.

Table VH-L2, UK, Labor Market Statistics

	Quarter Nov 2013-Jan 2014
Unemployment Rate	7.2% down 0.2 on quarter and down 0.7 from year earlier
Number Unemployed	(1) Down 63,000 on quarter and down 191,000 from year earlier to reach 2.326 million (2) Unemployment rate 16 to 24 years of age 21.0% of that age group (3) Unemployed 16 to 24 years excluding those in full-time education 628,000 (284,000 in full-time education) down 29,000 on quarter; unemployment rate 19.8% down 0.7 % Points
Number Unemployed > one and two years	(1) Number unemployed over one year: 828,000, down 38,000 on quarter, down 59,000 on year (2) Number unemployed over two years: 450,000, up 6,000 on quarter, down 1,000 on year
Inactivity Rate 16-64 Years of Age (Definition: Not in employment but have not been seeking employment in the past four weeks or are unable to start work in two weeks)	(1) 22.1%, down 0.1 on quarter, down 0.2 on year (2) Economically inactive 16-64 years down 19 on quarter and down 57,000 on year to 8.896 million
Employment Rate	72.3%, up 0.2 on quarter, up 0.7 % points on year
Number Employed	(1) Up 105,000 on quarter, +459,000 on year to 30.191 million                              (2) Number of employees down 60,000 on quarter to 25.49 million (3) Self-employed rose 211,000 on quarter to 4.46 million (4) Full-time 21.868 million, up 157,000 on quarter, up 412,000 on year (5) 1.46 million working part-time and self-employed who could not find full-time jobs
Earnings Growth Rates Year on Year	(1) Total +1.4% (including bonuses) over year earlier; regular 1.3%; private sector 1.7% on year earlier, public sector 0.5% on year earlier   (2) Regular private 1.6 % (excluding bonuses); regular public 0.6% on year earlier
Full-time and Part-time	(1) Number full-time 21.824 million, up 148,000 on quarter (2) Number part-time 8.045 million, up 38,000 on quarter
Claimant Count (Jobseeker’s Allowance, JSA)	(1) Latest estimate: 1.17 5million; down 34,600 in month, down 363,200 on year earlier (2) Claimant count 3.5%, down 0.1 on month and down 1.1 % points on year
Labor Productivity	(1) Output per worker fell 0.3% from IIQ2013 to IIIQ2013 (2) Unit labor costs fell 0.8% from IIQ2013 to IIIQ2013

Note: Labor Force Survey does not measure monthly changes

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/march-2014/index.html

Table VH-L3 provides indicators of the labor force survey of the UK for Nov 2013-Jan 2014 and earlier quarters. There has been improvement in UK labor markets with the rate of unemployment decreasing from 7.8 percent in Nov 2012-Jan 2013 to 7.2 percent in Nov 2013-Jan 2014.

Table VH-L3, UK, Labor Force Survey Indicators

	LFHP	EMP	PART	UNE	RATE
Nov-Jan 2012	40,177	29,141	70.4	2,652	8.3
Nov-Jan 2013	40,220	29,732	71.5	2,516	7.8
Feb-Apr 2013	40,237	29,756	71.5	2,511	7.8
May-Jul 2013	40,253	29,836	71.6	2,487	7.7
Aug-Oct 2013	40,299	30,086	72.0	2,388	7.4
Nov-Jan 2014	40,344	30,191	72.3	2,326	7.2

Notes: LFHP: Labor Force Household Population Ages 16 to 64 in thousands; EMP: Employed Ages 16 and over in thousands; PART: Employment as % of Population Ages 16 to 64; UNE: Unemployed Ages 16 and over in thousands; Rate: Number Unemployed Ages 16 and over as % of Employed plus Unemployed

Source: UK Office for National Statistics

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/march-2014/index.html

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